Class-action lawsuits have their own unique rules for payouts. Most people are only familiar with high-profile lawsuits. There is more to how they work than most realize.

What Is A Class Action Lawsuit?

If you don’t have a legal background, you may be wondering what is a class action lawsuit? Most class action lawsuits come from defective products. Another large chunk comes from unsafe work environments or pollution. Some famous examples are asbestos, tobacco, talcum powder, and more. Others come from unfair business practices like fraud.

What is Class Certification?

This is based on the Federal Rules of Civil Procedure. The FRCP states:

  • There must be so many possible claimants that it would be not possible to put them all in one case
  • They suffered the same common injury
  • The claims are very similar
  • The law firm will not take advantage of claimants

Does it Cost Anything to Join?

Unlike a regular lawsuit, you are likely to get invited to join a class-action lawsuit. It often does not cost you a penny out of pocket to join. Many people get a postcard in the mail letting them know they may be eligible.

Other times there will be advertisements in the newspaper and on television.

How Else Can Someone Find Out If They Are Eligible to Join?

There are websites and services that you can use to find out. Online articles also show recent class-action lawsuits. There are also websites that show you current cases. These sites also show what cases are pending.

How Does Compensation Work?

Plaintiffs in a class-action lawsuit receive a payout that is a percentage of the total fund. Attorneys also receive a payout based on the amount won. Often it is around a third of the total fund. The reason is the attorneys put up a large amount of time, expense, risk of bringing the case through the courts.

There is always a very real chance that a case will be dismissed or lost in court. Other times the case loses on appeal. Compensation for big lawsuits takes quite some time to bear any fruit. People should have realistic expectations about how long it will take.

Trial or Settlements

Many lawyers dream of winning a big trial in court like on television. The problem is trials take many years to win. Most cases that win result in settlements.

Building up the case to be strong enough to win at trial is important. But, it is less expensive for both sides to settle the matter in most cases.

The payout will be based on how much could be won if the case goes to court. A judge will review the settlement to make sure it gives fair compensation to members. There must be an order from the judge approving the settlement as final.

How Much Is The Average Payout?

Many times there are so many claimants that the reward is a few hundred dollars. For example, Hyundai owners received an average of $353 [source].

Most of the time the named plaintiffs will receive more than other class members. The reason is class members still have to prove their injury and standing.

Can You Opt-Out?

Yes, if you feel the case does not apply to you. Another time you can opt-out if you do not want to be bound by the outcome of the case. Some class-action lawsuits can be frivolous or have very low payout probabilities.

Opting out allows you to bring your own case later. Sometimes you will have received damage that is far worse than the average class member. It is best to consult with an experienced attorney before making either decision. The success rate of finance-related lawsuits is not high.

Closing Thoughts On Class-Action Lawsuit Payouts

It is a personal choice to participate in a class-action lawsuit. On one hand, there is no cost to you. The catch is that payment is lower when there are many other class members.

Some money is better than no money. Also, some cases will result in a sizable payout. Some people find relief in seeing negligent or fraudulent actors get punished. You should consult with an attorney about your best course of action.

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