Class action lawsuits are a legal tool that allow ordinary citizens to obtain justice against larger corporations. Sometimes an individual loss due to a corporate failure is too small in and of itself to justify a lawsuit.
But when large numbers of people are wronged by the same corporate failing, the collective impact can certainly justify legal action. That’s where the class action comes in, and there have been 3 famous class action settlements where the final collective sum exceeded $5 billion.
Two caveats have to be made. The first is that the final amount can be a moving target until the last payment is made.
Furthermore, most conventional readings of famous class action settlements include the over $200 billion in damages paid out by the tobacco industry in the late 1990s. Another popular example is the Gulf of Mexico Oil spill, settled in 2016 for over $20 billion.
In those cases, the settlement money was ultimately paid out to government actors. The 3 examples below are where money went directly to ordinary people.
Volkswagen emissions
The German-based car manufacturer had an idea to help people beat the emissions tests. A so-called “defeat device” was installed that allowed a Volkswagen to detect an emissions test and then adjust itself accordingly.
Essentially, the car would become compliant while going through the test, but then switch back to a more powerful driving mode when operating under normal conditions.
The final settlement was for nearly $15 billion to cover the half-million or so cars that were sold using this deceptive scheme. The funds were used to buy back the cars at market value, plus make cash payments to those that were cheated.
Enron Securities fraud
Enron and Blockbuster entered into a partnership to go into the video market. When Enron listed their earnings, they didn’t show the actual numbers, but instead what their “expected earnings” were going to be. Accounting gimmicks were used to hide debt and losses.
When the scam was revealed, stocks plummeted from as high as $90 per share to virtually nothing. About 1.5 million who bought stock were entitled to a piece of the action in what ended up a $7.2 billion settlement and ultimately sent 2 Enron executives to prison.
WorldCom accounting
WorldCom was aiming to be the largest communications company in the world in the late 1990s, as they worked on a merger with Sprint. The prospect of the merger increased WorldCom’s stock value, but the deal fell through.
To keep WorldCom’s stock price high, its CEO Bernie Ebbers used a range of tactics, from manipulative accounting to outright theft. Investors filed a class action and gained over $6 billion in collective relief.