Class action lawsuits often make the news when multi-million dollar settlements are awarded by courts. Whether drug companies, manufacturers, or service providers, class action lawsuits can hit companies where it hurts: their finances. From that money, though, a significant amount does tend to go to lawyers’ fees, with individual payments to class members often a mere fraction of the overall sum. Is the perceived hassle and time commitment of taking part in a class action really worth it for consumers?
Many take part in class actions on principle, seeking to redress an illegal act.
Not too long ago, one of the most widely used companies on the planet, Facebook (more than one billion users worldwide, and 170 million in the U.S.) settled a class action over the use of images and users’ content in “sponsored stories.” Affected users were notified by e-mail that they could elect to take part in settlement claims and access a pot of some $20 million Facebook had set aside. The grand amount individuals could claim? “Up to $10.” Enough for a good cup of coffee, perhaps, but enough to bother filling out paperwork?
In many ways it’s the paradox at the heart of class action litigation. Companies pay out large sums, but those who have suffered from whatever injury the lawsuit is alleging – the class - can receive a fraction of that amount. The fact is that the reason settlement amounts are so large is that by definition they often have to provide enough for an entire class to claim. $10 may not be much to a single Facebook user, but a look at the big picture reveals that the amount of users able to claim costs the company millions. There’s also a less financial aspect to a successful class action – members receive acknowledgment that they have been wronged, justice against the company or business they filed against, in some cases, punitive damages.
The perception that class action lawsuits are at times not worth it for individuals may have something to do with their presentation in the media. The widespread reporting of million-dollar settlements creates a common misunderstanding that all class action lawsuits lead to financial payment, and all payments are big money. The nature of a collective action, though, is in its name: collective. Class actions seek to bring together multiple parties with similar claims, giving them the combined legal strength to take on big companies and seek damages on behalf of others like themselves. Many take part in class actions on principle, seeking to redress an illegal act, and the monetary gain – often equal to the monetary loss suffered – aims to leave members no worse off than before. The company, however, is hit with large bills to pay.
As for the lawyers’ fees, the work that goes into a class action lawsuits - especially one with a large membership – can be complex, requiring specialized knowledge and skills, and long hours, along with years of experience. Courts assign settlements with full knowledge of lawyers’ fees, and the amount individual members receive shouldn’t be diminished because of their lawyer’s payments.
Are class actions worth it? It depends on your approach to them, and on your reason for taking part. As a get rich quick scheme, absolutely not. As a way to redress an injustice, and to punch above your weight, absolutely. Collective actions empower consumers and make companies pay attention. You can’t expect to receive millions of dollars because your pictures got used by Facebook, but you can expect a public recognition that it was wrong, and a payment established by the courts to be equal to your losses.
At the end of the day, class action lawsuits still work for individuals and consumers, and to be a part of one is to stand up for your rights in a meaningful, effective way.
About the Author
Greg Coleman is Managing Partner and founder of Greg Coleman Law P.C. The practice deals with product liability, medical malpractice, toxic torts, personal injury and class action cases, among others. Mr. Coleman is admitted to practice in Tennessee state court and Supreme Court, and the United States Supreme Court, as well as the United States Court of Appeals for the Sixth Circuit and the United States District Courts for the Eastern District of Tennessee.