What Is a Class-Action Lawsuit?

If you follow the news, you've probably seen stories about class-action lawsuits being brought against companies or other entities that were negligent or engaged in deceptive practices. But, what is a class-action lawsuit and how does it work?

Read on to learn more about these group complaints and how they can help consumers and other wronged parties.

A class-action lawsuit is a legal proceeding in which one or more plaintiffs file a complaint on behalf of a group of people who claim to have been affected by another party's actions. If the lawsuit results in a settlement or judgment, penalties paid by the defendant are divided among members of the entire group.

What Cases or Issues Are Typically Brought as Class-Action Lawsuits?

Class-action lawsuits typically involve negligence or deception on the part of an individual or company, resulting in physical or monetary injuries to consumers or other individuals. Common issues that lead to lawsuits include:

• Discrimination
• Data breaches
• Deceptive practices
• Disability violations
• Defective or hazardous products
• False advertising or labeling
• Unpaid wages
• Violations of consumer protection laws

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Who Is Part of the ‘Class’ — and Do They All Get Compensation?

In a class-action suit, the class is comprised of the individuals or entities who claim to have been affected by the defendant’s actions. These groups may include consumers, employees, investors or other groups with common ties. However, before a group can be considered a “class,” a judge must certify it. Class certification typically depends on whether the group and the lawsuit meet several requirements:

• The number of individuals in the group should be large enough to make individual personal injury lawsuits impractical.
• The injuries suffered by each group member must be sufficiently similar.
• The lead plaintiff must be representative of the entire group.

Opting In and Opting Out

In certain types of cases, affected individuals may need to opt in to be considered part of the class.

In others, the group of affected individuals is so large that they’re automatically opted in. You’ll need to opt out if you don’t wish to be part of the class and want to reserve your right to file a lawsuit on your own.

What Are Examples of Class-Action Lawsuits?

One industry that’s often been targeted by class-action lawsuits is pharmaceuticals. Companies such as Merck & Co. have been successfully sued for making false claims about their products. In one well-known lawsuit, Merck was sued for concealing information about cardiovascular risks associated with its arthritis painkiller, Vioxx. The company settled separate suits, with one class made up of shareholders and the other comprised of consumers.

In a more recent class-action suit that involved household appliances, Whirlpool reached a multi-million-dollar settlement for dishwashers that were sold with a defective part that caused them to leak. If approved, the settlement would pay class members up to $225 each if they had to repair or replace an affected dishwasher.

How Do Class-Action Lawsuits Work?

Class-action lawsuits begin when the lead plaintiff files a complaint in state or federal court. The party being sued must then respond to the allegations. Often, the defendant contests the allegations and asks for the case to be dismissed.

If the judge upholds some or all of the charges, the proposed class can be certified. At that time, parties may go to mediation to attempt to settle. If the parties reach a settlement and the judge grants preliminary approval, class members are notified about their rights. They must file claims if they wish to receive monetary restitution. Eventually, the judge grants final approval and claims are paid out.

If a settlement isn’t reached, the case goes to trial. Class-action lawsuits that go to trial often take several years, depending on whether appeals are filed after the initial verdict.