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What Is A Class Action Lawsuit
A class-action lawsuit is a civil lawsuit where one person or one entity acts as the representative of a group of people and entities that have suffered damages or injuries caused by the same defendant.
In essence, when many people have been wronged by the same defendant, instead of each injured party having to file a separate and independent lawsuit, the injured parties can unite and together file one civil lawsuit to resolve their common dispute.
A class action lawsuit is a type of lawsuit allowing plaintiffs who have typically suffered damages but are too small to justify filing a full-blown lawsuit or who do not have the means to file a complaint against the defendant.
However, when these individuals act as a group, they have the opportunity to hire a common attorney (and law firm) and prosecute the defendant in a practical and cost-effective manner.
Why File A Class Action Lawsuit
Class action lawsuits are filed mainly because they give plaintiffs a better chance to prosecute the defendant for damages suffered.
For example, if many consumers suffered $100 worth of damages by using a defective product, this amount of damage will not justify the consumer filing a lawsuit against the company responsible for the defective product.
However, if 1,000,000 consumers having suffered $100 in damages file a lawsuit against the defendant company, now you have a real civil lawsuit where the plaintiffs have a true chance of prosecuting the defendant and getting compensation.
If the defendant loses the case, they are immediately exposed to damages evaluated at $100,000,000, not to mention any punitive damages that may be awarded by the court.
Benefits of Class-Action Lawsuits
Although each plaintiff has the right to file an independent lawsuit for damages suffered, in some cases, there are important benefits to filing a class-action lawsuit.
One Legal Proceeding
The first benefit is that a class-action suit is more practical for the plaintiffs as they will have to deal with one legal proceeding, hire one expert, present one set of evidence, and testify with one set of witnesses.
Plaintiffs May Recover Smaller Damages
Another reason for moving forward with a class action lawsuit is when there are many plaintiffs injured but the injuries for each plaintiff were very small which would not justify a lawsuit for each individual plaintiff.
Plaintiffs Have Better Ability To Recover Damages
From a recovery perspective, going forward with a class action will be better for plaintiffs as they can all hope to get something from the recovery.
However, if plaintiffs file independent lawsuits, the first few plaintiffs that win and get a judgment may fully recover their damages and there will be no money left for the others in case the defendant no longer has the ability to pay.
More Practical For The Court To Manage
Furthermore, dealing with one lawsuit is more practical for the courts and certainly cheaper for taxpayers who are funding the court system.
With one lawsuit, the court will only have one judge to dedicate to the matter instead of having multiple judges, multiple court hearings, multiple cases dockets with essentially the same type of documents and evidence deposited, and so on.
Leveling The Playing Field For Plaintiffs
From a litigation strategy point of view, dealing with a class-action lawsuit will also place the plaintiffs on a more level playing field against the defendant.
If the defendant is a large multinational corporation with the financial means to fight in court, having a class-action lawsuit will bring the defendant to be more inclined to potentially settle as losing the case in court can be very costly.
Class Action Lawsuit Criticism
Although there are important benefits for the plaintiffs and the court system to handling a matter as a class action lawsuit, there are also many critics on the topic.
The first type of criticism put forth is that some class actions are abusive and actually harm a member’s legitimate legal claim, as indicated in the Class Action Fairness Act of 2005.
As a result, many plaintiffs may join a class action lawsuit, but their legitimate legal claim is not adequately dealt with.
Another important criticism against class action suits is that the lawyers and law firms that handle such cases get paid outrageous amounts of money consuming a large part of a settlement or an award.
Consequently, little to no money will be effectively left for the class members to compensate them for their injuries.
Finally, critics say that there are many class action lawsuits where the attorneys and law firms have the interest to get paid for their services and may accept settlements that may not be adequate for all class members.
Types of Class Action Lawsuits
Let’s look at what types of class action lawsuits plaintiffs may file so we can better understand the meaning of class-action lawsuits.
In essence, the causes or issues underlying class-action lawsuits can vary.
In other words, the court can authorize any type of civil lawsuit to proceed as a class action when there are many plaintiffs that suffered the same injuries or damages and have the same cause of action against the defendant.
However, in most cases, class action suits will fall into five categories:
- Securities class actions
- Product liability class actions
- Personal injury class actions
- Consumer class actions
- Employment class actions
Let’s look at each of these quickly.
