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Class Action Lawsuits

A class action lawsuit occurs when one or more members of a large group, or “class,” take legal action against a company or other entity whose actions have harmed the class members in a similar way. Class action lawsuits can produce huge settlements or awards, based on the number of members in the lawsuit, even though the actual award going to each individual class member may be relatively small.

There have been numerous high profile class action lawsuits over the years. Many of those involve securities fraud (when shareholders sue a company and its officers for wrongdoing that devalues their investments), while others relate to pharmaceutical drugs, credit card abuses, and dangerous or unhealthy products (like the tobacco and breast implant litigation).

LawInfo has selected some “favorite” class action lawsuits over the past few years. Below is our list of the top ten class action lawsuits either won, settled, or pending. (Note: although corporations may be found legally and financially responsible for damages in these types of cases, settlement agreements almost always stipulate that the defendant does not admit to any wrongdoing.)

1. Tobacco Master Settlement Agreement — (1998) $206 billion over 25 years

Each individual state, represented by that state’s Attorney General, filed suit against each of the top six tobacco companies in state court. To settle the individual suits, tobacco companies Brown & Williamson Tobacco Corporation, Lorillard Tobacco Company, Philip Morris Incorporated, R.J. Reynolds Tobacco Company, Commonwealth Tobacco, and Liggett & Myers entered into a joint settlement.

The individual lawsuits were filed to recover smoking-related healthcare costs covered by each state, and to enforce laws designed to reduce smoking by people under 18 years of age. Under the settlement agreement, the tobacco companies agreed to:

  • Refrain from directly or indirectly advertising to persons under the age of 18
  • Refrain from using cartoons in any tobacco related advertisements, and
  • Refrain from sponsoring concerts, athletic teams and events, and events where participants or spectators are under the age of 18.

Over the years, the tobacco companies had faced individual class action lawsuits. For instance, ‘Big Tobacco’ was slammed with a $10.2B verdict in the Illinois class action case of Price v. Philip Morris Inc. The Master Settlement Agreement released the tobacco companies from further litigation in state courts.

Update: While Tobacco companies have paid over $100 billion to state governments and smoking rates have decreased in many places, a lot of the settlement money has been used by states for things unrelated to public health and tobacco prevention, such as tax relief and agricultural programs.

2. Wal-Mart Stores v. Dukes — (Filed 2000) N.D.C.A. seeking $11 billion.

Betty Dukes, a female employee of Wal-Mart, sued for gender discrimination under Title VII of the Civil Rights Act of 1964 because after several years of excellent work evaluations, she was denied a promotion. The case was converted to class action status to represent every female employee from 1998 onwards.

Update: This case went all the way to the Supreme Court who decided in 2011 that the case could not proceed as a class action lawsuit because the plaintiffs did not have enough in common to be considered a “class” — their circumstances were too varied.

3. Enron, Inc. — (2008, Texas) $7.2 billion

Investors in Enron corporate stock filed lawsuits under both federal and state securities laws against Enron Corporation; individual Enron officers and directors; Enron’s accountant Arthur Anderson; individual Arthur Anderson partners and employees; and Enron’s former law firm Vinson & Elkins. The lawsuit’s primary contention was that Enron engaged in fraud by concealing from investors losses by Enron-controlled special purpose entities.

Because Enron’s primary corporate losses were attributed to these entities, those losses were not disclosed in annual reports or SEC filings. Enron agreed to a $7.2 billion settlement to compensate shareholders whose stock became worthless during the company collapse. This is the largest payout to date in a shareholders securities class action.

Update: In 2009, a judge dismissed an additional class action lawsuit against banks accused of helping Enron commit fraud.

4. WorldCom, Inc. — (2004-2005, New York) $6.2 billion

This class action lawsuit represented investors who held World Com stock from April 29, 1999 through June 25, 2002. Lawsuits claiming securities fraud were initiated against World Com, the company’s underwriters, and individual employees Bernard Ebbers (CEO), Scott Sullivan (CFO), David Myers (Controller), and Buford Yates (Accounting Director). The main charges of fraud stemmed from improperly classifying expenses as “capital costs” and inflating revenue statements with false entries. The Securities and Exchange Commission (SEC) later stated that the earnings and assets had been falsely stated by over $11 billion. Multiple settlement agreements added up to over $6 billion.

