Counsel in civil cases must abide by the requirement of Federal Rule of Civil Procedure 1 (or a state law equivalent) to litigate cases in a “just, speedy, and inexpensive” manner. However, how is counsel supposed to litigate class action cases in this manner when there may be tens of thousands of class members and millions of dollars at stake?
Class action cases often require more time and resources than most traditional civil cases, and this article presents some ideas for increasing the likelihood of resolving your class action case in the most “just, speedy, and inexpensive” manner possible.
Don’t hide the ball. Be candid with opposing counsel about your and your client’s view of the case from the outset of the case.
By being candid with opposing counsel and listening to your counterpart, you are more likely to learn more about the strengths and weaknesses of your case. You are also more likely to gain a better understanding of your counterpart’s perspective. Understanding each other’s position, which does not mean agreeing with each other, often facilitates more productive conversations among counsel and can even help build rapport. This can be incredibly useful when it comes time to discuss resolution of the case.
While some counsel may disagree, I find that being an open book about a case often opens the door for more honest and direct communications between counsel. This will often help you learn whether settlement is even an option, and, if settlement is not yet an option, it will at least help you determine the most effective time to discuss resolution of the case.
By being open and candid with opposing counsel, you will often learn the appropriate time to have class-wide settlement discussions. Perhaps the appropriate time is after the court rules on the propriety of class certification. Perhaps the appropriate time is after the court rules on a particular motion. Or, perhaps, the appropriate time is at a court-ordered mediation.
Determining the right time to have class-wide settlement discussions is critical. Discussing resolution of the case too early may not lead to the best results for either side. Alternatively, waiting too long into the case to discuss resolution can make it next to impossible to effectively resolve the case.
Once you determine the right time to begin class-wide settlement discussions, the next step is to present your offer or demand in the form of a detailed settlement term sheet.
Class action cases are different than traditional civil cases. There are many more moving parts to a class action settlement than exist in most traditional settlements. The primary consideration of any class action settlement under Federal Rule of Civil Procedure 23(e)(2) is whether the settlement treats class members fairly, reasonably, and adequately. To achieve this goal, it is critical that counsel and their clients properly consider the many moving parts of class action settlements.
Remember, unlike counsel, the parties and insurers involved in class action litigation are often new to the process. Most parties and insurers view litigation as being solely about agreeing on a number. While agreeing on a number is often the most critical aspect of a class action settlement, providing a detailed settlement term sheet to your counterpart will help increase the parties’ understanding of the issues at hand and avoid surprises.
More importantly, providing a detailed settlement term sheet can help build momentum during settlement discussions. Oftentimes momentum is built by finding areas of agreement between the parties. By providing your counterpart a detailed settlement term sheet, you create a greater opportunity to find some areas of agreement.
A detailed settlement term sheet should include, at a minimum, the following items:
The settlement term sheet should define the scope of the class. Sometimes the class definition is the same as alleged in the complaint. Sometimes it is different.
Defining the class scope, however, is critical so that both sides understand at the beginning of negotiations which claims are at issue and the precise scope of the class. This also helps counsel and the parties better understand the amount of damages at issue. Defining the class at the beginning of settlement discussions is also important because it avoids surprises down the road and ensures the parties are all on the same page. Imagine thinking you have a settlement only to learn that you and your counterpart were considering drastically different settlement classes.
The settlement term sheet should detail whether the settlement will be a claims-made settlement or an opt-out class. In other words, will the class members need to make a claim to receive the benefit of the settlement, or will the class members automatically receive those benefits unless they exclude themselves from the settlement?
If the settlement is a claims-made settlement, the settlement term sheet should also detail what information needs to be submitted for a class member’s claim to be considered valid.
The term sheet should detail how much is to be paid by the parties and when. For example, the term sheet should detail whether the defendant must pay the entire amount of relief available to the class by a certain date. Does the defendant need to fund a settlement fund by a certain date, or does the defendant need to simply make payment through the settlement administrator once it is determined how much money will be paid to class members after the claims process is complete? Discussing the timing of payments is especially critical when dealing with a business that may have cash-flow issues.
Relatedly, the term sheet should detail the form of compensation. For example, payments in class action cases have been made to class members as cash, gift cards, credit for certain products or services, etc. The form of payment can also have a significant impact on the cost of settlement administration.
The term sheet should also detail whether any unclaimed funds revert to the defendants. If the funds do not revert to the defendants, the agreement should detail how those funds will be disbursed. For example, will those funds will be disbursed among other class members or provided to a cy pres recipient?
The term sheet should detail any nonmonetary relief. For example, a settlement term sheet may detail that the defendants will agree to change certain practices as part of the settlement. Nonmonetary relief can be especially useful to include in settlement term sheets because such relief can often help bridge the gap between the parties.
While release language is always negotiated in detail when formal settlement documents are exchanged, it is a good idea to present at least a framework of the scope of the release in a term sheet. Doing so provides the parties a general framework and understanding of what claims they expect to be released. Discussing release terms at the beginning of negotiations helps avoid future surprises.
The settlement term sheet should include specific terms about how the settlement will be administered. To most effectively present the details of settlement administration, it is often best to first meet with multiple settlement administration companies. Settlement administration companies will provide you with helpful information about the most effective and efficient ways to administer the settlement of your case.
In addition, it is helpful to get bids from the settlement administrators before sending a term sheet. This will give you a better idea of the costs involved, which ultimately allows you to have more productive settlement discussions.
The items concerning settlement administration in your settlement term sheet should, at a minimum, address the following questions:
Following these suggestions does not guarantee your case will always resolve in a “just, speedy, and inexpensive” manner. However, following these suggestions can increase your likelihood of success and, at a minimum, will allow the parties to have more productive settlement discussions. It may seem daunting to detail so much in an initial settlement demand or offer. Discussing these details at the beginning of settlement negotiations, however, can save you and your client a tremendous headache down the road.
