What is the difference between a class action and a derivative action?

Class action and derivative actions are two types of lawsuits that are pursued by individuals and firms in order to obtain financial compensation. The main difference between the two is that a class action is a lawsuit that involves multiple plaintiffs, or a group of people, while a derivative action is a lawsuit that is brought by an individual on behalf of the company or organization that they are a part of. In class action lawsuits, each member of the class, or group of plaintiffs, may sue the defendant for the same issue and each recover a financial settlement. In order for a class action lawsuit to be successful, the class must be certified for the case to proceed. With a derivative action, the plaintiff is considered to be a representative of the organization and they are suing on behalf of that company. The settlement may be monetary, but it could also be a court order for a change in policy or practice. Class action lawsuits are more common than derivative actions, and tend to seek out larger settlements. This is because the settlement amount will be divided among the group of plaintiffs, as opposed to a derivative action where the settlement amount will go directly to the organization the plaintiff is representing. Both class action lawsuits and derivative actions can be beneficial for plaintiffs, as they are able to obtain a financial settlement despite the fact that a lawsuit is a long and tedious process.

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What is the difference between a class action and a derivative action?

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