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How Do Consumer Class Action Lawsuits Work?


Many consumer-rights claims are combined into class action lawsuits. This article tells you what a class action is, why and how it is used, and how you may participate in or benefit from a class action.

Q: What is a consumer class action?
A: 
A consumer class action is a lawsuit in state or federal court that is brought by one individual, or a few individuals, on behalf of a larger class of people similarly situated. Typically it seeks damages (compensation for harm done) on behalf of the named persons bringing the suit as well as the members of the “class.” For example, class actions have been brought on behalf of all persons who purchased a certain type of automobile during a particular time period, and have experienced brake or tire failure, etc.

Q: What types of claims may be brought as a class action?
A: 
In general, claims involving mass accidents or disasters, certain product defects, or violations of state consumer protection laws may qualify for class action treatment.

Q: Why is a class action used?
A: 
The classic basis for the use of a class action is to combine the smaller-dollar claims of a large number of people. Each person’s claim individually may be too small to pursue cost-effectively.  Combining many relatively small claims, however,  may justify the expense of litigation and improve the chances for success, especially against large corporations.

Q: How are the attorneys who bring the case on behalf of the class compensated?
A: 
Typically attorneys who specialize in class action work take cases on a contingent fee basis. This means that the attorneys receive a portion of the money recovered in the case, either by settlement or after trial. If there is no dollar recovery, the attorneys are paid nothing.

Q: What courts can hear class actions?
A: 
Both state and federal courts hear class actions. Some cases, such as those claiming violations of certain federal statutes, can be brought only in federal court. Generally, the class action procedures are similar in state and federal courts.

Q: How does a class action work?
A:
 When a case is brought as a class action, usually the court decides first whether it is a proper class action through a process called class certification. Then, the parties proceed toward trial on the basis of the claims in the case. Settlement negotiations may occur at any point in the case. The court must approve any settlement and will order notice to be given to any class action members who will be bound by a settlement agreement or a dismissal of the case.

Q: I have heard about “opting in” and “opting out” of a settlement.  What do those terms mean?
A: 
In certain types of class actions, a class member may choose whether to participate in a settlement that has been negotiated. If you receive notice of a settlement and the choice to opt out, you may choose to accept the settlement terms or decide not to participate in the settlement (you may want to opt out, for example, because you wish to bring your own claim). If you do not return a paper stating your wish to opt out, then you must follow the terms of the settlement.

Q: What should I do if I receive notice of a class action settlement affecting  me?
A:
 Read the papers carefully; they will explain the terms of the settlement, and the choices you have. Usually, a toll-free number or Web site address is provided in case you have questions, or you may want to consult an attorney about your rights, especially if you believe you have a lot of money at stake.

4/15/2013

Law You Can Use is a weekly consumer legal information column provided by the Ohio State Bar Association. This article was prepared by Charlie Faruki of the law firm of Faruki Ireland & Cox, PLL in Dayton.​​

Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

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