Hidden fees, defective products, and data breaches impact millions yearly.
What if you didn't have to face these giants alone? Class action lawsuits enable individuals to unite and demand what's rightfully theirs.
The top 10 class action settlements in 2024 totaled a staggering $42 billion, with product liability cases alone accounting for $23.4 billion.
Some argue class actions are slow and messy, while others see them as the only way the little guy can take on big corporations.
So, what is a class action lawsuit? Understanding how class actions work can make the difference between leaving money on the table and receiving a check in the mail.
Key takeaways:
- Class action lawsuits enable group claims: Class actions allow individuals to unite and seek compensation for shared grievances, making it easier to hold companies accountable. They consolidate many similar claims into one case, improving the chances of securing a larger settlement.
- Class actions address common issues: Whether due to consumer fraud, wage violations, or defective products, class actions are ideal for resolving widespread problems that affect a large group of people. They help bring collective action against big corporations.
- The legal process of class actions: From filing the complaint to class certification and settlement distribution, class actions follow a structured and defined process.
- Settlemate simplifies class action participation: Settlemate makes navigating class actions easy by using AI tools to match you with relevant settlements, offering personalized claim assistance, and tracking payouts. With smart claim matching, step-by-step guidance, and secure document management, Settlemate ensures you never miss an opportunity to claim what's yours.
What is a class action lawsuit?
A class action lawsuit is a legal case filed on behalf of a group of people, known as a "class," who've been harmed similarly by the same defendant. Instead of each person hiring a lawyer, one lead plaintiff sues on behalf of the group, holding the company accountable and seeking compensation for everyone affected.
The goal is simple: One case, one ruling, thousands (or millions) of wins.
It's the fastest way to get your money back from companies that bet you won't bother.
Legally, class actions in U.S. federal court operate according to Rule 23 of the Federal Rules of Civil Procedure. The law defines a class action as any lawsuit where one or more people sue "as representative persons" on behalf of a larger group, under Rule 23 or a similar state law.
One common comparison between class actions and mass torts is that both involve multiple plaintiffs seeking compensation from a single defendant, but they differ in how the cases are managed and resolved.
In a class action, a group of people with similar claims is represented by a lead plaintiff, and all plaintiffs are bound by the outcome unless they opt out. In a mass tort, each plaintiff has an individual case, though they are all related to the same issue, and the outcomes can vary for each person.
Key characteristics of a class action
Some defining features make class actions unique compared to ordinary lawsuits:
- Group of plaintiffs with common claims: A class action involves many people (often hundreds or more) with similar legal claims against the same defendant. The group is called "the class," and all members allege an ordinary wrongdoing, such as being overcharged or harmed by the same product.
- Lead plaintiff(s) – class representatives: Typically, one or a few plaintiffs represent the entire class. These lead plaintiffs file the lawsuit, work with attorneys, and make decisions on behalf of the group. Their claims must reflect those of the class, and they must protect the class's interests.
- Single proceeding vs. many lawsuits: Instead of individual suits, a class action consolidates all claims into one case, efficiently resolving common issues for all members.
- Binding outcome for all members: Unless they opt-out, all class members must accept the class action's outcome. The result, such as compensation or an injunction, applies to everyone, and they cannot file a separate lawsuit on the same issue.
5 common triggers for class actions with real-world examples
Class actions arise in many areas of law. Some of the most common types include:
Consumer fraud or deceptive practices
Consumers can unite if they were misled or defrauded by a company's false advertising, hidden fees, or unlawful sales tactics.
In 2024, the Equal Employment Opportunity Commission (EEOC) received 88,531 new charges of discrimination, reflecting a 9.2% increase from the previous year. Additionally, the U.S. Department of Labor's Wage and Hour Division recovered over $202 million in back wages for nearly 152,000 workers during the same period.
Example: The Volkswagen emissions scandal
In the Volkswagen emissions scandal, also known as "Dieselgate," the company installed software to cheat emissions tests.
This led to numerous consumer class actions for deceptive marketing and product misrepresentation, resulting in a $14.7 billion settlement in the U.S. for affected customers.
Employment law violations
When an employer's policies violate wage and hour laws, discriminate against a group of employees, or otherwise harm many workers, a class action may result.
Example: Walmart wage and hour violations
Walmart faced a series of wage and hour class actions alleging systematic unpaid work and break violations. Ultimately, Walmart paid over $640 million to settle 63 lawsuits by employees for these labor violations.
Defective products or drugs
Product liability class actions occur when a defective product (such as a faulty vehicle part or a dangerous pharmaceutical drug) injures numerous people.
Example: Johnson & Johnson talcum powder turmoil
Johnson & Johnson has faced tens of thousands of lawsuits alleging its talcum powder products caused cancer. In a pending mass litigation, J&J has even proposed an $8.9 billion global settlement to address these claims, illustrating the massive scale such product-related actions can reach.
Data breaches and privacy violations
As data breaches rise, companies are increasingly facing class actions for failing to protect customers' personal information.
In fact, data breach class action filings have surged – 1,488 such cases were filed in 2024, more than double the number in 2022.
Example: The Equifax 2017 data breach
In September 2017, Equifax, one of the three largest consumer credit reporting agencies in the U.S., disclosed a breach in its systems that compromised the sensitive personal data of 148 million Americans.
The resulting class action led to a settlement of up to $700 million, including providing affected individuals with free credit monitoring and cash compensation.
Environmental harm
When pollution or environmental disasters impact entire communities, class or mass actions can seek remediation. These collective lawsuits allow affected individuals to hold corporations accountable for widespread ecological damage.
Example: PFAS Water contamination
Communities affected by industrial chemicals like PFAS ("forever chemicals") have filed class actions against manufacturers. In 2024, 3M Company agreed to a $10.3 billion settlement to resolve class-action claims by public water systems over PFAS contamination, one of the largest environmental class-action settlements to date.
