More Likely To Get a Straight Flush Than a Payoff? Want to Bet?

Forbes published a very interesting article recently. The title was certainly eye-catching: Odds Of A Payoff In Consumer Class Action? Less Than A Straight Flush. For class action critics – and they certainly exist – the title alone is proof of everything they’ve always said. Class action lawsuits are a waste of time. Class action lawsuits are just a way to make lawyers rich. Consumers never see a penny. It’s all a game of chance.

Public understanding needs to improve, but the burden is on lawyers to help this happen.

Except, of course, that Forbes’ article has a lot more to it than the title. The claim about payoff rates comes, it seems, from a claims administration company:

Now, there’s something very important to pay attention to here. The low rate in question – 0.023%, compared to the 0.0279% chance of getting a straight flush in poker – actually refers to the number consumers who claim their money, and not to the rate of success for class action lawsuits, or to how often those covered by the suits receive compensation after staking their claim. It doesn’t even refer to all class actions, instead highlighting only those with “little or no direct mail notice to consumers.”

How Do Individuals Usually Find Out If They Can Make a Claim?

The fact is that in most class actions in which class members can be identified, notices are sent out to those individuals. This happens either when the class is certified or a settlement has been reached. If some or all class members can’t be reached, advertisements are often placed in newspapers, on the radio or online – all in an attempt to let people know that they may qualify.

Cases that conclude without significant effort to find and inform consumers about the settlement are not the norm.

What About Consumers Who Are Notified And Still Don’t Claim?

Why aren’t people claiming their money? There could be a variety of reasons. Sometimes people move and leave no forwarding address. Maybe they’re on vacation and miss the announcement, or they receive the notification and mistake it for junk mail, or don’t realize its significance. The point is that there may be a problem with the number of people who end up filing claims in certain cases, but is there a problem with class actions themselves, as Fisher argues? No. Just within the last few weeks, we’ve seen Electrolux brought to account for producing clothes dryers that allegedly caused fires, and Dreamfields agree to an $8 million settlement for mislabeling products as low-carb. A joke? Sounds more like solid results to me – and a (slightly) better world for consumers.

In a takedown of a related Forbes article also written by Fisher, Media Matters puts it well:

Responding to Fisher’s argument that the arbitration clauses are a viable alternative to lawsuits, Media Matters had this to say:

There’s no denying that those rates are a problem, and there’s clearly work to be done improving consumers' understanding of – and access to – compensation after a class action lawsuit is resolved. ClassAction.org just recently launched its own settlement page as a place for consumers to find up-to-date information on resolved cases.

Daniel Fisher, the writer of the Forbes article, also has some very good suggestions for increasing the number of consumers who take part in settlements:

In the end, Fisher’s points aren’t entirely wrong, despite the somewhat misleading title. If only a tiny percentage of those covered by a suit manage to learn about a settlement and claim their money, there’s clearly a problem. The problem seems to be one of both communication (that people just don’t know about settlements) and motivation (that once a settlement is agreed, neither attorneys, judges nor the companies are entirely responsible – and accountable – for ensuring consumers have a reasonable chance of being informed.) There also seems to be a wide misunderstanding of class action lawsuits and settlements. Are people who receive notifications worried that they’ll have to go to court, or that taking part in the settlement will cost them? Public understanding needs to improve, but the burden is on lawyers to help make this happen.

In poker, you have to play the odds – and there’s an awful lot of luck involved. For class action lawsuits, the opposite should be true. A solid case, brought before a court to assert consumers’ legal rights, follows a rigorous procedure, striving for transparency and accountability. If the odds aren’t in consumers’ favor right now, they can be changed and improved as the system continues to develop. In addition, class actions remain consumers’ best shot for joining together to take on large corporations. If poker’s your game, you’re truly on your own.

It is your money, after all.