Parties to a legal dispute can agree to end the dispute at any time. The process of ending that dispute through an agreement is known as a “settlement.” If you’re in a large-scale lawsuit with multiple people, you can settle with some or all of the parties if they are on board with settling. Typically, the judge has to approve a settlement, so unreasonable settlements will sometimes be tossed out [while it can happen, judges refusing a settlement is rare]. In many situations, a party will settle when it becomes apparent they will lose the lawsuit, as a way to stem the damages and prevent future issues. The settlement is a binding contract and typically will include some sort of release, permanently preventing the complainant/plaintiff party from bringing the same issue before a court again. Settlement agreements also regularly contain confidentiality provisions that prohibit both parties from chatting about the dispute with anyone, and many have a provision to the effect of “__ admits no fault,” allowing a presumably losing party some level of moral victory. While it does mean you get to skip attorney fees, court fees, time, and the stress of court, a settlement should not be entered into lightly because it represents a substantial release of rights and an agreement to an outcome. It is also worth noting that a settlement is only applicable as a protection from further litigation if the parties are following the agreement. If a person settles a lawsuit and agrees to change their activities or pay a sum of money in exchange for release of the lawsuit, failure to fulfill their side of the bargain results in a breach of contract claim and can, at times, result in fines, court orders, stipulated penalties, and even rescission of the settlement.
There is a separate legal concept known as the “class action.” A class action is where the court takes a named plaintiff and allows them to sue on behalf of themselves and other unnamed individuals who all suffered the same injury. The concept arose in the 1930s, when the court attempted to improve the “efficiency and economy of litigation,” aggregating claims into a single lawsuit to avoid the time and expense of doing duplicative lawsuits. To form a class, federal rules of civil procedure require that (1) the class has so many people that aggregating the claims is impractical, (2) the class shares legal questions or factual issues, (3) the representative party’s claim or defense serves as a typical example of the entire class, and (4) the representative party will act to defend their own interest and that of the class fairly and adequately. [E.g. “all people who shopped at these specific 3 Trader Joe’s between May and August 2024”] The class action can be differentiated from a mass tort, so for example, when a person causes a 10 car pileup by driving poorly, all 10 injured vehicles may be able to sue the poor driver, but each will have varying injuries, claims and defenses and a class action would not be used [though the whole thing may be consolidated under a single judge to streamline the mass tort issue]. If the representative settles the class action lawsuit, they need court approval that the settlement is fair and adequate. From there, the class representative must send out notice as best they can to all members of the class. When you get those mailers that say “you may be part of a class action,” it’s because of this step in the process. Typically, the notice will say “you are automatically opted in, but can opt out if you choose,” some say “you are automatically opted out, but can opt in if you choose.” If the class member opts out of the lawsuit settlement, they retain the right to sue over the issue. For all the members of a class who have opted in, intentionally or automatically, the ability to sue over the class action lawsuit’s issue will typically be cut off by the settlement agreement itself. As a result, a class action can be a way to tie up thousands of loose ends simultaneously.
It is worth noting that the class action preemption that prevents lawsuits only applies to the specifically settled issues. For nationwide lawsuits on complex issues, this can create some complications. For example, if a lawsuit was over a combination of federal and state laws, it may only be possible to create a large enough class on the federal law issues; which would mean that the defendant in the lawsuit may find themselves subjected to individual state laws [e.g. if you sue over unfair trade practices act violations under ORS 646, the ruling would not apply in any state outside Oregon unless the court finds that Oregon law was the most appropriate law to govern all claims or unless the court found that Oregon’s law was a “uniform” law adopted in many states. The Unfair Trade Practices Act is not a “uniform law act”, but many Oregon laws are, such as the Revised Uniform Limited Liability Company Act, the Uniform Commercial Code, Uniform Trade Secrets Act, Uniform Electronic Transactions Act, etc. This can mean a release of claims is much more limited than the defendant may hope.
All taken together, if you are on the business end of a class action lawsuit and the outcome requires you to change your practices, the shield against future litigation over the same issue only applies if you follow through with those practice changes. If you refuse to adhere to the changes or let your compliance slide while still bound by the terms of the settlement, you may find yourself the target of renewed legal scrutiny and substantial fines.