Legal Definitions - opt-out class

An opt-out class refers to a type of class action lawsuit where a group of individuals who have suffered a similar harm are automatically included in the legal action.

For members of an opt-out class, participation is the default. If an individual does not wish to be part of the lawsuit, they must take an affirmative step to remove themselves from the class, typically by submitting a formal request by a specified deadline. If they do not opt out, they are bound by the outcome of the lawsuit, whether it results in a settlement or a judgment, and usually cannot pursue their own individual lawsuit for the same claim.

Here are some examples illustrating an opt-out class:

• Example 1: Defective Product Lawsuit

  Imagine a scenario where a major electronics company sells millions of smart home devices that are later found to have a critical software flaw, making them vulnerable to security breaches. A class action lawsuit is filed against the company on behalf of all purchasers of these devices. The court certifies this as an opt-out class. All individuals who bought the affected devices are automatically considered part of the lawsuit. They receive a notice explaining the lawsuit and informing them that they will be included in any settlement or judgment unless they actively choose to "opt out" by a specific date. If a customer does nothing, they remain in the class and will be eligible for their share of any compensation awarded, but they also give up their right to sue the company individually for the same defect.

• Example 2: Unfair Banking Fees

  Consider a large bank that is accused of systematically charging excessive overdraft fees to its checking account customers over a five-year period. A class action lawsuit is brought against the bank, and the court certifies it as an opt-out class. All customers who were charged these specific fees during the defined period are automatically included in the class. These customers receive a notification detailing the lawsuit and their automatic inclusion. If a customer wishes to pursue their own claim against the bank or simply not be part of the class, they must formally opt out by the deadline. If they do not opt out, they will be bound by the outcome of the class action, meaning they would receive a portion of any settlement but could not later sue the bank individually for the same overdraft fees.

• Example 3: Data Privacy Breach

  Suppose a popular online retailer suffers a massive data breach, exposing the personal information (names, addresses, email, etc.) of millions of its customers. A class action lawsuit is filed against the retailer for failing to protect customer data. The court certifies this as an opt-out class. All customers whose data was compromised are automatically included in the lawsuit. They receive a notice explaining the breach, the lawsuit, and their automatic inclusion. The notice clearly states that if they wish to pursue an individual claim or not participate in the class action, they must submit an opt-out form by a certain date. Customers who do not opt out will be included in any settlement reached and will typically waive their right to bring a separate lawsuit against the retailer for the same data breach.