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How is a Class Action Lawsuit Paid Out?

A class action lawsuit is an effective way for multiple individuals who have been similarly injured by the negligence of a large corporation to attain justice. If the lawsuit is won, the plaintiff and class action members receive compensation. The class action lawsuit is paid out via the following ways.

How Class Action Lawsuits Work


What are the reasons for class action lawsuits?

Countless reasons can be the cause of a class action lawsuit. Businesses may find themselves as a defendant when they promote defective products, commit fraud or negligence, or engage in misleading advertising. Their wrongdoings lead to customers’ loss, injury, or psychological distress.

Filing a class action lawsuit offers greater chances for success in comparison to filing an individual lawsuit, simply because of the number of class members. The number of participants can be in the hundreds or hundreds of thousands—their strength is in their numbers.

Given that class action lawsuits consist of scores of class members, any compensation awarded is usually minimal. Each member receives a small monetary award because it is divided between them. Since class members number in the thousands, it is no surprise that their compensation is trivial.

What happens after a class action lawsuit settles?

Rather than go to trial, most class action lawsuits enter into a settlement agreement. The settlement process begins with a proposed class action settlement, which must be approved by the court. The judge determines if the settlement amount is fair and equitable.


What is the high range of class action settlements?

Settlement amounts can skyrocket to the millions or billions of dollars. In fact, the largest class action lawsuit award was from the 1998 Tobacco Master Settlement Agreement, which paid out $206 billion to 46 US states to cover public healthcare costs that resulted from tobacco-induced diseases.

A federal judge approved a $7.2 billion settlement in 2008 to resolve claims that Enron had defrauded shareholders before declaring bankruptcy. The number of class members who received compensation was around 1.5 million and consisted of individuals as well as institutional investors.

In 2015, a pharmaceutical company was held liable for concealing safety risks of one of its diabetes drugs, which potentially caused bladder cancer with extended use. Takeda Pharmaceutical agreed to pay $2.4 billion to the nearly 10,000 consumers who filed claims against the company.

More recently, Facebook users filed a class action lawsuit against the social media giant because their personal data had been accessed without their consent—otherwise known as a data breach. Facebook agreed to pay $650 million in this 2021 class action lawsuit.


How is a class action lawsuit paid out?

Based on these numbers, it’s easy to see how a million-dollar settlement divided between thousands of class members can lead to them receiving a small payout. Nevertheless, once the settlement agreement is approved, all the class members are notified, either through online ads, mailings, or magazine ads.

The nature of the class action settlement agreement determines how compensation is distributed. Class members, for instance, may need to submit a claim form and supporting documentation to make a claim. Alternately, class members may be automatically entered into the settlement.

After class members are notified, they are free to object to the settlement or exclude themselves. If they perceive the settlement agreement as unfair, an objection is valid. Class members who opt to exclude themselves are not entitled to the settlement benefits but can make a separate claim.


Who gets the most money in a class action lawsuit?

Normally, the lead plaintiff receives their share of the compensation first. The class action attorneys working on a contingency basis also receive a percentage of the settlement to cover their legal fees. The courts enforce fairness by limiting the lawyers’ compensation to a reasonable amount.

The remainder of the settlement is distributed among the class members. If the award is small, the class members receive it in a single payment. Plaintiffs, on the other hand, may be paid in one lump sum or receive payments via a structured settlement.


How much do plaintiffs get in a class action lawsuit?

Class members may receive as little as $10 when they fail to present evidence, like receipts for defective products, to support their claim. However, the final payout is dependent on the number of class members, the number of lead plaintiffs and the number of injured plaintiffs.

When settlement money from a class action lawsuit goes unclaimed (due to fewer valid claims), the funds are not awarded to the defendant. Rather, depending on the settlement agreement, unclaimed funds are distributed among class members or distributed to a charity or nonprofit organization.


What are the benefits of joining a class action lawsuit?

Although class members generally receive minimal compensation from a class action settlement, pursuing one has benefits. Class members are financially able to pursue litigation against powerful corporations, are passive rather than active members, and have an opportunity to attain justice.

Filing a class action lawsuit holds negligent companies accountable for their wrongdoings. Even plaintiffs who sustain minor injuries have valid reasons to damages when a traditional lawsuit wouldn’t warrant a lawsuit. When you aim to file a class action lawsuit, consult Anderson + Wanca.


Class Action Attorneys at Anderson + Wanca

We are a firm of leading class action attorneys who are dedicated to fighting on behalf of clients who have been injured or harmed due to no fault of their own. Our lawyers handle a variety of cases, from money schemes to fraud and deceptive advertising.

Anderson + Wanca attorneys are also highly experienced in class action litigation for total vehicle losses, junk faxes, and robocalls. We can secure compensation for you when insurers underpay, companies send unwanted faxes, or businesses send robocalls without your written permission.

The scope of our legal services extends beyond these areas. If you believe you have been harmed by a company, it’s important to seek expert legal counsel. The class action attorneys at our law firm will review the details of your issue and advise whether you have a valid case.

Class action lawsuits may be filed for further reasons, including data breaches, biometric privacy breaches, increasing life insurance fees, and long-term care insurance fraud. Call Anderson + Wanca at our Rolling Meadows, Illinois, office for more information about class action settlements.