How Much do Lead Plaintiffs Get in Class-Action Lawsuits?
UPDATED: April 28, 2020
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- Class-action lawsuits are more complicated than most lawsuits
- They also require an extra step called class certification during which a court must approve the lead plaintiff and the appropriateness of pursuing a class action
- Lead plaintiffs are representative of the entire class and participate in the case on their own and the entire class's behalf
- Lead plaintiffs may get more compensation for their extra work on behalf of the whole class
- How much lead plaintiffs get in class-action lawsuits is determined on a case-by-case basis
You may not even know it, but odds are you have been part of a class-action lawsuit. Often, all you ever find out about these lawsuits is on the postcard or letter you receive giving you the option to opt out of the class or settlement. If you read that piece of mail, you probably saw that the portion of the settlement you were entitled to was very small.
Maybe you were in line for a few dollars for a product you bought; maybe you found out you were due a few hundred dollars for a data breach that compromised your private information. Recently, some famous class-action lawsuits have affected hundreds of millions of people. For example, if you used your debit card at their stores, maybe you were part of the Target class-action lawsuit in 2019.
When you consider how big the class can be, it's easy to see how much money can be at stake. That explains why an attorney who is paid a contingency fee would take on the case, but why would anyone want to bring the suit in the first place? In other words, how much do lead plaintiffs get in class-action lawsuits?
After all, as a member of the class, you're one of the plaintiffs. Would you go through the effort involved in starting a lawsuit just for the few hundred dollars that the plaintiffs get? Or even the few cents...?
Sure, some class actions are about more than money — they often force industries or even states to reform how they treat classes. But in many instances, the lead plaintiff of a class action will be entitled to more compensation than members of the class.
If the class action notice you received offered you the options to opt out, join, or join as a class representative, why might you want to take the third option? On the other hand, if you want to explore starting a class action yourself, you can search for a class-action attorney here.
How do Class-Action Lawsuits Work?
Class-action lawsuits can be brought in either federal or state court. In order to proceed as a class action, the class has to be certified by a judge. The judge will certify the class to proceed if it meets all of the requirements.
The first requirement is that there must be too many potential class members for individual lawsuits to be reasonable. Most class actions involve at least fifty and up to thousands of class members. While there is no set number, some federal circuits have determined factors to be weighed in determining if this criterion is met.
The second requirement is that the class members must all share a common question of fact or law. You can consider these requirements as two sides of the same coin, as both are about efficiency.
The courts do not want to have to process the same lawsuit dozens or hundreds or thousands of times. If the first requirement isn't met, then certifying the class won't consolidate a significant number of cases. If the second requirement isn't met, then the cases aren't different enough that one case will settle the matter.
Without the class action system, there could be a hundred cases (the first requirement) all about the same thing (the second requirement). It would be extremely inefficient to not consolidate all these cases down to one class-action suit.
The other requirements for class certification are all about the lead plaintiffs, known in the rules of procedure as the class representatives.
What is the lead plaintiff in a class action?
The lead plaintiff — or lead plaintiffs: there can be more than one lead plaintiff — is the class representative who actively participates in the case from start to finish. The lead plaintiff has a lot of extra responsibility compared to a class member. The lead plaintiff also often gets an incentive award which means they make the most money in a class-action lawsuit.
There is no guarantee, though. It's a class representative proposed incentive award. In other words, the attorneys ask for an extra award for the lead plaintiff, but the judge decides whether the award is appropriate and how much it will be.
What are the pros and cons of being a lead plaintiff?
There are two other requirements for class certification, both of which have to do with the class representatives/lead plaintiffs. The class representative must have the same claims as the class overall, and the class representative must provide adequate protection to the whole class.
This final requirement is related to the lead plaintiff's responsibilities in hiring the attorney to represent the class. Because the lead plaintiff is the one who initiates the lawsuit and hires the attorney to represent the class, they are in a unique position to make sure that the attorney fees aren't excessive in comparison to the compensation to the entire class.
At the time that the class is certified, the judge may appoint different or additional class representatives to ensure that they adequately represent the class as a whole.
The Lead Plaintiff's Responsibilities
The lead plaintiffs are the only class members involved in a class-action case throughout its entire duration. The lead plaintiff is the person who institutes the class action in the first place.
It's up to the lead plaintiff to find an attorney and file the lawsuit. After the class is certified and the lawsuit is allowed to go forward, the lead plaintiff and other class representatives will consult on the case and work with the attorney throughout the process.
