Class-action lawsuits are in the news just about every day. They make headlines because the whole idea of class-action lawsuits is controversial and stridently opposed by many and because the amounts paid in settlements are sometimes in the same league as the net worth of, say, Bill Gates.

What are class-action lawsuits? In simplest terms, they are brought by a small group of allegedly injured individuals on their own behalf and on all others who might have suffered a similar legal wrong. Class-action lawsuits allow claims that otherwise wouldn’t be pursued because of cost to be combined, resulting in a total claim big enough to get someone’s attention.

The theory is that class-action lawsuits serve a useful role as a deterrent against bad behavior by big companies. On the other hand, class-action lawsuits can be abused by lawyers who round up the plaintiffs and then negotiate settlements resulting in a nice fee for themselves but little benefit for class members .

There are many requirements for a class-action lawsuit to proceed, and they are all regularly in dispute, requiring close supervision by a court and multiple rulings before a case can move on. These requirements are listed in Rule 23 of the Rules of Civil Procedure (state and federal): there are questions of law or fact common to the class; the claims or defenses of the representative parties are typical of the class; the representative parties will fairly and adequately protect the interests of the class; and a class action is superior to other available methods to resolve the dispute.

As an example of how these requirements come into play, a federal district court judge in New York, Sidney Stein, just ruled that a lawsuit brought against Swiss mega-bank UBS and various of its subsidiaries would not be allowed to go forward as a class action. The plaintiffs — residents of Puerto Rico — alleged they were victims of illegal behavior when they bought mutual funds owning risky Puerto Rico bonds and that UBS failed to meet its obligation to determine whether these mutual funds were suitable investments .

Stein concluded a determination of investment suitability would require an individual analysis and did not present a common question of fact or law applicable to all plaintiffs, as required for a class action. The plaintiffs will now have to bring their claims in individual arbitration proceedings.

Stein also recently ruled in a case against a New York dating company named It’s Just Lunch that, with a slight narrowing of the definition of the class, the case could proceed as a class action. (Courts must also approve class-action settlements and, in this case, a proposed settlement was rejected by the court because part of the settlement involved giving plaintiffs a voucher for an additional free date. The court didn’t think this was a fair settlement since the basis of the lawsuit was that the plaintiffs were unhappy with the company’s services.)

Jim Flynn is with the Colorado Springs firm of Flynn & Wright LLC. Contact him at moneylaw@jtflynn.