CLASS ACTION LAWSUITS; WHAT ARE THEY GOOD FOR?
November 27, 2014 - MarcWites
People with small claims often never get their day in court, even if their case is a slam dunk. Imagine that you are overcharged for a good or service, and the overcharge was only five dollars, or even $500. Would you be willing to pay a lawyer $300 per hour to pursue your case? Do you think a lawyer would take this case on a contingency fee? The obvious answer is no. And, while a five dollar overcharge may not be meaningful to one person, when a big company overcharges tens of thousands of customers five dollars a month, it results in a huge windfall to the company.
This is not to say that all corporations are bad, and act with malicious intent. But, when it happens, the only way to level the playing field, and give individuals with small damages their day in court, is through a class action lawsuit.
A class action is a lawsuit brought by one person that has a claim that is the same or similar to a larger group of people. Only one person is required to start a class action. The person bringing the lawsuit is commonly referred to as the “Class Representative” or the “Named Plaintiff”. The larger group of people is called the “Class”. Only one person is required to start a class action. The Class may include hundreds, thousands or even hundreds of thousands of persons.
The law of class actions, and the rules of civil procedure that govern class actions, apply to virtually all cases. For example, class actions may involve defective products; fraud in the sale of securities (i.e., stock); antitrust violations; overcharging for products and services such as insurance or fees in real estate transactions; charging a fee when no service is provided; unfair and deceptive trade practices; and pharmaceuticals.
There is power in numbers. Large corporations are most-often undeterred by complaints, or even lawsuits, from just a few individuals. When large profits are at stake, corporations sometimes view a few unhappy customers and shareholders as a cost of doing business.
Class action lawsuits positively impact society. For example, they have caused automobile manufacturers to recall and fix defective cars, required service providers to fully disclose the terms and conditions of their services, forced companies to refund monies they improperly charged their customers, mandated that food manufacturers fully disclose their products’ ingredients, and compelled manufacturers that engage in price fixing to compensate retailers and consumers that paid artificially high products for goods and services. Equally important, class actions serve as a deterrent against such behavior by corporations.
Class actions are sometimes ridiculed in the press. Without them, however, consumers and shareholders with small claims would be without any means to pursue them, effectively giving large companies immunity for their bad acts. So, class actions are not only good for something, they are sometimes they only way to level the playing field between individuals and large companies.
Marc A. Wites is an attorney and a shareholder of Wites Law Firm, a law firm which represents injured people and their families in personal injury and wrongful death actions, class actions, investment fraud matters, consumer debt litigation, and immigration.