A class action lawsuit is a civil legal action in which one or more individuals sue a person or entity on behalf of a larger group or class of people. Class action lawsuits are commonly used to address situations in which a large number of individuals have been injured or wronged by the defendant in the same manner. For example, a large number of individuals injured by taking a harmful medication may join in a class action lawsuit against the drug manufacturer. To explore this concept, consider the following class action lawsuit definition.
Definition of Class Action Lawsuit
- A civil lawsuit pursued by one or more plaintiffs on behalf of a larger group of plaintiffs who have a common claim.
What is a Class Action Lawsuit
A class action lawsuit enables plaintiff or an attorney to assert the rights of a large group of people in situations in which no individual party has a great enough economic advantage to bringing a lawsuit. By bringing the common interests of a large group of people before the court, a social service may be served by drawing attention to, and receiving compensation for, a great wrong committed against many people.
A class action lawsuit may be pursued in circumstances in which separate, “piecemeal” lawsuits might result in erratic, unequal results, whether settlements or judgments, imposed on the defendant. In addition, class action suits are used in situations in which multiple separate lawsuits against the same defendant might impair the ability of other class members to protect their interests.
Class Action Settlement
A class action settlement is an agreement between the plaintiffs and the defendant after having worked out the issue outside the courtroom. Commonly, the defendant in a class action lawsuit offers the plaintiffs a settlement amount, which the plaintiffs can accept as full compensation, waiving their rights to sue in the future. The monetary amount and other terms of a settlement may be negotiated for some time before an accord is reached. Although the plaintiffs have sued the defendant as a group in a class action, the lead plaintiff bears the responsibility of accepting or rejecting a class action settlement.
It is important for members of the plaintiff class to understand that any settlement offer accepted must be split between them, usually after the attorney takes his percentage plus “costs.” Costs often include everything from photocopies and postage costs, to filing fees, fees paid to expert witnesses, court reporters for depositions, and other costs. It is a good idea for the lead plaintiff, responsible for accepting or rejecting the offer on behalf of the group, to request a detailed accounting of their attorney’s costs to date, as well as the number of class members, to help determine whether a settlement offer is fair.
Class Action Fairness Act of 2005
Over the years there has been some concern over the potential for abuse in class action litigation. As a result, Congress has enacted certain legislation to help limit such abuse. These include the Private Securities Litigation Reform Act of 1995, which was designed to limit frivolous class action lawsuits in securities transactions, and the Securities Litigation Uniform Standards Act of 1998, which governs class action lawsuits regarding securities fraud.
The Class Action Fairness Act of 2005 is Congress’ answer to the abuse of class action lawsuits in which plaintiffs and defendants reside in different states, and the amount of damages sought is very large. The Class Action Fairness Act gives jurisdiction to the federal court system in any class action suit in which there are 100 or more plaintiffs, where any of the class of plaintiffs lives in a state different from any defendant, or the amount of damages sought exceeds $5 million. The Act also instructs the court to closely scrutinize settlements in class action suits, especially those involving corporate defendants.
The purpose of the Class Action Fairness Act of 2005 was to protect both sides of such large class action lawsuits by:
- Eliminating “forum shopping” in which plaintiffs seek to file their lawsuit in a state most friendly to their cause. This is accomplished by mandating federal jurisdiction over class action lawsuits with “out-of-state” defendants.
- Requiring high level scrutiny of the terms of every class action settlement. This includes ensuring the attorney’s fees charged to defendants are not excessive relative to the benefits offered to the plaintiff class members.
The need to closely review proposed settlement agreements in these cases came as a result of cases in which attorneys for the defendants received fees amounting to more than the defendants themselves actually obtained from such settlements. Such as the infamous case against the Bank of Boston in the Alabama state court in which the defendants, after their settlement had been approved by the judge, were shocked to discover that, not only did they not end up with money in their pockets, but actually owed their attorneys because their fees exceeded the recovery amount for the lawsuit.
