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Class Action Lawsuits: Everything You Should Know

Class action lawsuits can be one of the most effective ways to hold negligent parties accountable in the American justice system. Yet, since they involve many people and can take time, they receive an unfair amount of negative scrutiny. This is mostly because class actions have developed a reputation for dividing results between all participants.

While this is true, what many people don’t realize is that a class action might be the only way they can get any compensation for an issue. Class actions are designed to help people join and secure results when it would’ve been essentially impossible for them to get them separately.

If you’re wondering about class action lawsuits, this post is designed to answer some of the most common questions people have about them.

Have questions about your potential class action lawsuit? Call Arnold & Itkin LLP now at (888) 493-1629 to have your questions answered during a free consultation. We’ll consider your situation and help you decide what steps you should take next.

What Is a Class Action Lawsuit?

Simply defined, a class action lawsuit is when a group of individuals file a lawsuit against a party or multiple parties accused of the same thing. Many people don’t realize that class action lawsuits make legal actions that would be otherwise difficult or impossible to file a reality.

For example, if a company knowingly produced a product worth $50 that was defective, every consumer who purchased that product would be affected. If the company refused to make things right, a person would likely have trouble filing a lawsuit individually. This is because the cost and time requirements to file a case would far outweigh its $50 benefit.

Yet, companies shouldn’t be allowed to get away with producing a faulty product simply because it doesn't negatively impact individuals enough. This is where class action lawsuits become important. While not powerful alone, people can consolidate their claims into one case—increasing its value and the practicality of taking it to court.

In short, class action lawsuits make justice for a group of people possible when it otherwise would’ve been difficult or impossible for them to obtain it individually. A class action most often involves one party behaving negligently or dishonestly in a way that affects multiple people, but can also name multiple defendants. 

Class action lawsuits might involve:

How Do Class Action Lawsuits Work?

As mentioned above, a class action lawsuit is a great solution for a group of people who’ve suffered individual losses from the same source. By combining the value of their claims, participants in a class action lawsuit can use strength in numbers to hold a negligent party accountable.

Generally, a class action lawsuit starts by notifying every potential participant of their ability to join one. Once notified, a person has the option to join the class action lawsuit. Once they’ve joined the claim, it’s unlikely that they’ll need to take any more steps until a settlement or verdict is reached by the legal team working on the case.

How Much Does It Cost to Join a Class Action Lawsuit?

It costs nothing to join a class action lawsuit. The only thing a person needs to consider if they’ve been notified of their eligibility to join a class action is if they should file their claim individually. In some instances, a person might not be aware that they have a claim until they receive notification of a pending class action lawsuit.

If their damages exceed the losses of others in the class action, a person might want to consider opting out of a class action to file their own case. This is important to remember because if a person is part of a class action lawsuit, they'll likely be unable to pursue further legal action for the same issue once the case is finished.

What Are the Advantages of Joining a Class Action Lawsuit?

Class actions are a great way for people with minor claims to join together and hold a negligent or dishonest party accountable. If you have a small claim, joining a class action means you don’t need to worry about lawyer’s fees, hiring legal help, or participating in any court proceedings.

Class actions also help:

  • Increase the efficiency of the court system by consolidating many cases as one
  • Reduce stress on participants
  • Provide consistent and fair compensation for all members
  • Hold companies accountable for “small" misdeeds that affect many people

How Does a Class Action Lawsuit Start?

A class action lawsuit can start after a single person contacts an attorney. If the attorney believes the person’s claim is fit for a class action, they’ll begin working on finding others who are eligible to join it.

Is My Case Too Small for a Class Action Lawsuit?

It depends on the situation. Class action lawsuits are designed to help many people join together to seek compensation for small individual damages. So, it’s crucial that other people were also harmed by the same set of circumstances and the same party for a class action lawsuit to be possible.

How Many People Are Required to Start a Class Action?

There is no specific amount of people required to start a class action lawsuit. Instead, several factors can influence if a class action lawsuit is possible. While having enough people is important, other factors such as the severity of monetary damages each member of the class action suffered can influence how many people are needed to start the process.

What Are Opt-In & Opt-Out Class Actions?

