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    Assessing a Possible Class Action

  2. Hiring the Right Attorney

  3. Filing the Case

  4. Insights into the Defendant's Strategies

  5. Certifying the Class and Sending Out Notice

  6. Establishing a Valid Claim

  7. Approving Settlements: Fairness Hearings

  8. Paying the Attorneys

  9. Compensating the Class Representatives

Step 1: Assessing a Possible Class Action

Knowing if You Can Bring a Class Action
Have you ever been charged a $25 late fee because you were a few days late with a $10 payment?

Have you sent in a rebate form for a product, only to wait months and months before actually receiving a check?

Have you ever stayed at a hotel, only to find out at check-out that the hotel was charging you an "energy use" fee or some other charge that you didn't anticipate and that didn't make sense to you?

The truth is that everybody has been the victim of illegal business practices. As just one example, a recent government investigation into New York City health clubs found that 96% of them were misleading consumers about their legal rights. That means that, if you were looking to join a health club, you would have less than a one-in-twenty chance of finding one that actually complied with the law.

Many people just assume that, because a big business is doing it, it must be legal. That's simply not the case. Businesses violate the laws for a variety of reasons. Sometimes, they count on people not knowing their rights or not wanting to spend the time or energy to get back a small amount of money. Sometimes, they don't know the law themselves and are breaking it unintentionally. Often, they know they're breaking the law, and they know they're going to be caught sooner or later. They just figure they'll still make bigger profits breaking the law, even if someone does eventually take them to court.

However, just because a large company is breaking the law, that doesn't automatically mean that a class action is proper. Class action suits are usually appropriate only when a company has been violating the rights of or injuring a large number of people in the same (or very similar) way. One of the first things any class action lawyer will want to know when considering a case is whether it is possible to prove that the company has been breaking the law in a systematic way.

In the end, the best advice is to simply "trust your gut." If a business is acting in a way that seems unfair or just plain smells fishy, it is usually worth having an attorney look into it.

Deciding if You Want to Pursue a Class Action
Even if you realize that you might be the victim of an illegal practice and that a class action might be proper, that doesn't answer the most important questions: Is it worth bringing a class action, and how can you tell?

There are many reasons people decide to bring a class action. Some people realize that it would be too expensive to hire an attorney to bring an individual lawsuit, and decide it's the only way to recover what they lost. Some people take pride in holding large company accountable for its misconduct and fighting for the rights of countless others who were taken advantage of. Still others believe class actions are a way in which they can personally make money.

All of these considerations are legitimate. However, just as the best class action attorneys are the ones that are fighting for what they believe in, the best class action plaintiffs are not doing it merely to make money. Indeed, while it is true that in most states, class action plaintiffs may be entitled to "incentive awards" in successful cases, those awards are in no way guaranteed. Also, it is legitimate for a defendant to question the motives of the class action plaintiff. If he or she is only trying to make a quick buck (as opposed to looking out for the interests of the class), the court could very well refuse to allow the case to proceed as a class action.

The role of the class action plaintiff (generally called the "class representative") is to work with the attorney to make sure that the interests of the other class members are being looked out for. In practical terms, that means that a good class representative understands what the case is about and understands (and agrees with) the lawyer's strategy in fighting the case. The best class representatives want to know about the key developments in the case, including any settlement offers.

Being a class representative does not take as much time as being a plaintiff in an individual case, but there are things that class representatives should be prepared to do. Once a class action is filed, the defendant usually requires the class representative, with his or her lawyers, to respond to "written discovery." That means that they serve your attorneys with written requests for information, usually about your experience with the defendant, and for copies of relevant documents. Your lawyer will guide you through the process of responding. Also, you might be asked to take part in a deposition or testify at trial. A deposition is meeting, most often in a conference room, during which the defendant's lawyer is allowed to ask you questions under oath, with the questions and answers being written down by a court reporter. Unlike a trial, a judge is typically not present. Good class action lawyers will fully prepare you for your deposition or trial testimony.

Overall, if you believe in what you're fighting for, class actions are a great way to have a positive impact on society. Class actions have cleaned up entire industries, shut down corrupt companies, and recovered billions of dollars for injured victims. Personally, we're pleased to say that the vast majority of the class plaintiffs we have represented have both enjoyed and been proud of their involvement. Still, the most satisfied clients are the ones who best understand what the benefits and responsibilities of their involvement will be. It is therefore very important to find a good class action lawyer.

