What is a Lead Plaintiff in a Class Action Lawsuit?
The Lead Plaintiff in a class action lawsuit is the named party(s) and is officially appointed by the court at the time the lawsuit is certified as a class action. The Lead Plaintiff owes a fiduciary duty to the class and must be capable of representing the interests of all the class members.
Responsibilities of a Lead PlaintiffThe Lead Plaintiff in a class action has several important responsibilities including: hiring the class action lawyer; filing the class action lawsuit; consulting on the case; participating in the case; and, agreeing to any settlement.
(1). Hiring the Class Action Lawyer: While the Lead Plaintiff enters into a retainer agreement with the attorney(s) in a class action, the Lead Plaintiff is not responsible for attorney fees and therefore does assume a monetary risk. Instead, in class action lawsuits, the attorneys usually take the cases on a contingency fee basis which means the attorneys pay all costs during the case and recover those expenses and their fees only if they are successful. With Court approval, the Lead Plaintiff may recovere expenses such as travel, copying, and postage.
(2). Filing the Class Action Lawsuit: The Lead Plaintiff is the one who initiate the case on behalf of all the people who suffered the same and similar damages at the hands of the same guilty party.
(3). Consulting on the Case: The Lead Plaintiff participates in case strategy and decisions, has some form of control over how the case is handled. The Lead Plaintiff should consult with their attorneys on any major decision and provide their input throughout the case. Their attorneys should keep them advised of the status of the case at all times and provide them copies of any major pleadings or motions (such as a motion for class certification) to review and provide input before they are filed.
(4). Participating in the Case: The Lead Plaintiff participates in the lawsuit, which may mean participating in discover, the process of gathering information that may involve answering interrogatories, producing documents and other evidence, and having their deposition taken. The Lead Plaintiff also attends hearings, trials, and other court proceedings.
(5). Agreeing to Any Settlement: Perhaps the most important role of the Lead Plaintiff is to consult with the class action lawyers about any possible settlements. The Lead Plaintiff should consult closely with his or her attorneys regarding any settlement offers and the attorneys may not agree to any settlement without client authorization. The lead plaintiff is the only party with the authority to accept or reject a settlement offer. Any settlement agreed to by the Lead Plaintiff is automatically binding on all other class members.
What Compensation is a Lead Plaintiff Entitled to Receive?In addition to recovering their actual losses, a Lead Plaintiff may, at the discretion of the court, be awarded additional funds above and beyond the compensation granted to other members of the class. This award is known as an incentive award. An incentive award offers individuals who suffered injuries or losses an incentive to serve as the Lead Plaintiff in a class action. With all the responsibilities class representatives handle, it is only fair they receive some type of extra compensation for their work. Indeed, incentive awards are intended to compensate class representatives for "work done on behalf of the class, to make up for financial or reputational risk undertaken in bringing the action, and, sometimes, to recognize their willingness to act as a private attorney general." Incentive Awards are generally sought after a settlement or verdict has been achieved.
In determining whether to make an incentive award to the Lead Plaintiff, courts have considered the following criteria: (1) the risk to the class representative in commencing suit, both financial and otherwise; (2) the notoriety and personal difficulties encountered by the class representative; (3) the amount of time and effort spent by the class representative; (4) the duration of the litigation and; (5) the personal benefit (or lack thereof) enjoyed by the class representative as a result of the litigation.