The lead plaintiff has the advantage of being able to consult closely with his or her attorneys regarding settlement offers and is the only party who may object to a settlement agreement.
Lead Plaintiffs and Filing the Lawsuit
Several requirements must be met for someone to be certified as a lead plaintiff in a class action.
- The lead plaintiff must be representative of the class overall in their interests and issues related to the case.
- The lead plaintiff must be familiar with the basics of the case.
- The lead plaintiff must devote the necessary time and energy to the case.
- The lead plaintiff can't have a conflict of interest.
- The lead plaintiff must have no history of dishonesty or fraud.
Lead Plaintiffs and Hiring an Attorney
Though the lead plaintiff finds the attorney and enters into an agreement with them in a class action, the lead plaintiff is not responsible for attorney fees and does not take a monetary risk. Attorneys in class action lawsuits usually take the cases on a contingency fee basis.
You've seen ads on TV about attorneys who don't get paid until they win your case, right? Those are lawyers who are working on a contingency fee basis. A typical contingency fee is between 25 and 35 percent, and a class-action attorney's contingency fee is usually a bit lower, at 20 to 30 percent.
When you consider that class-action suits can typically result in settlements of hundreds of millions of dollars, that lower percentage doesn't look so bad.
Typically, the attorneys will pay all case-related costs upfront, and this can include the lead plaintiff's expenses, such as travel and postage.
Lead Plaintiffs Throughout the Case
Throughout the case, the lead plaintiff participates at approximately the same level as a plaintiff in a non-class-action case would. The amount a plaintiff participates will vary from case to case, but only the lead plaintiff and possibly a few other class representatives will take part, instead of the entire class.
The lead plaintiff may participate in discovery — the process of gathering evidence through depositions, document requests, and other information-gathering tools. They will also participate, along with other class representatives, in hearings, attending the trial, and other court proceedings throughout the case.
There are also some special rules such as a lead plaintiff deadline that must be met in certain types of securities class actions. All of these responsibilities fall on lead plaintiffs and class representatives, not on the vast majority of class members.
How much money do you get from a class-action lawsuit?
You rarely hear about a jury reaching a conclusion on a class-action lawsuit. The vast majority of class actions reach a negotiated settlement which, as the National Law Review discusses, can be nearly as complex as reaching a verdict.
What do most class members do and what portion of the settlement do they get?
The lead plaintiff must represent the interests of the class and not just their own interests. Only the lead plaintiff can object to a settlement agreement. All the other class members can only opt out of the suit if they don't like the settlement, so the role of the lead plaintiff in approving settlements is very important.
The decision to opt out or not is the only decision that most class members will have to make. Though a class member can be kept informed on the case itself, being a party to the class action or the settlement is the only time they get to make any decisions.
Compared to the lead plaintiff, class members have basically no responsibilities.
How much do lead plaintiffs get in class actions?
When you consider how much more the lead plaintiff has to do, it might seem like they should be entitled to a larger share of the settlement than the average class member. You may be surprised to learn that no rule guarantees the lead plaintiff more than a standard share of the settlement.
Often, though, there will be some additional portion of the settlement paid to the lead plaintiff. This is generally based on several factors:
- the injury suffered,
- the level of involvement in the litigation, and
- the overall size of the recovery for the entire class.
All settlements must be approved by the court, and they often include additional amounts for the legal expenses as well as an additional amount awarded to the lead plaintiff compared to other class members. The court has broad discretion in deciding on this amount, and they will do so by considering the factors above.
The bottom line is that sometimes there is no extra money for class representatives, but some of the largest lead plaintiff awards have been nearly $100,000.
Bringing it All Together
A class-action lawsuit has to go through the extra step of having the class certified before it can move forward. Class certification requires that the members of the class be numerous and have substantially the same issue that must be resolved.
Class certification also requires the lead plaintiff to be representative of the class overall and to not have a history of fraud or deceit.
Being a lead plaintiff has its ups and downs. While the lead plaintiff is heavily involved in the class-action suit from start to finish and is responsible for working with the attorneys and participating in the trial, all these responsibilities have benefits.
Not only does the lead plaintiff get to make many decisions about how the case ultimately resolves — including what settlement to accept — they may also get additional compensation from the court.
Does that answer your questions about what being a lead plaintiff entails? What else do you want to know about class action lawsuits?
If you want to consult an attorney about a class action or any other legal issue, you can get started by following this link to begin your search for an attorney in your area.