Assalam U Alaikum,
A brother would like to know if compensation received from class action lawsuits is halal? He is concerned because in his view the compensation is not earned, nor is there a loss that he suffered.
To expand a bit. There could be two types of factual scenarios:
- A known product defect was fixed by the manufacturer post-sale but they still have to pay additional compensation. For example car air bag recall case where auto company fixed the issue of current owners but still have to pay.
- Where the defect was not fixed or is not fixable and the user is getting compensation. For example if the defect was dishonest marketing, or price fixing at the time of sale etc.
Bismillahi Ta’ala
Walaikum Assalam Warahmatullah
Compensations received in a genuine class action lawsuits, which are not exaggerated nor build upon lies or deception, can be permissible as well as impermissible. Here is a brief detail:
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- If the law suit claim is for negligence and bodily harm, then fuqaha have given scope for seeking compensation under the diyah (blood money). However, there would be further detail whether one could seek compensation for opportunity costs or not. [ opportunity costs refers to possible potential gain one would have acquired had this injury not taken place ]
- If there was indeed some material loss in the accident or an event, then the claim through the law suit can demand up to a fair valuation of loss incurred. This can be valuated by the market valuation conducted by specialists.
If the settlement or the lawsuit brings forth more money than this fair evaluation, then the excess money will have to either be returned, or if one wishes to honor courts order of penalization of the defendant (company that was in error) for negligence, then one would need to be given out in charity without reward.
The excess money cannot be kept by the plaintiff (claimant).
In light of above:
- Since auto company fixed the issue, there is no need for excess monies. One may not utilize the additional money and can eitheri return it, or give it out in charity without rewards.
- In the condition where defect was not informed, and the sale went through, the rules of Khiyar, especially khiyar al ayb will be applied. Essentially one either accepts the sale with the defect, or cancel the entire transaction and return the item. If the latter is not possible then the only choice is to accept the sale done with defect. Any compensation earned in this case will have to be donated without rewards.
See:
The option gives the right to the buyer to either accept the commodity along with the defect in lieu of the agreed price, or return the item. It does not give him the right to retain the item and seek the compensation or discount from the seller in lieu of the defect.
http://www.qafila.org/five-5-options-that-can-be-enacted-with-a-transaction-in-islamic-economics/#_edn3
Wallahu A’lam
And Allah Ta’āla Knows Best
Mufti Faisal al-Mahmudi