What is a Class Action Lawsuit

It is a rare person who has not received a post card in the mail, telling them that they may be entitled to compensation as part of a class action lawsuit. So what is a class action lawsuit, and what should you do if you get a notice?

A class action lawsuit is a type of lawsuit that is designed to resolve a large number of similar claims in a single proceeding. In most class action cases, the amount of damages that an individual might receive for their injury may be very small, far too little to justify bringing an independent lawsuit. By bringing a case for dozens, hundreds, or thousands of people in a single case, even if the recovery for an individual is small, the total amount that may be recovered justifies the considerable cost and effort necessary to litigate the claims.

For example, imagine a corporation that defrauds one million of its customers of one dollar. The corporation profits through its misconduct in the amount of $1,000,000.00, but its customers have no meaningful remedy to recover their money. It would be too costly in terms of both time and money to litigate the claims individually. The class action permits the claims to be brought in a single lawsuit, with the goal of avoiding the waste, duplication of effort, and financial cost of individual actions.

What Is a Class Action

A class action lawsuit occurs when a group of similarly situated people have suffered injury arising from a common set of laws, facts and circumstances. One or more people within that group will be identified as plaintiffs representing the class, and at in the early stages of litigation the trial court will be asked to "certify" the class. On rare occasions, a class action suit might involve a plaintiff who seeks to have a group of defendants certified as a class.

A class action is brought in the name of at least one of the people who was injured as a result of the misconduct attributed to the defendant. A plaintiff who is named as representing the class is referenced as the "lead plaintiff" or "class representative".

Request for Damages or Relief

A class action may seek money damages, but may also or instead seek other forms of relief:

  • Class action lawsuits typically seek financial compensation for the alleged wrongful conduct of the defendant.
  • Sometimes a class action won't seek money damages, but will instead seek injunctive relief. For example, a civil rights lawsuit could be brought as a class action, demanding that the government cease certain conduct which the class contends is discriminatory or otherwise unlawful.
  • A class action may seek a declaratory judgment, meaning that the class asks the court to make a ruling on a point of law in favor of the plaintiff class which will be binding upon the defendants, but without ordering any further remedy or relief.

It is possible for a class action to demand more than one remedy, for example seeking both money damages and injunctive relief.

Class Action Procedure

To start a class action lawsuit, the lawyers for the lead plaintiff will file and serve a complaint and petition to proceed as a class action, and the defense will reply to those pleadings. The trial court must appoint the lead plaintiff, who then has the duties to:

  • Represent the interests of the class members;
  • Hire the lead counsel for the class, subject to court approval;
  • File the lawsuit, and consult with counsel as the case progresses;
  • Agree to the eventual settlement of the class action lawsuit.

Following a period of discovery, the trial court will be asked to rule on the issue of certification, with the defense arguing that the lawsuit should not proceed as a class action, and perhaps also asking that the trial court narrow the legal issues for a class action, narrow the class, or dismiss the lawsuit.

In the certification process, based upon the governing law and court rules, the trial court evaluates the case to determine whether the legal and factual claims made by the named plaintiffs justify their being recognized as a class. If the judge finds that the proposed class involves too many divergent legal claims, or that the injuries suffered by the proposed class are too divergent, the judge may deny certification or grant a narrower certification than was requested.

Class action litigation is procedurally complex, and there is significant cost in notifying a large or national class of the pendency of the class action litigation. As a result, there are relatively few firms that specialize in class action work.

The Class Action Judgment

If a class action is allowed to proceed by the court, then the parties proceed in a manner similar to any other civil lawsuit, with the case either settled in advance of trial or being decided by a trial and verdict.

As with most civil litigation, class action lawsuits normally settle. In the event of settlement, the judge presiding over the class action lawsuit must approve the amount of compensation to be awarded to class members, and the attorney fee to be paid to the attorneys for the class.

Notice may be sent to members of the injured class, giving them the opportunity to comment upon or object to the proposed settlement. If the settlement is approved, it becomes an enforceable judgment. Practically speaking, few class members file objections and objections rarely affect the terms of the settlement.

The judgment in a class action is binding upon both the named plaintiffs, and upon the members of the class they represent. The lawyers in a class action are normally paid out of the recovery.

Class Actions vs. Mass Actions

Sometimes when multiple people are injured in a similar manner by the same defendant, the case that they file against the defendant is deemed a mass action instead of a class action. Mass action lawsuits are similar to class action cases:

  • They involve a group of people who claim to have been harmed;
  • The same defendant or defendants are claimed to be responsible for causing the harm; and
  • The lawsuits are consolidated into a single case.

Once the claims have been consolidated into a mass action and the plaintiffs prevail, the primary difference between a mass action and a class action is that:

  • in a class action all of the claimants are claiming a similar injury and damages are awarded in equal amounts to similarly situated plaintiffs;
  • in a mass action each plaintiff's injury is separately evaluated and damages are awarded based upon the injuries suffered by each individual plaintiff.

Mass action cases do not require class certification, or notice to all prospective members of a class. It is thus possible for a lawyer to commence litigation for a mass tort without meeting the criteria for bringing a class action, or incurring the high costs that are usually involved when commencing class action litigation.

Opting Out of a Class Action

In a typical class action, you are not invited to join the class action lawsuit. Instead you are made part of the class by the trial court, and then are provided with a notice of the lawsuit and given the opportunity to "opt out".  Notice is often provided in the form of a mass mailing, detailing the class action and the steps a class member must take to opt out of the action.

If you do not follow the procedure to opt out, the judgment will ordinarily be binding upon you. Many people discard these notices without reading them, or mistake them for junk mail, meaning that many people don't even realize that they can opt out until it is too late to do so.

In some class action lawsuits involving more significant injuries and where it may be difficult to otherwise identify potential class members, law firms may advertise to try to encourage class members to contact them to have their situations reviewed for possible individual actions.

In most cases, a class action will treat class members equally. Some class action verdicts or settlements provide a formula for the distribution of funds, such that more severely injured members of the class receive larger awards.

A plaintiff who has suffered a more serious injury, or who believes that a greater recovery will be available through independent litigation, may choose to opt out of the class action and bring a separate lawsuit. A plaintiff who is considering opting out of a class action that involves significant potential damages should first consult a lawyer, to assess the risks associated with opting out. Factors to consider include the cost of litigation, the likelihood of recovery through an independent action, the amount of damages that could potentially be recovered, and whether any award obtained outside of the class action is likely to be recovered from the defendant.

Copyright © 2005 Aaron Larson, All rights reserved. No portion of this article may be reproduced without the express written permission of the copyright holder. If you use a quotation, excerpt or paraphrase of this article, except as otherwise authorized in writing by the author of the article you must cite this article as a source for your work and include a link back to the original article from any online materials that incorporate or are derived from the content of this article.

This article was last reviewed or amended on May 8, 2018.