In the 1938 case of Sprague v. Ticonic National Bank et al., the U.S. Supreme Court ruled that federal courts do not have inherent power to hear cases as a class action unless expressly provided by statute. The plaintiff, Mrs. Sprague, had brought an individual lawsuit against Ticonic National Bank and others for alleged fraud in selling her shares of stock at less than their value during the Great Depression era bank reorganization process under Section 77B of the Bankruptcy Act (now Chapter X). She then sought to amend her complaint into a "spurious" class action on behalf of all other similarly situated shareholders who were also allegedly defrauded but did not join in her suit or even know about it. The court rejected this attempt, holding that Rule 38(b) allowing such amendments only applied where there was joint interest among plaintiffs and defendants alike - which was absent here because each shareholder's claim depended upon facts peculiar to his own case rather than any common question of law or fact binding them together as a class.

In the dissenting opinion for Sprague v. Ticonic National Bank, Justice McReynolds disagreed with the majority's decision to allow a representative plaintiff in a class action lawsuit to bind non-participating members of that class without their consent or knowledge. He argued that this violated basic principles of due process and fairness, as it effectively denied these individuals their day in court. Furthermore, he contended that such an approach could lead to potential abuses by unscrupulous plaintiffs who might seek to manipulate the system for personal gain at the expense of others' rights. In essence, Justice McReynolds believed that every individual should have the right to control his own litigation and not be bound by decisions made on his behalf without his participation or consent.