Frequently Asked Questions

 Here are some Frequent Asked Questions about Class Action Lawsuits

What is A Class Action?

A class action is when one individual or a group of individuals sue a defendant on behalf of a larger group of people, referred to as a “class.” The goal of such a lawsuit would be to hold a company accountable for damages sustained by fraudulent, neglectful, or harmful actions of the company, and to help the afflicted consumers recover.

Is A Class Action Considered To Be A Civil Lawsuit?

Yes, a class action is considered to be a type of civil suit.  A civil lawsuit involves a dispute between 2 or more parties. The parties can include individuals, a corporation, and even the government.

Who Is The Lead Plaintiff?

The lead plaintiff is the person who files the class action as the spokesperson of that class.  This person will work with the attorneys to help build the case and might need to appear in court. The lead plaintiff is also known as the class representative.

What Does It Cost Me To Bring A Class Action?

It doesn’t cost you anything to be a class member or a lead plaintiff.  In most class action lawsuits, the lawyer’s wages are paid from the money that is collected as part of the settlement agreement.  A judge has to agree to the percentage as being fair compensation.

Can A Corporation Be A Lead Plaintiff?

Yes, however, a corporation is usually the defendant in a case.

What Is The Class Action Fairness Act?

The Act grants federal courts exclusive jurisdiction over class actions when the amount in controversy exceeds $5 million.  What this means is if a class action is filed on a state level and the total damages will likely exceed $5 million, then the defendant can request to have the case be transferred to a federal court.

Can I Get Fired For Participating In A Class Action Against My Employer?

Absolutely not!  If you participate in a class action against your employer, that has to do with alleged workplace discrimination or violations of wage and hour laws, then you are protected under federal law against retaliation by your employer.

What Is A Common Fund?

A common fund is the total amount recovered by the class action. This is the pool of money from which lawyer fees are paid and then the remainder is used to payout the members of the class.

Do I have to pay taxes on the money received from a class action lawsuit?

The simple answer is yes and no, and that’s because it depends on the specific case. Typically, the settlement from a class action is divided amongst all the people in the class and therefore the checks distributed end up being a small amount. Once you accept the settlement you must remember to report the earnings to the IRS

It is then up to the IRS to determine what income is subject to income tax. Generally, the IRS considers the reception of anything of value as taxable income. Therefore if you received a settlement for a faulty washing machine, then, in theory, the earnings would be considered taxable.
However, Title 26, Section 104, of the United States Code allows people receiving compensation for personal physical injury or physical sickness to exclude those amounts from their gross income. That means if that faulty washing machine caused you physical harm then the earnings might not be taxable. Since this question is not as simple as yes or no, we suggest you always consult with an accountant

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