(We originally posted this in 2020. You can read more of our original ideas in our archive.)
Problem: Class-action lawsuits often don’t pay much. As described by Kiplinger,
Settlements in recent years have averaged $56.5 million, according to NERA Economic Consulting. But individual class members rarely see a fat payday. For example, the proposed Target settlement is $10 million (separate lawyers’ fees total $6.75 million). If all 40 million people who had a debit or credit card compromised file a claim, each one could receive just 25 cents, assuming none of them can document their financial losses. However, Hyundai owners will receive an average of $353, and Kia owners will receive an average of $667.
Solution: Since it’s not often that class action lawsuits have big payouts (on average, class action lawsuits in 2019 paid only $10-$50 as per the graph above), the business would specialize in helping individuals donate the money from their lawsuit to a charitable cause. For instance, in 2019 there were 74 settlements totaling $2 billion and “the median settlement in 2019 of $11.5 million was unchanged from 2018 (adjusted for inflation) and was 34 percent higher than the prior nine-year median,” as reported by Harvard Law School.
The business would specialize in identifying the winners of class action law suits and persuading them to donate the proceeds they received (which individually are negligible, but in aggregate can actually amount to millions in charitable donations) to charity. I think the value of such a business would not actually be in the exchanging of dollars, but in the ability of an organization to quickly find and identify potential members of a class action lawsuit. Currently, all of this work falls on the attorney. As described by ClassAction.org,
After the lawsuit has been resolved, attorneys working on the case may issue a notice to the class members informing them about the settlement or judgment and their right to opt out of the case. The notice will describe the underlying facts alleged in the lawsuit and describe the groups of people who may be able to claim part of the settlement. In some lawsuits, this notice is sent after the judge has certified the case as a class action and again after the lawsuit has been resolved.
Should some members fail to collect their compensation by the settlement deadline, one of three things may happen to the remaining money. It may be given back to the defendant, distributed among class members who claimed their awards or donated to a charity or non-profit organization whose mission falls in line with the purpose of the case.
The notion of donating class action money to charities in not new; however, what would be new is creating a proactive rather than a reactive method for contacting settlement group members.
Monetization: Access for law firms to the class action data set.
Contributed by: Michael Bervell (Billion Dollar Startup Ideas)