A class action lawsuit is one person or a small group of people suing on behalf of a larger group of people who have all suffered the same injury.
These injuries can be physical or financial, ranging from concussions to money lost on products that were defective or falsely advertised.
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When someone is injured, either financially or physically, he or she may be able to sue the person or company responsible for causing the injury. If this person has only suffered a relatively minor loss (anywhere between 10 and several thousand dollars), it may not be financially viable for him or her to file an individual lawsuit. In other words, the potential award the person could receive does not outweigh the expected cost of litigation.
A person buys a defective clothes dryer made by Wessex Appliances, Int., and it breaks within three years of use. It would not be worthwhile for this individual to file his or her own lawsuit against the manufacturer, as the cost of litigating the case would outweigh its potential recovery – most likely $700 (the cost of replacing the dryer) plus any additional damages the court deems appropriate.
If this clothes dryer, however, was sold to 100,000 consumers across the country and each contained the same defect that led to the premature failure, the potential recovery in the case could be upwards of $70 million ($700 x 100,000).
Fortunately, this does not mean this individual is without legal recourse.
Class action lawsuits provide legal relief to large numbers of individuals who were wronged by a corporation and only suffered relatively small monetary losses. Class action lawsuits are typically filed by one person or a small group of people on behalf of all those who were harmed in the same way ("class members"). This means that while the class members are not the ones filing the lawsuit, they will be able to receive a part of any settlement or court award that results from the case.
Example of a Class Action Lawsuit
LiveNation, Inc. Lawsuit
In 2009, a class action lawsuit was filed against event ticket broker Live Nation, Inc. The suit alleged that the company violated consumer protection laws when it added parking fees and other charges to the price of tickets purchased online for concerts at PNC Bank Arts Center in Holmdel, New Jersey. The lawsuit was filed by Michael Katz on behalf of himself and anyone else who incurred the allegedly illegal fees and surcharges.
Specifically, the lawsuit defined this "class" of people as:
Any person (i.e. each unique purchaser) who purchased a ticket over the Internet for an event at PNC Bank Arts Center in an electronic transaction through Livenation.com or Ticketmaster.com during the period of time between June 23, 2003 and June 15, 2011.
Several years later, the suit settled. Under the settlement agreement, anyone who met the definition outlined above – the class members – could receive three free tickets for a future concert. The attorneys working on the case created a website where people could learn about the lawsuit and submit their claims to receive free tickets.
What Is the Purpose of a Class Action Lawsuit?
The purpose of a class action lawsuit is to provide compensation to a large number of people who suffered similar harm – either financial or physical – as a result of an illegal or wrongful act.
Class actions help the public pursue justice by:
- Deterring Corporate Wrongdoing
- Because large companies know their customers can band together and file a class action, these lawsuits serve to deter corporate wrongdoing.
- Increasing Legal Efficiency
- Class actions increase the efficiency of the legal process by replacing multiple lawsuits with a single case.
- Providing Financial Incentive for Lawyers to Sue Big Companies
Large corporations have the financial resources to hire small armies of expensive, Ivy League-educated lawyers to defend them. A person who purchased a defective product, on the other hand, probably does not have such resources at his or her disposal.
Class actions, by aggregating the legal rights of hundreds or even thousands of people, level the playing field between individuals and corporations.
Because the settlements and verdicts in class actions can be quite large, this type of lawsuit provides a strong financial incentive for skilled attorneys to represent individuals in class actions.
- Providing Legal Relief to Many
When a large number of people lose money because of a company's wrongful act, a class action may be the only way in which these individuals can obtain legal relief.
Class actions provide opportunities for consumers to band together and fight back against powerful corporations in cases where the amount of damages each individual has suffered (e.g., $75 for a defective microwave, $3,000 for faulty shingles) is not large enough to justify the expense and time of filing separate lawsuits for every person who was harmed.
If a bank illegally charges a $35 overdraft fee to several thousand customers, it would not make financial sense for each individual customer to file a lawsuit seeking a $35 refund; however, if thousands of other customers were also charged the fee, it would be financially viable to file a class action seeking refunds for anyone who was charged the unfair fee. Through a class action, one person can pursue justice for an entire group.
- Providing Support to Related Charitable Organizations
- In the event money is left over in a class action settlement fund, it's possible these funds can be distributed to a charity or non-profit organization whose mission falls in line with the subject matter of the lawsuit. For instance, if a lawsuit was filed over unpaid overtime wages, it's possible that the remaining settlement funds could be donated as a "cy pres" award to an organization that helps protect workers' rights.
Who Can You Sue?
You can file a class action lawsuit against any corporation whose negligent, reckless, illegal or intentional conduct has caused physical or financial harm to a large number of people.
Lawsuits can be filed against:
- Manufacturers of consumer goods and appliances
- Banks, mortgage companies, and debt collection agencies
- Employers that discriminate against their employees or fail to adhere to wage and hour laws
- Food companies that use misleading advertising
- Car manufacturers
- Construction product companies
- Insurance companies
Can You Sue The Government?
Yes, you can sue the United States government for injuries suffered as a result of:
- The negligent or wrongful acts of government employees
- Defective equipment or machinery owned and operated by the federal government
- Negligently maintained property owned by the federal government, such as post offices, national parks and government buildings
Under the Federal Tort Claims Act, before you can file a lawsuit against the federal government, you (or your attorney) must submit a written claim to the federal agency that committed the negligent or wrongful act informing the government of your intention to sue and the amount of compensation you are seeking. The federal agency is then required to investigate your allegations and inform you in writing if it will offer you compensation for your injuries.
After the federal government mails its settlement offer or rejects your claim outright, you have six months to file a lawsuit. You are prohibited, however, from filing a lawsuit if the government has offered to pay the total amount of damages you requested in your claim letter. Many states have similar requirements for filing lawsuits involving the negligent or wrongful acts of state governments.