21 August

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Class Settlements And The Risks Of Viral Media Attention

Unfortunately, class action settlements tend to be another step down the road of financial uncertainty and unpredictability. In the class action context, when resolving a case using a claims-made settlement, the financial payout varies significantly, which can adversely impact liquidity, enterprise value, cash flow and assets. Additionally, when settlements go viral, companies face extreme losses which could exceed reserves and available cash on hand. So what causes cases to go viral and create unmitigated financial risk for settling companies? The answer is simple and also multifaceted: the internet. Digital communications and the thirst for relevant news content have completely changed how consumers gain awareness of class actions and how they file claims for settlement benefits. As a result of these changes, the ability to reach potential class members as well as those intent on abusing the system to receive free cash has created a fundamentally different risk paradigm for those looking...

12 March

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To Insure or Not to Insure with Class Action Settlement Insurance? That is the Question.

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For most companies, Class Action Settlement Insurance is the answer. Few organizations walk away from a class action lawsuit unscathed. After spending significant sums to defend, the vast majority of cases result in some type of monetary settlement. Additionally, key executives can be diverted from business for months on end. Adding insult to injury, today’s media climate dramatically increases the likelihood that a class action will go viral. Cases against popular brands are frequently picked up by national news sources. Moreover, scores of websites and social media pages are dedicated to finding putative class members and instructing them on how to make a claim. In one widely publicized action, for example, a settlement involving the energy-drink brand Red Bull resulted in nearly 3 million class members seeking a $10 payout. In short, the risks associated with class action suits are greater than ever. But there is a way to mitigate this...

29 August

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Seven Reasons Companies Seek Class Action Certainty Through Risk Transfer

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Companies spend billions of dollars defending class action lawsuits each year. Compared to other forms of litigation, defending a class case is exceptionally challenging because the percentage of these cases considered “bet the company” continues to rise, while the overwhelming majority still results in settlement. Compounding the complexity of these matters is the universal understanding that the company’s and class counsel’s perspectives on settlement are wholly divergent. Knowing this, companies looking for certainty should consider risk transfer as a viable strategy in class action litigation.

30 June

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Viral Settlements are Unpredictable, but More Common Than You Think

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Viral settlements—which are neither uncommon nor predictable—present a clear danger to the financial health of settling companies. For example, the recent Naked Juice settlement was a typical settlement involving labeling claims. Unfortunately, the media picked up on the settlement, running numerous multimedia news stories that generated a groundswell of interest which turned into a tidal wave....

23 June

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Notifying Consumers of the Settlement Isn’t the “Easy Part”

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A common misconception of class action settlements is that notifying consumers of the settlement is the “easy part,” when in fact, it is one of the hardest things to get right. Alerting the correct class members while simultaneously reducing fraud can be a challenge, and if not done correctly, it can cause the court to decline the settlement – forcing the defendant to start over and wasting valuable time and money. Working with a third-party administrator (TPA) who has a qualified media expert with a long, successful track record of approved notice programs helps prevent these problems, and finding the right third-party administrator can be key to success. Before deciding on a TPA, consider these tips: Avoid TPAs that attempt to “white-label” expertise. Ask the right questions to save you a big headache: Be sure to find out if the media person the TPA works with is in-house, or if they...

16 June

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Article: Tax Deductibility & Statutory Damages–A Waiting Trap

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What happens when class action resolutions include statutory damages? Are those payments tax deductible?...

15 June

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Article: Designing and Resolving Mass and Class Actions

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Few mass and class actions get resolved in one business day, and setting the pace and expectations of counsel and their clients are important ingredients to the ultimate resolution....

05 May

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Guest Post: Are Class Action Settlements Tax Deductible?

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Guest Post by Peter Robbins, CPA, Partner at Corbett & Robbins, LLP With the exponentially rising role that litigation plays in today’s business world, one might consider the costs associated with settling lawsuits to be “ordinary and necessary” business expenses, rendering them tax deductible under §162 of the Internal Revenue Code (IRC). However, as experienced tax professionals know, there are always exceptions and restrictions to the rules—factors that can leave the unwary with an unexpected and hefty financial burden to bear. To determine whether payments to the settlement class are tax deductible, settling parties must bear in mind the provisions of IRC §162(c)(2) and §162(f), which prohibit deductions for payments that are: 1. Deemed to be illegal under U.S. or state law 2. For a fine or similar penalty paid to a government for the violation of any law Therefore, the ability to receive tax deductions on class action settlements is entirely dependent on tracing...

21 April

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Guest Post: Transparency is Critical for Digital Notice Programs

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Advertising growth in digital media and multimedia channels has created a more challenging environment for digital class action settlement notice programs, which must now account for complex factors such as consumer distraction, cookie deletion, visibility and non-human traffic....

20 April

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Article: Class Action Settlements: Financial & Tax Reporting

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Current financial accounting, disclosure regulations and tax consequences of claims-made class action settlements can be devastating for a defending company. ...

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