Usually, potential class action members will be informed of their ability to join a case. When a potential class action member needs to confirm their willingness to join a class action, it’s known as an opt-in case.

Opt-out cases occur when a court automatically includes all potential class members in a class action. For these types of cases, a person will need to notify a court if they don’t want to be included in the class action.

What Is Class Certification?

A class action lawsuit is only possible if a judge is satisfied that all requirements for one have been met. A class certification doesn’t mean that the judge has sided with the members of the class action. Instead, it means that the judge has agreed that a case meets enough qualification to proceed as a class action.

A case is referred to as a “putative class action" before it receives class certification. The word putative means “assumed to exist" and is applied to a case that is awaiting legal class action status.

How Is Money Divided in a Class Action Lawsuit?

Money is divided after a class action lawsuit according to the terms provided by the settlement or verdict obtained by one. If a class action lawsuit is settled before it reaches court, a court will still have to approve that it is a fair and adequate result.

Generally, the results of a class action are divided between:

  • The lead plaintiffs
  • Participants
  • Lawyers who worked on the case

Since they devote more time and effort to a class action, lead plaintiffs are often awarded a verdict or settlement that is separate from the amount that’s divided among participants.

What Is a Lead Plaintiff in a Class Action?

Lead plaintiffs are those who are filing the lawsuit on behalf of the class. While members of a class action don’t have to do anything besides join the case, lead plaintiffs have much more responsibility during the process. A lead plaintiff will be the name attached to a class action and will publicly represent the interests of each member of the lawsuit. 

Lead plaintiffs must:

  • Start the class action
  • Have losses that are representative of those participating in the class action
  • Find an attorney and file the lawsuit
  • Remain involved throughout the case
  • Only accept settlements that are in the best interests of class members

Additionally, a lead plaintiff must have no prior history of dishonesty or fraud and must not have any conflicts of interest. In other words, lead plaintiffs must be representative of the issue, devoted to the case, and have a reliable history. 

How Are Potential Class Action Members Notified of Their Eligibility?

Lawyers working on a class action will try to reach potential claimants in multiple ways. If possible, they’ll mail notification to those who are eligible to join a class action. If it isn’t possible to reach people directly, law firms often try to reach participants through advertisements.

How Much Money Do Lawyers Make from Class Action Lawsuits?

Attorneys who work on class actions typically do so using something called a contingency fee agreement. This means that they cover all legal fees, investigative costs, and any other expense associated with the class action. Importantly, lawyers who work on contingency fees only get paid if they win results.

Contingency fees provide incentives for lawyers to work for the best results while also eliminating the financial burden that a lawsuit would place on plaintiffs.

Because a law firm’s earnings from a class action suit depend on results, determining how much one will make from a class action is close to impossible. Contingency fees are often between 30 to 40 percent of the results of a case.

Importantly, a court will always factor in contingency fees to decide if a settlement or verdict will be fair for the plaintiffs.

Who Pays Lawyers for a Class Action Lawsuit?

Lawyers are paid directly from the recovery secured from a settlement or verdict. In other words, no one is directly responsible for paying lawyers during a class action. Instead, payment is collected by legal teams from the results they secure.

Do You Need a Lawyer for a Class Action Lawsuit?

Yes. If you’re a lead plaintiff, you’ll have to find an attorney who is ready to start the class action process for you. If you’ve received a notice informing you of the chance to participate in a class action, you can join it without enlisting the help of an attorney. In some situations, it can be useful to call a lawyer to make sure joining the class action is the right option for you.

How Long Do Class Action Lawsuits Take?

This is different for every case. While some class actions only take months to be settled, others result in legal battles that can take years to reach a verdict. Defendants that appeal the decision a court makes during a class action can also hold up the process.

What Is a Fairness Hearing?

If a class action is settled before going to trial, a judge will conduct a fairness hearing to make sure the terms of the settlement are fair for all people involved with the case. If members of the class action object to the settlement, they have the right to express their concerns during this trial.

When Will I Be Paid After Joining a Class Action?

How long it’ll take to receive payment after joining a class action is difficult to predict. In some instances, it’ll only take weeks or months to receive a payment. This is especially true if the case is settled and approved by a court before going to trial. If a case goes to trial, it can take weeks, months, or even years before participants receive a payment.

