What is a Class Action Lawsuit?


Kimberly Dawn Neumann

There’s power in numbers, especially when a group has all been wronged in the same capacity. That’s when filing a class action lawsuit can help bring about a settlement that represents multiple people at the same time. In fact, in 2022, class action lawsuits recovered over $63 billion in total damages for class action participants.

By definition, a class action permits one or more plaintiffs to pursue a claim on behalf of a larger group. But the specifics of this type of legal remedy are a little more complicated. This guide will take you through all you need to know about starting or participating in a class action.

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Types of Class Action Lawsuits

The amount and value of class action lawsuits nearly doubled from $1.9 billion to $3.8 billion in 2022. More people have been joining class action lawsuits now than ever before, and there are several types you should look out for:

  • Product liability. Meaning a product consumers use regularly is found to be defective or dangerous and doesn’t have a warning. Product liability class actions have some of the highest settlement awards of all personal injury lawsuits.
  • Consumer fraud. This comes into play, for example, when consumers are victims of false or misleading advertising.
  • Antitrust. Cases where there’s evidence of monopoly, bid rigging, and price fixing fall in this category. When one company intentionally crushes or buys all competing companies, the “squashed” companies might bring a class action.
  • Employment. When multiple employees are victims of discrimination or their employer deprives them of owed wages, a class action might result.
  • Securities fraud. If a company artificially inflates its value, misleading investors, then those who lose money might file together.

How to Start a Class Action Lawsuit

Class actions may be filed federally or in your state by one or several individuals in an “injured” group. These cases are always civil in nature, meaning their purpose is to recover damages for losses. The “named” plaintiffs will actively be a part of the prosecution process, whereas other claimants serve to bolster validity.

Anyone who thinks they have a common grievance where there may be multiple plaintiffs can start a class action. However, it’s wise to find a lawyer before attempting to put together a class action since it requires several steps.

How Many Plaintiffs are Necessary for a Class Action Lawsuit?

There is no specific number for how many plaintiffs should be present before filing a class action claim. However, this requirement usually depends on the plaintiffs’ numerosity. This means there must be enough apparent claimants that it would be too tedious for each to sue individually.

Too few plaintiffs, however, will probably prevent class certification by the court. In general, less than 20 is too few, more than 40 will probably be acceptable. But it will absolutely vary by case.

Rule 23 of the Federal Rules of Civil Procedure outlines all the requirements for a class action to be valid. One of the primary factors is that the court must find the “joinder” of all members is “impracticable”.

What that means is that a “joint action” claim would be too large with too many plaintiffs. So, the court allows one person, the lead plaintiff, to represent all the other claimants.

How to Become a Lead Plaintiff in a Class Action Lawsuit

The class member — or sometimes a few members — who becomes the “lead plaintiff” must receive approval from the court. This will happen during the certification process of the class action lawsuit after filing a claim.

What’s important to know is that the lead plaintiff must represent all claimants in the case. Whomever the court selects as the class representative will have to meet certain criteria, including:

  • Adequately and justly representing the injuries and interests of the entire class
  • They do not have any conflicts of interest that could hinder the outcome for others in the case.
  • They have legal representation, like a lawyer, who will submit a plan for the proposed class action. This includes an explanation of how they’ll locate other class members.

The lead plaintiff must know they’ll have to be very involved with the case. They will have to attend hearings and other court appointments. They also must approve or reject any settlement offers on behalf of the class. However, the reward for all their work is they usually get a slightly larger payout if the claim is successful.

Even if you’re the one starting a class action suit, you may not be the strongest lead plaintiff. You should talk to your attorney and decide who will make the best representative for all the claimants. That should be the person the lawyer offers as a potential lead for the case during certification.

Certifying a Class Action Lawsuit

The legal document that starts the process is a class action complaint. A lawyer will file that with the court and it’s the judge who decides if the case may proceed. The term for this decision process is certifying the complaint.

Per Rule 23, when it comes to the certification of a class action lawsuit, a judge will consider the following:

  • Numerosity. Are there enough potential plaintiffs with similar situations for this case to warrant class action status?
  • Commonality. Do the claim members share common questions of law or fact?
  • Typicality. Are the claims or defenses of the lead plaintiffs typical of the claims or defenses of the rest of the class?
  • Suitability. Will the lead plaintiff be an adequate and fair representative to protect the interests of all members?

A class action suit is not automatically going to receive certification. However, if a case meets those four criteria, chances are pretty good it will move forward.

What is the Average Payout in a Class Action Lawsuit?

There is no average class action settlement per person because there are so many variables with every case. It depends on:

  • Severity of the injuries
  • Number of involved parties
  • Whether it settles or goes to court

A plaintiff might get a $10 gift card, or they might get a check for $1,000.

However, according to the Duane Morris Class Action Review, there were more billion-dollar class action settlements than ever in 2022, more than any other year in American history. There were 15 class actions that ended with awards over $1 billion split between plaintiffs.

How is the Settlement Split Among Plaintiffs?

Class actions usually result with settlement offers before going to trial. As such, it’s hard to define exactly how an award will be split. However, whether settled in court by a jury, or out of court via negotiations, payouts usually happen in tiers.

The lead plaintiff/plaintiffs will generally receive their award first. As previously mentioned, it may be higher than other “classmates” owing to the time they’ve invested and their injury severity.

Next, the lawyers—who typically work on contingency, meaning they get nothing unless they win—get their fees. However, the court will limit what they receive to a fair percentage of the claim.

Once those payouts are complete, the other class members split the rest of the leftover money. So, the amount anyone participating in a class action lawsuit will receive depends on how many class members remain.

Joining a Class Action Lawsuit

Unnamed plaintiffs should receive a notice informing them of a class action after court certification. At that point, you will receive instructions on what is necessary for participation.

In some cases, you don’t have to do anything for inclusion. In others, you may have to submit proof showing that the statements made in the claim pertain to you as well. Sometimes you may not even know you were part of the suit until you receive an award notification.

Generally, you’ll have to file a claim online or via regular mail to get your part of a payout. Any notice you get should have clear instructions for claiming your share. The lawyer representing the case should also be able to help guide you.

Should I Start an Individual Lawsuit Instead?

There are pros and cons to joining a class action you should know about. If a potential plaintiff believes they have a strong enough individual case, they may choose to file solo. Filing the lawsuit individually may yield a larger settlement for yourself. You may also control your lawsuit with more agency yourself than with a class action.

Remember, a person can always opt out of a class action lawsuit, which means the outcome won’t affect them. But keep in mind, opting out also means not receiving any of the class action compensation if the case is successful.

This is where it’s vitally important to consult with an attorney with experience in class action cases. A lawyer can help determine if your chances for higher compensation increase or decrease if you pursue the case individually.

Find Your Legal Answers With an Employment Attorney

Class action cases are confusing. This is not something to attempt to take on without skilled legal counsel in your corner.

However, there are lawyers with experience in this type of lawsuit in our network. Reach out through this evaluation form so we can connect you with someone who can assess if you have a class action claim.

Kimberly Dawn Neumann

Kimberly Dawn Neumann is a multi-published NYC-based magazine and book writer whose work has appeared in a wide variety of publications ranging from Forbes to Cosmopolitan. She graduated summa cum laude from the University of Maryland, College of Journalism. For more, visit: www.KDNeumann.com, Instagram @dancerscribe, and Twitter @KimberlyNeumann