When Is a Class Action Lawsuit a Bad Idea?

Who hasn’t gotten a letter in the mail notifying them they were entitled to a share of a class action lawsuit? Often these notices come out of the blue, addressing problems you didn’t even know you had. But a bad class action lawsuit can actually hurt your rights. Find out why doing nothing in a class action lawsuit could a bad idea, and what you can do instead.

What is a Class Action Lawsuit?

The words “class action lawsuit” tend to get thrown around in popular culture to mean “big legal deal”. And they can be. But many also function on a much smaller scale. The term “class action” has nothing to do with the money changing hands, or the publicity a case receives. Instead, it is a tool that allows one set of lawyers and a handful of representative plaintiffs to bring a case for the benefit of everyone involved. 

These cases are designed to resolve the kinds of legal issues that could result in hundreds, or thousands, of lawsuits across the country that all look the same: a person in the same situation is injured in the same way by the same conduct of the same entity. For example, there have been successful class actions representing patients prescribed drugs without being warned of their side effects, or consumers who were sold a product even though the company knew it was dangerous. Each of these cases:

• Have a way to identify who’s in and who’s out of the class (Ascertainability)
• Involve so many people they can’t be easily added individually (Numerosity)
• Revolve around the same legal question or factual situation (Commonality)
• Would involve the same legal arguments or defenses (Typicality)
• Allow the named parties to fairly and adequately represent the class (Adequacy)

When a lawsuit meets these requirements, a class is certified. Anyone who falls within that class is entitled to receive a share of the benefit (either money or injunctive relief). However, class members also lose their rights to sue individually unless they opt out of the class in time.

Why Would a Class Action Be a Bad Thing?

It’s that loss of rights that can sometimes turn a class action lawsuit into a bad idea. If you have been severely injured by a defect or business practice that was more of an inconvenience to other people, you could lose your right to sue for more substantial relief. Sure, most people can ignore that Notice of Class Action and accept whatever the settlement is. But if you have been directly affected, you may need more than you will get from that settlement. That’s when you need to opt out and pursue your own legal action.

Class Actions Should Serve Consumers First

Class actions are often intended to make a remedy available when the cost of independent litigation would be too high to warrant the benefit received if a person won. These lawsuits hold companies accountable for widespread misconduct that would otherwise go uncorrected by allowing a class of injured parties to share the cost of one litigation and still get relief for their injury. 

But sometimes, the injury identified and the relief granted are actually worthless to protect consumers. In a recent Seventh Circuit Court of Appeals decision, In re: Subway Footlong Sandwich Marketing and Sales Practices Litigation, the court said:

“A class settlement that results in fees for class counsel but yields no meaningful relief for the class is no better than a racket.”

When a class action lawsuit puts legal fees before consumer remedies, class members can find their interests left on the negotiation table. This is why consumers should be wary of any Notice of Class Action they receive. If you find out that you are a member of a represented class, it is up to you to be sure your interests were represented and either object to the settlement or opt out before the deadline if they weren’t.

Class action lawsuits serve an important purpose in America’s legal system. They provide accountability to companies and streamline the recovery process for consumers. But if you aren’t careful to review your mail carefully, you could end up giving up your rights to something bigger.

Dani K. Liblang is a consumer protection attorney at The Liblang Law Firm, PC, in Birmingham, Michigan. If you have questions about a class action notice you received, contact The Liblang Law Firm, PC, for a consultation.