Why Is It a Good Idea To Opt-Out Of Class Actions?
Class action lawsuits tend to include hundreds, thousands, or even tens of thousands of people by default. Class action settlements automatically include people in a class action instead of leaving them out.
Yet, not everyone included in a class action should be included?or even wants to be there. Here?s when to consider opting out of a class action and how to do it.
How Class Action Lawsuits Form and When To Opt-Out
As a class action lawsuit begins, one step the court takes is to ?certify? a class. A class is a group of people who all have the same type of claim against the defendant in a class action.
For example, suppose that an auto manufacturer built a vehicle with a defective engine that couldn?t be repaired after a reasonable number of attempts. A class might include every customer who purchased a vehicle with that defective engine.
The definition of a class is usually rather broad. The class in this example might be defined as ?Every customer who purchased or leased a vehicle with the defective engine from between June 10, 2021, and April 17, 2023,? for instance. Every person who fits this description is automatically included in the lawsuit. The settlement may simply be an extension of the warranty and new software to monitor the defective engine. In exchange for the agreed upon compensation between the defendant and the representative plaintiffs, members of the class will typically release all claims related to the harm alleged.
If you are not satisfied with the approved settlement, however, you are not stuck in the class. When a court approves a class action settlement, it will require that class action settlement include an ?opt-out? period and deadline. During this period and before the deadline expires, class members can leave the class if they don?t want to be included in the class action and want to pursue their own individual claim for the issue.
Should I Opt-Out of a Class Action Lawsuit?
When you?re included in a class action, you are automatically a party to that lawsuit. You may not have to appear in court, but you are affected by the court?s decision in the class action.
For this reason, most people who opt out of a class action do so because they want to bring their independent claim against the defendant. They don?t want to accept whatever the court approves as a settlement for everyone in the class.
Choosing to bring your claim may be the right choice if you suffered different harm or more severe harm than the rest of the class. For example, using the defective engine example, suppose you are included in a class action against the automaker that built and sold the defective engine. Unlike consumers from other states, you may have stronger consumer protection rights as a California purchaser and be entitled to a repurchase or a replacement, incidental and consequential damages caused by the defective engine failures, and also civil penalties up to two times the amount of your actual damages.
Since the harm you suffered is different from the harm most other class members suffered, it may make sense for you to opt out of the class action and bring your own case.
Generally, common reasons people opt out of a class action lawsuit include:
- Ethical, moral, or ideological objections to the case itself. They cannot in good conscience be involved in the case.
- Unwillingness to compromise their relationship with the defendant. For instance, a business client of the defendant may choose not to be included in the class action even if they fit the definition of the class.
- The Class Action does not provide for payment of all your damages. This is often the most common reason. Using the defective engine example, your potential damages and recovery under the California under the lemon law would be greater than an extended warranty and monitoring software. California lemon law provides for a replacement or repurchase of your vehicle if it is a qualifying bad vehicle. California?s lemon law also provides for civil penalties to be awarded, which may be up to two times your actual damages.
What Happens If I Opt-Out?
Those who opt out of class action lawsuits face certain consequences. They may also gain opportunities they did not have as a member of the class.
If you opt-out, you won?t receive any settlement or court award the class receives. Since you?re not a class member, you won?t get anything the class gets. At the same time, you won?t release your claims against the defendant.
However, if you opt-out, you preserve your right to bring your own claim. You will have to work out how to pay legal fees, which can be on a contingency basis or hourly basis, and where to fit the case into your schedule.
If your claim is different or potentially worth more than the amount of your share of the class action settlement, it may be well worth the decision to opt out of the class action to maximize your individual damages.
If you stay in the class, you?ll only receive compensation for the harm the entire class suffered. If you bring your own claim, you can seek compensation for the harm you specifically suffered. In situations like these, opting out of a class action may be the best course of action.
Weigh the pros and cons of opting out carefully before you make the decision. If you need help coming to a conclusion, talk to an attorney with experience handling class actions.
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