Main benefits of a class action
Class actions offer several significant advantages for plaintiffs and the justice system:
- Cost-effective for plaintiffs: Joining a class action is usually free upfront, and the group shares the legal costs. Lawyers work on contingency, making it affordable to pursue claims that would otherwise be too costly.
- Strength in numbers: Class actions combine similar claims, improving the chances of holding a defendant accountable. A collective case is more complicated to ignore than an isolated complaint, often resulting in larger settlements or remedies.
- Efficient for courts: One class action case is more efficient than hundreds of identical lawsuits. It saves court resources and prevents inconsistent rulings by resolving common issues in a single proceeding.
- Drives corporate accountability and reform: Class actions not only compensate victims but also encourage companies to change harmful practices. Many settlements include reforms or industry-wide changes, and the potential for large payouts deters future misconduct.
How class action lawsuits work (step-by-step process)
Here is a step-by-step overview of how a class action typically progresses:
1. Filing the Complaint
Every class action begins with a complaint – the legal document that starts the case. The lead plaintiff(s) and their attorney file this document on behalf of the proposed class.
The complaint names the defendant(s), describes the wrongdoing, and defines who the "class" includes (for example, "all customers who bought Product X between 2020 and 2023 and experienced defect Y").
At this stage, the case is proposed as a class action, but it is not yet officially a class action until the court approves.
2. Class certification
Class certification is a pivotal stage where the court decides whether the case can move forward as a class action.
The judge evaluates the Rule 23 requirements, which include:
- Numerosity: The class is so numerous that joining all individuals in one lawsuit is impractical. (There's no strict number, but generally at least a few dozen people or more).
- Commonality: There are questions of law or fact common to the class. In other words, the core issues are shared across all class members (e.g., the same defect, the same illegal policy).
- Typicality: The lead plaintiff's claims are typical of the class. Their situation arises from the same course of events and legal theory as everyone else's, so by pursuing their case, they also advance the class's case.
- Adequacy: The lead plaintiff (and class counsel) will adequately represent the class's interests. This means no fundamental conflicts of interest, and the lead plaintiff is capable of advocating for the whole group's benefit.
3. Notification to class members
Once the court certifies the class, it directs the delivery of notice to all potential class members. Notification is how people find out that they are part of a class action and about their rights.
This often involves mailed notices, email notices, published notices in newspapers/online, and sometimes targeted social media or ads to reach as many class members as possible.
Typically, class members have two main choices upon receiving notice:
- Do nothing (stay in the class): If you do nothing, you remain an included class member.
- Opt Out: If you don't want to be part of the class, you have the right to exclude yourself, but you must do so by the deadline stated in the notice. If you opt out, you can file a lawsuit on your own.
4. Litigation or settlement
After notice, the case proceeds like a regular lawsuit, but with many claims involved. The two main options are continued litigation or a settlement.
During litigation, both sides gather evidence, including documents and witness testimony. They may also file motions to dismiss or resolve issues. Discovery in class actions can be complex, as it often involves large datasets or representative test cases.
Most class actions resolve before trial. If the parties reach a settlement, it applies to the entire class, subject to court approval. If they don't settle, the case proceeds to trial. Class action trials are rare, and many companies settle to avoid the risks and reputational damage of a trial.
5. Settlement approval and distribution
Once the parties settle, the court must approve it to ensure fairness. Here's how this final phase works:
- Court review: The judge evaluates factors such as the total amount, distribution plan, attorneys' fees, and whether any class members are unfairly favored. If preliminarily approved, the court sends notice to class members, explaining their rights to comment, object, or opt out.
- Claims process: After approval, class members must submit claims to receive their share, unless distribution is automatic. Missing the deadline could forfeit payment. The settlement administrator reviews the claims for validity.
- Distribution of funds: Once the claims are processed, the settlement funds are distributed, typically by check, deposit, or other benefits. In large settlements, distribution can take months, especially with appeals or complications. Unclaimed funds may revert to charity or the defendant, or a second distribution may occur for those who claimed.
Real life example: the Facebook data breach settlement, where personal data was compromised, individuals waited up to a year for their claims, with payouts averaging $35 per affected user, depending on the number of claims. Similarly, in the T-Mobile data breach class action, compensation ranged from $25 to $200, and payouts were made several months after settlement approval.
How Settlemate helps with class action lawsuits
Navigating what is a class action lawsuit can be overwhelming, especially when it comes to finding the right cases, filing claims, and tracking your settlement.
This is where Settlemate comes in.
Settlemate is an innovative platform designed to make it easier for people to get their share of class action settlements and to stay informed.
Here's how Settlemate can assist you with class actions:
- Smart claim matching: Settlemate uses AI tools to match you with class action settlements you may be eligible for. The platform scans your purchases, services, and potential data breaches to identify claims you may qualify for. With your permission, it can access your email inbox to identify class action notices or receipts for products involved in settlements.
- Personalized claim assistance: Once Settlemate finds a relevant class action, it guides you through the claims process with step-by-step instructions. You can choose automatic or manual submission, making it as easy as online shopping.
- Faster payout tracking: Settlemate keeps you updated with real-time tracking of your claims. Through its dashboard, you'll know the status of your claim, when it's approved, and when payouts are coming. It centralizes all your claims in one place, giving you clarity and reducing the waiting time.
- Secure document management: Settlemate provides a safe platform for uploading and storing documents, such as receipts and account statements. With Settlemate's secure system, you avoid the hassle of mailing or faxing documents and ensure your information stays protected.
Are you ready to claim what's yours in a class action lawsuit?
Try Settlemate today and discover how simple it is to get your share of the compensation you deserve.
