A Primer on Class Action Lawsuits

A class action is a lawsuit that one or more individuals bring on behalf of themselves and all other individuals who may have the same legal claim against a corporation or other entity. Class action lawsuits offer a means by which individual consumers or investors may obtain damages or restitution for wrongs visited upon them by large corporations when the corporation has inflicted the same type of wrongdoing on an identifiable group of individuals.

Class actions are designed to ensure that individuals do not go uncompensated when they have suffered some damage which, although not inconsequential, does not economically justify an individual lawsuit. Instead, it permits hundreds or even thousands of individuals to essentially “pool” their claims against a defendant to create an aggregate amount of damages that justifies a civil action against the offending corporation. Not all cases are permitted to proceed on a class action basis. Cases are only certified when the court determines that the claims of every member of the class are sufficiently similar and that the members of the class are sufficiently numerous.

When the court certifies a class action, it means that it has decided that a class action is the most economical way to handle a large number of similar claims against a corporation and that the decision on the claims of the representative plaintiffs will be binding upon all other individuals who may have the same legal claims against the corporation. Once the class has been certified, the court requires that notice of the class action be given to as many potential members of the class as can be identified.

If you receive a notice of a class action, read the notice carefully so you have an understanding of the basis for the lawsuit and can decide whether you wish to participate. In most cases, you need do nothing if you wish to participate. If, however, you decide not to participate in the class, you must submit a written statement making known your desire to be excluded. This is called exercising your right to “opt out” of the class. The notice should contain instructions regarding how you can exercise this right.

If you decide to participate in the class action lawsuit, your time commitment will usually be nominal. The representative plaintiffs who brought the suit shoulder the greatest burden. They may be deposed and may have to testify at trial. If you are not one of the plaintiffs representing the class, your involvement will likely be limited to reading notices that you will receive from the court from time to time.

Most importantly, you will not be responsible for any attorneys’ fees or expenses. Those are advanced by the law firm(s) representing the class and, if approved for payment by the court, will be paid out of any recovery obtained for the benefit of the class. If there is no recovery for the class, the attorneys’ fees and expenses are borne by the attorneys.

If a judgment is entered or a settlement is reached that is favorable to the class, any monies that are recovered are distributed to individual class members according to a court-approved formula called a “plan of allocation.” In most cases, each member of the class will receive a pro rata share of any monies recovered after the court has deducted attorneys’ fees and costs.

Unlike most civil litigation, in a class action, virtually every significant step of the litigation is subject to court approval. The court determines whether the class should be certified, whether the representative plaintiffs’ attorneys are sufficiently experienced in class action litigation to properly represent the interests of the class, whether the representative plaintiffs are appropriate representatives of the other members of the class, whether any settlement is fair, and the amount of fees and expenses that should be paid to the attorneys involved. In other words, the court is constantly looking over the shoulder of the attorneys and other parties to ensure that the litigation is resolved fairly for the class.

Print Friendly, PDF & Email