What is a class action lawsuit?

A class action is a lawsuit that allows the victims of wrongs to group together to better protect their rights and fight for fair compensation. 

Class action lawsuits are about strength in numbers: they decrease the individual burden and increase the shared chance of success. Without class actions, it would be difficult for individual victims to challenge the might of large corporations or governments.

Maurice Blackburn has the largest class actions practice in Australia. Since establishing its Class Actions department in 1998, the firm has obtained close to $4 billion in class action settlement payments. In the wake of the 2009 Black Saturday bushfires, Maurice Blackburn ran two large class action lawsuits, both of which the firm successfully settled for a total of nearly $800 million.

Requirements for a class action lawsuit

Before launching a class action lawsuit, lawyers consider three key criteria:

1. Is there a serious wrong?

Class actions are long and demanding so it’s vital that the members have a strong chance of success from the outset. Class action lawyers rigorously analyse a potential lawsuit to determine whether it indicates a serious wrong and that it has a strong chance of a successful outcome.

2. Is there a significant amount of economic damage?

Class actions are resource intensive and expensive to run. Before proceeding with a lawsuit, a lawyer needs to be satisfied that the likely damages will benefit the members and not just cover lawyers’ fees.

3. Is there a significant prospect of recovering damages?

There’s no point in running a case that’s worth millions of dollars if the entity doesn’t have the resources to pay compensation for the harm it’s caused. There must be a significant prospect of recovering damages for the members of the class action.

The consideration of these three criteria means that class actions are not the norm. Still, analysis showed that 33 new class actions were filed across Australia in the 2014–2015 financial year. While this may be an increase from previous years, it is not the tidal wave that detractors of the class actions regime would like us to think.

Members required for a class action lawsuit

In Australia, a class action lawsuit requires a minimum of seven members; however, there’s no maximum: the Black Saturday Murrindindi–Marysville class action proceeding had more than 1100 members, and the Kilmore East–Kinglake one had more than 5000.

How long does a class action lawsuit take?

Class actions often run for years, especially large class action claims that involve many members, such as the Black Saturday proceedings. In fact, the preparation alone can take a couple of years. Legal teams need to consult with communities, identify members, collect stories, consult with experts, and gather and assess the evidence.

Class action trials can take many months or years. Kilmore East–Kinglake was in court for about 16 months. Murrindindi–Marysville settled the day before court, but administration of the settlement is ongoing: lawyers expect that by the time the more than 1100 members receive their compensation, several years will have passed since the initial plaintiff contacted Maurice Blackburn. The Black Saturday class actions were particularly difficult and time-consuming due to the sheer number of members, the complexity of the case theories and the fact that the fires destroyed a lot of the evidence.

Who finances a class action lawsuit?

A law firm will sometimes run a class action on a ‘no win, no fee*’ basis. This is a massive undertaking for the firm, and it was the way Maurice Blackburn ran the two Black Saturday class actions.

External funders often help resource shareholder class actions. First, potential financiers carry out a risk assessment on a potential class action. If they’re convinced that the lawsuit’s prospects are good, they enter into an agreement with the law firm to pay some or all of the legal fees. And if the class action settles successfully, these funders receive a commission.

How are settlements divided among class action members?

Once the matter is settled, the class action settlement money is paid into a fund that’s held in trust. In the case of the Black Saturday class actions, the court approved Maurice Blackburn to administer the assessment of individual members’ claims and to then distribute the funds.

To this end, each claimant completes a questionnaire regarding their personal injury or property claim, or both. A team of barristers and/or medical experts assess this information and use it to arrive at a figure for each member. Settlement monies are then divided on a pro rata basis between claimants in accordance with a settlement scheme approved by the court.

Class actions provide a mechanism by which victims of wrongdoing or negligence can stand their ground against the vastly superior resources of large corporations or governments. Without a class actions regime, such people simply wouldn’t have the means to seek redress or compensation in the courts on their own.

Find out more about all of our current class actions.