What is Class Action Lawsuit?
A ‘Class action suit’ has emerged when a common damaged or loss is faced by more than one consumer while using a particular product. In other words, when several people face similar damages or trouble after using a product (generally newly launched) and the different lawsuit has been claimed by different users.
- Some common examples of class action lawsuit are – damages caused by the usage of electronic gadgets i.e. Mobile phones, electric heater, and geyser etc.
- During 2017 Samsung has launched an upgraded Mobile handset named Note7, but due to its manufacturing default, some of the models got burst at several places across the world. The consumer claimed the damages caused by the blast and the Mobile Company has to bear all the losses of the property of the consumer.
- Several instances such as side effects from a pharmaceutical product damaged caused by tobacco products, side effects from surgery, breast implants or from a contraceptive device etc.
- Other cases include fraudulent activities in Corporate like the presentation of misleading Financials to investors, siphoning off money from the business, miss-utilization of wealth etc. Again, an employer making false commitments to its labors, employees regarding compensations, benefits etc. can be treated as ‘Class action suit’ by the employees.
- There should be a common theme or common circumstances where several people got affected due wrong commitments or damages caused by the usage of any newly launched product.
When a Class Action Lawsuit Becomes Certified?
When several class action Lawsuits were charged against a single product/services or any miss commitment, then the lawsuit becomes a class action and is called ‘Lead Plaintiffs’. Thus, the persons who faced the damages could ask the court to certify the case as a class action. However, to certify the case as a class lawsuit, there are certain criteria which the Plaintiffs has to show as proof. Again, under the following circumstances a class action lawsuit can be certified as a ‘Class action suit’:
- A legal claim against the defendants should be filed in a court and there should be an attorney or group of attorneys.
- Several (more than one) people should have experienced similar losses and damages from the particular product. For example of class action lawsuit, in case of side effects from any pharmaceutical product, there should be a similarity between the side effects, or else in case of any discriminations the type of injury should be shown as evidence and proper inspection should be made against it before jumping to any conclusion.
- A Primary Plaintiff should be self-sufficient to represent its own class. There should not be any ambiguity or conflict between other class members. The primary feature of Lead Plaintiff who could be called as a ‘Class action suit’ when he or she would reject the compensation for damages and would coupons for all other class action lawsuit.
When is a Potential Class Action Lawsuit Rejected?
General procedure followed by a court in case of a ‘Class action suit’ is that all the people who have suffered were informed via mail if they want to raise their voice? Unless the people opt out of the case, the class action lawsuit remains very much active and every person remains attached to the case.
Class members with zero evidence cannot take an active part of the class action lawsuit. The Lead Plaintiff has a big role to play; he/she consults with the attorney and decides if the compensation offered by the defendants should be granted or not? Other members who have suffered only have the option to vote for the Primary Plaintiff.
How to Divide the Class Action Lawsuit Salary?
After the case has been proved by the Class Members and if the defendants proved to be guilty of fraudulent activity, then the salary amount is being asked to pay by the defendants to the suffered people. The amount generally equals the total damages of all the Class members along with certain extra charges. A certain percentage of the money is taken by the Attorneys as a fee and the Lead Plaintiff takes another part of the amount. The rest amount is generally divided by the other class members.
As a responsible citizen, it is the role of every person to take a necessary step against all odds and it could save the future of the civilization. As we all know the world is dynamic and there is a risk involved in every situation. For the betterment of the human lives, the evolution of laws has been successfully implemented in different situations which give justice to the common people.
Without the evolution of ‘Class action Lawsuits,’ there might be an abnormal increment of malpractices, fraudulent activities by different corporate houses and business units. Again, if the Business units proved to be guilty, then necessary steps could be taken against them apart from providing the damages. The business license can be canceled if the fraudulent activities are practiced repeatedly by any organization. The goodwill gets marred if the compensation is not duly paid to the Class members. Whereas, the Lead Plaintiff should be abided by the responsibilities keeping in mind of the consequences faced by the other members. Thus, with the advent of active ‘Class action Lawsuits’, there should be the emission of fraudulent activities in the society.
This has been a guide to Class Action Lawsuits. Here we discuss class action lawsuit definition, when it becomes certified, and when it gets rejected. You may learn more about Corporate Finance from the following articles –