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Step 2: Hiring the Right Attorney

There are many excellent class action attorneys in the United States. Because class action law is fairly specialized, you should look for a lawyer with significant class action experience. Additionally, because there are many different types of class actions, look for a lawyer who has specific experience in the type of class action you wish to bring. In other words, an attorney who regularly brings consumer class actions might not be the best choice for a securities class action and vice-versa. Finally, it is a good idea to ask any lawyer you're considering a lot of questions before hiring him or her. If you feel that you don't communicate well with the lawyer or it just does not seem like a good fit, talk to someone else.

The following is a list of "tips" for finding the right class action attorneys:

  • Ask them about their experience with class actions, including the type of class action you want to bring.

  • Ask how much of their practice is devoted to class actions; it is generally preferable to hire a lawyer who regularly handles class actions rather than one who only dabbles in or handles class actions occasionally.

  • Ask the lawyer you are interviewing if he or she will be the one spending the majority of the time on the case or if another lawyer will be the lead attorney.If another lawyer will take the lead on your case, interview him or her as well.

  • Ask what their strategy would be in litigating case and if they expect a quick settlement or if they think the case will go to trial?

  • Find out how many cases the firm is currently handling and if they will be able to devote sufficient time and effort to your case.

  • If the attorney you speak to cannot represent you, ask for a referral.

  • ALWAYS insist on a written representation agreement.

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Step 3: Filing the Case
After you have hired an attorney, his or her first step will be to investigate the case and prepare a "complaint." A complaint is the legal document that starts a case. It explains the factual basis for the lawsuit and explains why, assuming those facts are true, the defendant broke the law. In the complaint, your lawyer will identify the case as a "Class Action" and explain why the court should recognize it as a class action instead of an individual suit.

One of your attorney's key considerations will be where to file the class action. Most class actions are filed in state court, but sometimes they may be filed in federal court. Also, they are usually filed in the state where the wrongful conduct occurred. Sometimes, however, they must be filed in other states (for example, if a contract governing the transaction in dispute requires it.)

Although the filing of a complaint is a relatively easy thing to do, no ethical class action attorney will file a class action suit before having very good reason to think the defendant is breaking the law. The reason for this is that class actions can be powerful weapons.

Class action suits are more likely to generate media attention and can cause a great deal of concern to the defendant. Those are good things when the defendant has broken the law. However, a class action lawyer who hasn't done his homework can cost an innocent defendant thousands of dollars.

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Step 4: Insights into the Defendant's Strategies
Sophisticated defendants generally take two primary approaches to fighting class actions First, they will challenge the substance of the suit. For example, they might argue that they didn't violate the law or that nobody was hurt by their illegal conduct. Second, and equally important, they will try to convince the court that the case should not be a class action and that each member of the proposed class should have to hire his or her own lawyer and file his or her own lawsuit.

Many people assume that class action settle immediately, especially when there's no question that the law has been broken. This is true at times. In one of our more prominent cases, the defendant's attorney called up the day after receiving our complaint, admitting his client violated the law and offering to settle. Far more frequently, however, a defendant will fight the case for some time in hopes of either winning outright or wearing down the resolve of the class representatives and the lawyers.

A defendant who decides to fight will often file what is called a "motion to dismiss." Motions to dismiss ask the court to throw the case out immediately. These motions can often determine the success or failure of the whole case and tend to be very hard fought on both sides. The class representative usually has little active involvement at this stage. Instead, the lawyers present legal arguments to the court without any testimony from witnesses, including the class representatives.

Assuming the case survives any motion to dismiss, the defendant will then typically argue that the case should not be allowed to proceed as a class action, based on the rules for what constitutes a legitimate class action. The class action lawyers will present evidence that it is fair and efficient for the case to continue in the form of a class action, and the defendant will present whatever contrary evidence and arguments it can come up with. Ultimately, it is up to the court to decide if the case will proceed as a class action.

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Step 5: Certifying the Class and Sending Out Notice
If the court decides that the case can proceed as a class action, the court "certifies" the case as a class action and assigns a "definition" to the class. For example, the court might define the class as every person who bought a particular brand of computer in Indiana from 1996 through the present. That means every person fitting within the class definition is automatically entitled to be in the class if he or she wants to.

Once the class is defined, the parties are ordered to send notice to the class. Notice can be sent in a number of ways. Usually it is sent by mail to all of the class members that can be identified by the parties. At times, notice is published in newspapers or magazines (either instead of, or in addition to, notice by mail). Also, courts have begun recognizing that, in appropriate contexts, notice can be sent via e-mail or even posted on a prominent Web site.

The content of the notice, which generally must approved by the court prior to being sent out, briefly explains what the case is about, what has happened in the case so far, and if a settlement has been reached. Most importantly, the notice usually provides each class member with the right to stay in the class, exclude himself or herself from the action, or file an objection.

