Simply put, a lawsuit involves a person or a business (or several persons/businesses) who sue others to resolve a legal dispute. The persons or businesses initiating the lawsuit are called “plaintiffs,” and those being sued are called “defendants.” For example, if ABC Company files a lawsuit against XYZ, Inc. for breach of a business contract, ABC Company is the plaintiff, and XYZ, Inc. is the Defendant. However, there is another type of lawsuit called a “class-action lawsuit,” in which hundreds or thousands or even tens of thousands of plaintiffs sue one or more defendants. Obviously, class action lawsuits are financially dangerous for the defendants since, if the plaintiffs win, the defendants will end up paying hundreds or thousands of judgments to the victorious plaintiffs.

Class action lawsuits can be filed in New York State or federal court and involve almost any legal claim/dispute. For example, as reported by The Real Deal, in 2019, NYC landlord Steve Croman faced a class action lawsuit by more than 100 then-current and former tenants of an East Harlem building accusing the landlord of illegally deregulating rent-controlled apartments. Here is some basic information on class action lawsuits.

Class action lawsuits are generally not filed as directly as class action lawsuits. Rather, the initial lawsuit is filed as a normal lawsuit by one or several plaintiffs who seek to act as and be designated as the “representatives of the class.” Moreover, the judge assigned to the case must approve the case as a class action lawsuit. This process is called “certification of the class.”

The key to obtaining certification of the class from the judge is to show that the class representatives and all of the potential class members have suffered some sort of “common injury” as a result of the conduct or behavior of the defendant. For example, assume that a business charged each customer a $5 fee for some reason. Assume further that the fee was prohibited by New York or Federal law. Each customer who was charged the illegal fee suffered the same common injury. This would be the sort of case that could be certified as a class action lawsuit. Two or three customers would initiate the lawsuit, seek permission to certify the class, and then prosecute the case against the defendant on behalf of all the class members. If successful, at the end of the case, each class member would receive some portion of the money judgment obtained against the defendant.

Our example also demonstrates one of the main justifications for allowing class action lawsuits. In our example, each customer victimized by the illegal $5 charge could file a lawsuit against the business. But, litigation is expensive and time-consuming, and very few customers would bother filing a lawsuit to recover a $5 fee that was illegally charged. For obvious reasons, the time and legal fees costs would far outweigh any recovery. However, in a class action lawsuit, all the claims are “bundled,” which makes the litigation cost-effective and allows plaintiffs to vindicate their legal rights even when they have only suffered a small injury.

Class action lawsuits are also justified as enormously efficient for pursuing justice. Instead of a thousand lawsuits, a thousand judges, and a thousand separate trials with thousands of witnesses, only one judge, one trial, and one set of witnesses is needed.

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For more information, call the experienced New York City business lawyers and litigators at Wright Law Firm NYC. We provide top-tier legal services for New York businesses. We can help get your startup off and running. To schedule a consultation, please contact our office by e-mail or call us at (212) 619-1500.