What is a Class Action Lawsuit? How Do You File and Who’s Eligible for a Settlement?

Earlier this year, T-Mobile agreed to pay current and former customers $350 million following a 2021 cyberattack that exposed millions of people’s personal information.

The carrier agreed to the settlement — the second-largest data-breach payout in US history — to resolve a class-action lawsuit that alleged its negligence enabled hackers to access names, addresses, birth dates, Social Security numbers, and other sensitive information.

Class action lawsuits can make headlines, especially when they target major corporations or have multimillion-dollar settlements.

But what is a class action law suit? How do you find out if you’re eligible to join one? How are settlements determined and distributed? Read on to find out.

For more on class-action settlements, find out if you could get a check from Capital One’s $190 million payout, Sara Lee’s $1 million deal or Facebook’s $90 million data-tracking payout.

What is a class action lawsuit?

A class action lawsuit is a civil case filed on behalf of a group, collectively known as the “class,” who believe they’ve suffered common injuries as a result of the defendant’s actions.

They’re given this right under Rule 23 in the Federal Rules of Civil Procedures, which allows individuals to sue or be sued as a group.

Criteria for a class action suit can include:

• There are legal or factual questions common to all the individuals involved.
• The claims or defenses involved are consistent.
• The class is so large that including them all individually is impracticable.
• The representative parties “will fairly and adequately protect the interests of the class.”

Elizabeth Kramer is a partner at Erickson Kramer Osborne, a San Francisco law firm that specializes in class action suits.

“There’s a huge efficiency purpose to having the [class action] rule,” Kramer told CNET. “Also, it’s useful for claims that are hard for an individual to bring on their own. If there’s a pattern of racial discrimination, for example, one person is going to have a hard time proving that and getting relief.”

Kramer has represented plaintiffs in numerous high-profile class action suits — including the data breach case against online brokerage Robinhood that settled for nearly $20 million and the $73 million settlement with the University of California resolving sexual abuse allegations against gynecologist James Heaps.

What are the steps of a class action lawsuit?

Depending on the nature of the case, going from filing suit to receiving remuneration can be a long process with many steps.

“Two years is very fast to resolve a class action,” Kramer said. “I try to set realistic expectations.”

Obtain class certification.
Typically, individuals who believe they’ve been similarly injured would approach a firm like EKO with their claims. “When the case is filed, it’s often a proposed class-action — a small group coming to an attorney saying ‘We think this is a larger issue,'” Kramer said.

These named plaintiffs, who are filing a suit on behalf of themselves and others, are called the “class representatives.”

Defendants can argue the criteria for a class action suit haven’t been met or that the claims would be better addressed on an individual basis.

“Ultimately it’s up to the court to approve the motion for a class certification,” Kramer said.

Nearly 100 million Capital One customers and applicants were eligible for part of the bank’s recent $190 million settlement over a 2019 data breach,

Rafael Henrique/SOPA Images/LightRocket via Getty Images)

Give notice to class members.
If the court approves class certification, others who would be considered part of the class need to be informed about the lawsuit — including what it’s about, how they need to file and any deadlines.

It’s estimated that 98 million Capital One cardholders and applicants were eligible to file a claim in the bank’s $190 million class action settlement, the deadline for which recently passed.

If the class members are known and trackable — as in the case of the Capital One members — they are typically notified through the mail, by email and via public notices.

If the members are not known, as in the case of users of Roundup weed killer — who may be eligible for part of a $45 million settlement from Monsanto — the class representatives’ counsel will typically launch a website to enable them to submit a claim, see relevant court documents, read a FAQ and get more details and contact information.

In the Roundup case, for example, you can go to Weedkilleradsettlement.com to see if you qualify to join the case.

Allow class members to opt out of the suit or settlement.
If you meet the criteria of class membership — you bought the defective product, say, or had your personal information exposed in a data breach — you generally don’t have to do anything additional to be included in the suit.

But you can request to be excluded, for whatever reason — because you want to file your own separate lawsuit, for example.

An opt-out deadline is provided, usually well before the deadline to file a claim. The deadline to be excluded from the Capital One deal was July 7, 2022, while the deadline to file a claim was Sept. 30.

