May 7, 2015

Class Action Settlements

Those bringing suit in a class action are seeking relief from a defendant for some wrong caused or done by that defendant’s product, service or behavior. Therefore, a beneficial settlement for the class will be one that provides adequate relief in the timeliest fashion.

To that end, there are a number of class action settlement red flags that members of the class should be mindful of.

  • Not Enough Relief: Whatever the defendant provides for relief as part of the settlement should be enough to resolve the issue at hand.
  • Delivery of Relief: What makes more sense will depend upon the details of the specific class action. However, relief can be provided as “general relief” or as part of a “claims process”. The method for interested parties to attain relief through the settlement should be in line with the specifics of the case.
  • Too Many Stipulations: In settling, the defendant will attempt to limit exposure to other similar lawsuits following the resolution of the class action. This is acceptable to a certain degree, but defendants should not be allowed to use a settlement to indemnify themselves.

To that end, these are red flags that may signal a settlement is not ideal:

  • Beneficial Judge: Different judges bring different temperaments and biases to the table. If the judge handling the case has a history of siding with defendants in class action cases, then it may be advisable to resolve the class action in court rather than through a settlement.
  • Too Little Closure: A settlement that is beneficial to the defendant will be one that brings closure to the issue at hand. Therefore, if a settlement does not include language that prevents future defendants from suing over the same or similar issues, then settling would not be advisable.
  • Gives Too Little: Although costly, a settlement must provide relief to the members of the class. If the settlement that it is proposed and reached does not provide adequate relief in the eyes of the judge presiding over the case, then it will be rejected. This complicates the process and adds unnecessary legal fees.
  • Gives Too Much: By the same token, the settlement should not be too financially onerous. Depending upon the defendant and the structure of the defendant’s business, there should be ways of providing relief to the class in a manner that meets the class’ needs that are not entirely financial. In a consumer product class action, for example, replacement products could be provided, or repairs could be made.

Every Case Is Different

The above red flags are most at issue for members of the class and defendants, however, there are others. What those are, though, will depend upon the specifics of the case and the issues at hand.