Class Action Settlements: Why Most Plaintiffs Get Pennies

When a group of individuals come together to file a lawsuit against a company or organization for similar grievances, it is known as a class action lawsuit. These types of lawsuits are commonly seen in cases of consumer fraud, defective products, and discrimination. However, despite the large number of people involved in the lawsuit, the majority of plaintiffs often end up receiving minimal compensation, referred to as “pennies,” while the lawyers and defendants walk away with much larger settlements. This raises the question – why do most plaintiffs in class action lawsuits get pennies? In this article, we will delve into the factors that contribute to this phenomenon and shed light on the reality of class action settlements.

What are Class Action Settlements?

Before we dive into the reasons behind the paltry sum received by plaintiffs in class action lawsuits, it is crucial to understand what class action settlements are. In simple terms, a class action settlement is a legal agreement reached between the plaintiffs and defendants in a class action lawsuit. It outlines the terms and conditions of the resolution of the lawsuit, including the amount of compensation to be awarded to the plaintiffs.

In most cases, class action settlements involve a large sum of money, which is divided among the plaintiffs to compensate for their damages. However, as we will see, not all plaintiffs receive an equal share of the settlement amount.

Lawyers Take a Large Cut

One of the main reasons why most plaintiffs in class action lawsuits end up with pennies is because the lawyers involved tend to take a significant cut of the settlement amount. In fact, in most class action lawsuits, lawyers receive up to 30% of the total settlement amount as their fee. This not only applies to the lawyers representing the plaintiffs but also to the lawyers representing the defendant.

While it is true that lawyers play a crucial role in ensuring justice is served for the plaintiffs, their large cut can significantly reduce the amount of compensation that the plaintiffs receive. This is especially true in cases where the settlement amount is minimal, to begin with.

Complexities of Class Action Lawsuits

Class action lawsuits are complex and time-consuming. They can drag on for years, with the plaintiffs and their lawyers investing a significant amount of time, money, and resources in pursuing the lawsuit. As a result, when a settlement offer is presented, most plaintiffs tend to accept it, regardless of the amount, in order to put an end to the exhausting legal battle.

Moreover, class action lawsuits often involve a large number of plaintiffs, with varying levels of damages incurred. This makes it challenging to determine an equitable distribution of the settlement amount. In most cases, a large portion of the settlement goes towards compensating the plaintiffs who have suffered the most significant damages, leaving a minimal amount for the rest.

Opt Out Option

Another critical factor that contributes to most plaintiffs getting pennies in class action settlements is the opt-out option. When a class action lawsuit is filed, all potential plaintiffs are notified, and they have the option to opt-out, meaning they will not be included in the lawsuit and will not be entitled to any compensation awarded if the lawsuit is successful. However, if a plaintiff decides to opt-out and file an individual lawsuit, they stand a chance to receive a more significant amount of compensation compared to what they would receive in a class action settlement.

This leads to a scenario where plaintiffs with higher damages opt-out, leaving behind those with minimal damages. As a result, the settlement amount is divided among a smaller group, and the plaintiffs end up receiving minimal compensation.

Conclusion

Class action settlements are meant to provide justice and compensate individuals who have been wronged by a company or organization. However, as we have seen, the reality is that most plaintiffs in class action lawsuits get pennies, while the lawyers and defendants reap the benefits. While class action lawsuits provide a way for individuals to come together and fight against powerful entities, there are several factors at play that result in the majority of plaintiffs receiving minimal compensation. As consumers, it is crucial to be aware of these facts and understand our rights and options in situations where we are wronged.