A verdict is issued or a settlement is reached.
Once the class is certified and the notice period is complete, the attorneys make their case and a judge or jury renders their verdict — unless both parties agree to a settlement.

After Facebook was accused of illicitly tracking users across other websites in Davis v. Facebook, the platform’s parent company, Meta, agreed to a $90 million settlement, even though Meta said in court papers that it “expressly denies any liability or wrongdoing whatsoever.”

If a ruling has been made or a settlement has been reached, class members must be notified.

The settlement receives final approval.
Even if both the plaintiffs and defendants agree to the terms of a settlement, it must typically be confirmed in a final approval hearing. It’s relatively uncommon for a court to reject a settlement.

“It hasn’t happened in any of my cases,” Kramer said. “If it does, it’s usually because something unforeseen happened.”

The date of the hearing for final approval is usually well after claims have started to be submitted, so any hiccups can be addressed.

“We put in a lot of effort to show the process is working so we can get final approval,” Kramer said. “We report if people opted out or complained about the deal. If we show only five people opted out, that means overwhelming the class approves of the settlement.”

Payment is distributed.
Once the court has given final approval and any appeals are addressed, settlement payments can begin to be disbursed among class members.

Legal fees for the plaintiff’s attorney are usually taken out of the settlement first, then the class representatives are compensated first.

They’re entitled to the same relief as everyone else but they may be awarded a discretionary service award, Kramer explained, “to acknowledge the service they’ve done.”

“You’re exposed to certain scrutiny, you have to work on the case and turn over notes — you might even be called as a witness in a trial,” she said. “So the feeling is they’re entitled to something extra.”

After that, the remaining class members are given their share. Depending on the nature of the case, the funds may come as a printed check, a direct deposit, debit card or a credit to your account.

You may also be eligible for non-monetary compensation, like free membership in a cybersecurity protection plan.

How many people who qualify for a settlement actually file claims?

The percentage of class members who file a claim varies greatly, depending on the size of the class, the financial payout and the process involved in filing a claim.

“Sometimes you get a really high claim rate, like 50%, and sometimes it’s very low, closer to 1%,” Kramer said.

In the Robinhood case, her firm expects to get between 5 and 8% of eligible class members filing claims, “which is relatively high for a data breach case,” Kramer said.

“We have contact information for a lot of people,” she explained. “And it is $100 or $150 just to fill out a form.”

Resolving misconceptions about class action law suits

Kramer cautions that, while a settlement’s overall dollar amount may be large, the payout received by individual class members is often relatively small.

According to data from NERA Economic Consulting, the average settlement was about $56.5 million in 2014. But once legal fees have been paid and the money divided up among all class members, an individual check may only be for a few dollars.

In 2021, Welch’s agreed to a $1.5 million settlement to resolve a false advertising class action case. But when checks went out to class members this summer, they were only for between $5 and $12.

Potential plaintiffs shouldn’t think the only value in a class action suit is monetary, according to Kramer.

“Like, ‘if I only get $25 in the mail, it wasn’t worth it,” she said. “A lot of the purpose is to create a deterrent effect.”

In the case of UCLA Health, “there was extensively negotiated institutional change — that was very important to our clients,” she said. “Those were hard changes for the institution to make.”

UCLA Health ramped up its sexual abuse and misconduct policies in 2019, according to the network’s website, including increasing staff training, more rigorous vetting of doctors, improved monitoring of online reviews and “the presence of a trained chaperone for all intimate examinations.”

With the Robinhood suit, Kramer said, “most people were just upset they couldn’t get someone on the phone — so that’s one of the things we went for.”

As part of the settlement, Robinhood agreed to increase real-time voice support for customers.

There are other remedies besides a class action suit

If you don’t have solid grounds for a class action suit, There are still ways to seek relief, according to Kramer, including reaching out to the Better Business Bureau or other local, state or federal consumer protection agencies.

“If someone just wants their $100 back, say for a defective product, they’re better off just filing a complaint,” she said.

Where can I find out about open class action suits and settlements?

Larger class action settlements, especially those involving major companies, have their own websites with details on the nature of the case, how to file a claim and relevant deadlines.

In addition, sites like TopClassActions.com and OpenClassActions.com list many class action petitions lawsuits and settlements.