The ABCs of Class Action Settlement for Attorneys and Consultants

1. Explore Opportunities to Settle Before Getting into Burdensome Litigation

All parties to litigation can potentially save considerable time, money, and effort by considering settlement early on, even before any discovery has been exchanged. From the defense perspective, early settlement is almost always a good option. As Heather observed, defendants are usually “not in the business of litigation.” Plaintiffs, however, may want to be more cautious. Adam noted that he is always willing to discuss settlement, but plaintiffs can be harmed if settlement discussions become a reason to “slow roll” discovery into the merits of the case.

One kind of case is almost always suited to early settlement: high-visibility cases with “social momentum,” like recent actions against Volkswagen and the National Football League. “Clients with a problem on that scale may want to resolve the matter quickly just to get off the front pages,” Heather said.

2. Be Wary of Settlement-Focused Discovery under Rule 408

Parties can engage in limited discovery under Federal Rule of Evidence 408 to learn about the other side’s position without committing to full-blown merits discovery that can be broadly used in later phases of litigation. While Rule 408 discovery can be helpful in reaching a settlement, it may ultimately serve to drag out the resolution of a case if the court ultimately requires adversarial discovery before approving the settlement. Adam noted that some cases are impossible to resolve with only Rule 408 discovery. “If you have to prove something contested, like a failure rate for a consumer product, you need adversarial discovery because a defendant will never concede that.”

3. Be Aware of Potential Benefits to Rigorous Settlement Approval Guidelines, Despite the Additional Workload

In 2018, the Northern District of California implemented rigorous new guidelines for settlement approval, requiring the parties to submit detailed information about the settlement, the anticipated claims rate, and other facts before the court will consider even preliminary approval. As a result of the guidelines, settlement in the Northern District of California is now more “front-loaded,” and all parties have more work to do early on in order to get the required information in front of the court. Despite the extra workload for the parties, the new guidelines have the potential to foster better settlements. “The guidelines came along because of a cultural suspicion of class action settlements,” Heather observed. “They’re useful to provide more transparency, to give judges more involvement and information.” As Adam noted, “there are bad class actions, since anyone can bring one. This will help to weed some out.”

Unfortunately, the additional workload brought on by the guidelines may have the effect of preventing smaller class actions from even being filed, regardless of their merit. “The amount of work required by the guidelines makes it difficult to resolve modest class actions, because you’re under water at the end of the day,” Adam observed.

4. Give Early Consideration to the Role of Settlement Consultants

Settlement administration consultants can potentially assist at every stage of the litigation, and they may be even more useful when the parties are operating under more rigorous guidelines like the ones implemented in the Northern District of California. Cases can run on for years, Frank observed, and “you could have lots of people coming and going.” Consultants can act as a repository for crucial records about class members, notifications, communications, and distributions when attorneys—and even sometimes the judge—change over the years.

Everyone agreed that “‘know your class’ is like a mantra,” but what is most important to know? “That depends on the data associated with the case,” Frank observed. Some classes may have special requirements as far as notice or distribution method. For example, a class composed of nursing home residents might be more difficult to reach through social media.

Conclusion

At the end of the day, everyone agreed that reaching and getting approval for a settlement that everyone can be happy with comes down to information—not just about the merits of the case but also about the individual class members and details like claims rates now required under the Northern District of California guidelines. The parties need to know where to get this information, get it early, and plan ahead so that they can manage it and present it to the court.

James E. Richardson is an associate at Girard Sharp LLP in San Francisco, California.

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