What Is A Class Action Lawsuit?
Over 100 tenants are ganging up on an eviction firm and management company in Colorado! Many of these tenants were convinced to join multiple class action lawsuits as one particular legal firm rakes in the legal fees!
According to Cornell Law School, “A class action is a procedural device that permits one or more plaintiffs to file and prosecute a lawsuit on behalf of a larger group, or class.” It is used in times when a court would be unable to manage the number of lawsuits if each individual plaintiff was to sue individually. The concept obviously makes a ton of sense, the problem is if you are on the wrong end of one. A group is much stronger and frankly more aggressive. They feed into each other and get upset when, often times, there is either nothing to be upset about or something that can easily be resolved. It is the class action attorneys that derailed condo developments and now they are on to their next victims. I should mention that a class action lawsuit will likely get derailed with a small group. Most attorneys will tell you that you need at least 15 to make it variable, so this is less concerning to smaller investors but is still a topic worth understanding.
Many of the attorneys that take on these cases are paid on a contingent fee. This means they are only able to collect their fees if they can collect damages in a lawsuit. Many times, these fees are extremely high as a percentage of the overall settlement or reward, but individuals are much more likely to aggressively pursue these lawsuits if they have no money at risk. I use contingent fee attorneys when we are trying to collect from tenants, so I do understand the need for this structure.
Adding A Class Action Waiver To Lease
Upon advice from our attorney, we are adding a class action waiver into our leases in hopes that this will prevent the frivolous lawsuits that are becoming more common. The attorney was very clear that he does not know if a waiver of this sort will hold up in court. It may not work but perhaps it will and at the very least, it is a deterrent. Because contingent fee attorneys only make money when they are able to collect, it is going to cost them money if they lose. They are less likely to pursue a lawsuit if there are layers of defenses to get through to win. We are just trying to add a layer of defense.
I want to be very clear that I am not giving legal advice and that I strongly encourage you to speak to your attorney about this concept and this waiver. I do however want to share a sample waiver you can use when discussing this with your own attorney for your own situation.
This is relevant no matter your property asset type or how many you own but it is especially true if you own any multi-family. Just know that the tenants talk to each other and often times they talk about you.
As I was digging into a few of the class action lawsuits, one tends to be more common than others and that is living conditions. I try hard to take care of my properties and am proud to offer safe and clean-living conditions for my tenants. I do that because it is the right thing to do but it will also protect you from a lawsuit. When the tenant needs a repair, I would encourage you to make the repair.
Sample Class Action Lawsuit Waiver
Here is a sample clause that you can run by your attorney and consider adding to your lease.
**Please be advised that this does NOT constitute legal advice. We are not your attorney. Please contact your attorney for any advice you may need.**
WAIVER: You agree that you hereby waive your ability to participate either as a class representative or member of any class action claim(s) against us or our agents. While you are not waiving any right(s) to pursue claims against us related to your tenancy, you hereby agree to file any claim(s) against us in your individual capacity, and you may not be a class action plaintiff, class representative, or member in any purported class action lawsuit (“Class Action”). Accordingly, you expressly waive any right and/or ability to bring, represent, join, or otherwise maintain a Class Action or similar proceeding against us or our agents in any forum. Any claim that all or any part of this Class Action waiver provision is unenforceable, unconscionable, void, or voidable shall be determined solely by a court of competent jurisdiction. You understand that, without this waiver, you could be a party in a class action lawsuit. By signing this lease, you accept this waiver and choose to have any claims decided individually. The provisions of this section shall survive the termination or expiration of this lease.