A closer look at class action lawsuits

May 4, 2009 It is critical you do not ignore letters about class actions some require you to make a call or send something in if you want to opt-out, which means if you ignore the notice, you're essentially agreeing to be a class participant and that may not always be in your best interests.

Randi Biba paid a company called JK Harris $5-thousand but she says JK Harris failed to deliver on its promise to reduce her debt to the IRS.

"I would love to be in touch with other people who would be willing to file a class action lawsuit."

Class-action lawsuits can be effective. Consumers may get some money they wouldn't otherwise and it can even get companies to change the way they do business!

Earlier this year thousands of consumers got free makeup. This was the result of a $175-million settlement of a class action price-fixing lawsuit.

But group lawsuits aren't always the best course. For instance, remember the now defunct mortgage company Ameriquest? Craig Curry told us its bad business practices cost him his home!

On behalf of Ameriquest consumers like Craig, states attorneys general banded together and won a $325-million settlement but Craig says his piece of the pie was only $18-hundred!

"I think it's a ripoff. $1800 is nothing compared to what I put into my home and what they took from me."

Attorney Christina Cowell is anti-class-action. She's filed a number of predatory lending cases on behalf of individual clients like Ameriquest customers Dee and Gregory Brock who, unlike Craig, were able to save their home from foreclosure.

Craig now wishes he could do the same but by taking the money in the multi-state settlement he gave up his right to file suit on his own, a critical consequence when joining group litigation.

So Villanova law professor Teri Ravenell says before joining a class action ask yourself could I reasonably sue on my own and what's at stake? How much money have I lost?

"For most of us $1000 or less would be a good idea to join a class action simply because I don't know you'd be able to find an attorney to represent you for much less than that."

Also read the details of the settlement, get an idea of how the money will be divided. Will consumers get a flat amount? If the settlement is to be divided, will it be divided evenly or will consumers get a percentage of their specific claims? What proof will they have to show?

And keep in mind, unless the settlement specifically provides the defense will pay all attorneys' fees. That money will come out of your pocket usually up to a third of the settlement amount.

Remember Randi Biba wanted to join a class action against JK Harris. She learned a Philadelphia consumer had already done so and the payout for consumers was less than $10!

"Well, it seems to me that JK Harris didn't even get a slap on the wrist for doing this."

JK Harris says quote:
We regret Ms. Biba is dissatisfied but the company did provide the services as contracted.

And JK Harris says it settled the class action lawsuit to avoid the cost and distraction of litigating. JK Harris in no way admits liability.

So again here's the bottom line on class actions, they're good in cases where individual damages are very small and the real goal is to change a systemic problem or the way a company operates.

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