Do class action lawsuits really benefit royalty owners?

After receiving yet another very small class action settlement check in the mail the other day, I have decided I will probably be “opting out” of the next class action that comes my way. I would rather not participate at all than be subject to a specious payoff of dubious benefit. Class actions in general are not the great equalizers they claim to be. While they are often touted as such, experience has taught me that remaining a member of a class action lawsuit often benefits the class attorneys, a few named plaintiffs, an over-burdened court system, and even the defendant more than it benefits the class members it’s supposed to help; especially when settled out-of-court as many are.

Settling a class action lawsuit out-of-court rather than taking it to trial often results in the class members receiving relatively little compensation, while their attorneys avoid paying the costs of going to trial and still receive huge paydays. The defendant also benefits from settling because in doing so they admit no wrongdoing, are insulated from future lawsuits, and avoid the risk that a jury, at trial, might force them to pay much more than they bargained for. A settlement also provides no “injunctive relief” that would put a stop to similar wrongdoings by the company in the future since by settling they were convicted of nothing.

Since it benefits both the plaintiff attorneys and the defendant to settle, there is temptation for collusion between the parties to settle rather than going to trial. The motivation to settle also makes it more likely that plaintiff attorneys will attempt to have even weak cases certified as class actions, knowing such cases can often be settled out-of-court while still resulting in a large payday for them. Additionally, since attorneys on both sides prefer to include as many people as possible in each class (bigger class equals bigger settlement and less people left to sue the defendant), even large settlements are diluted to the point where only a small percentage of class members receive any significant benefit.

Requiring potential class members to opt in to these suits in order to participate rather than requiring them opt out in order not to participate (as is the default currently) would be better for mineral owners. A mineral owner who had to choose to opt in to a case in order to receive anything would result in attorneys being motivated to pursue only cases that people would want to be a part of. Pursuing only the best cases would result in a larger payday for everyone, including the attorneys. In the current system, you have to make quite an effort to opt out of a class action, even one that will result in a lousy payday for you while still giving your attorneys millions at settlement.

If more people realized how underpaid they really are in these settlements I expect a lot more would choose to opt out of them in the future as I have. That said, I guess it’s probably true there are (unfortunately) a lot of people out there who would rather receive “something” for free by staying in, rather than nothing (by opting out), but for me I’d rather receive nothing now than be bound by a pennies-on-the-dollar settlement that I can never appeal.

Even if you elect to remain a class member so you can get a share of the settlement, estimating what your share might be before you are actually paid is ­­nearly always an exercise in frustration, since neither class counsel nor the settlement administrator seems to ever furnish this information in a timely manner. By the time you find out what your share will be, it’s probably far too late to opt out if you think it’s not enough.

By not opting out of class action lawsuits that are of unknown and often dubious to you, you only continue to endorse and encourage them. Why remain a party to a class action where you will likely receive little money while also giving up forever your right to sue the defendant on your own for a potentially much larger payoff? There are attorneys out there who will take strong cases to trial and win. Why not encourage this instead of encouraging the bringing of weak class actions that are destined to be settled out-of-court for pennies-on-the-dollar?

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