How to Start a Class Action Lawsuit
It doesn’t take a large number of people to start a class action lawsuit. In fact, a single person stepping forward to represent the many who have been harmed in the same way by the same defendant, is all it takes. The person initiating such a lawsuit is referred to as the “lead plaintiff,” or “class representative,” on the court documents, and is the person who gets the legal ball rolling.
The lead plaintiff hires an attorney to represent the plaintiff class, and works closely with the attorney throughout the proceedings, including attending hearings. This means that the lead plaintiff must be willing to make a big time commitment to the lawsuit. Although the lawsuit is undertaken to represent the interests of multiple plaintiffs, possibly thousands in large cases, only the lead plaintiff can approve or reject any settlement offer made by the defendant.
Inviting Other Plaintiffs to Join
In some class action suits, the identity of everyone who might have a claim against the defendant is known, for example, every female employee discriminated against by a defendant employer. In other cases, it may be necessary for the lead plaintiff or his attorney to advertise to inform people who may have been harmed by the defendant that the lawsuit is taking place, and that they can join if they desire.
Attorney’s Fees in a Class Action Lawsuit
Attorney’s fees in a class action lawsuit in which monetary damages are sought are generally paid out of the amount awarded by the court, which is put into a “common fund” for the benefit of the plaintiffs. Most attorneys charge a percentage fee, usually 25-35 percent, which comes off the top of the settlement or award. It should be noted that whatever costs have been incurred by the attorney in pursuing the case are then charged to the common account, after which the plaintiff clients split what is left.
If the class action lawsuit was pursued to obtain injunctive relief, or a declaratory judgment, the attorney is usually paid by the plaintiffs who hired him, or may be paid by the defendant if he wins the case, and the court orders it.
Are the Attorney’s Fees too High
While recent years have seen growing concern over abuse of the use of class action lawsuits, some examples of questionable attorney’s fees leading the charge, the trust is that attorneys who take on class action lawsuits do a lot of work, often over an extended period of time. It is true that, in some cases, the attorney receives compensation that far outstrips the sum received by any one class member, though the total awarded to the class members as a whole exceeds his fees by many times.
Most class members consider this to be a fair price to pay for being given the ability to seek damages in a situation in which their sole claim would have been given no notice by the defendant. For example, when Alma is cheated out of $100 by a new policy at her bank, she knows it is terribly unfair, and likely to cost many people $100. While Alma would be unlikely to find an attorney to represent her in her $100 claim against her bank, if she is joined by 1,000 other bank customers who have been similarly cheated out of $100, the case becomes worth taking on. This gives the group, rather than each individual, the power to take on the mighty bank, in an attempt to effect change.
Filing a Class Action Lawsuit
The actual filing of a class action lawsuit is much like filing any other civil lawsuit. The plaintiff must first determine which court has jurisdiction to hear the matter, which can be tricky if the plaintiffs and defendant are in different states, the number of plaintiffs is expected to be more than 100, or if the amount of damages sought is very high. The complaint and summons are then filed in the correct court, and served on the defendant. While actually filing the class action lawsuit is not a complicated matter, the lawsuit as it progresses is sure to become a complex endeavor which requires the aid of an experienced attorney.
Related Legal Terms and Issues
- Civil Lawsuit – A lawsuit brought about in court when one person claims to have suffered a loss due to the actions of another person.
- Damages – A monetary award in compensation for a financial loss, loss of or damage to personal or real property, or an injury.
- Declaratory Judgment – A judgement made by a court determining certain rights of a party without ordering any action to be taken, or ordering any damages.
- Defendant – A party against whom a lawsuit has been filed in civil court, or who has been accused of, or charged with, a crime or offense.
- Expert Witness – A witness possessing training, education, skill, or experience in a specific subject, that is beyond that of the average person, who is allowed to give an opinion at trial.
- Forum Shopping – The practice of a litigant seeking to have a legal case heard in a court that might treat his case most favorably
- Injunctive Relief – A court-ordered act or prohibition against an act or condition.
- Plaintiff – A person who brings a legal action against another person or entity, such as in a civil lawsuit, or criminal proceedings.