Update: As part of the settlement, WorldCom’s accounting firm, Arthur Anderson LLP agreed to pay $65 million to the plaintiffs but also agreed to the possibility of contingent payments. In 2012, Arthur Anderson LLP agreed to an additional $38 million cash payment in exchange for not having to pay any more contingent payments.

5. Exxon Mobil Corp. — (1994 – 2001, Alaska) $5 billion punitive damages award (reduced in 2001 to $500+ million)

This class action lawsuit related to the Exxon Valdez oil spill affected thousands of people and over 1,300 miles of coastline. A federal judge ordered ExxonMobil to pay $6.75 billion in punitive damages and interest to thousands of commercial fishermen, cannery workers, land owners, Alaska Natives, and others who were harmed by the spill.

Updates: After some back and forth between various courts over the years, the U.S. Supreme Court reduced the punitive damages from $2.5 billion to $507.5 million in 2008. With interest, the total award to the plaintiff class was $1.52 billion.

There have also been several attempts at class action lawsuits against Exxon for the 2013 rupture of its Pegasus pipeline in Arkansas.

A new class action lawsuit is pending against Exxon for allegedly false and misleading statements it made in connection to the value of its oil and gas reserves. The class covers anyone who purchased Exxon stock between February 19 and October 27, 2016.

6. Breast Implant Litigation — (1994) $3.4 billion

After years of litigation claiming women suffered autoimmune disease from their silicone breast implants, the major breast implant manufacturers (Corning, Baxter, Bristol-Meyers Squibb/MEC, 3M) settled the class action litigation for $3.4 billion. At the time, it was the largest class action lawsuit in history.

Update: Subsequent scientific studies found no sufficient evidence linking silicone implants to cancer, immune system dysfunction, or connective tissue diseases. The FDA lifted its ban on silicone gel-filled breast implants in 2006. Therefore, an increasing number of manufacturers began to win breast implant lawsuits regarding these diseases. However, other types of breast implant lawsuits continue.

7. Tyco International Ltd. — (2005-2007, New Jersey) $3.2 billion

A series of class action lawsuits were filed against Tyco International Ltd., former officers and directors of Tyco, and PricewaterhouseCoopers. The lawsuits alleged that these individuals and entities made false and misleading public statements, and that they omitted material information about Tyco’s finances in violation of the Securities Exchange Act of 1934.

Update: The distributions of money from this lawsuit were made in 2009, 2010, and 2011. No further distributions will be made.

8. Cendant Corp. — (2000, New Jersey) $3.1 billion

A lawsuit representing investors who held stock in Cendant from May 31, 1995 through August 28, 1998 was filed against the company for securities fraud. In 1998, Cendant disclosed that for the past ten years the company had been fraudulently overstating its income by up to $500 million. Executives created false profit statements which caused an increase in the value of the company’s stock. When the false profits were discovered, the value of the company collapsed. In addition to being sentenced to jail, former Vice Chairman Kirk Shelton was ordered to reimburse Cendant $3.27 billion, with a multimillion-dollar upfront payment and monthly payments of $2,000.00 once he gets out of prison.

Update: Cendant Corp. has since split up into various companies, and has changed its name to Avis Budget Group.

9. AOL Time Warner — (2005, New York) $2.5 billion

Investors in AOL Time Warner stock sued the company and its auditor for fraud under federal securities law. The company improperly accounted for dozens of advertising transactions between 1998 and 2002. The improper transactions created the appearance that they were generating revenue when in reality they were just shifting money back and forth. The false earnings statements inflated the company’s value by $1.7 billion.

Update: Many lawsuits were subsequently filed against the media giant by shareholders who opted out of the 2005 settlement.

