How Do Class Action Settlements Work?

Put simply, a class action suit is where a single person (or a small group of people) represents a larger group of people in a lawsuit. You’ll often see class action suits in corporate fraud, consumer privacy or product quality/safety cased.

Any settlement award resulting from the decision in a class action suit is distributed to the involved parties—minus the legal fees paid to the legal professionals who brought the case.

The class action settlement award can be distributed in a variety of  ways, including:

• Coupon settlements: In these settlements, class members receive a voucher, coupon or discount of some kind from the defendant(s).

• Common Fund: This method, often used in securities and antitrust cases, creates a pool of money from which to compensate class members.

• Claims-Made: In claims-made settlements, the defendant pays the value of all valid claims submitted. The settlement amount increases with each new claim. Some claims-made settlements place a cap on the amount the defendant must pay.

Read more about class action settlements here: Viral Class Actions Offer Good (and Bad) News for Plaintiffs’ Firms