What Class Action Lawsuits Mean to You

Class action lawsuits are those where a group of plaintiffs join together and file suit against another group entity such as a corporation. Class actions give these plaintiffs access to the legal resources such as class action lawyers necessary to go up against these powerful entities. Without this type of lawsuit, most would never be able to afford the retainers required for class action attorneys and have no remedy for recovering damages done to them.

How Are Class Actions Filed?

Class action lawsuits can be filed in courts at either the state or federal level. The first step in the procedure for this type of suit is to determine if it can be considered a true class action. In other words, the individuals in the plaintiff group, or class, should total 100 or more before the case can be considered a class action.

Defining the class is more than just counting the heads of plaintiffs. The judge must state the criteria required to be part of the class. For example, a large corporation gives false information about the turnover of its products (sales figures) and it is discovered. The consequence is a significant reduction in the value of the corporation’s stock thus leading to substantial losses for the investors. The investors file a class action lawsuit for punitive and compensatory damages against the corporation. The judge, in a case such as this, might define the class as those holding the corporation’s stock between a specific range of dates when it is believed the fraud occurred.

Once the class has been defined, the next step is to notify all plaintiffs included in it. Different types of media are used to do this such as mail, television, radio, and local newspapers. An individual member in a class is included by default so, along with the notification, instructions for opting out of the suit are given as well. An individual may believe that the extent of his damages warrants opting out so that he can file his own lawsuit against the corporation.

The class action attorneys representing suit are appointed by the judge. This more than likely will be the attorneys filing the suit. Nevertheless, the judge will weigh the experience, knowledge, and adeptness of the attorney in the area of class actions. A class action lawyer will work on a contingency basis and collect anywhere from 30 to 50 percent of the award.

Awards in Class Action Lawsuits

As mentioned before, awards in class action lawsuits can be divided into compensatory and punitive components. The compensatory component awards a monetary amount for direct damages caused by the corporation. The punitive component addresses the fact that the corporation was negligent either accidentally or willfully. All awards and settlements must be agreed upon by the judge and can be appealed.

Just about any corporation and class action lawyer would rather that a class action lawsuit be settled than go to a full jury trial. The reasons for this are because the amount that the corporation has to award may be less and the lawyers can get their percentage of the award more quickly.

Advantages and Disadvantages

The main advantage of a class action lawsuit is that it gives an individual a mechanism for recovering damages done by a large corporation. Few individuals have the financial means to wage a lawsuit against such a large entity but as a group they do. Since the class action lawyers are selected by a judge, the plaintiff party has access to those who are more experienced and who would be too expensive if retained on an individual basis.

Another advantage has to do with the number of lawsuits that a corporation has to deal with. In other words, if a corporation loses one large lawsuit, it could go bankrupt before it could pay an award in another individual case. By pooling all plaintiffs together, the award can be distributed among them and the lawyers fairly. Everyone gets their fair share.

Class action lawsuits are not without their disadvantages. One disadvantage is that if a corporation files an appeal, it can be a lengthy process and can make the plaintiffs wait an excessively long time for their award. Corporations have the access to legal resources that facilitate lengthy appeals.

Another disadvantage is that critics of class actions claim that class action lawyers will frequently rush to settle before a trial so that they can claim their fees quicker. The settlement may not be in the best interests of the class yet the class action attorneys receive a substantial fee.

Persons included in class actions may choose to opt out once they receive notification. As mentioned before, if a person does not opt out, he can never sue the corporation for the same breach on an individual level. Class action lawyers will advise on this. In spite of the nominal disadvantages, class action lawsuits are the most powerful tool available for going up against giant corporations and provide class action attorneys with valuable experience that will do them well in their legal career.