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How does a class action lawsuit work?

On Behalf of | Oct 10, 2022 | Class Action, Consumer Protection

You likely have received a notice that you may be a party to a class action lawsuit. Usually, these cases involve a claim against a large company or entity that did something negligent.

When you sign onto a class action, you will lose your right to file a lawsuit independently. You agree to the binding decision in the case.

The basics

The idea behind a class action lawsuit is representatives will file the lawsuit on behalf of a larger group. Generally, the matter at the heart of the case is something that impacts a significant number of people. The goal is to condense lawsuits because if each individual filed, the courts would be slammed with cases and unable to keep up with the demand.

The rulings

When the court issues a ruling, it applies to everyone who has opted into the lawsuit. Any damages awarded are split among everyone who is a party to the lawsuit, but they are not necessarily evenly split. There is generally a large payout for attorney fees, the named parties will receive a chunk of the damages and then the remaining amount divides between all the people who signed onto the class action.

The benefits

Besides freeing up court resources, class actions also help ensure consistent rulings. If every person went to court, there could be a variety of rulings on the matter, which could result in a lot of confusion and additional cases. It also ensures there is more of a chance of a large penalty against the party who was in the wrong. Usually, in class actions, if the court finds a company or entity did something wrong, it then rules they have to do something to make up for it beyond just paying out damages. This helps to improve business and strengthens protections for all consumers.