Everything You Need to Know About Class Action Rebates

This article is a beginner’s guide to understanding what Class Action Rebates are and how one can benefit from this.

People buy a lot these days, whether they are products or services, and when something bad happens, there’s usually a problem with the product or the service itself.

The problem becomes bigger if the product’s manufacturer or the company providing the service has done something wrong. It may be because of misleading advertisements, improper labeling, or lack of necessary information.

Affected consumers might be eligible for compensation if they took legal action against the company and file a class action lawsuit.

Lawsuits enable people to get companies and other groups to be responsible for defects in their products, problems with their services, fraud, negligence, or other actions that might bring harm to people.

Class action lawsuits often enter a settlement agreement (class action rebate) instead of the trial once the defendant and the plaintiff agree to settle out of court. The money that goes into settlement funds is often large, although to who it should go is a different matter altogether. 

Even if the settlement fund is low, experts advise eligible class members to still file a claim.

Class Action Lawsuits: How Do They Work?

A class action is a type of legal proceeding that is brought against another person or entity represented by a member or members of that group. They begin like any other legal actions, such as with a complaint filed by a person or group against other parties they claim caused harm.

As with other legal proceedings, the defendant and the plaintiff should be in constant communication and respond to each other’s filings in court and forward any evidence supporting their positions.

Class actions can also be consolidated into multidistrict litigation (MDL) if in case there are several lawsuits filed that are similar. It may be the defendant involved and the product or service linked to the lawsuit.

Plaintiffs are also responsible for proving that the class of people they’d like to represent is accurate and that they are the best representative for the class action lawsuit. This is called Class Certification.

If the court grants class certification for a class action lawsuit, settlements are often common. It’s often rare that a class action lawsuit goes to the trial stage, but a proposed class action settlement will still need approval from the court. 

Class actions are important in protecting consumers as they hold businesses accountable for injuries their products or services incur to customers.

The money divided in a class action lawsuit may go to a lot of class members. Even with millions in Class Action Rebates, if it needs to be divided into a lot of class members, the individual awards get smaller.

Class Action Rebates: What Are They?

If a problem or injury arises because of a product or service that did not meet people’s expectations based on advertisements they’ve seen, information on the product label or necessary details lacking at first blush often resort to people suing to set things straight.

When a lawsuit is filed against a company, they’d most often try to resort to dismissing the case to the best of their ability. If the defendant is not able to have the case dismissed, they still have the option of offering class action rebates.

The judge handling the case may order it, or they may give it as part of a settlement agreement because both the defendant and the plaintiff agree to resolve the case out of court. 

What happens next is the settlement fund, and eligible class members will then submit their claims to receive the class action rebate.

Different Ways of Setting Up a Rebate

Claims Made Settlements

Class action lawsuits over claims that a company was unfair to a customer or committed fraud may enter this kind of settlement. 

It may also be difficult for parties to identify class members, so the defendant shells out an amount equal to the overall value of all the valid claims.

For the plaintiffs’ awards and attorney’s fees, they are handled separately.

Common Fund Settlements

These involve employment claims or antitrust activities. When the settlement funds enter a common fund, they can divide it among the class members with the use of a formula determined by the defendant and the plaintiffs.

Pro-Rata Settlements

The settlement gets divided by splitting the amount equally among the class members. This will depend on:

• Total number of people in the class
• Number of filed valid claims

Vouchers or Coupons Settlements

This type is a bit uncommon, especially after the Class Action Fairness Act was passed in 2005. If class members are required by the voucher class action settlement to buy additional goods from the defendant, they risk being disapproved by the court.

Advantages and Disadvantages of Class Action Lawsuits

There are people who don’t sue if the damages are not worth it. Where there are serious injuries or losses, that’s the only time they think to file a case against someone.

This is the reason class action lawsuits are great. Even if there are people who might have small claims, they can be justly compensated if they are part of a class action lawsuit.

One other advantage that class action lawsuits have over individual lawsuits is that the latter works on a first-come, first-served basis. 

Compared to class action lawsuits, if someone already sued a business and won a lot of money, there’s a chance that the company won’t be able to pay anything out if they lose another lawsuit filed against them.

With class action lawsuits, payments are spread equally among the affected parties. They also ensure that even if plaintiffs can’t afford to be represented by an excellent attorney, they can still hire one because the lawyers get paid out of the settlement rebate.

One disadvantage is that when plaintiffs lose a lawsuit, each class member cannot file individual cases for the same reason the class action lawsuit was filed. 

So it is best to quickly opt-out of a settlement if the damages are greater than what the settlement is.

The Class Action Fairness Act of 2005 (CAFA) was also implemented to address concerns about how class actions are done, especially with voucher settlements.

Instead of paying out cash for damages, there are businesses that offer vouchers for a dollar value of new items that the company is selling. Counsels take their fees out of the total value of the coupons, even though few plaintiffs will use them.

How the Plaintiffs’ Awards and Attorneys’ Fees Get Paid

The money in a class action settlement would have a provision to award the plaintiffs of the lawsuit. The awards are not that much and serve as compensation for the lead plaintiffs of the case.

Same as for both parties’ counsel, their fees are already provisioned when a class action lawsuit enters a settlement agreement. They can be structured differently, but it needs to be approved along with the settlement.

There are people who thought that this might result in petty lawsuits filed by lawyers looking for a quick buck, but they actually allow people to hire better lawyers than what they could afford.

What Happens to Unclaimed Money?

Once a case gets settled, the court will reach out to each eligible class member to inform them of the settlement. 

Not everyone in the class has complete contact information, which means some class members could not claim their money.

Counsel for both sides discusses and agrees to where the unclaimed money should go, and it usually goes through several options.

Sent back to the defendant

Sometimes unclaimed money from the settlement goes back to the defendant. Although they won’t gain or even consider it as an income from the refund. 

One way to get this done is by the court ordering the defendant to lessen the price it charges for its products in relation to the refund they’ll get.

Given as a donation to charity

This is another way of making sure that the settlement money will not be sent back to the defendant. The court may donate some of the unclaimed settlement money to a charity, non-profit organization, or to a cause.

Allocated to the known class members

Sometimes, even though eligible class members have already filed their claim and received their part of the settlement, they still get another payout. This is another way for the court to decide where the unclaimed money will go to.

Things People Needs to Know in a Class Action Lawsuit

These depend on several things. It may involve how bad the injuries were, or the number of individuals in a class, or what the judge’s decision will be based on the facts of the class representative case.

Sometimes, plaintiffs in a class action lawsuit may receive a modest amount of money between them. Generally, it may come in smaller payouts.

The judge will also decide on one case. A class action lawsuit will involve one group of class members, who’ll be considered as a single plaintiff. 

Whatever the judge decides applies to every one of the class members. If the defendant wins the case, no one in the class can file for further legal action.

The lead plaintiff will be the only one who can take part in any decision-making that needs to be done; other class members cannot.

Once a class action case ends, the judge will need to approve how the defendant will distribute any payouts in the lawsuit after the counsels handling the case deduct their fees and court costs.

Editor’s Note on Class Action Rebates – What Are They & How Do They Work:

This legal guide is to help a beginner understand what exactly a class action rebate is and process involved behind it. If you believe we have a made a mistake or would like to request an article or have some queries, then please feel free to send us a text through the “Contact Us” button below.

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