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We’ve all received that letter. Out of the blue, a law firm lets us know that a product we bought, or a pharmaceutical we used, or a company we worked for, is being sued as part of a class action lawsuit. Many of us throw the letter away. Should we?
And how did they get our name anyway?
How They Get Our Names
“You can’t call up AT&T and say, ‘Who did you defraud? Can you send us a list of those people?’” Bern says. “It’s court-ordered, and then a notice goes out. … It’s not like [the consumer is] being contacted before there’s litigation. Generally the litigation has already commenced, and that’s how the names are given to the plaintiff’s steering committee.”
Along with that list of names, and the list of those who have already registered for the class action, a third list of names is gathered via court-ordered advertisements.
“The court will say, ‘Submit various publications that you feel will hit the proper demographic,’” says Bern. “Oftentimes Parade magazine is used because it has such a wide and appropriate reach.”
Determining who and what actually composes the members of the class can be a complex matter.
Generally, a class is an “aggregation of people who are similarly situated under a similar fact pattern,” says Joseph J. Ortego
, a partner with Nixon Peabody. “It’s supposed to be a more convenient way to deal with a group of people, a tool by which you can resolve multiple claims with multiple people in one place.”
What They’re For
“Class actions, if they have legs, are for economic losses or damages because a product has not met statements about the product or warrantees,” says class action lawyer Sheila Birnbaum
, a partner with Quinn Emanuel, who represents defendants.
Class action lawsuits do have a few drawbacks. The process can be laborious and lengthy while the payoff from settlements can be enormous in sum but small once sliced into individual pieces.
But there are financial advantages to remaining in as a class member rather than pursuing an individual claim. “It could cost millions to do discovery,” says Paul Rheingold
of Rheingold, Valet, Rheingold, McCartney & Giuffra in New York City. “But if you spread it across lawyers, it doesn’t cost as much.” (Rheingold notes that the cost structure remains the same in a class or mass action the difference between the two has to do with organization, control and binding outcomes.)
As for tossing that letter aside: Should we do it?
“Absolutely not,” Bern says. “Many people get multitudes of these things. You could get up to five to 10 a year. … Whether you get a dollar back, or you get a coupon for something, or you get a new toaster oven instead of the old one, it ultimately will pay off for you.”
Not to mention, says Andrei Rado
, a partner with Milberg, that class actions can be an effective way to improve an industry’s behavior. “Even if you don’t get a lot of money back,” Rado says, “you can still get a company to stop doing what they were doing.”