What Is a Class Action?

A class action is a legal procedure used to prosecute efficiently a lawsuit in which a large number of people have been injured by a common act or set of actions. The class process is used, for example, in cases alleging or concerning price fixing conspiracies (antitrust), fraudulent stock manipulation (securities) and oil spills (mass tort). In a class case, one or two named plaintiffs stand in for the entire group of similarly aggrieved persons during the course of the litigation. When a class action settles, the judge presiding over the case must approve the fairness and propriety of the settlement. Usually, potential class members have the option, after receiving notice, of excluding themselves from a class or class settlement, and pursuing the case on their own. The class procedure allows individuals and small businesses to prosecute meritorious cases that would have been too expensive or too small to pursue on an individual basis.


What Kinds of Cases Are Litigated as Class Actions?

In the 1960s, the Federal Rules of Civil Procedure were amended to allow for class actions. The new Rules were promulgated with an eye toward strengthening the hands of government agencies seeking to uphold and enforce then recently enacted civil rights legislation by the empowerment of private attorneys. Class action law has evolved over time and is now used to seek money damages and other relief arising out of securities law violations, consumer fraud, human and civil rights violations, employee benefits disputes, and environmental and mass torts.


What Incentives are There for Serving as a Class Representative? Who May Serve?

Any member of the class may serve as a class representative. In addition to the potential benefits conferred upon the class if the case is successful, class representatives are often awarded an "incentive" fee by the court for having brought a successful claim on behalf of the class.


Should I, or Do I need to Be, Involved in a Class Action? Is There Risk or Expense for Me?

In most cases you need take no steps of your own to join a class action. Indeed, usually only those who wish to exclude themselves from a class need do anything. By participating in a class case, you accomplish a number of objectives. You may receive compensation for a wrong, injury, or loss you have sustained -- compensation that may not have been available to you in any other forum. As a member of a class of similarly harmed persons, you help demonstrate to the court that the alleged harm done was substantial and affected a large number of people, increasing both the likelihood of a recovery and its size. Moreover, with rare exceptions in a handful of states, the only cost to you will be drawn from any settlement or judgment upon successful resolution of the matter. Class action attorneys work on a contingency fee basis and are paid upon a successful resolution of the matter. Generally, the attorneys advance the expenses and costs of prosecuting class cases.


How are the Plaintiff's Attorneys Paid in Class Action Cases?

The plaintiff's attorneys are usually paid in accordance with an order from the court before which the case is pending. The judge responsible for the class action reviews a submission made by the attorneys, called a "fee petition." This petition sets forth in detail the work the attorneys have done on behalf of the class. After consideration, the court enters an order fixing the amount of the fees to be paid to the attorneys from the judgment or settlement fund. The amount of the fees awarded is based upon a number of factors, including, among others, the quality of the work, the difficulty of the case, the nature of the result, the amount of time spent on the case, and the risks involved. As a percentage of the gross settlement or recovery, the fee amount can vary greatly within a wide range depending on the factors the court takes into account and the weight it attaches to each of them.