Should I Join a Class Action?

You get a letter in your mailbox or an email about a class action claim. You’re informed that a product you bought, a pharmaceutical you used, or a company you worked for is being sued as part of a class action lawsuit.

A class action lawsuit combines the similar legal claims of a large number of people against the same defendant. The notification gives you a chance to remain in the class or exclude yourself.

For most potential class members, their best option is to remain in the class. However, if you suffered additional losses or a unique situation, you may want to opt out. Talk to a class action lawyer for legal advice when you get notice of a class action claim.

What Is a Class Action?

A class action is a lawsuit in which multiple people are included in one claim. “The class all share a common complaint against the defendant and have similar damages,” says Mark E. Burton, who practices class action and mass torts law at Audet & Partners in San Francisco.

“A class action is when the court allows one plaintiff or a small group of plaintiffs to act on behalf of a larger group,” says Kevin Parker, who handles personal injury appeals at The Lanier Law Firm in Houston.

“The same thing has happened to them — the paint on their house is defective, there’s something wrong with their car, or their bank is charging rates that are too high — and they’re trying to fix it across the board,” says Parker. “Class actions solve the problem for everybody at the same time. There’s an efficiency there where you don’t have thousands of people seeking the same small remedy for the same thing that went wrong.”

Class Action Representatives and Class Members

The court appoints the plaintiff’s attorneys as “class representatives” to represent the interests of the class members. In the end, adds Burton, “The court has ultimate control over issues such as settlement.”

If you received a letter, you might be wondering how the attorneys got your name. Usually, the plaintiff’s team gets a court order to request that the defendant provide the names of people potentially injured by the alleged actions and who are members of the class.

How Are You Added to the Class Action?

The lawyer can’t just get names, says Marc J. Bern, a class action attorney in New York. “You can’t call up AT&T and say, ‘Who did you defraud? Can you send us a list of those people?’ 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 class action litigation has already commenced, and that’s how the names are given to the plaintiff’s steering committee.”

Determining who and what actually compose the members of the class is 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 in Manhattan.

“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 Is the Payout in a Class Action Claim?

Claimants aren’t likely to get rich in most class actions. The class action settlement is divided among so many people that the per-person payout is usually low.

“The whole premise of class actions is somebody is doing something illegal that’s costing a lot of people a small amount of money,” Parker says. “So, the defendant who’s doing that is making a lot of money from it, but it’s not coming from one person. It’s coming from a lot of people. And the amount is so small per individual, it’s not worth it for anybody to go hire a lawyer. But if they’re doing it across a class of their customers, a small amount multiplied by 10,000 is more money, and it becomes perhaps worth it.”

So if you get that letter, Parker says it’s usually best to opt in. “In most class situations, they didn’t even know it was going on until they got the letter, and so it’s not going to be a moneymaker for this class. If they opt out of the class, then going it alone requires them to find a lawyer, they need to pursue that case, and it’s generally not going to be worth more than a few hundred dollars.”

What Are Some Examples of Class Actions?

Class actions can include securities fraud, data breaches, defective medical devices, and other claims affecting large groups of people. Here are some well-known class actions from recent decades:

1. Tobacco Master Class Action Settlement Agreement ($206 billion)

• States filed suits against the major tobacco companies to recover smoking-related health care costs and reduce exposure to minors
• Settled in 1998
• Each state receives roughly $3.98 billion a year until 2025

2. Enron ($7.2 billion)

• Company shareholders and investors filed a $40 billion suit after the stock price fell from $90 a share in 2000 to less than $1 by 2001, arguing fraud and concealment of information
• Settled in 2008
• An estimated 1.5 million people received $4,800 each

What Is the Advantage of a Class Action Case Over an Individual Lawsuit?

“When a defendant’s actions have affected numerous people, the courts could never provide a trial for each of them, and typically the amount involved for any one person is not high enough to justify bringing a case,” Burton says. “Bringing a class action can more efficiently handle numerous claims and make it worthwhile to rectify wrongs committed against many, but in a small amount.”

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 Giuffra Ruffo Plotkin & Hellman in New York City. “But if you spread it across lawyers, it doesn’t cost as much.”

“From the plaintiff’s standpoint, class actions are used to fix things that need fixing, and that often wouldn’t be fixed if you didn’t have a class of people bringing the suit,” says Parker.

“Even if you don’t get a lot of money back, you can still get a large company to stop doing what they were doing,” says Andrei Rado, a partner with Milberg Coleman Bryson Phillips Grossman in Garden City, New York.

Are There Disadvantages To Joining a Class Action Suit?

There is also a potential downside to joining a class action. “Class actions can take longer than individual cases and have more procedural hurdles in order to make a recovery,” Burton says. “If an individual’s claim is worth enough money and they can find a competent attorney to represent them, it may be best to proceed on your own.”

Perhaps you suffered more serious damage than average from the defective product. “Then it might be worth it talking to a lawyer and have your lawyer talk to the class lawyers to get you involved as a class representative,” Parker says. That’s assuming it’s early enough in the case that they haven’t already reached a settlement. If you’ve already received a letter, the settlement offers have likely been negotiated.

Parker gives an example of a situation in which it might be better to get your own experienced plaintiff’s personal injury attorney. “I worked on some cases 15 or 20 years ago involving siding on your home that was defective. Well, now you’re talking about a higher amount of money. And in that kind of situation, you may want to get your own lawyer, because this is my home and it’s going to cost me $30,000 or something. Maybe worth pursuing.”

Find an Experienced Class Action Lawyer

Many class action lawyers provide free consultations to learn more about your case and assess the legal issues involved.

If you might be a member of a class action, contact a law firm and speak with a class action attorney.