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Frequently Asked Questions About Class Action Lawsuits

Parry, Deering, Futscher & Sparks, PSC is a nationally recognized consumer class action law firm.  If you think you have a claim against a corporation or insurance company for bad faith or deceptive practices, you may not be alone, and your claim could become part of a class action.  You may find the following information about class actions helpful.

 

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What is a class action?

Class actions empower people to effect change for an entire group of people harmed by the same practices. A class action is a civil lawsuit where one or more selected complainants, called class representatives, sue on behalf of a class of people. The judge first decides whether the claims of the class representatives arise from facts or law common to the class members. This is called commonality.  Most class actions are called plaintiff class actions, because in a lawsuit the parties doing the suing are called plaintiffs. But in limited circumstances, a class action can be filed against one or more defendants representing a group of defendants, and would be called a defendant class action.

Class action suits can help people who have been harmed by another party, such as a product manufacturer or developer, a lending or other financial institution, or an insurance company. An individual may have been injured or suffered some other damage, but one person's damage alone may not be great enough to justify the expenses of a lawsuit. The wrongdoer in such circumstances may get away with the wrong because of the cost of bringing a lawsuit. But if enough people have also been injured, then the combined damages may be enough to justify bringing a lawsuit to hold the wrongdoer responsible for the harm caused.

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What types of class actions may be filed?

Most class actions are filed to recover money. Class actions may also be filed to resolve disputes over a limited fund, where the money available is inadequate to fully compensate all class members. Occasionally, what is called declaratory judgment class actions are filed asking for a decision from a court as to the rights and obligations of the parties. Sometimes class representatives may ask the court to order a person to do something or stop doing something. That is called an injunctive relief class action. For example, a class action may be filed to request that the court order the police or authorities to stop doing something unconstitutional or to enforce environmental rights.

Who pays the lawyers in a class action lawsuit?

In a class action for money damages, lawyers who represent the class are generally paid out of the money that is recovered, called a common fund, for the people they are representing. In class actions involving declaratory judgments or injunctive relief, lawyers may be paid by the people who hired them, or in some cases, by the people or companies they are suing.

Attorney's fee awards are subject to court review and approval. Ordinarily, if an award is made in a common fund case, it will be awarded as a percentage of the total money available for the class. A benchmark award generally accepted by the courts is approximately 25 percent of the total, although the award may be adjusted higher or lower, depending on the specific facts of a case.

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Can I be bound by a settlement or judgment of a class action?

Yes. If the court decides the underlying legal proceedings were fair, all absent class members are generally bound by the judgment or settlement of a case. But if the lawsuit is primarily to recover money, absent class members are entitled to notice and an opportunity to opt out (exclude themselves) from the proceedings. If you opt out, you are not bound by any judgment or settlement of the class action. Opting out may free you to bring a claim for damages individually. When a class action is for declaratory or injunctive relief, notice is not required to bind absent class members and the court may not allow a person to opt out.

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How do I join a class action?

Generally, before a court certifies a class action, it must conclude that there are too many class members for them all to be named as parties in the lawsuit. Technically, class members do not join in the litigation, but decide to participate by not opting out. It is only in rare instances that a suit is filed as an opt in class action. In those rare instances, a claim form or request to join form may be necessary. Ordinarily, the notice issued to class members in the usual suit for money damages tells the class members if they need to take any action to participate. In a suit for money damages, any class member who does not opt out may be bound by the results of the litigation if it proceeds as a class action. If a class member should determine, however, that he wants to participate in the suit as a named party, he may hire his own lawyer and seek to intervene (participate) in the lawsuit.

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How do you know if you have the makings of a class action lawsuit?

First, a significant number of people must be potential members of a class. This is called numerosity in legal terms. There must be so many potential plaintiffs that it is not practical that they each individually bring their claims. There is no magic number, as it is determined on a case-by-case basis. There must also be common facts or similar legal questions between the class members, called commonality. The class representatives' claims must also be typical of those who are members of the proposed class. It is not necessary that their claims be identical. This is called typicality. Finally, the class representatives must be able to fairly and properly represent the class. The court must be convinced that the representatives are pursuing the interests of the class and not just their own interests at the expense of the class members.

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If I have a claim, should I file my own lawsuit?

The answer depends on the nature of the suit and your own individual circumstances. Often, class actions seek recovery for a large group of people, but individual damages may be small. For instance, if a mortgage company is improperly charging interest, and as a result every class member paid $100 more than he or she should have been charged, the cost of litigation may make it impractical to file such a case individually. On the other hand, if you have substantial damages and a serious claim, you should talk to a lawyer about whether to file your own lawsuit.

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Why do I hear about allegations of an unfair settlement or improper legal representation?

There has been a great deal of criticism of class action litigation in the news in recent years. Sometimes the criticism is justified; often, it is not. A good deal of the criticism focuses on the fees that lawyers receive. Many times, the most vocal opponents of class action litigation are insurers who are required to pay covered claims as a result of the litigation, or the wrongdoers involved in the underlying misconduct.

It is true that lawyers who represent a class often receive fees many times greater than the compensation received by any given class member. But the total money recovered on behalf of the class in a proper settlement is invariably many times the fee awarded to lawyers.

Without a means to sue wrongdoers for cheating people out of small sums, we would all be at the mercy of small time cheats. Generally, no one person cheated out of $100 can find a lawyer to represent him. But several thousand people cheated out of $100 each have a powerful collective wrong that attracts qualified legal representation to put a stop to the practice.

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