Class Action Lawsuits Q&A

Class Action Lawsuits – Q&A
What is a Class Action Lawsuit?
A “class action” is a lawsuit filed against a company whose actions, or lack thereof, have damaged a large number of people in the same way. Should the case result in a financial recovery, either via a pre-trial settlement or trial, all of the class members receive a portion of the settlement paid by the party being sued.

What number of claimants are needed to file a Class Action Lawsuit?

Even a single person who has been injured or otherwise suffered, may file a class action on behalf of others that have been harmed. Note that it is common, after the case has been filed, for many other injured people to join the lawsuit. If you are interested in consulting an attorney about a possible Class Action case, read on.

What types of Class Actions are there?

There are many types:  consumer class actions, stock shareholder class actions, class actions for employment discrimination and so forth. Whenever a large group of people (or other entities, like a collection of small businesses) have been similarly injured or damaged by wrongdoing, a Class Action can be filed.

How are the attorneys’ fees paid in a Class Action?

Almost all Class Actions are brought on a contingency basis, which means that the lawyers receive payment via the recovery amount they obtain. This contingency system helps ensure that even if an individual is due only a small amount, a larger group of investors or consumers can afford to bring a Class Actions Suit and get relief.

How can I tell if I’ve been victimized by stock fraud?

Of course, every case is different, but when a stock has dropped in value, your loss may be related to fraud if:

  • Company executives hid, or misstated, facts relating to financial aspects of the business, or held off publishing “bad news” that should have been disclosed to shareholders earlier.
  • The stock value drops dramatically after a disclosure of wrongdoing by the company its executives, or employees.
  • The company, or its accountants, end up having to “restate” their financial results, revealing the true state of the company’s financial affairs.
  •  Employees, or other insiders, engage in insider trading by selling their shares at inflated prices, especially when associated with witheld “bad news”.
  • Many other situations can indicate fraud. If you are not sure of your rights, you should consult with an attorney.

Can biased deals with insiders or related companies be considered fraudulent?

These types of “insider deals” can be considered a type of improper conduct generall known as a “breach of fiduciary duty.” This type of wrongdoing includes:

  • waste or abuse of company assets
  • unfair or biased business transactions with executives, or other insiders
  • participating in a sale of the company at a price that does not reflect its true value
  • other actions that improperly devalues a company, or shrinks shareholders value.

In these cases, a lawsuit can be filed on behalf of the company or its shareholders to recover financial damages and to ensure that shareholders have been treated fairly.

Can a consumer file a class action related to a product or service?

Yes, absolutely. There have been many successful class actions lawsuits that where initially filed by end consumers. Some common examples of consumer fraud include:

  • Products or services that don’t work as advertised.
  • Intentional misrepresentation of a product or a service.
  • Hidden fees or charges and/or billing iregularities.
  • Products that break or wear out well before expectations
  • Injury and/or Medical Conditions caused by the product or service

Can a file a stock fraud class action case if I never sold my shares at a loss?

Yes. In almost all cases, as long as you held the stock when it lost value in reaction to bad news, you may file a case. The key point  is that you bought the stock at a fraudulently inflated price. Your rights are the same whether you later sold the stock at a loss or have held your shares hoping that the price would recover.

Can class actions produce large monetary recoveries?

While the results depend on the strength of the case and the extent of the damages, it is a myth that class actions fail to produce substantial returns. For instance, the settlement in the “American Continental/Lincoln Savings & Loan Securities” case yielded roughly $250 million. That’s about eighty percent of the actual total damages of $288 million. More recently, shareholders of Waste Management, Inc. recovered $220 million, and Informix shareholders won their settlement….for over $100 million dollars. Strong class action cases can, and do, produce strong recoveries.

I may have been defrauded. How long can I wait to file a lawsuit?

There are time limits, driven by “statutes of limitation”, and these can vary depending on the type of claim involved as well as the state in which the you reside. If you think you have a valid case, don’t delay before consultin an attorney as you may find you are “time barred” by these statutes.

The foregoing is provided for informational purposes only, and should not be relied upon as a substitute for legal advice concerning your particular situation. If you desire legal advice, you can e-mail us here, or consult your local bar association for a recommendation.

© 2012