Securities Class Action Lawsuit
Securities class actions typically deal with investors that have lost money dealing with a common defendant.
Product Liability Class Action Lawsuit
Product liability class actions deal with injuries caused to a number of individuals by a defective product.
Personal Injury Class Action Lawsuit
Personal injury class actions relate to an injury caused to many individuals by the same defendant such as in a mass disaster.
Consumer Class Action Lawsuit
Consumer class actions are lawsuits filed by consumers against companies that have violated the law, scammed consumers, or harmed them fraudulently.
Employment Class Action Lawsuit
Employment class actions are employees filing suit against the same employer for various types of employer wrongdoing.
Class Action Procedural Steps
To file a class action lawsuit, the first thing that must be done is to ensure that there are many plaintiffs that have suffered an injury or have suffered damages from the same defendant.
If that was the case, one or few plaintiffs will need to hire a law firm that specializes in class action lawsuits so they can start putting the case together.
Once the law firm investigates the matter and believes there’s enough evidence to justify a class action lawsuit, the next step is to formally file the complaint against the defendant on behalf of the entire proposed class.
Once the complaint is filed, the next step is for the court to certify the lawsuit for the benefit of the proposed class.
This is a step where the court evaluates the legal claim against the defendant by the plaintiffs, considers that there’s merit in allowing for this action to proceed in the form of a class-action lawsuit, determines that the class of plaintiffs is sufficiently large, assigns a lead plaintiff, and renders other relevant orders.
Notice to Class Members
Once the court authorizes the class action lawsuit, the next step is to send a notice to all the class members allowing them to opt-in or opt-out of the lawsuit.
Then, the lawsuit will formally engage against the defendant where the plaintiffs and defendants do what’s necessary to gather evidence, prepare expert reports, and do what they feel is necessary to win their case.
Settlement or Award
Eventually, the class action lawsuit can either be settled or the matter goes to trial.
At trial, the court can reject the plaintiffs’ claims or can issue a judgment awarding the plaintiffs compensation of some kind.
Distribution To Class Members
If a settlement is reached or the court awards damages to the plaintiffs, the law firm will then need to distribute the damages to each of the plaintiffs who are part of the class.
What Is The Legal Definition of A Class Action Lawsuit
Legally speaking, a class action lawsuit refers to a procedural device allowing one or more plaintiffs to file a lawsuit on behalf of a group of plaintiffs having a substantially similar cause of action and having suffered similar damages by the same defendant.
When one person or company represents a group of plaintiffs, we refer to that group of plaintiffs as a “class”.
In essence, a “class-action” lawsuit is one lawsuit allowing the court simultaneously resolve the legal issues for many plaintiffs at once rather than dealing with each of the plaintiffs’ cases individually.
For example, imagine that a pharmaceutical company causes personal injuries to hundreds, or even thousands of people, by selling drugs that resulted in severe physical impairments or harm.
Instead of having thousands of plaintiffs file separate lawsuits, they can all get together and file a class-action lawsuit against the same pharmaceutical company all at once.
This will allow the injured plaintiffs the opportunity to prosecute the defendant once, present one set of evidence, present one expert, go to trial once, and get one settlement or one judgment.
This is more practical for the plaintiffs as they only deal with the matter once and resolve the damages caused to thousands and it’s practical for the court as they do not have a thousand small civil lawsuits that get filed.
What Is Class Action Lawsuit Takeaways
So there you have it folks!
What does class action mean in simple terms?
A “class action lawsuit” refers to a civil lawsuit where a group of people, having suffered damages in a similar manner, file a single lawsuit seeking compensation against the same defendant.
Dealing with a class action lawsuit will allow the litigation to proceed in a quicker and more cost-effective manner.
Also, since most class action lawsuits target large corporations having significant budgets to defend themselves against lawsuits, having many plaintiffs unite and deal with their cause of action as a group allows for a more leveled litigation playing field.
A famous example of a class action lawsuit that was filed is when investors filed one against Tesla following Elon Musk’s tweets about taking the company private for a share price of $420.
Investors argued that Elon Musk’s tweets artificially brought up the Tesla stock prices thereby causing damages to investors in general, particularly short-sellers and those who had bet that the stock would go down.
Now that you know what are class action lawsuits, good luck with your research and investigation.
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Understanding What Is A Class Action Lawsuit
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