Pros & Cons of a Class Action Lawsuit
When a company’s actions affect hundreds, thousands, or even millions of people, a class action lawsuit can give ordinary individuals an opportunity to seek justice together.
Class actions are commonly associated with issues such as data breaches, consumer fraud, defective products, privacy violations, and other situations where many people experience similar harm. But while class action lawsuits can be powerful tools for consumers and victims, they are not necessarily the right option in every situation.
Before joining a class action lawsuit—or deciding whether to opt out—it is important to understand both the advantages and disadvantages.
What Is a Class Action Lawsuit?
A class action lawsuit allows one or more people, known as class representatives, to bring a lawsuit on behalf of a larger group of people who have experienced similar harm.
Rather than thousands of individuals filing separate lawsuits against the same company, the claims can potentially be handled together in one case. Class actions are designed to make the legal system more efficient and give individuals the ability to pursue claims that may not be financially practical to bring on their own.
The Pros of a Class Action Lawsuit
Strength in Numbers
One of the biggest advantages of a class action is the ability for individuals to join together against a large corporation or organization.
A single person may not have the financial resources to take on a major company. However, when thousands or millions of people have similar claims, combining those claims can create a much stronger case.
Class actions can help level the playing field between individual consumers and powerful corporations.
It Can Make Small Claims Worth Pursuing
Many people suffer financial losses that are real but relatively small. For example, someone affected by a data breach may spend time monitoring their credit, changing passwords, and dealing with fraudulent activity—but may not have enough individual damages to justify filing a lawsuit on their own.
A class action allows people with smaller individual claims to pursue compensation collectively. Without the class action process, many companies could potentially avoid accountability simply because each individual loss is too small to justify separate litigation.
Lower Costs and Less of a Time Burden for Individual Class Members
Class action litigation is typically handled by attorneys representing the class, meaning individual class members generally do not have to pay the enormous costs associated with pursuing complex litigation on their own.
Investigating claims, hiring experts, reviewing documents, and litigating against a large corporation can be expensive. By handling similar claims collectively, the costs and resources involved in the litigation can be managed more efficiently.
The class representatives and class counsel handle the litigation on behalf of the group. Depending on the case and settlement, a class member may simply need to submit a claim form and provide any required documentation.
This can make pursuing compensation far more accessible for people who would not otherwise have the time or resources to bring an individual lawsuit.
Class Actions Can Hold Companies Accountable
Successful lawsuits can encourage companies to change their business practices, improve data security, correct dangerous products, or stop conduct that harms consumers.
For example, a data breach class action may bring attention to inadequate cybersecurity practices and encourage companies to take stronger steps to protect sensitive personal information.
The Cons of a Class Action Lawsuit
Individual Payouts May Be Small
One of the most common criticisms of class action lawsuits is that individual class members may receive relatively small payments.
Even when a settlement involves millions of dollars, the money may need to be distributed among a large number of eligible class members. The amount each person receives can depend on the size of the settlement, the number of claims submitted, and the terms approved by the court.
For someone who suffered significant individual damages, a class action settlement may not fully reflect their personal losses.
You Have Limited Control Over the Case
In an individual lawsuit, you generally have much more control over decisions involving your case.
In a class action, the class representatives and attorneys handling the case make many of the major litigation decisions. Individual class members usually do not control the legal strategy or decide whether to accept a proposed settlement.
This can be frustrating for someone who believes the case should be handled differently.
Class Action Lawsuits Can Take Years
Complex litigation takes time.
Class actions may involve extensive investigations, motions, discovery, disputes over whether the class should be certified, settlement negotiations, and possible appeals.
As a result, it may take years before a class action reaches a settlement or final resolution.
You May Give Up Your Right to Sue Individually
This is one of the most important issues to consider when receiving notice of a class action settlement.
Depending on the type of class action and the applicable procedures, remaining in the class may mean that you are bound by the final settlement or judgment and may release certain claims against the defendant.
If you have suffered damages that are significantly greater than those experienced by the average class member, you may want to speak with an attorney before deciding whether to remain in the class or pursue an individual claim.
Do I or Don’t I Join a Class Action?
Class action lawsuits can be powerful tools for consumers and individuals who have been harmed by the same company or conduct. They allow people to combine their claims, share legal resources, and seek accountability when pursuing an individual lawsuit would not be practical.
However, class actions also involve tradeoffs. Individual payouts may be relatively small, class members have limited control over the litigation, and the final result may affect a person’s ability to pursue an individual claim.
If you receive a class action notice—or believe you may have been harmed along with many other people—it is important to understand your rights before making a decision.
At McShane & Brady, LLC, we believe that individuals deserve to understand their legal options and have a voice when corporations fail to protect consumers and their personal information.
Have questions about a potential class action lawsuit or data breach? Contact McShane & Brady to learn more about your legal options.
