Navigating Class Action Lawsuits

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Class action lawsuits happen constantly and can include a great number of people. Faulty products or bad investments are just a few examples of legal cases that can lead to such large-scale lawsuits. For example, when defective Bridgestone/Firestone tires led to countless accidents and injuries, a federal judge in Indiana allowed the range of the class to include “all current residents of the United States who… owned or leased a 1991 through 2001 model year Ford Explorer as of August 9, 2000” [source: FindLaw].

Why We’re Asking:

We began to wonder about the advantages and disadvantages of being part of such a large collective group looking to get fair compensation. We invest in products to keep us safe, and medicine to keep us healthy. But sometimes, these items can fail to perform. When you end up injured or misled by a product or service, is it more advantageous to opt out of a class action lawsuit and sue independently or be represented by the qualified lawyer representing the larger class?

So it’s time to weigh in:

I got a letter inviting me to participate in a class action lawsuit. What do I do? Is it a scam?

What happens if I don’t respond to a class action lawsuit?

Do I have to pay anything to participate?

We’re excited to hear back from our legal professionals. Check back later in the week to see what advice they have to give about class action lawsuits!

Post your answers in the comment field below!

6 COMMENTS

  1. Generally, class actions can be helpful in righting small wrongs done to many people.
    A good example is bank fees that may be outside of the banking agreement. It adds up to millions of dollars but no one plaintiff could afford to pursue an individual claim of $15 – $20.
    However, class actions for individual harms done by a faulty product are better left to an individual lawsuit. The litigant doesn’t want a small claim lumped into his big claim as it diminishes the large claim.
    Often there is no choice if the court declares a class and lumps everyone together.
    It all comes down to individual choice. I usually advise against joining a class if the claim is large, but joining the class if the claim is small.
    Leighton Rockafellow, certified specialist, injury and wrongful death.

  2. Most class actions have trouble getting “certified” which means they cannot be pursued as class actions and that leaves the “class” members back where they started seeking their own lawyers to defend or enforce their rights. In the field of mortgage litigation nearly all class actions have failed to get certified. Mass joiner actions have not proven to be effective tools either.

    The second thing about class actions is that for really large class demographics, besides the certification question, is that the results seem to favor the attorneys more than the class members. But the caveat to that is that many of the class members might otherwise not have the resolve or resources to fight on their own so any remedy obtained through the class action might be better than they would have obtained by doing nothing.

    The larger the claim, the less likely you are to get a satisfactory result in a class action. In the case of mortgage or foreclosure litigation, the government is doing a better job at class actions but the results in “Settlements” have produced dubious benefits to the actual homeowners are generally viewed as people whose eyes were too big for their pocketbook when in fact they were hard sold and coerced into taking deals they didn’t understand. These facts tend to be different for each homeowner, which is why it is so hard to get the class certified.

    Several individual lawsuits or groups of lawsuits litigated by individual defendants are having a “class” effect in that they are pointing the way to better remedies and strategies in consumer loans, mortgage loans and related financial services. It seems wise then to keep track of cases in your state and in other states where favorable decisions are rendered that closely track your facts.

    In the end, you are more likely to obtain a satisfactory result if you pursue individual remedies in individual lawsuits unless there is no hope of recovery of attorney fees recovery. Then you must measure the economic damage you suffered against the probability of success and the extent to which you might succeed.

    Remember that all litigation involves highs and lows during the progress of the suit and that it is emotionally draining to be involved. A decision to pursue your rights would be just as correct as saying it isn’t worth it to you to go through the hassle of seeking legal remedies. In foreclosure we hope that most people decide to fight, because (a) they are right and (b) it will help hundreds of others. But the rule still applies: it is a personal decision to be made on your personal circumstances.

  3. We began to wonder about the advantages and disadvantages of being part of such a large collective group looking to get fair compensation. We invest in products to keep us safe, and medicine to keep us healthy. But sometimes, these items can fail to perform. When you end up injured or misled by a product or service, is it more advantageous to opt out of a class action lawsuit and sue independently or be represented by the qualified lawyer representing the larger class?

    Answer:

    Like everything in life, there are pro’s and con’s of joining a class action. Primarily the key differentiator seems to be the type and extent of the injury you’ve sustained. So, if the defendant is a Company who caused a very small amount of damage to each individual – but if you add the damage up the dollar value is great – that’s the type of class action where it wouldn’t pay for you to have your own lawyer so joining the class is probably your only option. Also, if the injury you’ve suffered is pretty much the same as others, and the facts needed to be proven are the same as for others, then the class action may be preferable. (I discuss why below). However, if the injury you’ve sustained as a result of the company’s wrongdoing translates into a lot of money and the facts needed to prove your injury are specific to your situation only, then opting out of a class and having your own personal advocate who will argue the specific facts of your case, may be preferable.

