How Do Class Action Lawsuits Work?

Class action lawsuits promote judicial efficiency by grouping similarly situated people into a single lawsuit. Lawyers use class-action lawsuits in many situations in which the harm from a defendant’s conduct spreads across several plaintiffs.

In this article, we will cover some of the basics of the ways class action lawsuits work.

What is a Class Action Lawsuit?

A class-action lawsuit happens when a court certifies a class of people to bring a lawsuit as a group, rather than as individuals. Under the law, a group of people must meet four requirements for certification for a class action:

• A numerous class
• A common question of law or fact
• Typical claims or defenses that apply across the class
• Adequate protection for the interests of the class

These requirements ensure that the court can clearly define the class and ascertain membership in the class.

Examples of Class Action Lawsuits

Class action lawsuits often happen when a product or service has harmed the public. Some examples of class action lawsuits include:

• Toxic exposures
• Securities fraud
• Defective products
• Data breaches
• Consumer fraud

For example, a judge might certify a class action lawsuit if hackers were to steal millions of credit card numbers from a retailer’s computer system. The class members share the same question of law — whether or not the retailer was negligent in securing the customers’ financial information.

Effects of Class Action Lawsuits

A class representative leads the class action lawsuit; that class representative’s claim gets litigated in court. If the class representative’s claim leads to a damage award or settlement, the entire class shares the compensation recovered.

The benefit of a class-action lawsuit for members of the class include:

• No need to hire a separate lawyer
• Share in the recovery without proving damages
• Not required to prove anything except membership in the class

The drawbacks of a class action for members of the class include:

• Share of recovery might not cover actual damages
• Everyone gets an equal share of damages, regardless of actual loss

For some people, these drawbacks can persuade them to opt out of the class. If they do so, they cannot share in the recovery. However, they can file and pursue an individual lawsuit against the defendant to receive damages tailored to their cases.

To discuss the benefits and drawbacks of initiating or joining a class action lawsuit, contact Shrader Law, PLLC, for a free consultation.