A class action is a type of lawsuit that allows a large number of people to sue or be sued as a group, or class. The group is represented collectively by a single member or a few members of the group, known as class representatives. Class actions lawsuits are used when the number of people hurt by a product is so great that it is unmanageable to individually name them all as plaintiffs in a single lawsuit or for them to file individual lawsuits.
Sometimes hundreds, thousands or even millions of people are injured by the same company in the same way. In these instances, it can be impractical or even impossible to name each person as plaintiffs in a single lawsuit. And if each person were to file his or her own lawsuit, it could be both costly and a drain on court resources.
Instead, the individuals may choose to join together in a class action, with one or a few members of the group representing the interests of other consumers who have experienced the same problem. A class action allows the issue to be determined once for all members of the class.
A class action usually ends in a settlement as opposed to going to trial. Settlements in recent years have averaged $56.5 million. However, a settlement does not guarantee a large payout for the individual members of a class.
Potential class members may be notified directly or through an advertisement or posting after the court certifies the case as a class-action lawsuit or after the parties reach a preliminary settlement. In most cases, an injured person will be included automatically in a class. Members of a class have the option to opt out of the class action and sue on their own.
Joining the class means a person is eligible for compensation but it also means waiving the right to file a separate lawsuit, even in the event that the plaintiffs lose the class action. Class members do not actually participate in the legal proceedings. However, they will be bound by its outcome.
In other words, people who do not opt out of a class action must live with whatever the final verdict is. Class members may be unaware of their right to opt out because they did not receive an opt-out notice or they did not read it or understand it.
Many people injured by products choose not to go after large corporations on their own because their injuries seem relatively minor and the payout might be small. Even if many individual consumers have relatively small claims, the collective loss of all consumers could be very large. By bringing one lawsuit for all of the consumers, a class action can make sure the law is carried out, and that the people who are injured — even minimally — by a company’s widespread wrongdoing receive compensation.
In some cases, class actions may appear to be the only way to force companies to pay for the harm they have caused and to deter them from wrongdoing in the future. Proponents of class actions say pursing a class action helps gain more traction, limits individual litigation costs and provides representation for people who may not have been able to afford a competent attorney on their own.
Class actions also avoid the need to repeat witness testimony, exhibits and other elements of a trial. And it prevents different court rulings that could leave a defendant without clear standards of conduct to follow. In cases where funds are limited, a class action may ensure all plaintiffs receive compensation, not just the people who sue first.
People can file their class action lawsuits in both state courts and federal courts. Whether a class action is governed by federal or state law depends on the subject matter.
Class action lawsuits in which claims exceed $5 million and cases involving plaintiffs or defendants from many different states fall under federal jurisdiction. The Class Action Fairness Act of 2005 defines the criteria for a federal class-action lawsuit.
The act shifts many class actions to federal court, which is likely to delay or prevent a class action from being decided. This is because federal courts are busier and federal judges are thought to be less receptive to class actions than state judges.
Whether it’s federal or state, a court must certify a class for a group of claims to move forward as a class action.
In order to progress in the legal system, class-action lawsuits must satisfy certain criteria. The procedure for certifying a class may be different depending on the state you’re in. Many states mirror the Federal Rules of Civil Procedure (FRCP), which also lays out the criteria for class actions filed under the federal system.
The Class Action Fairness Act also cracks down on attorneys’ fees and a type of settlement known as a “coupon settlement.”
Coupon settlements are when class members receive a coupon — usually with very little value — that can be used as a credit or discount in a future transaction with the defendant instead of receiving cash awards.
In those cases, the plaintiffs’ lawyers are usually paid cash fees way above the award recovered by individual class members.
Proponents of class actions say deciding an issue once is more efficient than doing it over and over in different cases. However, drug and device lawyers generally don’t recommend class actions because every member of the class is awarded the same amount of money regardless of the severity of their injuries. In fact, many criticize class actions because individual class members often receive little or no benefit, have no control of their cases and do not get their own lawyers. For this reason, lawyers instead may choose to file individual lawsuits that may be consolidated into a group of cases called a multidistrict litigation (MDL).
Although MDLs are not the same as class actions, an MDL can lead to a class-action lawsuit. Unlike class actions, which can be filed in state or federal courts, MDLs are exclusive to federal courts. The U.S. Judicial Panel on Multidistrict Litigation establishes MDLs when cases involving one or more common questions of fact are pending in different U.S. district courts.
MDLs are made up of individual cases that stay separate but are transferred to a single court for coordinated and consolidated pretrial proceedings. MDL cases do not all share in the same settlement or verdict.
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