A class action is kind of a civil suit that is brought about on behalf of multiple people who are similarly affected by a situation. In simple terms, a class-action lawsuit is titled as such because there is a class of people who are in a substantially similar circumstances and they get together to form a class in order to get relief through the lawsuit. Such class-action lawsuits have gained a lot of popularity over the past decades years and there also have been many movies made on the relief brought about by such class-action lawsuits.
Some of the common examples of class-action lawsuits include lawsuit filed by workers of the company to get a judgment against illegal hiring or salary practices. Similarly, class-action lawsuits are usually filed against drug companies when they make illegal claims about a product that results in physical damage or severe harm.
One of the most common causes of class-action lawsuits is securities claims. For instance, a company issues a false press release that causes the stock price to move up substantially but the stock price dives below the original price when the truth comes out. The stockholders who bought the shares of the company after reading the deceptive press release issued by the company may get together and bring about a class action against the company to get relief due to the loss caused as a result of the action of the company.
An individual joining a class-action lawsuit is usually required to sign papers wherein he or she declares that they forfeit the right to sue the other party as an individual. If the lawsuit is successful, damages are awarded to the plaintiffs suing the company. In many cases, all the class members are not given equal compensation from the damages obtained. In these class-action lawsuits, the lawyers usually work on a contingency basis.
A contingency fee arrangement means that they work for free for their clients but they do get a portion of the damages awarded by the court. However, their clients are under no obligation to pay any fees in case the suit is unsuccessful. In some cases, the reward for the lawyers can go up to 50% of the total awarded damages but in many cases, it may be as low as 30%.
As far as the damages awarded in a class-action lawsuit are concerned, these are usually split into compensatory and punitive damages. The compensatory damages, as the name suggests, are awarded to address the actual damages caused by action of the defendants such as suffering, pain, loss of life or illness. There is also punitive damages which, as the name suggests, are a type of punishment for the defendants who have committed the illegal acts that have resulted in harm. In many cases, punitive damages are extremely high where the lawyers are able to demonstrate that the defendants have shown utter disregard for the safety, health as well as emotional well-being of the sufferers.
The class-action lawsuit may be settled prior to trial or may also become jury trials. Direct mediation is also accepted in many cases. Mediation or settlement means that the plaintiffs and defendants do not have to go through the costly process of jury trial and they mutually agree to the damages. One of the biggest problems with jury trials is that a company can always appeal the decision, and the appeal process usually last for years which results in a very long period of weight for the plaintiffs before they can see any money. In some cases where huge punitive and compensatory damages are awarded, the company may also declare bankruptcy to avoid paying any compensation to the plaintiffs.