Are there downsides to joining a class action lawsuit?

Asked by: Myrtie Hauck  |  Last update: February 19, 2022
Score: 4.2/5 (60 votes)

One of the dangers of joining a class action lawsuit is that you lose the right to file an individual lawsuit if the class action case fails. In addition, you cannot reject a settlement offer to which the class representatives have agreed. ... You can't reject it and sue for more money.

Is it a good idea to join a class action lawsuit?

In most cases, it is a good idea to join the class action if you believe you suffered injuries or financial losses caused by the defendant. We do recommend you give us a call and discuss your situation with one of our class action lawsuit attorneys before you make a decision, however.

Is it better to opt out of a class action lawsuit?

The result may be that someone brings a class action lawsuit. But if you've suffered a significant financial loss, you should be wary of participating in a class action. You'll almost always be far better off if you “opt out” of the class and pursue your own individual case.

Why would you opt out of a class action lawsuit?

Why You Might Want to Opt Out of a Class Action

If your losses were significantly more than other members of the class. If the facts of your case were different and you are concerned that the class action might not address all your interests. If you lack confidence in the attorneys or lead plaintiffs in the case.

Can I leave a class action lawsuit?

In general, you can opt out of any class action. The class notice will state the deadline for opting out of the lawsuit. In most cases, you will have to notify the attorneys handling the case in writing of your decision to opt out.

The Basics of Class Action Lawsuits

21 related questions found

Are class actions worth it?

In general, yes – class action lawsuits are worth it. For Class Members who are able to recover benefits from a class action settlement, all it takes is filling out a claim form and potentially providing documentation. This can allow them to recover up to thousands of dollars in compensation.

What happens if you lose a class action lawsuit?

What Happens if You Lose a Class Action Lawsuit? If you are part of an unsuccessful class action lawsuit, you won't have to pay any lawyer's fees. However, it's likely that you won't be able to join any other legal efforts involving the same issue that the class action lawsuit was concerning.

Do you pay taxes on class action settlements?

The general rule of taxability for amounts received from settlement of lawsuits and other legal remedies is Internal Revenue Code (IRC) Section 61 that states all income is taxable from whatever source derived, unless exempted by another section of the code.

How is money divided in a class action lawsuit?

After a Class Action Lawsuit Settles

Depending on their participation in the class action lawsuit, the lead plaintiff receives their percentage first. ... Finally, the rest of the settlement money in a class-action lawsuit is divided among the class members.

Will I get a 1099 for a class action lawsuit settlement?

If your legal settlement represents tax-free proceeds, like for physical injury, then you won't get a 1099: that money isn't taxable. There is one exception for taxable settlements too. If all or part of your settlement was for back wages from a W-2 job, then you wouldn't get a 1099-MISC for that portion.

Is a settlement considered income?

Alternatively, your settlement might qualify as a recovery of tax basis, which is not counted as income. Spread payments over time to avoid higher taxes. Receiving a large taxable settlement can bump your income into higher tax brackets.

Can I lose money in a class action lawsuit?

There is no monetary loss for individual Class Members upon losing a class action lawsuit—only the fact that they cannot recover compensation for any damages.

What happens if you lie on a class action lawsuit?

If you believe you've been injured to a greater extent than the other class members, you can opt out of the suit, meaning you won't be covered by any settlement agreement resulting from the litigation. (These agreements typically provide a small amount per class member - $100, for example.)

Is Tik Tok in a class action lawsuit?

US residents who used TikTok prior to October may be eligible for part of a $92 million settlement. The settlement follows a class-action data privacy lawsuit filed in Illinois. Eligible users must submit a claim before March 1, 2022 to possibly receive payment.

What are the benefits of class actions?

Class actions place fewer obligations on individual class members than conventional lawsuits. Class actions are cost-effective and increase judicial efficiency because they unite multiple plaintiffs in one case. Class actions run on contingency fees.

What are the advantages and disadvantages of class actions?

Pros And Cons Of Class Action Lawsuit
  • More Strength as a Group. ...
  • Your Lawsuit Charges are Significantly Less. ...
  • Advantageous to the Judicial System. ...
  • Guaranteed Settlements. ...
  • Very Little Agency in the Matter. ...
  • Class Action Lawsuits Take a Very Long Time to Settle. ...
  • Class Action Lawsuits Cannot Be Reapplied To.

Is there a Blue Cross class action lawsuit?

Yes, the Blue Cross Blue Shield Settlement is legit, and some involved may have even received postcards in the mail notifying them of the lawsuit. ... For individuals and insured groups, the settlement class period is between Feb. 7, 2008, through Oct. 16, 2020.

How do class action lawsuits work?

How Do Class Action Lawsuits Work? A class action lawsuit combines many claims into one, making the entire process much smoother and quicker for all parties involved. ... During a class action lawsuit, the group of harmed people will assign their lead plaintiff to file the lawsuit on behalf of all party members.

What if someone lies on a lawsuit?

Consequences of Lies Spoken in Court

The judge may issue certain penalties against the person committing perjury. This could include fines, time in jail, prosecution that could lead to prison and other punishments depending on the circumstances.

Do you have to opt in to a class action?

One requirement of a class action lawsuit is to notify all potential victims about the case, and give them the opportunity to choose whether to opt in or opt out. ... Once you learn about the class action lawsuit, you must decide to opt in or opt out. If you opt in, you join the class action.

What percentage of a settlement is taxed?

Lawsuit proceeds are usually taxed as ordinary income – they're not subject to a special tax percentage rate just because the money comes as the result of litigation. The tax rate depends on your tax bracket. As of 2018, you're taxed at the rate of 24 percent on income over $82,500 if you're single.

Can the IRS take my lawsuit settlement?

If you have back taxes, yes—the IRS MIGHT take a portion of your personal injury settlement. If the IRS already has a lien on your personal property, it could potentially take your settlement as payment for your unpaid taxes behind that federal tax lien if you deposit the compensation into your bank account.

Why is a W 9 required for settlement?

The Form W-9 is a means to ensure that the payee of the settlement is reporting its full income. Attorneys are frequently asked to supply their own Taxpayer Identification Numbers and other information to the liability carrier paying a settlement.

Is Wells Fargo class-action settlement taxable?

Generally, if these settlements are from overcharged interest, on nondeductible interest payments such as credit card debt or auto loans it is not a taxable event and does not need to be reported. ... You must include the lump-sum portion of the settlement and report it on your taxes.

Do you get a w2 for a settlement?


The two primary methods to report the settlement to the IRS are either on a Form W-2 or a Form 1099-MISC. ... These payments would need to be reported on a W-2 and the check should be processed as if it was a payroll check allowing for deductions of income tax, FICA and state withholdings.