Is It Worth It to Sign Up for Class-Action Lawsuits?

You may have seen commercials on TV, ads on social media or fliers in the mail about financial compensation for experiencing problems with products and services, from prescription medications to car parts. These advertisements all apply to class-action lawsuits, which are collective lawsuits filed on behalf of a group of people — most commonly people who were wronged based on corporate actions, such as using a medical device that had unintended and unforeseen consequences.

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Many people wonder whether these mailers or advertisements are scams. And if they aren’t, do class-action suits even yield any sort of payout? Either way, you should know what you’re getting yourself into. Here are the pros and cons of getting involved in a class-action lawsuit.

What's a Class-Action Lawsuit?

A class-action suit is a specific kind of lawsuit in which a plaintiff files a case on behalf of a group of people, known as "the class," rather than a single person or entity. To participate, this group needs to have evidence that they were wronged or harmed by the actions of a defendant, but these cases are theoretically open to anyone meeting the requirements. Unlike a more traditional lawsuit, not everyone represented needs to be in court for the proceedings; only the lead plaintiff actually needs to appear for the trial. There's no minimum class size to initiate a class-action suit, but the larger, the better.

If the lawsuit is successful, the proceeds from the settlement, less the cost of legal fees, will then be distributed among the represented group. This can involve cash but may also take the form of services, such as credit monitoring in the 2017 Equifax data breach settlement.

Plaintiffs in class-action lawsuits are often contacted by email or mail or attracted by internet or TV ads that spread the message as wide as possible. In many cases, taking part in a class-action suit is the only way those wronged can seek relief, as it's far less expensive than suing as an individual.

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What Are the Pros of Joining a Class-Action Lawsuit?

In most class-action lawsuits, anyone qualified is permitted to take part, and there's no cost to do so. While this may seem counterintuitive, as legal cases can be expensive, the role of the class is used to support the plaintiff's claims, demonstrating the widespread need for a settlement.

In many cases, this is the only chance a regular consumer will have to seek restitution for a company's errors. The cost of filing individually can be prohibitively expensive, and the uniformity of a claim as supported by a class lends significant credence to the resolution of a lawsuit. This means a better chance of receiving a payout.

Further, the lawyers involved in class-action suits tend to be prominent and experienced professionals and are often better suited to seek settlements from big corporations than lawyers representing individual cases. This process is also generally more efficient, as it means one judge will be deciding the outcome rather than multiple judges across multiple smaller cases, decreasing the odds of variability in rulings.

While not necessarily a personal benefit, class-action suits also function as a way of reminding companies they can be held accountable for negligent actions. Small individual payouts for large pools of participants still mean costly consequences for businesses.

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What Are the Cons of Joining a Class-Action Lawsuit?

Since joining a class-action lawsuit is free, it may seem like a consequence-free endeavor. However, there are some potential downsides to be aware of before moving forward.

First, the payouts in class-action suits tend to be rather low, as the amount of a settlement is split among all participants. Even a high-value amount can mean piecemeal per person. For example, Google settled for $23 million in a 2013 class-action lawsuit, but the estimated payment per person was less than $8.

Once a class-action suit has been settled, that's it; participants aren't permitted to file again as an individual. This is important to note. If your injury was greater than that of other individuals in the class, you’ll still receive the same payout as them. Opting out and filing on your own may benefit you in this case.

Additionally, there's little opportunity to speak up as an individual during this kind of suit. The interests of the class as a whole are represented, usually based on what a lead plaintiff and the legal team decide. Individuals can choose to participate or not, but they usually have no say in what participation looks like, and progress tends to move slowly. Since these cases are large and cover a lot of ground, it can take a long time for a settlement to be reached. For example, the aforementioned Google case, which began in 2013, allowed eligible individuals to make a claim through July 31, 2023. While justice was eventually served, it took years to come to fruition.

Class-action suits aren't right for everyone, but participating can be more beneficial than risky. This is especially true for eligible parties who had no intentions of suing individually.