What Is a Class Action Common Fund?

A common fund is the amount of money that has been set aside to pay class members. Since members of a class action might not find out about a case until after a settlement or verdict is reached, the common fund provides a way for them to join the case and receive payment.

What If Money Is Leftover After a Class Action?

If a common fund isn’t used up after a certain amount of time, the remaining money might be returned to the defendant. Sometimes, leftover money might be distributed among class members or donated as a cy-pres award. In simplest terms, the cy-pres doctrine means a court will order the funds to be redistributed to a charity or another organization that aligns with the issue at hand with the class action lawsuit.

Are Class Actions the Same as Mass Torts?

No, mass torts are not the same as class action lawsuits. Class actions produce the same result for all members while mass torts produce different results for people with similar claims. During a mass tort claim, plaintiffs file a case against the same defendant but have their cases handled individually. Doing so helps bring similar cases before a judge without needing to flood the courts with similar trials.

Can I File a Mass Tort Instead of a Class Action Lawsuit?

It depends on your situation. Mass tort cases are only possible when a similar problem has caused considerable individual losses for each plaintiff. Understanding if you should pursue a mass tort or class action lawsuit is easiest when you speak with a law firm.

What Happens if You Lose a Class Action Lawsuit?

If you are part of an unsuccessful class action lawsuit, you won’t have to pay any lawyer’s fees. However, it’s likely that you won’t be able to join any other legal efforts involving the same issue that the class action lawsuit was concerning.

Are Class Actions Civil Lawsuits?

Yes, a class action lawsuit is a civil lawsuit because it involves a dispute between two or more parties. Civil lawsuits don’t involve criminal matters. However, a party might face other criminal penalties during a separate trial if a class action’s civil investigation reveals that it committed criminal acts.

What Are Compensatory Damages?

Compensatory damages describe the money a defendant is ordered to pay in order to make a plaintiff whole. They account for losses that the defendant’s behavior caused plaintiffs in a class action lawsuit to sustain.

What Are Punitive Damages in Class Action Lawsuits?

When a court finds a defendant to be harmful, it might order punitive damages to be paid to class members. Punitive damages are not compensation for anything class members have lost. Instead, they’re meant to be a punishment for particularly reckless or negligent defendants. Punitive damages are meant to set an example and discourage other parties from behaving in a similar way as the defendant in a class action lawsuit.

What Is the Class Action Fairness Act?

The Class Action Fairness Act provides jurisdiction to federal courts for any class action lawsuit that has damages exceeding $5 million. Supporters of this law argue that it helped reduce the abuse of the legal system. However, critics of the law assert that it makes class actions unnecessarily difficult for some people to file and that it prolongs the process of securing justice.

Where Are Class Action Lawsuits Filed?

Class action lawsuits can be filed in any state court except for those in Virginia, a state that bans class action hearings in its courts. Any class action involving residents of Virginia or disputes of $5 million or more must be filed in federal court.

Can I Hire a Personal Attorney for a Class Action Suit?

You can hire your preferred attorney only if you’re the original plaintiff—also known as the lead plaintiff.

If you’ve received notification of a class action suit, you have two options. First, you can join the suit and be represented by the attorneys who are already handling it. Second, you can opt-out of the class action if you’d like to attempt to file a case on your own. Before opting out of a class action lawsuit, it’s important to speak with a law firm.

Should I File or Join a Class Action Lawsuit?

If you think you qualify for a class action lawsuit or have been made aware of one that you might be able to join, it’s important to speak with an attorney first. Class action lawsuits are a great way for people to join and demand justice when they wouldn’t be able to do so on their own. However, they aren’t always the right option for a person with significant damages. Importantly, receiving a settlement from a class action might mean that you’ll be unable to pursue further compensation that you’re entitled to.

Finding out your options is simple, free, and confidential when you call Arnold & Itkin LLP at (888) 493-1629. Our team has recovered billions for clients by taking on some of the largest companies and fighting through the most difficult cases. We’re ready to listen to your story and help you decide what options are best for you.

Call us now for a free consultation about your class action lawsuit. We’re standing by to help you make the right decisions at (888) 493-1629.

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