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Can I make money from class action suits?

Candy bar manufacturers are shelling out cash to practically anyone who bought chocolate last decade. How can I get mine?
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Mark Moyes, September 20, 2013 12:03:01 PM

Good news, Canadian chocolate lovers: The big candy bar makers–Cadbury, Nestle, Hershey and Mars–just agreed to pay you $23.2 million.

That’s you as a group, you understand–you don’t get $23.2 million each. Basically, anyone who ate a chocolate bar between February 1, 2001 and December 31, 2008 is eligible to make a claim. (The companies are accused of illegal price fixing during that time.) Then the courts will take that 23-million-dollar pie and cut it up into thousands of teeny tiny pieces so everyone gets a slice.

But, as in lots of other class action lawsuits, the slice may be pretty small. In this case, preference goes to people who spent $1000 or more on chocolate bars during that period. (But here’s the kicker: they have to be able to be able to prove it. Like, with receipts.) Those who don’t have a shoebox filled with receipts for candy purchased a decade ago–so basically, the entire country minus a few very special hoarders–can still submit a claim, but that claim will max out at $50. It might be less.

And this is how class action suits work: They’re typically launched when the settlement for one person wouldn’t justify the legal fees. But get enough people together, and suddenly the complaint becomes an $18 billion class action suit– which is currently the largest in Canada’s history. That particular case has survived eight appeals, and is expected to reach court sometime in 2014. But just like in the chocolate bar case, all you’ll have to do is fill in a claim form, which is sometimes as simple as sending in your name, address and signature.

In most cases, the law firm takes a percentage of the court award – they only get paid if they win. That means there’s little risk in joining one, and the lawyers are happy because their payout can be pretty hefty. (A pending $700 million suit against the Government of Canada over immigration processing fees caps the legal fees at 33% of the final award.)

“But wait a minute. This sounds like free money,” you say. “How do I take advantage?”

It’s enough to make you want to turn your life into a sort of twisted version of Extreme Couponing, only with class action lawsuits. The hardest part may actually be finding them.

Once a trial’s approved, the judge will order that all potential plaintiffs be notified. So you may be notified directly by mail or email–or, depending on the case, they may take out ads in newspapers.

Still, the enthusiastic class action hunter has more resources. The Canadian Bar Association maintains a class action database, but submissions are voluntary, and you have to know what you want to search for in advance. If you’re truly dedicated, try setting up a Google Alert with the terms ‘class action’–you’ll get daily updates of class actions in the news.

Once you’re on the list, there isn’t much to do–the details get handled by lawyers. If you want to get more involved, you can apply to become Representative Plaintiff. If named, you’ll talk directly to the lawyers about the case, and you might have to testify. You may get a greater share of the award. Be warned though that in Canadian law, if the class action is lost, the Representative Plaintiff may be required to pay a portion of the winning party’s legal fees. In general, other class members don’t have the same risk.

Also, there may be times when you’d want to opt-out of a class action–and you need to do that explicitly. Once you’ve been a member of a successful class action suit, you cannot sue for individual damages. So if you’re seeking a substantially greater amount in damages than the rest of the class action members, it might be in your best interest to opt out and hire your own lawyer.

One last note: While this can seem like a source of easy money, some who’ve been through the process don’t find it worth the time and effort. A U.S. Ticketmaster class action settlement awarded $25.50 to plaintiffs. However, Ticketmaster was initially allowed to issue them as credit towards future purchases–at only $3.00 per transaction. So yes, millions of people got $25.50, but they got it as eight $3.00 off coupons. (A judge later threw out the settlement because it didn’t benefit consumers.)

But hey, at least it’s worthwhile for someone: The class action asked the court for $16 million in legal fees.

Photo courtesy of goodncrazy from Flickr.

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