A class action lawsuit is a legal proceeding in which a large group collectively sues another party, usually a corporation or business. According to Forbes, class action settlements totaled a record-setting $3.62 billion in 2021. In these cases, the group divides the money from one settlement rather than everyone receiving a separate payment from their own lawsuits.
The process of dividing the money in a class action lawsuit can vary depending on the case’s specifics. However, some general principles apply.
Payments go into a common fund
First, the money awarded in the lawsuit typically goes into a common fund. The fund pays any expenses related to the case, such as attorney’s fees and court costs. Any remaining money in the fund then distributes to the class members.
The class representative creates the allocation plan
An allocation plan usually determines how the money distributes among the class members. The class representative, who is the person or group who brought the lawsuit on behalf of the class, creates the plan. The allocation plan usually relies on the specific injuries or damages suffered by each class member.
It is important to note that not all class members will necessarily receive money from the lawsuit. In some cases, the amount awarded may only compensate some class members. In these cases, the funds distribute to the plaintiffs based on the allocation plan, with those who suffered the most severe injuries or damages receiving the highest payouts.
The division of money in a class action lawsuit is a complex process aiming to distribute funds fairly among the class members. The allocation plan is a critical component of this process because it considers the specific injuries and damages suffered by each class member.