What are the Advantages of Class Action Litigation?

Class action lawsuits have many advantages. In fact, in passing federal legislation relating to class action lawsuits, the U.S. Congress stated in the Class Action Fairness Act of 2005 that:

Class action lawsuits are an important and valuable part of the legal system when they permit the fair and efficient resolution of legitimate claims of numerous parties by allowing the claims to be aggregated into a single action against a defendant that has allegedly caused harm.

The most well recognized advantage of class action litigation is that it allows a person who has suffered minimal damages to seek compensation by combining their claims with the claims of other similarly situated persons so that litigation against a large corporation becomes economically feasible. Suppose, for example, that a fisherman whose livelihood was ruined by the BP Gulf oil spill suffered $10,000 in damages. While $10,000 is a great deal of money to most people, it would be difficult for an attorney to take on the time and expense of litigating a claim against a company like British Petroleum if their recovery was limited to a contingent fee of $4000 (40% of $10,000).

To handle such a complex case, an attorney would likely expend hundreds (or even thousands) of hours of time and literally tens of thousands (if not hundreds of thousands) of dollars in case expenses. There would be no way a rational attorney would agree to take on such a monumental task for such a limited recovery. Nor would it serve the best interests of his client, since the out-of-pocket expenses of the attorney would exceed the client’s actual damages, meaning the client would receive no compensation in the end.

Alternative Litigation Strategies

Suppose, however, the fisherman hires an attorney to file a class action lawsuit against BP on behalf of all Gulf Coast fishermen who lost their jobs as a result of the oil spill. Given the number of fishermen affected by the spill, the damages could easily be in the millions of dollars. Such damage claims would easily support a decision to sue BP and expend the time and money necessary to take on such a large corporation in such a complex case. By pooling his claims with the similar claims of others, the fisherman now has a realistic legal remedy where he previously had none.

Aggregating similar claims also leads to a more efficient use of precious judicial resources. Using the example above, if 1000 fishermen filed separate claims in separate lawsuits, the courts would be flooded with duplicative lawsuits. It would take literally years to try all of he cases and reach a resolution of all of the disputes. There would also be a risk of inconsistent results, with some plaintiffs prevailing and others not, depending on the judge, jury and lawyers involved. By aggregating the claims into a single lawsuit, the risk of inconsistency is eliminated and the litigation is handled much more efficiently by a single judge presiding over a single trial. Even defendants benefit; by aggregating the cases into one lawsuit, their defense costs are substantially reduced, they are better able to evaluate their risks and they are able to resolve all claims against them at one time, either through trial or a settlement.

In “limited fund” cases, class action suits keep the earliest-filing plaintiffs from draining the defendant of all assets, ensuring that all plaintiffs who have been injured are compensated. In lawsuits involving a failed company like Enron, for example, where the plaintiffs’ aggregate damages are greater tan the assets of the company, a class action lawsuit can ensure that all victims are fairly compensated in proportion to the amount of their loss.

A final advantage of class action lawsuits is that they often alter the conduct of businesses and corporation in ways that benefit society. The threat of being exposed to hundreds of millions of dollars in damages can cause a corporation to think twice about illegal, unethical, discriminatory or unsafe conduct. In 2010, the average securities fraud class action settlement was more than $36 million. These large settlements, and the prospect of even larger jury verdicts, are a powerful incentive for corporations to deal honestly and ethically with the public. Studies have also shown that class action lawsuits are an effective way to end discriminatory employment practices, encourage companies to develop safer products and ensure compliance with environmental regulations.

Heygood, Orr & Pearson Files Class Action Cases

The law firm of Heygood, Orr & Pearson has represented hundreds of clients in class action cases or other legal matters. Our lawyers have the trial experience to fight to get you the results you deserve and to ensure that your legal rights are protected.

For a free legal consultation to find out if you are eligible to file a class action lawsuit, contact the attorneys at the law firm of Heygood, Orr & Pearson by calling toll-free at 1-877-446-9001, or by filling out the free case evaluation form located on this page.