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Class Action Lawsuits: What They Are and How They Work

Jeffrey Johnson

Managing Editor & Lawyer

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A class action lawsuit in a civil lawsuit that is brought by one person or a few people on behalf of a larger group of people who have suffered similar harm or have a similar claim. Class actions can be brought in either federal or state courts, though a recent federal law, the Class Action Fairness Act of 2005, makes it easier for defendants to move class action lawsuits from state to federal courts.

Class actions are generally used when too many people have been affected by the subject of the claim for each of them to file a separate lawsuit. For example, class action suits are frequently used for claims of injury from hazardous products including pharmaceutical products and dangerous drugs. Successful class action cases have involved tobacco, asbestos, Agent Orange, breast implants, and a contraceptive device. Class actions are also frequently used in securities cases (such as fraudulent financial statements and practices like releasing false information about stocks and other forms of market manipulation); in employment cases (such as mass dismissals and violations of wage/hour laws); and to stop illegal or harmful practices like oil spills, manufacturing pollution, or violations of state or federal constitutional protections.

How a Class Becomes Certified

A lawsuit becomes a class action when one or more plaintiffs, often called Lead Plaintiffs, file a lawsuit claiming some kind of harm. The plaintiff(s) can then ask the court to certify the case as a class action. To have the case certified, the Lead Plaintiff and class action attorneys must show that the case meets several criteria:

There is a legal claim against the defendant(s).

There is a significantly large group of people who have been injured in a similar way and the cases of members of the class involve similar issues of fact and law as the case of the Lead Plaintiff(s). Class certification might be denied, for example, if people have suffered different kinds of side effects from a defective drug. The differences in injury would require different evidence for many class members.

The Lead Plaintiff is typical of the class members and has a reasonable plan and the ability to adequately represent the class. The Lead Plaintiff must also have no conflict with other class members. A Lead Plaintiff who seeks money damages for him or herself, but is willing to agree to coupons for all the rest of the class, is probably not adequately representing the class.

How Potential Class Members Are Notified

If a lawsuit is certified as a class action, the court will order that the class of people affected be notified, which is done through direct mailings as well as through the media and Internet. Class membership is automatic in all but a very few cases. Everyone affected by the action or product complained of will be part of the case unless they choose to opt out.

Class members do not take part in the case directly unless they have evidence to offer, and they are not involved in the decision of whether or not to accept a settlement offer. The Lead Plaintiff consults with the class action attorneys to plan the strategy of the case and to accept or reject settlement offers. Other class members have only the option of opting out of the settlement.

How the Recovery is Divided

The court decides how to divide any recovery at the end of a class action suit. The attorneys are given costs and fees, often calculated as a percentage of the entire recovery, the Lead Plaintiff(s) receive an amount partly determined by their participation in the lawsuit, and the rest of the recovery is divided among the class members.

For more information about class action lawsuits, see the following articles: