When you decide to join a class action lawsuit, it’s only natural to want to know how much your case is worth and how the personal injury settlement will be distributed. Since there are numerous plaintiffs, it can be hard to determine how much of the settlement proceeds will be allocated to you.
When a class action lawsuit settles, the presiding judge reviews and approves the settlement offer, and the personal injury settlement money is then distributed among the lead plaintiff, lawyers, and other class members.
Here, we’ll discuss how settlement proceeds are divided in a class action lawsuit and what factors determine how much you’ll receive.
Any Class Action Settlement Agreement Must Be Approved by the Judge
In any class action lawsuit, the terms of the settlement need to be reviewed and approved by the judge to ensure fairness. This includes the settlement agreement, which outlines the distribution of settlement funds and other key terms.
The judge will also have to approve your attorney’s contingency fee. In an ordinary personal injury case, most personal injury lawyers work on a contingency fee basis, meaning they only receive a percentage of the client’s total recovery, verdict, or award, and only after it is recovered for the client. This means there is no financial risk to pay lawyer fees if there is no recovery. Usually, their fee ranges anywhere from 30% to 40%.
With class action lawsuits, the judge usually limits the attorneys’ fees to somewhere around 25%.
The Lead Plaintiffs Typically Receive the Most Money in Class Action Lawsuits
The lead plaintiffs typically get more money from a settlement or court award in class action settlements than the other victims in a class action lawsuit.
The reason for this is that the lead plaintiffs are chosen based on the severity of their injuries and the amount of their damages. Additionally, they are generally more involved in the lawsuit, meeting with the attorneys, helping with discovery, and taking part in settlement negotiations, mediation, and court hearings.
How Much Do Plaintiffs Get From a Class Action Lawsuit?
As with other personal injury cases, the attorneys are paid first from the personal injury claim, before any of the plaintiffs. These settlement proceeds will also be used to cover any costs associated with the case, including medical bills.
Personal injury settlements paid are distributed based on several factors, including the total number of class members and the severity of their injuries, which may reduce the settlement amount.
Whatever is left will be divided amongst the entire class, starting with the lead plaintiffs. Lead plaintiffs receive more money because they have the most serious injuries and the highest damages. A plaintiff’s share depends on many elements, including:
- The total number of class members participating in the lawsuit
- How many plaintiffs suffered injuries
- How many lead plaintiffs there are
Some Class Members Only Receive a Nominal Amount
In addition to the class members who joined the class action lawsuit and actively participated, there are other less involved plaintiffs. These are people who didn’t suffer any serious injuries or evidence supporting their claim, like receipts for the dangerous product, medication, or medical records.
These class members would only receive nominal damages. Sometimes, their share of the settlement proceeds is less than $10.
Do You Pay Taxes on a Class Action Settlement
Receiving a class action settlement can be a relief for individuals who have been affected by corporate wrongdoing or negligence. However, the question of whether you
z need to pay taxes on these settlements is a common concern. The tax treatment of class action settlements depends on the nature of the settlement and the types of damages awarded.
In general, the IRS treats class action settlement proceeds as taxable income unless they are specifically designated as tax-exempt. The taxability hinges on whether the settlement funds are compensatory or punitive in nature.
Compensatory damages, intended to reimburse plaintiffs for actual losses or injuries suffered, are typically taxable. This includes settlements for financial losses, medical expenses, and emotional distress that have tax consequences. On the other hand, punitive damages, which aim to punish the defendant for misconduct, are almost always taxable.
It’s essential to carefully review the terms of your class action settlement to understand how the funds are categorized for tax purposes. Settlement agreements often outline the allocation of damages between compensatory and punitive categories.
Consulting with a tax professional or attorney who specializes in class action settlements can provide clarity on your tax obligations and ensure compliance with IRS regulations. Properly reporting class action settlement income on your tax return is crucial to avoid potential penalties or audits by tax authorities.
How Are Class Action Settlements Paid Out?
With smaller settlements, plaintiffs receive money once in a lump sum. In contrast, the money from larger settlements is usually paid out over time by the insurance company. This is known as a structured settlement.
The settlement process involves several steps, including reaching a settlement, distributing the settlement proceeds, and considering factors such as lump-sum vs. structured settlements. Additionally, insurance companies may impose medical liens on your recovery based on the compensation they paid for medical expenses. Medical liens enforce reimbursable payments for medical treatment to be compensated when the personal injury claim settles.
Benefits of Joining a Class Action Lawsuit
Joining a class action lawsuit can offer several benefits to individuals who have been affected by a common issue or wrongdoing by a company or organization. One of the primary advantages is strength in numbers: class actions consolidate the claims of numerous plaintiffs into a single lawsuit, which can increase the collective bargaining power against larger defendants.
This collective strength often allows plaintiffs to pursue legal action they might not otherwise be able to afford individually, leveling the playing field against well-funded corporations.
Another significant benefit of joining a class action lawsuit is efficiency. Rather than each plaintiff filing separate lawsuits, class actions streamline the legal process by consolidating similar claims into one case. This efficiency not only saves time and resources for both plaintiffs and the court system but also ensures consistent treatment of all class members. It can lead to faster resolutions and potentially quicker compensation for those affected by the alleged wrongdoing.
Additionally, class actions provide an opportunity for individuals to seek justice and hold corporations accountable on behalf of a larger group. They promote fairness by ensuring that all affected parties have the chance to participate in the legal proceedings and receive their share of any damages awarded.
This can be particularly important in cases where individual claims are relatively small, making it impractical for each person to pursue litigation independently. Overall, participating in a class action lawsuit can provide a sense of empowerment and solidarity among plaintiffs seeking redress for similar grievances.
Contact Our Office Today
If you’ve been injured by a dangerous drug or other product, there’s a good chance you’ll be entitled to damages. If you end up joining a class action lawsuit, it can be hard to figure out how much money you’ll receive.
What you can do is call and speak with one of our team at Rueb Stoller Daniel. Our experienced personal injury lawyer will provide legal assistance, handle settlement offers, and guide you through the process. While they can’t say exactly what your case is worth, they’ll be able to give you a ballpark figure. They’ll also update you throughout the case and keep you apprised of any settlement offers.
You can call our office today at 1-866-CALL-RSD and schedule your free, initial consultation today.
