What is a Class Action Lawsuit?

What is a Class Action Lawsuit?

February 13, 2017

 

The Miller Law Firm is a national leader in class action lawsuits, particularly in the areas of securities law and automobile design. While most people have at least a basic idea of what a class action lawsuit is, we thought it would be helpful to answer the question directly.

Class Action Lawsuit: A lawsuit in which a group of people with the same or similar injuries caused by the same product or action file suit against the defendant as a group. Other names for class action lawsuits include “mass tort litigation” or “multi-district litigation” (MDL).

 

What is the purpose of a class action lawsuit?

A class action lawsuit is used when a number of people suffer the same or similar injuries as a result of the use of the same product or the same wrongful action. Because many individual injuries are not worth enough to support a lawsuit, when they band together, the value of the lawsuit adds up. That’s when a class action makes sense. Also, filing as a class allows for the consolidation of attorneys, evidence, witnesses, and other aspects of litigation to make the lawsuit more efficient.

The special federal rules governing class actions are found in the Federal Rule of Civil Procedure 23. Many states also have their own rules governing class actions filed in state court, most of which are modeled directly on the federal class action rules.

Examples of class action lawsuits include:

  • A group of employees subjected to discrimination,
  • A group of patients who were prescribed the same drug causing injurious side effects,
  • A neighborhood of residents whose homes or families were injured by a toxic spill,
  • Consumers who purchased a defective product, or
  • Investors who lost their savings due to securities fraud.

 

How many people do you need to file a class action lawsuit?

Although it may help if several people are named as plaintiffs in the suit, a single person is generally enough to file a lawsuit as long as the attorney for the class has a good faith belief that a number of other people were injured in a similar way.

 

How are potential class members found?

Every person who could be affected by the class action lawsuit has a right to be notified that a lawsuit has been filed. While it is not possible to notify every person affected personally, they are entitled to the best notice possible. Often this notice to unknown class members is by television, ads in magazines, newspapers or posted flyers. The court handling the case will tailor the type of notice to fit the facts of each case.

Once identified, the members are told that they can join the group in the lawsuit (called opting-in) or decide to go on their own (opting-out). Generally, if the action has been filed over specified injuries caused by a particular defendant, such as an airplane crash, all those affected are automatically part of the class and must live with the outcome.

 

What are the benefits of a class action suit?

A class action lawsuit is efficient because it collects and disposes of a large number of claims at one time. The judge hears from both sides, plaintiff and defendant, then decides who wins for the entire group. If the class of plaintiffs wins, the judge decides the amount of recovery, which is divided among the group. If the judge decides for the defendant, the lawsuit is over and the individual class members can’t bring a later lawsuit on the same issues.

Another benefit is that the class action assures that each member of the class receives something. The defendant may not have the resources to pay each one in full for their losses, however, they will receive some payment.

And, finally, because many small claims are grouped together, costs of the lawsuit are lower. Attorneys, like the members of the Miller Law Firm, that file or defend class action lawsuits are experienced and trained in managing complicated class action litigation, thus keeping costs under control.

 

How are class actions resolved?

Because of the complexity and expense of class actions relative to individual cases, very few class actions go to trial. Instead, if a class action is not dismissed by the judge, the parties almost always reach a negotiated resolution. But there are several additional steps before the case is truly resolved.

First, the judge must approve the proposed settlement to make sure that it is fair to the class members. This is especially important because the class members may be foreclosed from filing their own, individual actions once the settlement is complete.

Second, the court gives notice of the settlement and allows all who wish to be heard to state their opinion and approve or disapprove the settlement, including the amount of attorneys’ fees.

Third, if payment to the class members is ordered, the judge, using the information provided by the parties and their attorneys, will create a plan of distribution. The plan will distribute the amount won minus the attorneys’ fees and litigation costs. Each class member may receive a percentage of the total amount or a set dollar figure. The court may appoint an administrator to handle the claims of class members.

Class actions are complicated. Should you need more information, please contact Sharon Almonrode, head of The Miller Law Firm’s Class Action Practice Group, at 248-841-2200.

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