    On a more detailed level…here are the pro’s of being part of a class:

    A lawyer who represents an entire class is looking to earn a substantial amount of money so they have to be at the top of their game. Usually what happens is that several lawyers represent similar plaintiffs and then they get together to ask to have their case “certified” as a class action – or the matter litigated in one trial in front of one judge. This will be granted if the facts needed to prove liability are substantially the same amongst all the plaintiffs because it leads to greater efficiency (ie you only have to pay an expert once, documents are produced only once, only one judge has to hear it all, etc.) Lawyers then choose amongst themselves who will represent the “class.” Generally the lawyer who has the greatest expertise, financial wherewithal and standing is the one who is “voted” to represent the class by the rest of the lawyers. So that person is probably the best representative you can find. Further, these matters can be very costly with expensive experts, market studies, product analysis, etc. In a class action, all those costs are shared over many plaintiffs instead of being put on the shoulders of one person. Once a recovery is obtained, the lawyers then fight amongst themselves over the value of their claims for distribution. In the case of some class actions, the company agrees to give each plaintiff something such as a credit, gift certificate, sum of money. In those cases everyone gets the same recovery. I remember once getting a $50.00 gift certificate from Cartier (which could not be used for watch repairs). So since their cheapest item was over $1,000.00, I figured this was the equivalent of getting a maximum of 5% off any purchase I might make. Since I was not in the market to purchase expensive jewelry, it was literally worthless to me. However, the lawyers made a whole lot of money on that case! (Note: in 2005, changes in the law provided for independent review prior to judicial approval to insure the consumers equally benefit from the terms of the agreement).

    The following are the cons of being part of a class action:

    Class Action lawyers make concessions for the good of the whole. Those concessions may be in the best interest of one individual as opposed to another. Likewise, parties can engage in individual or small group discussions with the defendant exacting a good deal for their clients but not a good deal for those who are on the outside of that group. Class action lawyers try to work together because most of them understand the concept of “United We Stand, Divided We Fall” but others may try to put their own interests or those of their client before other lawyers and clients. They may also get pressure from their clients to act in a manner which is not uniform. In those cases one runs the risk of recovering substantially less than others in the class. It’s the job of the lead litigator in a class action to try to “herd cattle” if you will. Try to work out the best deal for the good of the whole and then try to get all the lawyers to buy into it. That is not always easy so infighting can ensue to the betterment of some, detriment of others. Another aspect of the dilemma is that some people in the class may have interests which are not the same as other members. Being treated all the same may give some members a bigger benefit and others a significant handicap. In general, the concept is a more socialist form of cooperation – there will always be some who gain an unfair advantage but on the whole results should be fairly uniform and far more cost effective for the individual.

    Now, there are some times when lawyers would like to have their matter certified as a class action but the Judge refuses to grant certification (ie does not allow the cases to be tried together). In that case, all individuals must retain their own lawyers. This can be very difficult as individual lawyers may be unable to bear the burden of the high cost of litigation if they each have to go it on their own. In some cases lawyers can still share information, research and experts but most have to be duplicated. This is why many Companies oppose class certification. If each case has to pay for their own costs of litigation, many will not pursue the case because either the costs are too high or the recovery is too small. A few years ago, in a discussion with Professor Deborah Hensler at Stanford, she opined that class certification was on the decline. I haven’t seen any recent numbers but if that’s the case, it could certainly account for why the number of people who actually pursue litigation is so minor in comparison to the number of people sustaining injuries.

    I got a letter inviting me to participate in a class action lawsuit. What do I do? Is it a scam?

    While letters are in fact the manner in which lawyers reach out to potential plaintiffs for class actions, there are always unscrupulous people on the internet looking to take advantage of an otherwise legitimate request and turn it into an event to steal money from people. First, whatever you do, do not pay anyone money. Class action outreach is done to determine who should be included in the plaintiff class – not to ask for money from people to participate. Second, a few clicks on the internet should assist in the “smell test.” Look up the name of the law firm on the internet. Look at the biography of the law firm and the lawyers involved. Then go to the state bar for the state in which the lawyer operates and check his/her license and if it’s in good standing. Then look at the phone number/address information on the State bar records and confirm that you are calling/writing to the same law firm/lawyer. And again, remember, do not send money!

    What happens if I don’t respond to a class action lawsuit?

    Nothing happens if you don’t reply to the class action immediately – however, all matters have filing deadlines by which a claim must be filed. If you don’t join the class or retain a lawyer to represent you on your own in time, you will be prevented from moving forward with a claim. Some circumstances may warrant an exception to the filing deadline – but it would be an uphill battle that you would probably lose unless your reasons are very valid.

    Do I have to pay anything to participate?

    NO, you should not have to pay anything to participate!

  4. My California law firm has exclusively specialized in class actions nationwide for over 22 years. Q: “I got a letter inviting me to participate in a class action. What do I do?” A: In the US, if a case is certified as a class the court, not the parties or counsel, sends notice to the affected class members. The notice explains your rights. You are automatically included in the class, and your rights will be adjudicated, unless you affirmatively “opt out”. If you opt out, usually by sending a postcard or email to a given address, your rights will not be effected, but you will receive none of the settlement or winnings if the case is successful.

