Class Action Lawsuit vs. Private Lawsuit

Class action lawsuits are lawsuits brought by one or a few people on behalf of a larger group of individuals that have been harmed in some way by the persons or entities being sued. There are benefits to filing or joining a class action lawsuit, and there are also circumstances in which a class action may not be as appropriate as filing a private lawsuit.

Class Action Benefits

Class actions can be very useful in the right kind of cases. For example, if a large corporation like a bank is charging illegal fees of $50 to $100 to millions of people, an individual action for $100 won’t have much effect on this practice, but a class action for $200 million will get the bank’s attention. An individual doesn’t have much chance proving that a charge is illegal against a bank, and it wouldn’t be worthwhile to hire a lawyer for so small an amount. In a class action the attorneys can get a large enough fee to make it worthwhile to prove the fee is illegal, get some recovery for millions of people, and stop the illegal practice. A class action also creates a big enough risk for the defendant that the defendant usually offers to settle the case.

Class actions are a good thing for courts too. If every individual who had been injured in a class action filed a separate private lawsuit, such a large number of actions would clog up court schedules causing difficulty for the courts and for everyone trying to get hearing or trial dates. Class actions extend the statutes of limitations in some cases (the time your state allows you to file a lawsuit). In situations where there is a limited amount of money or assets for a recovery, a class action ensures that the recovery is divided evenly among the class of all people injured. If a number of individual actions are filed in this situation, the first plaintiffs to receive a judgment could take all the assets and leave later plaintiffs with nothing, even though they had been equally injured. A class action also gives consistent relief to all plaintiffs, while in private actions the defendant could win against one plaintiff and lose against another.

Class Actions, Private Lawsuits and Settlements

Most class action lawsuits settle, but the time it takes to settle them varies widely, just as it does in private lawsuits. Both class actions and private lawsuits may settle quickly or drag on for years. If your claim is small, you may have a better chance of getting a settlement in a class action where the total amount is large enough to worry the defendant. If your particular injury is easier to prove than the injury to a class of people, you may be able to settle a private lawsuit long before the class action is resolved. It all depends on the case.

The Downside

There is a downside to class action lawsuits too. Members of the class have no control over how the class action suit is handled or what settlement is reached, and members of the class might be included in the class even if they received no notice of the action. If you have suffered a significant injury that may be different from the injury others have suffered or if you have lost a lot of money, it may be better for you to file a private action so you can exercise more control over your own case. You should consult a qualified class action attorney to discuss a case any time you have a serious interest in a class action lawsuit.

Class Action Abuses

There has been a great deal of criticism in recent years about cases where Lead Plaintiffs and attorneys have worked out settlements that pay the attorneys millions, but the class members end up with a coupon, like a coupon for a box of breakfast cereal or for video rentals. In such cases the individual class members have usually not been seriously injured in the first place, and the case may not have been appropriate as a class action. In other cases, like those involving defective products, a settlement that allows the defendant to give coupons for replacement products might be inadequate, since the class members might not want a product from a company already shown to produce defective products.

In the cases where abuses have occurred, not only have the class attorneys and the Lead Plaintiffs failed to represent the interests of the class but the courts have also failed to exercise discretion in ensuring a fair outcome. Many critics believe that this happened because some class attorneys were engaging in “forum shopping,” looking for state courts that would allow questionable settlements so they could file their class action suit there and get what they want. As a result, Congress passed the Class Action Fairness Act of 2005, which makes it much easier for defendants to remove class actions from state courts to federal courts. This law should prevent class action attorneys from forum shopping and ensure a more consistent outcome in the federal courts.

For more information about class action lawsuits, check out the following articles: