People who are considering participating in a class action suit should consider the benefits and drawbacks of this type of lawsuit to determine whether joining would be in their best interests. Class actions are often pursued by injury victims and consumer organizations where multiple people are injured.
Understanding Class Actions
In a class action, a plaintiff files a lawsuit on behalf of a collective group or class of people or absent parties. The lawsuit can be filed against a single defendant or multiple defendants. Class actions typically involve large groups of people, 40 or more, who have been injured by a defendant/defendants in the same manner. Rather than each injured party bringing his/her own lawsuit, class actions allow injury claims against all parties to be settled in court with one lawsuit, even if some parties are not aware they have been injured.
In class actions, the plaintiffs do not have to be present in court. Class action lawsuits have an appointed class counsel and a representative plaintiff. In the U.S., most class actions are filed in civil court. However, class actions in U.S. district courts are regulated by federal laws that fall under the Class Action Fairness Act of 2005 (CAFA). Under this act, any class action with damages greater than $5 million can be moved from civil court to federal court.
Class actions are the most common type of lawsuit that involves multiple plaintiffs in the U.S. civil and federal court system. However, there are other ways in which large groups of people can bring lawsuits against one or multiple defendants:
Multi-district litigation allows multiple plaintiffs to consolidate certain court proceedings used to answer questions or state facts, such as evidence discovery and pretrial motions. However, in multi-district litigations, all plaintiffs must file individual lawsuits, rather than one lawsuit on behalf of a group like in class actions.
Mass Tort refers to any civil action lawsuit where multiple parties have been harmed by some type of personal injury. Common mass tort cases involve injuries from consumer products like over-the-counter drugs, prescription medications, defective medical devices, and defective consumer products. Mass torts can take the form of class action lawsuits or multi-district litigations.
Advantages and Disadvantages
The biggest advantage of a class action is that a large number of individual claims can be aggregated into one lawsuit. This increases the efficiency of the legal process and reduces the costs of litigation. Since most class action lawsuits don’t involve exhibits and witnesses, court time can be reduced. Most class actions only involve the presentations of facts and addressing questions about those facts.
The costs of filing an individual lawsuit with a personal injury lawyer can be significant, especially if there are delays and/or appeals. Since class actions aggregate claims and potential recoveries for damages, payouts to plaintiffs are divided up. If damages are awarded by the court, individual plaintiffs receive a portion of the total without ever going to court. For example, when thousands of individuals suffer injuries from using the same medical device or taking the same drug, it’s unlikely that all of those people will file individual lawsuits for various reasons. A class action lawsuit can be brought on behalf of all of those people who suffered injuries. Additional costs for punitive damages may be awarded.
In some cases, class actions result in very small awards or no awards at all. When class action lawsuits involve major manufacturers or large corporations, attorney’s fees are significant. If the cases are won, the attorneys who handled the case receive a large percentage of winnings right off the top. This leaves the thousands of individual plaintiffs with little or no money after the remaining money is divided up.
In the U.S., class action lawsuits often bind all class members with low settlement offers such as a small check or a coupon for future products or services from the defendant. In most cases, class members can opt out of the class settlement. Low settlements and opt-out features are ways for defendants to keep people from filing future litigation against them. Many people who are part of class actions are unaware of their rights, because they don’t receive notices in the mail, don’t read their notices, or don’t understand the complex language.
The Class Action Fairness Act of 2005 addresses low settlement offers in class actions. In some cases, settlements and offers are scrutinized by independent experts before judicial approval is given. This ensures fair settlements to class members. If coupons are offered for a defendant’s products or services, attorneys’ fees are weighed against the value to class members of the coupons that are redeemed.