Consequence of Losing Class Action?
In Ontario, losing a class action as a representative plaintiff means that you could personally be responsible for paying your own legal fee as well as the defendant(s)’s legal costs, unless a contingency fee (no-win-no-fee) agreement exists between you and your class action lawyer. If you are a class member, you do not take on the responsibility of paying legal costs, unless there’s an existing agreement between class members that said otherwise.
Is a Contingency Fee (No-Win-No-Fee) Agreement in A Class Action Really Free?
Losing a class action lawsuit that has proceeded to trial will have consequences for each Class Member who participated. Obviously, if the lawsuit is lost, Class Members will not receive any compensation for the damages they experienced that led them to pursue the class action litigation in the first place. But sometime not getting a financial reward for their hardworks in the Class Action as a representative plaintiff is the least of their concerns when losing a Class Action.
When a person receives notice that they are going to be included as part of a class action, it is important they understand the potential rewards and consequences of being involved in a class action versus opting out.
A Class Action in employment law context is a civil action brought by one or more representative plaintiff on behalf of a larger group of victims (“class members”) for matters involving common defendant(s) involving the same transaction or related transactions.
The representative plaintiff usually enters into an agreement with class counsel with respect to legal fees and disbursements. Any agreement, with respect to legal fees in a class action, must be approved by the Court. Generally, class counsel is paid on a contingency basis, which provides that class counsel is only paid if the class action is successful and costs are recovered from the defendant(s).
A Contingency fee agreement is an agreement between the lawyer and the group members of the class action that the lawyer will take a certain percentage of the judgment award if the case is won in exchange for the legal services, and in the event that the case is lost, the lawyer assumes the risk of lost in terms of legal fees. In other words, the class action lawyer will not charge the class action members and the representative plaintiff for legal fee if the case is lost.
But it’s a grey area when it comes to disbursements. Disbursements are out-of-pocket expenses such as court filing fee, process serving fee, printing cost, mailing, transportation, parking, advertising / publishing cost in the form of class notice, etc… It could be quite significant for a case as big as a class action. You want to be sure there’s a clear understanding as to who bares the disbursements if the case is won and when the case is lost.
What about if the case is lost? Who bares the risk of loss of the expensive and financially crippling Defendant(s)’s legal costs? The general consent from Class Action judges are that the class action lawyer bares the risk, but it can be contracted out in the Class Action Retainer Agreement or Class Action Contingency Fee Agreement between the Representative Plaintiff and the class action lawyer. As a representative plaintiff, you want to make sure these key issues are discussed in general, and you have obtained independent legal advice before signing the agreement with your class action lawyer.
Can A Former Class Member File Their Own Lawsuit after the Class Action is Lost?
When a person becomes a Class Member of a class action lawsuit, they also give up their right to file an individual claim over the same issue against the defendant(s). This means that once they opt in, the class action lawsuit is their one chance to receive compensation for whatever damages had been incurred.
An individual Class Member has very little or even no control over how the case goes. Whether or not a Class Member will lose a class action lawsuit will not be up to them—the representative plaintiff(s) is / are the one(s) who will decide if a settlement offer is to be considered, or to go to trial instead. In some arrangements, class members might be able to direct the direction of the cases to a certain extent by casting their votes in a certain way in a class member meeting, but there’s no guarantee such an arrangement exist. And even if it does, there’s no stopping a representative plaintiff from passing on a valid settlement offer in the hope that a higher amount would result if the case is to go to trial without informing the class members.
Individual Class Members are also not in control of whom the representative plaintiff will be retained to represent the Class as the class lawyer / class attorney. Sometimes, a case might be lost because of poor decisions on the part of the class action lawyer or the representative plaintiff(s).
The choice to become a Class Member in a lawsuit (or, more accurately, to not opt out, since Class Members are generally identified and notified that they are being included in a class action) can be a difficult one, with many factors to consider. It is important for potential Class Members to think carefully about whether or not they want to remain in a class action lawsuit or opt out, weighing the potential risks and rewards involved. Whether you are a class member or a representative plaintiff, you are highly recommended to consult a class lawyer to help you decide the best option available to you.
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