What are class actions? - Sotos Class Actions
June 3, 2019

What are class actions?

What is a class action?

A class action is a legal procedure in which one person brings a lawsuit on behalf of a group of people (the class) who have similar claims. The goal is to get justice for members of the class without each of them having to spend time, money and effort individually.

What's the point of class actions?

Lawsuits are costly. There are court fees, legal expenses, time, and effort required to prosecute a claim. People who have suffered serious injuries may decide that its worth these costs to go to court.

Often, though, individuals have suffered injuries that aren't big enough to justify the costs of an individual lawsuit. Plus, individuals may not know that they have been injured, or that they have rights to compensation.

If individuals do not sue for themselves, then they may not get the compensation they deserve. If a company or government has wronged many people, and most of them don't know their rights or can't afford to litigate, the defendant might profit immensely (and it might keep wronging people in the future). And even if lots of people sue, if they each do it separately, it bogs down the courts.

A class action addresses these three problems:

  1. it seeks compensation for the entire group (access to justice),
  2. it makes sure the defendant stops breaking the law and does not profit from wrongdoing (behaviour modification), and
  3. it streamlines the legal procedure so that one judge can determine many cases at the same time (judicial economy).

What are the stages of a class action?

Like most lawsuits, a class action begins with a statement of claim. This is a document that describes the defendant(s), the basis for the lawsuit, and the remedy that the plaintiff is looking for.

In order for a lawsuit to become a class action, the court must first "certify" it. At certification, the judge will ensure that the complaints of the class members are sufficiently similar for a class action to be appropriate. The judge will consider what the common issues are, whether there is a "representative plaintiff" who will represent the class properly, and whether a lawsuit is the best way forward.

Why does "certification" matter?

In Canada, like in the US, class actions are opt-out by default. This means that everyone in the class is automatically part of the lawsuit unless they take steps to remove themselves. (You might, for example, want to opt out of a class action if you think you suffered much more than the average class member and you want to bring your lawsuit to court separately, with your own lawyer.)

The certification motion is important because, once the lawsuit is certified as a class action, all members of the class will be stuck with the outcome. The judge needs to be confident that absent class members will be protected.

The judge will approve a mechanism for notifying class members that they are now part of a lawsuit. The notice will typically describe the legal issues are, explain that there is an option to opt-out and a deadline for doing so. People who don't take steps to opt out will be part of the lawsuit and typically don't have to take further steps before it goes to trial or settles. The representative plaintiff instructs the class's lawyer on behalf of all class members.

Then what happens?

Once certified, a class action is much like any other lawsuit. It may go to trial on the common issues, it may settle out of court, and there may be an endless series of hearings in between. The lawyers deal with these, with instructions from the representative plaintiff.

If the parties reach a settlement, it needs to be approved by the court. Again, the judge will want to make sure that the interests of class members are protection. The judge will order that class members be notified of the settlement approval hearing, and have an opportunity to object.

If it goes to trial, the judge will determine whether or not class members are entitled to compensation.

Whether the class action settles or the plaintiffs win at trial, the judge will approve some mechanism for damages to be paid out. Sometimes class members will have to prove their entitlement to damages, or prove their level of injury. Other times, class members will simply have to fill out a form to declare that they are members of the class and deserve compensation.

In rare cases, where individuals have suffered very small injuries or cannot be identified by the court, the judge may direct that some or all of the damages are paid to a third party, like a charity that fights for members of the class. This is a way of making sure that defendants cannot profit from their wrongdoing, even if they are unable to repay each individual victim.

If you think you have a potential claim on behalf of a group of consumers, get in touch!