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What to Do When Hit With a Class Action

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By Casey C. Sullivan, Esq. on January 22, 2016 5:59 AM

Someone didn't like your shrimp sales, or your "clean diesel" advertising, or your employment practices, and they've filed suit. It's not just any lawsuit, however. It's a class action, so the stakes are a bit higher than your everyday litigation.

What is in-house counsel to do? Here's what.

1. Get a Lawyer

Unless your legal department specializes in class action defense, you'll need to bring in outside counsel, ASAP. You'll want to make sure that your outside counsel is experienced in class action defense and with the venue in which the lawsuit was filed. As attorneys Eric Fisher and Ryan Grelecki write in Inside Counsel, "not only do courts have unique personalities and dispositions, but many have local rules relating to Federal Rules of Civil Procedure Rule 23 that govern class actions."

2. Venue Change?

One of your first decisions as in-house counsel should be choosing the best venue to defend against the suit. Does an arbitration clause apply? If so, you'll want to exercise it. (Luckily for corporate counsel, the Supreme Court has been making it harder for the plaintiff's bar to get around arbitration clauses.)

If the class action is filed in state court, you'll want to consider whether to remove the case to federal district court. You've got 30 days from the date of service to decide, so don't delay. Keep in mind that the removal requirements for federal court are somewhat relaxed for class actions.

3. Kill It in the Cradle

The sooner you can stop the suit, the better. If you can have the suit dismissed before class certification or discovery, you've proven your worth to the company for a year -- or five.

Some creative legwork can be beneficial here. Take, for example, a recent class action over Costco's shrimp, which were allegedly produced using slave labor. A California woman filed a class action against the wholesaler, alleging that its slave-shrimp contradicted its public statements that there were no human rights abuses in its supply chain and, thus, California false advertising law. After a quick check of her purchasing history, Costco was able to show that she had never bought the shrimp in question and viola no more suit.

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