Legal Claims vs. Settlement Claims: What’s the Difference?

Many people think submitting a class action settlement claim form is a way to get "free money" from a corporation. In reality, it means you are making a legal choice. Participating in a class action settlement (a settlement claim) is entirely different from initiating an active legal dispute (a legal claim).

Key Takeaways

• Legal claims are active: You assert your individual rights to seek the full value of your damages.
• Settlement claims are passive: You participate in a class action settlement that has already been negotiated, and you receive a pre-determined payout. Payouts are usually relatively small.
• Settlement claims waive your rights: When you submit a settlement claim, you permanently give up your right to sue the defendant for the same legal issue.
• Differences in risk and potential value: A legal claim requires patience and may not be successful, but offers higher potential value and allows you to seek the full value of your damages. A settlement claim provides a quicker payout of a specific amount of money, regardless of your actual damages..

The Misconception of "Free Money"

When you see an email about a class action settlement, it is not just an offer for free money. It is a contract. The defendant corporation is offering you a specific amount of money in exchange for you giving up your right to sue them individually.

Not all “claims” are the same. Asserting your legal rights against a company requires a completely different strategy than submitting a web form to receive a $15 check from a class action settlement. You need to understand the difference between a legal claim and a settlement claim before you decide how to proceed.

What Is a Legal Claim?

A legal claim involves asserting your personal right to seek full compensation for the harm you experienced from a defendant.

When you assert a legal claim—whether through a lawsuit or arbitration—you take the fight directly to the defendant. You and your legal counsel control the strategy. You can present evidence of your specific damages, and you are entitled to pursue the full financial value of your case. You are not forced to accept a take-it-or-leave it offer negotiated by someone else. However, legal claims can take years to pursue and the outcomes are uncertain.

What Is a Settlement Claim?

A settlement claim is a request for a pre-determined payment from a class action settlement fund that was negotiated by other people, usually without your direct involvement.

These payments are typically standardized, and they are often relatively small because the settlement fund gets divided among massive groups of people. You fill out a form, wait for the administrator to process it, and eventually receive a payment. By participating in a class action settlement (or sometimes, simply by failing to opt out), you give give up the right to seek your actual damages through an individual legal clam against the defendant.

The Core Differences

You generally have to choose one path or the other. You cannot double-dip. Here is how the two types of claims compare:

• Control: In an individual legal claim, you and your counsel control the strategy. In a class action settlement, the lawyers for the class, lawyers for the defendant, and the court control the outcome.
• Value: Individual claims allow you to seek the full amount of your damages. Settlement claims typically provide fixed, smaller payments.
• Rights Waived: By submitting a class action settlement claim (or sometimes, simply by failing to opt out of a settlement), you give up your right to bring your own lawsuit against the defendant for the same issue.
• Effort vs. Recovery: Settlement claims are designed to be easy to submit, but that convenience means you typically receive a smaller payment than what you could seek through an individual legal claim.

Frequently Asked Questions

Can I submit a settlement claim and still sue the company later? No. Submitting a settlement claim means you accept the "release" terms of the agreement. You permanently forfeit your right to bring your own lawsuit for that same issue.

Do I need a lawyer for a settlement claim? Usually, no. For most routine class action settlements, you can submit the claim yourself through the official administrator's website. However, you might consider seeking counsel for a settlement claim if you need assistance -- for example, if the submission process is complex or requires detailed proof.

Is it better to opt out and pursue a legal claim? It depends on the potential value of your case and your personal values. If a class action settlement offers $3,000 per class member but the law allows individuals to seek up to $150,000 in statutory damages, some individuals may choose to participate inthe class action settlement while others may choose to opt out and pursue their individual legal claims in court.

Disclaimer: This content is provided for informational purposes only and does not constitute legal advice. Consult with a qualified attorney for advice specific to your situation. Past results do not guarantee future outcomes.