Class action agreements are settlements between plaintiffs and defendants outside of court, often used for product liability cases. A class is formed when a victim seeks legal counsel, and the court must certify the group. Defendants may pursue a class action to avoid trial costs. Settlements are criticized for uneven compensation, but must be approved by the court.
A class action agreement is an agreement between the plaintiffs in a class action and the defendant in the action to resolve their differences outside of a courtroom. The defendant will offer a settlement, usually pecuniary, and the class plaintiffs will accept such an offer as full compensation, waiving their further right to sue.
Generally, class action litigation occurs when many people have been hurt by the same wrong. Product liability cases are often brought as class actions. Such litigation allows individuals to receive redress for minor mistakes in situations where it may not be worth it for each individual to sue. For example, if thousands of people bought an MP3 player with a bad battery, each individual would likely not sue for damages as the financial loss to any individual would be too small to warrant litigation. If all the people join as a class, however, a lawsuit can be filed at little or no cost to the plaintiffs, and each party in the class can receive compensation.
A class is formed when a particular injured victim goes to a lawyer to tell him of the wrong. The attorney may then decide to take a class action lawsuit and begin looking for other plaintiffs who would be interested in joining the class. Often, the first plaintiffs to seek counsel become the named plaintiffs.
When the class is formed, the court must certify this by accepting that each individual member of the class has suffered a similar legal wrong enough that it is appropriate for them to be grouped together. Once this occurs, the dispute is formally closed. Often, at this stage, the defendant who has been subpoenaed will consider pursuing a class action lawsuit to avoid a trial and potential jury verdict.
The defendant will bring a class action based on his estimate of the legal cost of defending the trial, as well as his belief of the company’s guilt or innocence and his estimate of the damages a jury could award. The named plaintiffs and attorney must then consider the class action agreement and determine whether it is appropriate compensation. Often, class actions are criticized in part because of the types of settlements awarded, as many times the attorney and named plaintiffs are handsomely financially compensated while other class members receive a coupon or other small token prize. However, before a collective settlement can be approved and finalized, the court must sign it and certify that it is fair.
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