These plaintiffs have the resources to hire an attorney and obtain restitution by filing the legal action as a group. Class action lawsuits also relieve courts of the burden of hearing hundreds or thousands of small claims cases.
What Are Class Action Lawsuits?
Class action lawsuits are often filed against government entities, financial institutions, manufacturers, retailers, or employers. Many are based on allegations of defective products, false advertising, discrimination, or unlawful employment practices. Some suits have even alleged that the defendant violated the Telephone Consumer Protection Act, which was enacted in 1991.
How Class Action Lawsuits Work
A group or class of plaintiffs is represented by one or more “lead” plaintiffs. The injuries suffered and the allegations alleged by the lead plaintiffs must be similar to those of the other class members. The class must be certified by a judge before the class action lawsuit can proceed. A lead plaintiff must demonstrate that the plaintiffs have a valid claim against the defendant and that all class members have similar claims. The lead plaintiff must also show that the suit can adequately represent all group members—all with the assistance of legal counsel, of course. The plaintiffs are notified by mail or other means after the class has been certified. All are automatically included in the lawsuit unless they opt out. Most class action suits are settled out of court. Each plaintiff receives a portion of the settlement, which can consist of cash, a refund, a service such as credit monitoring, or some other benefit.
Types of Class Action Lawsuits
Class action suits can either state of federal actions. They can be filed and heard in a state court or a federal court, depending on the circumstances of the case. Congress passed the Class Action Fairness Act (CAFA) in 2005, which was intended as tort reform to protect businesses from abusive class action lawsuits. Plaintiffs’ lawyers frequently forum-shopped before the law was enacted so they could file their suit in a state that would be most sympathetic to their case. Before the law was enacted, a defendant was unable to move a class action to a federal court if even one person on the defendant’s side of the case and one person on the plaintiff’s side were citizens of the same state. The Act allows a case to be moved to federal court if at least one person on the plaintiff’s side and one person on the defendant’s side are citizens of different states (or countries). Defendants can’t move their cases to federal court unless the damages sought by plaintiffs exceed $5 million. The class must consist of at least 100 plaintiffs.
Pros and Cons of Class Action Lawsuits
These can be complex lawsuits that can drag on for years due to multiple plaintiffs, and damages don’t always amount to much when they’re divided among the entire group. By the same token, class action lawsuits allow individuals who might not otherwise be able to afford to sue an opportunity to seek restitution.
