What is a class action lawsuit?
A class action lawsuit allows the court to hear the claims of many similarly situated plaintiffs in one trial, as opposed to each individual plaintiff bringing his or her own claim.
Example: If the electric company wrongly overcharged every customer by $1,000, customers could join together in a class action, rather than each suing the electric company individually.
On the Other Hand: If the electric company provided insufficient power to one home, and then too much power to another house, and completely shut down power to a third home, while over billing a fourth home, a class action would not be the best way to solve these claims. Each home has a very different claim against the electric company.
When many people suing have very similar claims, a judge will bring all those claims together and “certify” a class action. It is the judge who chooses whether a group of people suing have claims similar enough for a class action.
What are the advantages of a class action suit?
Class Actions Save the Court Time and Money. Instead of the court hearing hundreds of similar cases over and over, they just hear one. By hearing one case for thousands of claims, the court saves precious resources.
What are the disadvantages of a class action suit?
Courts Often Lump Claims that do not Belong Together: In order to be certified a class, those suing must possess very similar grievances. Judges sometimes are too quick to certify a class without looking to see if differences exist.
People Often Join Class Actions Without Knowing: When a lawyer files a class action suit, the law requires that he provide public notice. This allows individuals who want to file their own lawsuits to “opt-out” or get their own lawyer and file their own suit.
Notices are placed through television ads, newspapers ads, websites, and other public venues. Notices can also be mailed to the prospective class, but many people get this confused with junk mail.
Once a court determines that sufficient notice has been given, all individuals who do not “opt-out” or obtain their own lawyer and file an independent suit, are members of the class. Class membership has serious legal consequences.
Being a Member of the Class Means You Lose Your Right to Sue Individually: If an individual decides to remain part of the class or fails to “opt-out” because they were unaware of the lawsuit, they are bound by all rulings affecting the class, even if they don’t know about them.
Plaintiffs Maintain Little Control or Contact with Class Action Lawyers: Class action can encompass hundreds of thousands of individuals. With so many people, it’s next to impossible for the class action lawyer to effectively communicate with her clients.
Members of the class do not usually decide how the case goes forward.
Decisions like whether to settle and for how much are left exclusively to the class action lawyers.
Many times, class action lawyers negotiate settlements that provide for large fees for themselves, while providing little for the class members they purportedly represent.
Bottom Line: In Most Consumer Class Actions, Consumers Lose: After the case is settled, the attorneys receive their fees, which sometimes reach into the billions or millions, and the class receives its damages. Often, what the class receives is a mere fraction when compared to what the attorneys receive.
In a class action against a bank, trial lawyers made $8.5 million, while the class of people they represented actually had to pay $91.13 each due to attorneys’ fees.
In another case, lawyers received $5.8 million while the class received a $13 rebate on a new computer monitor.
A class action against a cereal maker netted lawyers $2 million while the plaintiffs received a coupon for a box of cereal.
How can the system of class action lawsuits be reformed?
One way to fix this system is to make sure class actions are correctly certified.
If a group of individuals have very different claims, or if the attorneys cannot give sufficient notice, or if the class is too large or diverse for one attorney or a small number of attorneys to adequately represent it, the class should not be certified.
Right now, once a judge certifies a class, it cannot be appealed to the Texas Supreme Court until the case is completed.
Texas is considering a law (SB 842 and HB 2072) that would allow the Texas Supreme Court to “double check” a trial court judge’s certification of a class.
Such a law would allow the Texas Supreme Court to ensure that a true class exists before the merits of the case are decided.
Call, write or email your legislator and let them know you support class action reform legislation. The following is the web site to locate your legislators and get their contact information:
Write a letter to your local newspaper. That contact information is available at: