What Is a Class Action Lawsuit?
When a business or individual causes harm to many people, it often makes sense for those affected to pursue a class action lawsuit. In this type of case, one or more individuals (referred to as “lead plaintiffs” or “named plaintiffs”) file a lawsuit on behalf of a larger group of people with similar claims. Any recovered damages are then distributed among all members of the group.
Class action lawsuits allow plaintiffs to hold defendants accountable, even when individual lawsuits might not be financially viable. For instance, if a bank unlawfully charged customers an extra $20 per month, it may have made millions in illegal profits. Filing individual lawsuits for a $20 fee would be impractical, but a class action lawsuit can seek justice for everyone affected and potentially return the lost money.
Class action lawsuits can be complex, and understanding what is a class action lawsuit is essential if you believe you are entitled to compensation. Here’s what you need to know about how they work:
How Does a Class Action Lawsuit Work?
For a case to qualify as a class action lawsuit, it must meet four key criteria:
- Large Class Size: The group of affected individuals must be so large that filing individual lawsuits would be impractical.
- Similar Claims: All class members must share similar legal claims.
- Representative Claim: The lead plaintiff’s claim must represent the entire class.
- Qualified Attorneys: The attorneys representing the class must have the necessary experience and qualifications to handle the case.
The process begins when the lead plaintiff files a lawsuit. The court will then review the case to determine if it meets the above criteria. If approved, the class is “certified,” and other members may choose to join or opt-out if they prefer to file their own lawsuit.
As the case progresses, attorneys will work to build the case and often attempt to negotiate a settlement with the defendant. If a settlement is reached, it must be reviewed and approved by the court. If no agreement is made, the case will go to trial.
If damages are awarded, they are typically distributed using a formula that accounts for the extent of harm suffered by each class member, meaning those who were harmed more may receive a larger portion of the payout.
It’s important to note that class action suits are often lengthy and can take years to resolve.
Common Types of Class Action Lawsuits
Class action lawsuits can arise in various situations. Some of the most common class action lawsuits to join include:
- Consumer Protection Cases
When companies mislead or deceive consumers, a class action lawsuit can help rectify the situation. For example, a food manufacturer might falsely advertise a product as healthier than it is, leading consumers to overpay. In such cases, affected consumers can seek compensation through a class action lawsuit.
- Employment Disputes
Class action lawsuits frequently arise when employers engage in unfair or illegal practices that impact a large number of employees. Common reasons include:
- Illegal background checks
- Mismanagement of employee retirement plans
- Illegal mass layoffs
- Failure to inform terminated employees about their COBRA healthcare rights
For example, consider a company that mismanages its employees’ 401(k) retirement plans by investing in high-fee, poorly performing funds without proper oversight. This negligence can result in significant financial losses for hundreds or thousands of employees over time. A class action lawsuit would allow all affected employees to seek compensation for the mismanagement and hold the company accountable for breaching its fiduciary duty to properly manage retirement savings.
- Product Liability Claims
When defective or dangerous products harm multiple customers, a class action lawsuit can help those affected seek justice. An example would be an e-cigarette that explodes during charging, injuring several users. These individuals could file a class action to recover damages.
- Securities Fraud
Securities fraud cases often involve large groups of investors harmed by illegal company practices. Misconduct may include:
- Misrepresenting financial information
- Insider trading
- Market manipulation
- Ponzi schemes
Since publicly traded companies often have many investors, class action lawsuits are an effective way to seek compensation for financial losses.
Benefits and Drawbacks of Class Action Lawsuits
Before joining or filing a class action lawsuit, it’s important to weigh the pros and cons:
Benefits
- Efficient for Smaller Claims: It allows plaintiffs to pursue claims that may be too small to justify individual lawsuits.
- Shared Legal Costs: Costs are spread across the class, making legal action more affordable.
- Time-Saving: Class actions are more efficient than pursuing separate lawsuits.
- Minimal Involvement for Class Members: Most class members do not have to actively participate, aside from the lead plaintiffs.
Drawbacks
- Longer Timeframes: Class action lawsuits often take longer to resolve.
- No Individual Settlement Negotiations: You cannot negotiate your own settlement terms if part of a class action.
If you’re unsure whether to join a class action lawsuit or pursue an individual case, our attorneys can help you understand your options.
How to Join a Class Action Lawsuit
Most class action lawsuits do not require members to opt-in. Instead, individuals are automatically included unless they choose to opt-out. However, to receive a payout, you typically need to submit a claim form by a specific deadline. Eligible class members should receive notice via mail or email.
The Role of the Lead Plaintiff
Lead plaintiffs represent the entire class and have several responsibilities, including:
- Providing evidence
- Attending strategy meetings and court proceedings
- Participating in depositions
- Approving or rejecting settlements on behalf of the class
Lead plaintiffs are chosen by the attorneys and must be approved by the court. They should be individuals who experienced similar damages as other class members and are willing to actively participate in the lawsuit.
Potential Outcomes of a Class Action Lawsuit
Class action lawsuits can result in different outcomes:
- Dismissal: The lawsuit is dismissed by the court.
- Settlement: The defendant agrees to pay a certain amount, and the court determines how the payout will be distributed among the class members.
- Court Verdict: If the case goes to trial, the court rules in favor of either the plaintiffs or the defendant. If the plaintiffs win, the court will decide the payout distribution.
Examples of Notable Class Action Lawsuits
Some class action lawsuits make headlines due to their size and significance. Notable cases include:
- Tobacco Master Settlement Agreement (1998): $206 billion settlement with tobacco companies over illnesses related to tobacco use.
- Enron Securities Fraud Settlement (2008): $7.2 billion settlement after Enron’s collapse due to fraudulent practices.
- Volkswagen Emissions Settlement (2016): $14.7 billion settlement for installing software that allowed cars to cheat emissions tests.
Could You Be Part of an Employment Class Action Lawsuit?
If you and other employees have faced similar violations from your employer, you may be eligible to join an employment class action lawsuit. Our experienced employment law firm has prosecuted countless individual and class cases, and we can help you evaluate whether a class action or an individual case is the right legal path for you. We can explain in detail how to start a class action lawsuit. We’re committed to standing up for employee rights and ensuring you receive the justice you deserve.
Contact Wenzel Fenton Cabassa, P.A. today for a free case evaluation and learn more.
Please Note: At the time this article was written, the information contained within it was current based on the prevailing law at the time. Laws and precedents are subject to change, so this information may not be up to date. Always speak with a law firm regarding any legal situation to get the most current information available.
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