6 Things To Know About Class-Action Lawsuits

(Image credit: Getty Images)

published 6 July 2015

A class-action lawsuit is a civil lawsuit brought on behalf of a group of people or business entities who have suffered common injuries as a result of the defendants’ conduct.

There are many cases and issues that can be brought as class-action lawsuits. Often, class actions fall into one of the following categories: securities, product liability, personal injury, employment and consumer causes of action.

When it comes to class-action lawsuits, it’s natural to wonder about the average settlement per person. Settlements can vary significantly based on numerous factors, making it essential to gain a deeper understanding of the dynamics at play.

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Here are six things to know to better understand how class actions suits work:

1. There’s strength in numbers

Consumer class-action lawsuits allow a person or a small group of people to sue a company on behalf of a larger group with similar claims. The cases, which often allege fraud or product defects, usually end in a settlement instead of going to trial.

For example, Google has settled a series of sweeping privacy lawsuits, resulting in nearly $600 million in settlement payout agreements to states and affected users. Verizon's class-action suit settlement, the telecom company agreed to pay $100 million to post-paid customers who were charged a monthly administrative fee. Cases involving consumer privacy, such as the $725 million Facebook settlement connected to the Cambridge Analytica data privacy scandal, have become even more common.

2. Don’t expect a windfall

Settlements in recent years have averaged $46 million, a 17% increase over the 2022 inflation-adjusted average settlement value of $39 million and the second consecutive year that this value has increased, according to a review by NERA Economic Consulting. But individual class members rarely see a fat payday. For example, the Verizon settlement is $100 million (separate lawyers’ fees total $33.3 million). If all 25,000 post-paid customer and were charged a monthly administrative fee filed a claim, each one is set to receive will receive at least $15 and up to $100.

3. Get in on the action

Potential class members may be notified directly or by way of an ad or in-store posting after the court approves the case as a class-action lawsuit or after a preliminary settlement is reached. Think you might be a class member in a suit but haven’t been contacted? Web sites such as www.consumer-action.org provide snapshots of current cases and settlements. You will probably also find a link to a Web site that has been set up to provide updates and additional details. If the terms are still not clear, or you’re concerned that a notice might be fraudulent, contact the consumer protection division of your state attorney general’s office.

4. Know your options

In most cases, you will be included automatically in a class unless you opt out. Joining the class means you’re eligible for compensation, but you waive the right to file a separate lawsuit. If you think you can prove that you have been harmed more than other consumers, consult a lawyer before excluding yourself from the class.

5. Don’t hold your breath

There are several opportunities for people and organizations to object to or appeal a settlement, and the settlement must receive final approval from the court. Assuming there are no further appeals, class members generally receive payment about six to nine months after a settlement agreement is submitted to the court for preliminary approval, says Stuart Rossman, director of litigation at the National Consumer Law Center.

6. Take the money

If you think filing for a minuscule settlement isn’t worth your time, or you don’t think you suffered sufficient financial harm for a case, take the money anyway and donate it to charity. Otherwise, the money may go to another class member or be donated to a charity chosen by the plaintiffs and the company. The money you receive is usually considered taxable income, but if you donate it and you itemize, you may take a tax deduction.

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Pitsker joined Kiplinger in the summer of 2012. Previously, she interned at the Post-Standard newspaper in Syracuse, N.Y., and with Chronogram magazine in Kingston, N.Y. She holds a BS in magazine journalism from Syracuse University's S.I. Newhouse School of Public Communications.