The Advantages and Disadvantages of Class Action Law

If you are training to become a lawyer, you have probably thought long and hard about what type of law you would like to practice. You have a wide range of choices from criminal, to corporate. And then there’s the area of tort law, including class action suits.

A class action suit is a lawsuit filed on behalf of a group, or class, of people seeking compensation for damages caused by a company. The class in question could be consumers, and family members, who have been injured or killed by the company’s product or it, could be employees of the company who have been injured by the company’s financial or employment practices.

Class Action Law

The YAZ lawsuit is an example of a consumer class action suit against a drug manufacturer who plaintiffs feel did not properly label and advertise their drug. The Equal Employment Opportunity Commissions age discrimination suit against AT&T is an example of an employee class action suit.

The advantage of a class action suit, over an individual suing a company, is the power of numbers.

If one person files a suit, then it’s essentially that person’s word against the company’s. In the case of the YAZ contraceptive, the company could argue that the plaintiff experienced adverse effect because she didn’t take the drug as directed, or that it was fluke. But if fifty or five hundred women step forward, all with the same issues, it gives the plaintiffs leverage. Because while it is possible for one person to take the drug the wrong way, it’s far less possible that five hundred people will make the same mistake and have the same result.

Another advantage is that the law firm can collect anywhere from thirty percent to fifty percent of the settlement money. In a billion-dollar suit, that’s millions of dollars in the law firm’s pockets.

A major disadvantage to class action suits is that most firms take them on contingency, that is, the firm only gets paid if you win the case. If the company opts to settle out of court, or go into mediation, you could reach a settlement fairly quickly. But if the case actually goes to court, even if the judge rules in your favor, it could take years to collect because the company has the right to appeal. This means your firm could end up spending years trying to get resolution, and in all that time, the firm is not getting paid.

The other issue is determining how to distribute the funds. Although all the plaintiffs are suing the company as one, the settlement is not usually distributed evenly. The fact is, while all the plaintiffs might be affected, there are different degrees of damage, and plaintiffs with greater damages generally get a larger portion of the settlement. But this also means that your firm has to determine the amount of the payout for each plaintiff, or else hire someone to do it for you. This costs time and money.

And finally, any plaintiff who joins the class action could forfeit his right to sue the company individually. If the class action is successful, that might not matter. But there have been instances where a firm was able to get a successful judgment on a class action suit, only to lose during the appeals process. And once that happens, the individual plaintiffs can’t sue again as individuals and they might also be prevented from joining any other class action suits against the same company.  On the law firm’s side, this adds up to several hundred unhappy clients. If your firm specializes in class action work, a major loss could seriously damage your reputation.

When they are successful, class action suits can be very lucrative. They can also give your firm the opportunity to give something back to the community by giving common people the ability to stand up against large corporations. But they can also be a lot of work, and a huge gamble, especially to a firm that does not usually specialize in this type of suit.