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Class Action Cases

Trials and negotiations take time and can be expensive. It's bad enough when one person needs to file a suit against a corporate defendant, but what happens when many people need to sue the corporation for pretty much the same reason? Is it effective for tens of thousands of cases to fill the courts with nearly identical cases?

The obvious answer is no. Courts prefer the class action lawsuit. In a class action suit, a group of people with similar injuries file suit against a defendant as a single plaintiff. This reduces the number of court cases and prevents litigants from trying the same issues over and over again.

Class action lawsuits are often filed in defective product cases, consumer protection issues, securities fraud, price-fixing instances, deceptive business practices, and wage and hour disputes.

Why Do We Need Class Action Lawsuits?

In some cases, such as product liability cases, individual claimants may not suffer the harm that requires legal action. For instance, if a car engine part is defective, some claimants may discover the faulty part before suffering any physical harm. They suffer the annoyance and expense of replacing the part and perhaps some vehicle damage.

On the other hand, some claimants won't learn of the defect until their engine fails at high speed on the freeway. They may suffer serious injury or even death. All these individuals are victims of the same product defect. It's common to expect accident victims to think of legal action, but others are eligible as well. A class action suit should be filed if enough accidents and other problems are due to the engine part.

Types of class action lawsuits

In a class action lawsuit, there are too many plaintiffs to join and participate on an individual basis. Claimants may request class certification, but the court has the final say. When making a class determination, courts consider:

  • Whether the number of class members makes joining them all in an action impractical. No set number is impractical, but the class members must meet all other requirements.
  • Whether the class members' claims share common issues of law or fact. All claimants must have similar claims against the defendant.
  • Whether the proposed class representative's claim is typical of all others in the class. The class action must have one named plaintiff. This case is the one that goes to court. It must represent all other members in the class.
  • Whether the proposed class representative will protect the interest of the entire class

Certifying a class also requires finding that separate actions would result in inconsistent findings for the claimants, or that rulings for some class members would negatively affect other class members' interests.

A mass tort may be a precursor to a class action. After a major accident, such as a plane crash, many victims have personal injury claims against the defendant airline or manufacturer. If their claims have enough facts in common, the court may certify a class action. In other cases, like pharmaceutical claims, there may be too many different types of claims to create a class representative.

In these cases, mass tort litigation protects each party's interests. Multi-district litigation (MDL) streamlines this process. When mass tort litigation has multiple cases in many states with similar features but not identical issues of fact and law, the federal courts may oversee the case on a temporary basis. MDL cases often involve antitrust and product liability.

The mass torts return to state courts for trial once the federal court resolves discovery and pretrial motions. The case ends if the parties reach a whole or partial settlement during pretrial negotiations.

Opting In and Opting Out

One major downside to a class action case is that it may involve parties unaware of the legal case. Once the court certifies a class, the class representative or lead plaintiff must notify everyone affected by the case. All potential claimants must have the opportunity to either opt in or opt out of the case.

The type of notice depends on the nature of the case. Very large cases may use newspaper advertisements or direct mail. If you have ever received a flyer asking if you ever used a certain product and wanted to be part of a lawsuit against the manufacturer, that was an opt-in notice.

Cases involving large numbers of potential plaintiffs may be opt-in by default. All claimants are part of the case unless they make a specific effort to remove themselves. Individuals who are part of a claim lose their right to sue later.

An example of this is the Schlesinger v. Ticketmaster case. The class action suit against Ticketmaster covered a period between 1999 and 2013 and involved up to 50 million potential claimants. Anyone who used Ticketmaster in that timeframe was eligible for part of the settlement, which was a ticket voucher.

Pros and Cons of Class Action Lawsuits

Class action litigation combines thousands or even millions of claims, and resolves all issues at once. If things go well, there are many benefits for the plaintiffs.

  • Combining many small claims increases the value of the total case. In some cases, such as data breaches or the Ticketmaster case, the loss to each claimant is small and possibly not worth litigating. Combining them makes the case worth filing.
  • In high-value cases, litigants may be unable to bring suit against the defendant. In securities class actions or other financial cases, individual victims face banks or securities brokers who can afford top-tier law firms. Class-action suits put litigants on equal footing.
  • The result of a class action suit applies to all members of the class. Individual cases roll the dice each time. A plaintiff might win or lose. If the defendant files for bankruptcy before the last plaintiffs file, those plaintiffs win nothing.
  • The defendant benefits by having the issue decided once. This offers a chance to resolve the facts in the case for any future related matters, known as issue preclusion.

As mentioned, the downside to class action suits is the lack of knowledge that many class participants have of the action. In addition, very large suits, like the Ticketmaster case, may lead to very small settlements. These nominal awards, called "coupon settlements," result in the lead plaintiffs and attorneys receiving large settlements and the remaining claimants receiving almost nothing.

Class Action Settlements

A class action suit tries to ensure equal treatment for all participants. The named plaintiff represents all other similarly situated claimants. Anyone who fits within the definition of a class member is bound by the terms of the settlement, whether they participated in the lawsuit or even knew about it.

The Class Action Fairness Act (CAFA) of 2005 addressed some of the notice and diversity issues of class action lawsuits. The court must review all coupon settlements and cash payments to ensure they have some value to all class members before approving a settlement.

The settlement must include a distribution plan. Class action settlements are divided pro rata according to the amount each person participated in the case. Named plaintiffs and attorneys receive the largest amount, but each class member must receive some payout.

In a class action, the court's decision applies to every participant who has opted into the class. All individuals who fit within the court's original definition of a class member are bound by the final court decision, even if they never go to court or otherwise participate in the lawsuit.

Class Action in Action

One of the most famous class action lawsuits, the "Fen-Phen" lawsuit, began in 1996. Two drugs, fenfluramine and phentermine, became healthcare stars as a potential treatment for morbid obesity. By 1996, doctors had written over 18 million prescriptions for the two drugs under their brand names.

That same year, the Mayo Clinic found that the drugs in combination could cause a serious heart valve defect. In 1997, the manufacturer of the brand name drugs, American Home Products, pulled them from production.

The Fen-Phen agreement highlights the benefits and drawbacks of a class action settlement. American Home Products set aside two funds for victims of the drugs. One fund, valued at $1 billion, paid for drug refunds and screening costs. A $2.55 billion fund paid personal injury claims up to $1.5 million each. 

The settlement offered three opt-out points. However:

  • Those who took the drugs for 60 days or less only received prescription refunds
  • Plaintiffs had to prove they suffered heart-valve defects to qualify for a maximum $1.5 million settlement. There was an opt-out provision at this point.
  • Although it can take months or years for damage from the drugs to become evident, the statute of limitations for filing a claim was not tolled (extended) until several years after the initial lawsuit

Fen-phen claims are still being paid in 2024, but most claimants joined the suit in 1996. 

The lesson to take away from the Fen-Phen lawsuit is that when a notice of a possible class action suit appears in your mail, don't toss it aside. It could be very important.

Talk to a Class Action Lawsuit Attorney

You may be part of a class action lawsuit if you suffered injuries due to a product defect or other cause that harmed others. Contact a class action attorney if you hear of legal action against a company that may have affected you or a family member. You have a limited time to join the suit and get the benefits of the class action.

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