In the past, you may have received an email inviting you to join class-action litigation or letting you know that you were automatically included. It can be daunting to join a class-action lawsuit, especially if it requires you to opt in and give up your right to sue on an individual basis.
Most of the time, joining these lawsuits is not a bad idea. They combine many claims — sometimes thousands — in one claim, reducing costs for each claimant, and possibly earning a larger payout.
There have been numerous opportunities to do this. According to a Duane Morris report, the United States had seen the largest number of class-action settlements worth billions of dollars in 2022, aside from tobacco settlements from decades ago. Class-action lawsuits of this magnitude are high stakes, since they set standards in corporate responsibility for areas like data privacy, employee harassment, securities fraud, and civil rights.
In cases where you have suffered serious harm, suing on your own could result in a larger payout.
Why you should opt in (or out)
Many class action lawsuits are so small that the payouts to victims are so low, participation is more a question of principle than reward. Even if you only receive $10 or $20 in compensation, joining a class-action lawsuit can help others get justice and deter companies from future harmful practices.
Russell T. Abney is an attorney at Watts Guerra who represents victims of defective medical devices and dangerous drugs. He says that the beauty of a class action is that it adds individual cases up to a high number to take on a large corporation.
Abney says that in most cases, plaintiffs who file class-action suits pay their legal fees contingently, meaning they do not pay anything until they win. These lawyers are paid a percentage from the settlement they win.
You’ll be included in a lawsuit if you are part of a “class,” that is, you were affected by describing event or purchase. In some cases, like those that involve wage violations or defective goods, you might have to opt-in.
Class representatives don’t always get a larger payout
You can participate in a lawsuit as a representative of the class, also known as a lead plaintiff, if you are strongly opposed to its outcome. It’s possible that becoming a representative of a group could result in a larger payout, but this is not always the case.
Jennifer A. Riley is a partner and vice-chair of Duane’s workplace group. She says that even though the headline of the case is “the class representative”, this person will not necessarily get a windfall. She says that in some jurisdictions, courts can award a service fee to the plaintiff who represents the case. These fees are usually between $2,500 to $7,500. However, other courts find these awards to be inappropriate. It’s hard to predict whether a service award will be given.
Many people find class-action lawsuits to be a time-consuming commitment. They can take from several months to years. Exxon Valdez, for instance, took 17 long years to settle a class action lawsuit.
When you should opt out or not join
It makes sense, if you intend to bring your own case, to not take part in a class action lawsuit.
Gerald L. Maatman Jr. is a partner and chair of Duane’s workplace-class-action group. He says that if you file your own lawsuit the value of your claim could be higher than if you were a member of a class. You’re deciding, “If I opt-out, will I do much better than if I were to join a class action?” And, in some circumstances, an individual might do better. They would get their money faster, and more money.
The New York Times reported, for example, that following the data breach of the credit-scoring firm Equifax in 2017, which compromised personal data from 147 million individuals, some people sued Equifax at small claims court, and won much higher sums than the class-action payouts.
The filing fee for small claims courts, which deal with claims between a few thousand and $15,000 depending on the state, is usually a very low amount. This makes them an affordable way to pursue damages. In most cases, the plaintiffs in small claims courts represent themselves, saving them expensive attorney fees.
The costs are higher if you plan to file a large lawsuit. A lawyer can determine if you have a good case and what the outcome might be.
This article was originally published in The Associated Press by The NerdWallet.
Claire Tsosie is an assigning editor for NerdWallet and contributed to the reporting of this article.