Class action lawsuits have been quite common in the United States. Class action lawsuits allow multiple plaintiffs to file a lawsuit together challenging similar behavior by a corporation, government entity, or individual person. The plaintiffs then take advantage of the court’s ability to issue class action lawsuits to resolve their dispute. Class action lawsuits originated in California after the Supreme Court ruled in favor of striking down part of the nation’s largest Milk Processor Workers’ Union. The ruling by the Supreme Court effectively banned strikes by milk processors against individual farmers and berry processor companies, allowing the workers to continue working for their companies.
Prior to the ruling striking down the Milk Processor Union, class actions had been largely ineffective in litigating labor law claims.
As a result, many legal professionals considered labor law class actions as having little value, unless they had strong evidence that the corporation or state officials had engaged in widespread abuse. In some instances, labor law attorneys would assign their clients large, expensive legal teams in order to gather such evidence. Attorneys would also often attempt to settle labor law disputes without ever having seen the evidence presented in class action lawsuits.
Current California state law now requires both the United States Tax Court and the United States District Court to require plaintiffs to file class action treatment briefs with the federal court in the event that the plaintiffs elect to challenge a tax assessment against them.
plaintiffs must submit a class action treatment brief to the federal court within two months of the date of the initial assessment. Failing to do so will result in the plaintiffs not being permitted to pursue their claims in state court. Once the class action treatment briefs are filed in the federal court, the plaintiffs must then elect whether or not they wish to pursue their claims through arbitration or through state court. If the class action lawsuit is concluded in the state court, then the plaintiff is required to pay costs if the case is accepted by the state court.
The second requirement that new plaintiffs must meet is the requirement that they notify their counsel that they wish to seek class certification.
In addition to the notification requirement, plaintiffs must also obtain certification. Certification, which is issued by the United States Tax Court on a class certification motion, provides plaintiffs’ counsel with additional information regarding the litigation and allows the council to make decisions about moving forward based on the specific facts of the case. Although certification is not mandatory, plaintiffs who seek certification must usually do so because the IRS has rejected their initial claims for relief. In other words, the IRS likely will deny certification unless and until the plaintiffs prove that the initial steps leading up to the denial of their claims were unlawful.
Plaintiffs typically file a complaint in the form of a class action settlement when they have been denied the initial opportunity to pursue an IRS audit or investigation.
Once the lawsuit has been filed in the appropriate venue, class members are advised to refer to Internal Revenue Service (“IRS”) Circular Letter (“C.L.C.”) as, well as Internal Revenue Code Sections regarding the procedure they must follow to file such complaints. Some state codes provide class members with more detailed information about filing a C.L.C.
In addition to advising plaintiffs on the proper procedures to be followed in seeking relief from the IRS, class counsel also provides them with an opportunity to settle the claims they have filed for a set amount.
The settlement amount will be either a fixed percentage of the damages claimed or an anticipated amount of one dollar. While class members are not required to pay the settlement amount directly to the IRS, counsel does recommend that they receive some form of reimbursement for their efforts on behalf of the class members. Settlement amount is generally paid by the class members in monthly installments. In California, class members are also advised to refer to their state Tax Attorney as the statute of limitations in the state may vary.
