Consumer Protection And The Role Of Class Action Lawsuits

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You might have read recently about the ‘class action lawsuit’ being brought against a major telecommunications company in Australia. It is claimed that nearly 18,000 of that company’s customers (and also some dealers) have joined the lawsuit, which arises from allegations of poor network performance.

One of the problems facing an aggrieved customer, is the economics of bringing legal action. Also, the financial loss arising from a slow or unreliable network is often difficult to quantify in dollar terms. If the impact is too serious, affected customers may vote with their feet, but changing networks is usually inconvenient, and terminating the original service may involve a penalty cost… not enough to justify the legal fees to take the matter to court, but certainly enough to make disgruntled customers see red. Although modern consumer legislation encourages large utility companies to meet minimum standards of customer service, the practical reality is that individual consumers remain relatively powerless.

This is where the right to bring a class action serves a valuable role, by allowing the claims of many affected customers to be consolidated into one lawsuit, reducing the legal costs payable by each individual class member, and also avoiding the impact of many similar claims clogging up the court system. This concept of group litigation is not a modern development, and in fact was very common in the 13th and 14th centuries in medieval England.

However, to participate in a class action, each participating member must contribute financially, or enter into a litigation funding agreement. Although the end result may exceed financial contributions, that is not guaranteed. If the lawsuit is unsuccessful, the contributions will be lost and there is a risk of belviq class action lawsuit members having to contribute additional sums towards any adverse costs order – that is, where the class action fails, and the plaintiff (the person representing the class members) is ordered to meet some of the defendant’s legal costs.

Once a class member has signed up to participate in a class action, they may have very little say in the decisions made on their behalf. Although class members can decide not to accept the class settlement, that option is, for many people, a Hobson’s choice… the member who opts out will then need to pursue his or her claim independently.

Another recent class action lawsuit, commenced in July 2009, was brought against one of Australia’s largest banks on behalf of individual investors who lost money after a financial broking company collapsed. Those investors allege the bank was partially or wholly responsible for their losses. An earlier, threatened action, also against the same bank but involving a different representative, led to a settlement for about 2,000 investors, but other investors are continuing their group action against the bank.

Further class actions, also arising from the broking company’s collapse, have been commenced against a bank in Queensland, Australia, and against the manager of two franchise stores associated with that bank.

These lawsuits illustrate the advantages and disadvantages of class action proceedings. In many cases, the sheer weight of numbers encourages a negotiated settlement, as the defendants in these cases are also anxious to avoid unrecoverable legal costs and the damage to their reputations from prolonged publicity. Although negotiated outcomes may be much less than the sums claimed, for many members the settlement will represent an outcome that could not otherwise be afforded. Also, as is the case with court proceedings generally, lengthy delays are nearly inevitable unless an early settlement is reached.