What are Class Actions and How Do They Impact Businesses?

California business lawyers provide advice to companies on lawsuit risks that they face. Companies could be sued by individuals, such as disgruntled employees who believe they were wrongfully terminated or who believe they were discriminated against. Companies could also be sued by members of a class action.

Class action litigation can be very expensive for companies to respond to. Brown & Charbonneau, LLP can provide assistance to businesses in understanding how class actions work, why class action litigation arises, and what steps companies can and should take to reduce the chances of being named as a defendant in a class action. To find out more, give us a call today to talk with our expert business lawyers who can help your business to reduce the chances of a costly lawsuit.

What are Class Actions and How Do They Impact Companies?

Class action litigation arises when multiple individuals are all allegedly damaged by the same wrong. The individuals who were harmed all come together in order to file a lawsuit against the company. Their claims are grouped in one big lawsuit, rather than individual plaintiffs bringing independent claims. Plaintiffs can join together in a class action if they believe that they were all financially damaged by a product that failed to live up to its promises; if they were all harmed by the same discriminatory employer; or if they were all injured by the same negligent actions of a company.

When a company is facing a class action, it has the potential for substantial losses because the many plaintiffs who are part of the class may all be entitled to a remedy if the company loses the lawsuit. It is very common for businesses to settle class action lawsuits because of the costs associated with defending a large lawsuit and because of the risk that the court could award a very large verdict to all of the plaintiffs who were alleging harm. However, even settlements can be expensive since there are so many people involved in the case.

Some companies have taken action to try to reduce the chances of being sued by including mandatory arbitration clauses in consumer contracts that bar class actions. Consumers who sign these contracts, which they typically must do in order to do business, give up their right to use the court system to pursue a remedy and waive their right to come together in a class action. If the consumers who signed the contract want to pursue a claim against a business, they will have to make their own individual cases in arbitration. This can benefit companies because often plaintiffs won’t invest the time and money to arbitrate small claims and because companies won’t have to worry about a big class action lawsuit that is very costly.

The Consumer Financial Protection Bureau (CFPB) passed a rule aimed at preventing certain companies from using arbitration clauses in consumer contracts to get consumers to waive their right to a class action. However, according to The Hill, the U.S. House of Representatives has indicated that it intends to vote on a resolution under the Congressional Review Act to undo the CFPB’s newly passed regulation (the Congressional Review Act provides an expedited process for rescinding agency rules) so this rule may not be in effect for long and companies will be able to once again take steps to protect themselves from being named as defendants by a large class of plaintiffs.

Your business should discuss with an experienced attorney the potential likelihood that you could be named as a defendant in class action and should talk with your attorney about the different steps you can take and legal tools that you can use in order to protect your company from this costly type of litigation.

Getting Help from California Business Lawyers

california business lawyers at Brown & Charbonneau, LLP will provide your company with advice on using contracts that you draft to reduce the risk of a class action and in taking other steps to reduce the chances that you will be sued either by individuals or by groups of plaintiffs alleging wrongdoing.

To find out more about how our firm can help you, give us a call at 866-237-8129 or contact us online today. Our experienced legal team is ready to work with your company to make sure you have the legal advice that you need to protect your interests and to thrive in ongoing operations, so give us a call now.