Companies that find themselves members of a class action often want to stay there. In commercial cases, they generally prefer the relative anonymity because, if they filed their own lawsuit, they would have to sue a supplier — usually one whose goods or services their business depends on. Unhappy relations with a key vendor can really hurt.
So why would a company choose to pursue a claim outside of a class action? Many do. Why do they risk upsetting an important supplier in hopes of getting a few more bucks?
Let Blawgletter suggest an answer, which builds on several realities.
- An ongoing business relationship gives large purchasers more bargaining leverage with suppliers than they have as class members. It may also provide the basis for a friendly negotiation, which may enhance the relationship.
- Existing customers can get a dollar of benefit from in-kind benefits (such as future discounts) that cost suppliers less than a dollar. That can maximize the value of a settlement to the buyer, who must otherwise depend on the class action to recover harder-to-afford (and therefore harder-to-get) cash.
- Trying to hide in a class doesn’t work all that well. The vendor knows about you already. He may in fact approach you to ask that you not participate in the class.
- Choosing not to opt out of a class cedes substantial control of your claim, often to lawyers you don’t know.
- Class actions usually recover direct overcharges only and don’t recoup other kinds of losses, including a hit to your profits.
These realities will seldom justify initially taking an aggressive posture with suppliers. But they do support having a backup plan.
Law firms that specialize in representing potential opt-out plaintiffs can help you realize maximum benefit on your claim without harming your vital relationships with vendors. Their expertise in the governing law, familiarity with the morass of class litigation procedures, thorough investigation of your claims, and close monitoring of class proceedings can significantly strengthen your position and give you a readily available alternative to class membership.
Your agreement with such counsel — whether on an hourly or contingent fee basis –should state that you alone will decide whether and when to opt out of the class case. That will preserve your flexibility by saving you from having to commit to opt out too early. It will also free you to make your own best deal with the supplier.
If you choose the contingent route, the agreement should also specify the percentages for recoveries at different stages. The rates should start relatively low for settlements you reach before the filing of an individual lawsuit and ramp up only after you actually do file.
This strategy allows you to choose the alternative that best serves the overall interests of your company. And that can’t hurt.