Why We Need Class Actions
Class actions often get a bad rap. People say that the lawyers get all the money and the class members receive next to nothing. These stories are spread around in the media and then by word-of-mouth. Big corporations are often responsible for planting these stories.
It is true that there are some bad class action settlements out there. But the majority of consumer class actions provide robust justice to the class members. For example, the Treinen Law Office handled one class action that resulted in the refund of 100 percent of the unlawful prepayment penalties that had been charged by the mortgage servicer. Each class member received $5,000-$10,000.
But a class action where each class member gets $5,000-$10,000 is exceptional. Often the amount paid to class members is a small amount. But that is not the result of greedy class action attorneys. Rather, sometimes the amount in controversy is a small amount, so there is no more to give out to each person than that amount. That is the nature of many class actions.
If a big corporation cheats every one of its customers in a way that robs them each of $5, no one is going to bring that lawsuit by himself. A consumer (or an attorney) that sues for $5 is insane. It will take much more than $5 to get the $5 back. Big corporations have lawyers that work all day and every day only for them. Big corporations will make sure that it is not worth the cheated person’s time and effort to bring such a lawsuit. But if all the cheated persons all band together to bring the case as a class action, then it is worthwhile.
The alternative is that big corporations get away with cheating the public. They get to keep the money as long as it is a small amount from each person. If hundreds or thousands of people have been cheated, the number, although small to each person, is big when added all together.
The schemes that big corporations use to rob each person of $5 are often difficult to uncover and even more difficult to prove up. These schemes operate in the shadows. It is the nature of fraud for the practice to be hidden. The person that figured it out – the class representative – either got lucky or had exceptional detective skills to even know that he was cheated. So everyone else usually has no idea that they were cheated. Without the class action, the cheating, which nearly nobody knows about, continues forever.
The founders of this country believed that courts and juries were needed to protect the little guy from the power of the politically powerful, like the big corporation. Courts provide for class actions to make sure the little guy can get a fair shake against the big corporation. Courts have in place strict rules to make sure class actions are fair. There are procedures to ensure that class action attorneys cannot secretly cooperate with the big corporation to sell out the class. All class action settlements must be approved by the court. The court must inquire into whether the settlement is fair to the class members.
Big corporations want to kill the class action because it is the only thing that holds them in check when the cheating is widespread but only a small amount is robbed from each individual person. Big corporations are not interested in consumer justice. They only care about their own profits, gained rightfully or, for unscrupulous corporations, gained by cheating. When big corporations say they are out to help the little guy, there is every reason to be suspicious. Foxes should not be trusted to guard the henhouse.