    Class notices are almost never scams. But remember that legitimate notices never ask you for money or confidential information.

    The preceding posts have addressed whether you should opt out or stay in. Generally, where a lot is at stake, e.g. more than $10,000, if might be worth it to opt out. But if the amount at stake for you is small, a class action is the only economically viable remedy and you should not opt out. You will have to file a claim to get your share of settlement proceeds. Typically, a neutral Claims Administrator is appointed by the court to administer the claims process and you can contract them via their toll-free numbers to inquire about specifics.

    “What happens if I don’t respond?” Typically, you will not receive any of the settlement and your rights to bring a separate claim will be extinguished.

    “Do I have to pay anything to participate?” No. Never. If anyone asks you for money or confidential information (such as your full social security number or credit card information) to participate in a class action, it is not really a class action, but a scam.

    In addition to the class notice, there are often case-specific websites set by for class actions which make the settlement documents and other information available for you. You can also contract the class counsel appointed by the court to represent the class for more information.

  5. Class action lawsuits are a powerful tool for protecting consumers from unfair, dangerous or illegal business practices. Class action lawsuits have led to mandatory vehicle airbags, lead-free paint, asbestos-free building supplies, restricted cigarette advertising and much more. By giving consumers the power to fight large businesses and other groups, it’s possible to leverage the legal strength of many people for a united cause.

    While class action lawsuits can be found in legal systems around the world, they are mostly a U.S. phenomenon. Lots of people receive email, postal, television, radio and phone advertisements about class action lawsuits that are underway. However, it’s important to weigh the pros and cons before joining a class action lawsuit.

    By aggregating a large number of lawsuits into a single case, plaintiffs in a case can hire better lawyers, paralegals, expert witnesses and other professionals. In addition, lawsuits give private individuals better lobbying power through collectivization.

    By aggregating a large number of people in a single case, it’s possible to significantly increase the efficiency of a lawsuit and its legal process. This can help lower the per-person cost of litigation. In addition, class action lawsuits can reduce repetitive exhibits and witnesses that may remain the same in similar trials. Since the cost of a lawyer and other legal professionals can be very expensive, a lawsuit can also improve per-person recovery rates in a case. If a defendant engages in practices that result in widespread harm, a class action lawsuit ensures that plaintiffs will receive compensation for their claims.

    Class action lawsuits are also a powerful incentive for companies. By litigating against practices that lead to public harm, class action lawsuits can create a safer, healthier society. In addition, trying a large number of similar cases under a class action lawsuit ensures that the legal outcome is the same for all cases. If plaintiffs bring a lawsuit against a defendant on their own, different plaintiffs may receive different rulings from the legal system.

    While lawsuits are a powerful tool for plaintiffs with a justified grievance, they do have several significant downsides. In the past, some abusive class actions have lead to poor results for both plaintiffs with a justified grievance and defendants with responsible practices. Aggressive class action lawsuits can increase business costs, reduce intrastate commerce and reduce the credibility of the legal system.

    In some class action lawsuits, class members receive no financial compensation for a favorable ruling. Since attorney fees can consume a significant amount of any class action reward, many consumers find themselves with low-value vouchers or coupons for their grievance. In addition, plaintiffs may receive unjustified rewards at the expense of class members.

    In 2005, the United States passed the Class Action Fairness Act. If a class action lawsuit will lead to a low-value coupon settlement, the settlement must be reviewed by a neutral third party. This ensures that class action members receive something of value for a ruling in their favor. In addition, this act ensures that class action attorneys in these cases must receive coupons instead of liquid assets for a ruling in their favor.

    Before joining a class action lawsuit, always research the amount of compensation one will receive from a case. In addition, it’s essential to avoid joining a class action lawsuit unless one has a justified grievance. If an individual joins a class action without a justified grievance, he or she may be exposed to liability if the court rules in favor of the defendant.

  6. What do I do? Is it a scam?

    Typically it’s not a scam. You should read the letter carefully. Most of the
    time you’re not required to do anything. If you do nothing you normally “opt
    in” and will automatically receive the benefits of the settlement. However
    some settlements require you to provide information to calculate your
    settlement amount, so it’s important to thoroughly review the notice and
    consult with an attorney if you don’t understand it.

    What happens if I don’t respond to a class action lawsuit?

    Typically if you don’t respond to the notice you have “opted in” and will
    receive the benefits of the settlement. However as I mentioned above, some
    settlements require information or confirmation from you, and you could be
    excluded if you don’t respond as requested or in a timely manner. Thus it’s
    critical to carefully read the notice and get legal help if you don’t
    understand it.

    Do I have to pay anything to participate?

    You should never have to pay anything to participate in a class action. The
    settlement usually provides for fees for plaintiffs’ class counsel, so you
    as an individual class member shouldn’t have to pay anything. Be very
    suspicious of any mailer that asks you to pay money to participate in a
    class settlement.

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