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The Benefits of Class Actions

April 24, 2012 | Comments: 0 | Views: 115

Let's suppose you suffered losses in some way - for example, you acquired stocks at artificially inflated prices because the company you invested in had overstated its revenues, or your employer misclassified you as an "exempt" employee so that it can avoid paying you for overtime, or you purchased a product that did not perform as advertised. You believe that the corporate wrongdoing also harmed other people. What can you do?

Although you can bring an individual action in an attempt to recover your losses, the reality is that it is often not economically feasible to hire an attorney if your financial losses are relatively small. Many attorneys will not agree to take on a small case. Even if you bring a lawsuit, you are essentially dealing with a David versus Goliath situation - a little guy fighting a big corporation in an uneven battle.

In these types of situations, a class action could help level the playing field. A class action is a lawsuit brought by a representative plaintiff, or "lead plaintiff," on behalf of others who are similarly situated. The class action mechanism allows a person to bring an action to recover for his or her own losses, as well as the losses of other people in a similar position. Because attorneys who agree to take on the class action will usually agree to work on a contingency fee basis - meaning that the attorneys will only be paid if the lawsuit settles or if they win at trial - someone who otherwise could not afford a lawyer or whose losses are minimal is able to bring an action to try to recover some of the money they lost or to otherwise right a wrong. If the plaintiffs' attorneys are successful in obtaining a recovery for the plaintiff and the class, they will apply to the court for payment of their attorneys' fees, which often ranges between 20-30% of the recovery. The plaintiffs' attorneys will also apply to the court for reimbursement of their expenses.

Because courts recognize that it would be impractical or too expensive for each person harmed by the same misconduct to individually file separate lawsuits - and the filing of many separate lawsuits arising out of the same misconduct would jam up the court system and possibly produce inconsistent judgments in similar cases - courts may allow a case to proceed as a class action if certain requirements are met.

These requirements usually include considerations of:(1) numerosity - whether the class is large enough to make individual lawsuits impractical;(2) commonality - whether the legal or factual claims are common to the class;(3) typicality - whether the representative plaintiff possesses the same interests and suffered the same injury as the other class members; and(4) adequacy - whether the representative plaintiff will fairly and adequately protect the interests of the class. If the court determines that these and certain other prerequisites are met, it can certify the action as a class action.

Class action cases can take many years and can be very expensive to litigate. The costs of attorneys' salaries, legal staff salaries, expert witnesses, class action notices, depositions, court filing fees, and other items can easily add up to hundreds of thousands of dollars. However, the risks that these fees and costs might never be paid are usually borne by plaintiffs' attorneys who agree to accept the case on a contingency fee basis and to advance the costs of litigation. If the case is successful, the attorneys receive a percentage of the recovery and reimbursement of their expenses - both of which are subject to court approval. At the same time, the representative plaintiffs and the members of the class stand to recover the money they lost or some other benefit. In short, class actions can be effective for righting wrongs and for helping those who otherwise would not have the money or resources to recover their losses. It empowers little guys to keep corporations honest.

Elizabeth Lin is an experienced class action litigator and the principal of The Lin Law Firm, A Professional Law Corporation. For more information, please visit ATTORNEY ADVERTISING. Prior results do not guarantee or predict a similar outcome with respect to any future matter.

Source: EzineArticles
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