10. Nortel Networks — (2006, New York) $2.4 billion

Two separate class actions covered investors who held Nortel stock from October 24, 2000 through February 15, 2001, and from April 24, 2003 through April 27, 2004. The lawsuits were filed under federal securities laws for fraud. Nortel was a leading supplier of fiber optic equipment to emerging internet companies. After the internet bust caused the company’s sales to vanish, the company started creating false accounting entries showing steady equipment sales. When the fraud was uncovered, Nortel’s stock eventually fell to $0.47 from a high of $124.00.

Update: Nortel Networks has since ceased operations and has sold billions of dollars of assets in bankruptcy.

Other Notable Cases: LawInfo’s “Runners Up” in billion dollar settlements/verdicts

Royal Ahold — (2005) $1+ billion

A class action lawsuit alleging violation of securities fraud was filed against Royal Ahold, individual officers and directors of Ahold, Ahold investment bankers Goldman Sachs, Merrill Lynch, ING, and several other outside advisors.

The class represented investors who held Royal Ahold stock from July 30, 1999 through February 23, 2003. The alleged fraud consisted of accounting manipulations by a U.S. subsidiary, U.S. Food Service. Executives used inflated promotional rebates from suppliers as income. This caused the company in 2003 to restate earnings by more than $800 million covering 2000 to 2002.

Update: The SEC also pursued charges against former Ahold executives. The company replaced its leadership and merged with Delhaize Group in 2016.

Zyprexa Class Actions — (through 2007) $1+ billion

Numerous individual and class action lawsuits were filed against Eli Lilly & Co., the makers of Zyprexa, regarding severe side effects suffered by patients including diabetes, pancreatitis, increased risk of suicide, and other diseases. Eli Lilly was also charged with FDA violations, overzealous marketing of the drug, and its failure to warn the public despite knowing about the drug’s dangerous side effects.

Update: Eli Lilly has paid billions of dollars in settlement costs and lawsuits continue to be filed against the manufacturer for Zyprexa’s side effects.

Initial Public Offerings Litigation – (1998, New York) $1+ billion

A master settlement agreement was made covering 309 separate class actions involving the sale of initial public offerings (IPOs) of 309 separate companies. Plaintiffs claimed that 22 investment banks who underwrote the sale of the IPOs illegally sold the IPO shares by forcing interested purchasers to buy additional shares at double or greater the cost of the share. These tactics forced investors to buy more than they wished, increased the demand for the shares which increased their cost, and eliminated all risk for the investment banks. In a normal IPO, the underwriter has usually guaranteed to its client, the company issuing the shares, that they will purchase all unsold shares after the IPO has expired. The banks’ tactics guaranteed that there would be no unsold shares and increased the banks’ profits at the expense of investors.

Update: After years of litigation, the parties agreed to a $586 million settlement.

In re Visa Check/ MasterCard — (2003) $1+ billion

This case was an antitrust class action settlement regarding Visa and MasterCard’s “honor all cards” rules. Merchants sued the companies alleging that the policies unfairly required them to accept signature debit cards the same as credit cards at the same transaction fee. As a result, merchants paid billions of dollars in excess fees for debit-card transactions. Merchants also alleged Visa and MasterCard attempted to monopolize the debit card business. The settlement resulted in debit cards being clearly marked so that they would not be confused with credit cards. This was the largest antitrust settlement at the time.

Update: In a separate action in 2012, Visa, MasterCard, and major banks agreed to pay $7.25 billion in what attorneys called the largest antitrust settlement to date. A court of appeals overturned the settlement, but negotiations are ongoing.

Toyota Recall / Defect-Related Class Actions — (2010) $1+ billion

Toyota has faced multiple class action lawsuits filed throughout the country for injuries and losses. Some claims involved safety-related product defects in gas pedal acceleration and floor mats. Also, Toyota owners are frustrated by the diminished value of their vehicles as a result of the injury reports and massive recall. Legal experts estimate Toyota could face multiple billions of dollars of liability and other costs.

Update: In 2014, Toyota finalized a class action lawsuit settlement for more than $1 billion, in addition to the safety upgrades available to certain Toyota owners. Additional lawsuits for these and other issues are ongoing.

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