Class Counsel’s Perspective on Class Action Settlements
When it comes to class action lawsuits, it is a universal truth that the class counsel will always want to settle. In fact, the sooner, the better as, class counsel is paid upon resolution. And, quicker resolutions, allowing the payment of a class benefit and a pathway to fees, are optimal. So, while defense counsel and the companies they represent consider whether settlement is even appropriate given legal and business interests, class counsel is already focusing on the structure of the settlement.
Generally speaking, class counsel aims for the following:
- Class Payment: Creates a robust benefit to the class, including fair compensation for class members based on case difficulty, chances of success and availability of payments now, rather than years later
- Settlement Notice: Provides class members with notice of the settlement that meets due process requirements of Rule 23 and the Center for Federal Judiciary
- Class Claims: Creates a straightforward, fair claims process
- Counsel Payment: Obtains approval for class counsels’ fees
- Settlement Objectors: Avoids or defeats settlement objectors
- Finality: Achieves final, non-appealable approval of the settlement
On the surface, these class counsel goals may seem reasonable; however, the details can wreak havoc on defending businesses. A robust benefit is subjective, and class counsel may not consider the impact that a large settlement can have on a company’s balance sheet, financial planning or ability to raise capital. For example, in a breach of warranty class action case, class counsel may push for full refunds for the entire class. However, a refund of sales revenue for a product which generated thin margins creates a precarious financial situation for the business.
While class counsels’ settlement perspective may be reasonable to them, the impact can translate into a business-ending discussion. Fortunately, there are methods that companies can use to mitigate the financial risk of settlements while achieving class counsels’ objectives of providing a robust benefit to the class.