You Can't Get in Trouble for Participating in a Class Action Lawsuit

The law can be pretty complicated, and it’s fair to say that misunderstandings – even myths – about lawsuits are common. A lot of these worries, however, are unfounded, and having a basic understanding of what it means to be part of a lawsuit – including a class action lawsuit – can go a long way when it comes to making the process easier.

The whole point of class actions is to make it financially viable for a person to take legal action and recover.

Class action lawsuits are specifically designed to help large numbers of people who have all suffered a similar injury come together and take legal action against the company or entity that wronged them. Injury, in this sense, encompasses financial or material loss, and not just physical harm. In fact, class actions were designed to effectively litigate cases in which individual damages are relatively small and to make it worth your while to go after a large company that made, for example, a defective product. One person who wants to get $100 back is never going to be able to afford a lawsuit, but 1,000 people working together could have the means to take action. It’s the principle of “strength in numbers” applied directly to the law – and when a class action lawsuit is filed, it’s filed on behalf of an entire class, or in other words, anyone who was affected by the allegations contained in the suit. For instance, a recent case highlighted on our blog – a class action filed over Hulu’s auto-renewal policy – was filed on behalf of “all persons who upgraded from a free Hulu account to a Hulu Plus subscription on Defendant’s [Hulu] website utilizing their personal computer in California […] from Hulu, L.L.C., […] since December 1, 2010.”

Now, what does it mean if you find yourself included in that definition? Do you have to do anything – and could you find yourself in court?

The short answer is – no. Class actions are filed by a lead plaintiff – who, in the example above, is Nathan Kruger, the man who accused Hulu of violating California law. As an opt-out class action, qualifying members will automatically be covered by any settlement, and there’s no possibility of getting in trouble even if the class action doesn’t continue.

You might, however, still choose to opt-out.

There are a number of reasons for wanting to opt-out – the most common being the desire to file your own, separate lawsuit. An individual who is a member of a class, and covered by a settlement, cannot decide that they want to file a lawsuit for more compensation after claiming their settlement money. If you believe you’ve been injured to a greater extent than the other class members, you can opt out of the suit, meaning you won’t be covered by any settlement agreement resulting from the litigation. (These agreements typically provide a small amount per class member - $100, for example.) By opting out, you can then seek a larger, more adequate amount of compensation by filing your own lawsuit. Before opting out, you should speak with a lawyer to make sure you are not time-barred by a statute of limitations (a restriction on how much time can pass before lawsuits can no longer be filed) from filing your own lawsuit.

A recent lawsuit over the Suave Keratin hair smoothing kit is a good example of when you might want to opt out. The company was accused of promoting a product that caused hair loss and damage upon proper application. Following a class action lawsuit, a $10.2 million settlement agreement was reached. For customers who purchased the product, a $10 refund is available. For those who experienced injuries, such as a burned scalp, up to $25,000 is available per claim. If an individual was severely injured and required treatment that amounts to more than this and they didn’t opt-out, then they may find themselves unable to file a suit for more compensation.

This example, however, shouldn’t make you too wary of choosing to remain in a class action. The vast majority of cases identify a class where members’ injuries or losses are similar enough to be nearly identical, and your best bet may be to accept the settlement, rather than incur legal expenses by filing your own lawsuit. The whole point of class actions is to make it financially viable for a person to take legal action and recover, for instance, $100 (which may not be a huge amount to a business, but is often a substantial sum for an individual) by bringing together as many claimants as possible.

As we said, even if a proposed class action is denied, or a judge makes a ruling against the suit, there are no real legal, financial or other associated risks for those who are part of the proposed class. Importantly, your credit will not be affected.

Class action lawsuits have proven themselves to be an effective way of seeking justice on behalf of a large number of people – and if you find out you qualify as a class member, the only thing you need to do is make sure you keep up-to-date with the suit’s progress. After all, there’s a deadline for claiming settlement money. After that date has passed, you’ll once more find yourself without a way to receive compensation for your losses.