What is a Class Action? What You Need to Know About Class Actions

What You Need to Know About Class Action Lawsuits

What is a class action?

A class action lawsuit is a type of lawsuit that allows a large group of people who were wronged by an individual or company to come together as one to sue them. A situation that may cause a class action lawsuit includes fraud, injuries, discrimination, deceitful advertising, and more.

How do class actions work?

Class action lawsuits are filed because many times, individual cases aren’t strong enough to support an independent lawsuit. But, when numerous people come together who were wronged in the same way by the same person or company, a weak case sometimes becomes much stronger.

Class action lawsuits can be filed by one or more plaintiffs, and others who wish to join can choose to become a class member. If the plaintiffs win the lawsuit, compensation may be awarded, and the court creates a distribution plan to give each class member a percentage. With that said, most class action lawsuits, like many civil lawsuits, are resolved outside of court. Usually, both parties negotiate to reach a resolution before the case reaches the trial phase.
class action

What are the benefits of class actions?

Benefits of a class action lawsuit include combining resources to hire legal counsel, as well as gaining a larger pool of evidence and witnesses, both in quantity, quality, and scope. It also allows all wronged parties to participate in one, aggregated action, rather than many separate lawsuits.

What are the disadvantages of class actions?

There are drawbacks to class action lawsuits. If the plaintiffs win, awards can be quite small in value or be of a non-monetary character. Compensation can sometimes result in just a coupon, replacement products, rebates, or something else of little value. Also, if a plaintiff had plans to sue independently, that right may be automatically forfeited once he or she elects to become a class member.
You should carefully consider the pros and cons when considering either filing or opting-into a class action lawsuit.

Notable class action lawsuits include:

  • The BP oil spill in the Gulf of Mexico for $20 billion in 2016.
  • The Volkswagen emission scandal for $14.7 billion in 2016.
  • The Enron fraud scandal for $7.2 billion in 2008.
  • Red Bull false advertising settlement for $13 million in 2014.

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Reinhard von Hennigs