Eli5: What is a “class-action” lawsuit?


Eli5: What is a “class-action” lawsuit?

In: 7

A class action is a lawsuit where one person or perhaps a small group of people sue on behalf of a much larger group of people for the same reason. For example, let’s say 50,000 people were injured by a defective product that they all bought. In that case, a small number, maybe 5 or 10, can sue the company that made the defective product on behalf of all 50,000 people who were injured by the defective product, and all 50,000 will share any money awarded to them.

When there are many people who would file a lawsuit against the same plaintiff for the same reason, they can all be rolled into a single group lawsuit. You typically see this when a single company has somehow harmed/wronged a large customer base, such as violating customers rights or hiding fact that products were defective or harmful.

Imagine I hit you with my car, and your car is damaged. You can sue me for the value of the car, because it was my fault your car was damaged.

Now imagine that you just had your car serviced at my auto shop, and I took your money and pretended to fix your brakes, but actually replaced them with a pair of slinkies. Then your car crashes, not because I actively hit you, but because you didn’t have any brakes. You can still sue me because it’s my fault your car was damaged.

But what happens if I did this with every single person in town? Sure, all of them could sue me, but some people wouldn’t know yet that they have no brakes (they haven’t been in a situation where it would be apparent), and some people couldn’t afford to hire a lawyer to sue me, and some people might sue me after everyone else has sued and so get nothing because I’m out of money.

Also, because of something called collateral estoppel, if one fact is legally found true or untrue, then cases after it can’t challenge it. If you can prove that me installing the slinkies caused the accident, then everyone after can just take that as a given; conversely, if I prove my slinkies were completely irrelevant to your crash, no one else can sue me on that basis.

So instead, a group of people who are all victims of my slinky scheme filed a class-action lawsuit. This accomplishes a couple of things:

* Anyone who either doesn’t know about the suit or can’t afford to sue can still get some restitution that they otherwise wouldn’t have.
* Everyone gets an equal cut of one pot of money if they win, rather than having Person A go first and get $1 million, then Person B sues next and is only able to get half a million, etc., but Person Z gets nothing because I’ve already lost everything to Persons A-Y.
* If one side wins, the case is decided for *everyone*, win or lose.

Incidentally, this last bit is why often class-actions are settled without admitting wrongdoing: it’s a way for the sued person to get the case to go away WITHOUT invoking collateral estoppel.

The over simplified explanation is basically a bunch of people team up to sue a large company if they all suffer the same harm. For example, if you bought a shoe that had a defect that caused you to lose your toe, it would be hard for you to sue the shoe maker if you don’t have the time or money. If 50,000 people also lost their toe because of this shoe, you can roll all 50,000 law suits into 1. A high quality lawer is gonna want to take that case because if they win, they win a small percentage of all 50,000 pay outs which is a lot. The case will be stronger with a high chance of winning or getting a settlement. The only draw back is the pay out to the individual people is watered down. The reason you see them mentioned in TV commercials so often is that the people in charge of the lawsuit have to prove that they gave everyone a reasonable chance to join the suit because once the suit is settled, someone else can’t sue for the same thing in the future.

A lawsuit can be initiated by a person, an entity, or a “class” of persons (defined as all of the people who live on a given street when they dumped poison on it or all of the peopleused a certain product over a certain time).
People can be members of this class and it saves the court times because that can be one case covering a thousand people and all of the evidence can be pooled.