Class Action Lawsuits For Fun and Profit
How you can make more money than you think off of consumer class action lawsuits.
Over the past five years or so, large corporations have pushed the envelope in a major way on selling customer data, using aggressive algorithms to price goods and services, and generally just cutting corners in the pursuit of extra profitability. This has greatly annoyed consumers, regulators, and ultimately the courts. As such, we’re now in a golden age for consumer class action lawsuits. The public perception of these tends to be that you fill out a bunch of paperwork and get a check for $3.19 a couple of years later. The reality is far better than the perception, however! While I’m a bit cynical by nature, I’ve been pleasantly surprised by just how effective recent consumer class actions have been in hitting back at misbehaving companies. I’m now making a few thousand dollars per year with minimal effort by selectively joining strong consumer class action cases, and in this article, I’ll show how you can too.
How Do You Get in On Class Action Lawsuits?
Most of the consumer class action lawsuits that I’ve joined are the result of responding to ads on social media. The most efficient way for law firms to reach you is to advertise on social media platforms like Facebook and Instagram, because the defendants are forced to give email information on affected customers in discovery. Then you’ll see ads in your feed. There’s a nice kicker here– because these law firms have to pay to advertise, you have the benefit of “positive selection”. The more profitable a class action is likely to be for you, the more likely you are to get an ad about it on social media. This is due to the contingency structure of class actions, where the firm gets 30-40% and you get the rest. As a rule of thumb, if it’s worth it for a big law firm to pay for an ad to reach you when they’re only getting a third of your claim, the claim is generally worth doing for you as well.
I also have had great luck responding to law firms that have emailed me about class actions, under the framework that if they’re taking the time to reach out to me that the case is decent. Sometimes all you need to do is tell them where to send the money. The time investment in these is generally minimal and tops out at a few minutes per case, and there’s something to be said about waking up to random payouts every few weeks. Joining class actions is certainly not a get-rich-quick scheme, but it is an effective long-term strategy to make extra money.
You can also seek out active class action cases, for example, on www.classaction.org. You won’t have the benefit of positive selection here, but it can be a good way to get the ball rolling on some cases and get in on cases that you’ve ignored ads for in the past. It takes a good nose for common sense to identify a case that is likely to be profitable. Certain statutes allow for you to collect triple damages, and against the right defendant, where you’ve spent money for your business, the claims can get much bigger. In general, I believe that antitrust cases are the most profitable to join (because of triple damage statutes), but certain data privacy cases have been very effective lately in the courts.
Another very interesting category is securities class actions. Led by Interactive Brokers and Vanguard, certain brokerages and investment houses have set up divisions staffed with people whose job is to enroll their clients in class actions on any affected stocks. For a cut of 20%, they’ll automatically enroll you in class actions and collect the money for you. Since there’s plenty of misbehavior on Wall Street, I think these new programs are a fantastic way to claw back the toll taken by insider trading, market manipulation, and incorrect corporate disclosures. Not all brokerages have these, and this reinforces my view that Vanguard is the best in the business for long-term investors.
How Much Money Can You Make Off Of Joining Class Actions?
My smallest consumer class action settlement was literally for pennies, and my largest is pending for approximately $21,000. I get these not because I’m particularly unlucky or that the world screws me over more than my readers, but because I am willing to respond to ads and cold calls. Since you’re taking the time to read this, you probably are too, and my guess is that you’ll find it worth your time. Again, finding the right cases takes a good nose for BS. In general, the more money you’ve spent on a product, the more potential damages you can recover. The typical case will make you $10 to $100, but some consumer class actions are for orders of magnitude more.
Two notable cases right now that are on the bigger side are the RealPage antitrust case (for renters) and the Google Ads antitrust case (for businesses that advertised on Google). Both cases involve antitrust law, a lot of money changing hands, and parallel actions by government regulators. Cases that I think won’t make you much money but are still potentially worth joining are privacy cases against Google and Meta for free users of Google and Facebook. Because the products are free, the damages tend to be much more limited. This means I expect those cases to settle in the typical $10-100 per consumer range. Consumer privacy cases against companies where you’re a paying customer tend to settle higher, so you’ll want to keep your eye out for those. In all, I have dozens of cases going–most of them are related to consumer privacy violations.
Bottom Line
I’ve made quite a bit of money simply by picking up the phone in class action cases. Chances are that you can too, whether you’re a stock trader, a business owner, or simply a savvy consumer. While not every class action case is worth your time to get in on, many are. I think many of you reading this will find it well worth exploring your options.