Class Action

Posted in Finance, Accounting and Economics Terms, Total Reads: 358

Definition: Class Action

Class Action is a lawsuit where a person on behalf of a larger group which is referred to as a class sue another person or company or the group of people.

Class Action Suit is very common in the USA, the UK and Singapore. Under Class Action Suit, one or more plaintiffs files and prosecutes litigation in a court of law on behalf of a larger group. Here members of the larger group have at least one common grievance to be referred to as a class. Class Action is preferable when class is so large as to make individual suits impractical. Here, representative party protects the interests of a class.

So Class Action reduces multiplicity of suits, the cost of litigation and brings higher chances of success. Class Action is common in securities fraud litigation, employment discrimination, product liability claims, unfair wage claims, claims of price-fixing and claims of environmental contamination.


In the Satyam Fiasco, Satyam owner Ramalingan Raju was involved in misstating accounts and because of that share price was plummeted. So American investors in the company who owned American Depository Receipts (ADRs) demanded a settlement to the tune of USD 125 million by exercising class action lawsuit.


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