Class-Action Lawsuits Carry Risks, Rewards
Darla Dernovsek
Joining in a class-action lawsuit often seems like a no-risk way to share in the proceeds of legal action. But every lawsuit has an element of uncertainty and where there's a gamble, there's a risk. Potential participants in class-action lawsuits should understand the possibility of liabilities and losses before agreeing to partake in the benefits.
Questionable rewards
For Gerry Ann Overley of Evansville, Ind., participating in a class-action lawsuit filed against telephone company SBC (formerly SBC Ameritech) yielded questionable rewards. The class-action lawsuit against SBC was filed in 1997 after customers claimed that SBC failed to disclose that participation in its inside wire maintenance plan was optional.
Materials about the class-action lawsuit were sent to all affected SBC customers in Indiana, Illinois, Ohio, Wisconsin, and Michigan. Recipients were notified that they were automatically included in the lawsuit unless they chose to opt out. Overley says some of the legal jargon contained in the materials was incomprehensible, but it was clear she could share in the rewards without incurring any obligation.
"I didn't have to take any action," Overley recalls. "I thought, 'Well, if I don't have to do anything, why not participate?' "
As part of the lawsuit's settlement with customers in the Indiana region, Overley received a 37-minute prepaid phone card with her January 2003 telephone bill. The card can only be used at SBC pay phones to make local calls or local toll calls within the customer's area code. SBC, which admitted no wrongdoing in the suit, values the card at $15. Overley sets the value considerably lower.
"I'd say the benefit is absurd," Overley says. She rarely uses pay phones and she only knows one person whose number is a local toll call. It's likely that she will throw away the card, yet she is philosophical about the experience.
Joining in a class-action lawsuit often seems like a good way to hold wrongdoers accountable.
"I really didn't pay attention to what the whole lawsuit was about," Overley says. "I still don't understand it, but I'm not too upset about it."
Common issues
Like Overley, many consumers view class-action lawsuits as a way to recoup losses from some form of perceived mistreatment without taking any risk. Yet, class-action lawsuits can have more serious implications for participants because they span a wide range of complaints and damages involving an equally wide range of participants.
A sampling of class-action lawsuits can be found on the FindLaw Web site, where the class-action section provides information about current suits and settlements. The lawsuits range from mundane attempts to recoup minor damages to heroic quests to compensate people for severe suffering.
For example, a class-action lawsuit was the true story behind the movie "Erin Brockovich," where the heroine of the same name helped residents gain compensation for damages suffered due to contamination of the water supply. Another class-action lawsuit recently grabbed headlines by attempting to hold major fast-food chains responsible when long-term customers become obese; the judge dismissed that effort.
One undoubted benefit of class-action lawsuits is the ability for large groups of people to join together to seek damages that might be too small to merit action if individuals were forced to seek redress one by one. Among the disadvantages is the lengthy class-action process--settlements typically take at least several years--and the likelihood that lawyers will receive a substantial share of financial awards.
Every lawsuit has an element of uncertainty.
How it works
Experts estimate that more than 10,000 class-action lawsuits are filed annually in state or federal courts. Generally, a case must meet four requirements to be certified as a class action:
The number of people involved justifies bringing the suit as a group, or "class." Groups vary in size from 20 people to more than a million.
The same misconduct or legal issue affects all class members.
Claims made by the individuals chosen to represent the class within the lawsuit are "typical" of the other class members.
Legal counsel can be retained to represent the class fairly without any conflicts of interest. Law firms often agree to work on a contingency basis, receiving a percentage of the settlement if they win, but bearing all costs and fees if they lose.
Once the court defines the class, everyone who fits the definition automatically becomes part of the lawsuit. In many cases, people affected by class-action lawsuits are contacted using records such as product registrations or customer lists. In other cases, advertising may be used to reach potential participants or announce a settlement.
Class-action lawsuits often reflect larger issues, such as concerns about the ethics of executives who control publicly held corporations. Disgruntled shareholders gained the right to challenge corporate management with the Federal Securities Litigation Reform Act of 1995. Generally, cases dealing with financial irregularities have the greatest chance of success.
A class-action checklist
While joining in a class-action lawsuit seems like a good way to hold wrongdoers accountable, consider any legal action thoughtfully. Before discarding materials about any class action, read the fine print carefully while keeping several key issues in mind.
Class-action lawsuits range from mundane attempts to recoup minor damages to heroic quests to compensate people for severe suffering.
Group members lose the right to file separately. By participating in a class-action lawsuit, you typically forfeit your right to file a lawsuit for individual damages. If you have incurred serious injury, consult an attorney before participating in a class-action. Remember, once a class-action lawsuit is settled, you can be prevented from ever seeking redress on the same issue whether or not you participated in the original class-action--because, as we said, everyone who fits the definition automatically becomes part of the lawsuit.
You can be liable. In some class-action lawsuits, participants can be liable for settlement costs. This is uncommon, but it does occur. Make sure the materials you receive spell out your potential liability or consult an attorney.
Deadlines matter. The court will set deadlines for every stage of the process. If you miss a deadline, you may lose your right to address the wrongdoing or participate in the settlement.
Doing nothing can be costly. If you are eligible to participate in a class-action lawsuit that requires you to "opt in" but you discard notices without acting, the opportunity is gone. If the suit automatically includes all affected people, you must follow official procedures to "opt out" to preserve your right to act individually.
Monitoring the process is your job. Proposed class-action settlements are reviewed at a fairness hearing, which gives participants an opportunity to object to the settlement and suggest improvements. But it's your job to monitor the progress of the suit and proposed settlements. Likewise, if you relocate while the lawsuit is in progress, it's your responsibility to notify the law firm representing the class so you can receive a share of the benefits.
Published March 24, 2003
|