If a class member wants to take part in the class action, he or she does not need to do anything. If a class member wants to be excluded from the class, he or she is typically required to send in a letter stating his or her desire to opt out of the case. If the notice is sent after the parties have agreed on (and the court has approved) a settlement, class members may be required to send in a "claim form" verifying that they are members of the class and requesting particular compensation provided for in the notice.

Most people stay in class actions after getting notice, but some decide to opt out. The most important reason people opt out may be that they have already filed - or plan to file - similar lawsuits against thedefendant. In that situation, people who neglect to opt out may be inadvertently giving up their right to take part in any other case or, in the case of a settlement, they may be releasing their claims against the defendant.

Keep in mind that the attorneys representing the class are there to answer questions. If you are confused about what to do or if you just need more information, don't hesitate to call them or send off a quick e-mail.

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Step 6: Establishing a Valid Claim
Once the class has been certified and the class members have had an opportunity to opt out of the case, the plaintiff begins to prove his or her case. The first thing the lawyers do is engage in a process called "discovery." In practical terms this means the sides have a chance to ask each other written questions (called "interrogatories"), oral questions (called "depositions"), request important documents, and interview potential witnesses.

At the end of this process, the defendant will often make a final effort to have the case thrown out by asking for "summary judgment." Simply put, the defendant asks the court to take another look at the case now that the evidence has been gathered, arguing that the case is without legal merit.

Assuming the case survives summary judgment (and has not been settled), a trial date is scheduled. It is important to note that most cases never reach trial. That is especially true with class actions. Because they are so hard-fought before trial, both sides generally have a very good idea of the strengths and weaknesses of their positions prior to trial. And because the stakes are often so high, the parties usually have a lot of incentive to act reasonably and try hard to reach a fair result without having to go through the risk and expense of trials.

There are times when a class action will go to trial. Because it isn't realistic to have every person in the class testify (sometimes there are millions of people in a single class), generally only a few of the class members will testify at trial. Often the parties will hire experts to talk more generally about the experiences of the class.

After the trial, the parties have the right to file appeals - asking a higher court to review the case to make sure the law was properly applied by the trial court.

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Step 7: Approving Settlements: Fairness Hearings
If a class action settles - whether before trial, or afterward to avoid appeals - the court takes on an active role in making sure the settlement is fair to all class members. Usually the court will hold two fairness hearings. The first is a "preliminary approval" hearing, in which the court examines the settlement and makes sure that what the class is receiving is fair in comparison to what it might get if it won at trial, balanced against the expense and the risk of losing at trial.

If the court decides that the settlement is fair, it then sets a second hearing - called a "final fairness" hearing. The difference between this and the preliminary approval hearing is that the final fairness hearing takes place after notice has been sent to the class. The court looks at how many people stayed in the class, how many opted out, and how many people filed objections. This is also an opportunity for members of the class to attend a hearing and testify about their views (positive or negative) about the settlement. The class notice states the time and place of the final fairness hearing and states how a class member can indicate that he or she wishes to attend the final fairness hearing.

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Step 8: Paying the Attorneys
One of the most debated - and least understood - parts of class action litigation is how the lawyers for the class get paid if the case is successful.

If the case settles, generally, as part of the settlement, the sides will agree that the plaintiff's attorney is entitled to reasonable fees, not to exceed an agreed upon amount. Members of the public often assume that this figure is what the attorney will necessarily get, but that is not always true. Instead, it is usually a maximum limit on how much the class action lawyers can be paid.

In fact, it is generally up to the court to set the compensation for the class action lawyers. The court does this, usually as part of the final fairness hearing, by hearing evidence as to how much work went into the case, how risky the litigation was, and what the results were. Usually, the court will evaluate the fairness of requested fees based on two approaches. First, the court uses a "percentage of recovery" approach, determining the percent of the requested fees as compared to the total value of the class recovery. Unlike personal injury cases, where attorneys traditionally get one-third of what they recover for their clients, courts generally limit class action attorneys' fees to an amount around one-quarter of the what they recover for the entire class. Next, as a "cross-check," courts will look at the total amount of attorney time and expenses to make sure that using a percentage approach would not result in a windfall.

If the case does not settle, but rather is won at trial, the court holds a similar hearing to evaluate the fairness of the requested fees.

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Step 9: Compensating the Class Representatives
At the final hearing, after the case has either been settled or won at trial, the court is often asked to set the appropriate amount of money to be given to the class representatives, apart from the relief that each class member is to receive, to reward and compensate them for taking the time to pursue the case. This is called an "incentive award." The amount of incentive awards vary depending on factors such as the size of the suit, the amount of the class representatives' involvement, and the risks (if any) he or she incurred in prosecuting the suit. The size of these awards vary and can range from hundreds of dollars to over $50,000.

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