How Is Money Divided in a Class-Action Lawsuit?

A class-action lawsuit is usually filed when many consumers or victims want to file cases for similar complaints against a single entity or corporation. Instead of filing multiple cases, a single class-action lawsuit is filed, and the resultant settlement or final decision is applied to every class member involved in the suit.

As can be observed from most class action lawsuits, a settlement agreement could be reached even before going to trial, or the trial could end up awarding a settlement to the plaintiff. And the settlement, while being a large sum in total, may trickle down to a measly figure for each class member. Here is an informational article that will help you understand class action lawsuits and how the money is divided among the class members.

The Class-Action Lawsuit Process 

Like every other lawsuit, a class-action lawsuit starts with the plaintiff filing a complaint against the party who was the cause of the alleged injury or distress. The accused party then responds to the court filings, and each party submits evidence that supports their stand on the court.

In some instances, the class action lawsuit may also be conducted as multidistrict litigation. The plaintiff should also provide the authenticity of the class members they represent and obtain class certification to be approved for the trial process.

Once a class certification has been obtained, the parties may either reach a settlement agreement or go ahead with the trial. Even if settlements are agreed upon before heading to the trial, the court must approve the proposed settlement. Once the court has approved the settlement, it is disbursed among the class members.

Dividing The Money In A Class-Action Lawsuit

As mentioned earlier, while the actual sum awarded in a class-action suit could amount to multi-million dollar payouts, the actual amount divided among the thousands of class members may not amount to much. But even so, every individual member is required to file the claim to receive their settlement amount.

Typically, once a settlement has been achieved, all class members are notified of the settlement by various means like:

  • Magazine ads
  • Direct mailings
  • Online ads
  • Class action websites

The class members have to send their claims with supporting evidence and documentation to validate their claim. Depending on the specific settlement agreement, some class members could be automatically entered as well.

A class member is also given the option to exclude themselves from the claim process. People who prefer to reject their claim are not entitled to any of the benefits awarded by the settlement but are allowed to make separate claims.

The usual ways by which a class action settlement is divided up can be classified into the following types

Claims Made

This type of settlement procedure is used in cases involving fraud and unfair customer treatment. As finding all affected parties can be difficult, a fixed amount is paid to all consumers who have made a valid claim and can be identified as a valid class member. Unclaimed funds are usually donated to the charity noted as the cy pres recipient. The attorney fees are handled separately apart from the claims funds.

Common Fund

Common fund settlements are used for lawsuits involving antitrust activities. The claim amount for each class member is calculated using a formula as determined by the involved parties. The defendants or class members are all usually identified with ease, and any unclaimed fund is given to a charity recognized as the cy pres recipient.


Pro-Rata settlements divide the entire settlement money into equal parts among all the class members involved. If a high number of valid claims are submitted, the actual payout for each claim can get relatively low.

Vouchers And Coupons 

Since the Class Action Fairness Act of 2005 came into effect, these settlements are not used as much as they used to be. The class members are paid in terms of vouchers or coupons. These settlements are not usually preferred as they could be disapproved by the court if the class member makes purchases of value higher than the vouchers or if the coupons expire.

Besides the settlement amount, the plaintiff of a class action lawsuit may be awarded a modest amount to compensate for the cost of taking up the case.

There is also a separate fund allocated for paying the attorney’s fees, and this amount and fee structuring is mentioned in the settlement agreement. Only the plaintiff’s attorney fees are covered, while defendants have to pay their attorneys themselves.

Contact Our Class Action Lawsuit Attorneys

Class action lawsuits are an essential judicial aid for consumers to hold big corporations and organizations responsible for their possible negligence and harmful acts. To know more about claims and get first-hand resources into fighting for victims nationwide, do contact us. With our expert class action attorneys and long-standing experience in the legal field, we can help you get the compensation you deserve.