May 21, 2019

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A Class Settlement Checklist

Having heard good things about it for years, last month I finally got around to reading Dr. Atul Gawande’s book, The Checklist Manifesto, and have begun to give some thought regarding its application to class action practice. Proposed class action settlements are currently occupying much of my time, and my usual practice when drafting the settlement agreements is to draw upon lengthy agreements I have negotiated before.  However, after reading Dr. Gawande’s opus, it occurred to me that a short, simple checklist would likely be a helpful tool in considering the most commonly recurring terms of class action settlements. With the book as inspiration, I offer the following as a first, high-level attempt at a simple class settlement checklist, one which can be expanded, refined, and otherwise improved upon. Each item on the checklist is followed by a little clarification of what it entails. Taken together, the items represent the basic provisions of many class action settlements, but each case is different, and settlements of increasing complexity will require increasing amounts of craftsmanship. I hope the reader will find it useful while recognizing its limited, generic scope.

  1. Identify the parties to the agreement. This is basic, but where more than one corporate entity has a stake in the settlement, it may require more than fleeting consideration.

  2. Define the settlement class. The class definition is one of the most important terms of the settlement, as it will determine who will be bound by the release. Although in some cases it may be easy to define the class, in others it may be difficult, and in all cases the class definition should be drafted with great care.

  3. Identify the relief to be afforded the class. In many cases, there will be a settlement fund, but in some cases the relief may be primarily or even exclusively equitable.

  4. Decide how funds will be allocated to class members. In some cases, the defendant will have data to which a formula may be applied to allocate settlement funds. In other cases, a fixed amount might be allocated to each person in the class.

  5. Decide how settlement funds will be distributed. For example, if it is possible to identify all class members by name and address, funds might be distributed automatically to each class member. If it is not possible to do so, or for other reasons, a claims-made process may be preferable.

  6. Decide on service awards to named plaintiffs. A reasonable service award to compensate the plaintiffs for their time and effort is typically awarded.

  7. Decide how any residual funds will be disbursed. If a common fund is created and there is a possibility of money being left over after all other distributions and payments are made, the parties need to decide what will become of those residual funds. Many courts disfavor reverters (i.e., leftover amounts reverting to defendants), and any proposed cy pres recipients must be thoughtfully selected.

  8. Draft the release. The release is the principal incentive for the defendant to settle, and its language is critical to accomplishing the defendant’s goals. It should be custom-tailored to the case.

  9. Include an appropriate provision for attorneys’ fees and costs. Typically, the fee provision specifies that the plaintiff will not request fees above a certain amount, and that the defendant will not object to a fee request up to that agreed amount. It also may make clear that the settlement will go forward even if the court awards fees below the amount counsel requests.

  10. Identify the notice and administration firm(s). The court will want to know that the settlement will be administered by experienced and credible firms.

  11. Specify who will bear the costs of notice and administration. Sometimes administration costs come out of the common fund and sometimes they don’t. Clarity is crucial.

  12. Prepare the class notices. There may be different versions of the notice, such as mailed notice, emailed notice, and website (or long-form) notice. The court will need to review and approve the content and manner of notice, and it generally is wise to attach the proposed notices to the settlement agreement.

  13. Propose deadlines for objections, opt-outs, and termination. Also, the parties may agree that either side can terminate the agreement if opt-out rates exceed a certain percentage of the class.

  14. Define the “Effective Date.” This date may be tied to the expiration of all or most appellate rights, and will be the basis for calculating other key dates, such as the dates for funding the settlement, paying class members, and paying plaintiffs’ attorneys’ fees.

  15. Define the effect of non-approval. The parties usually will hedge their bets by specifying that, if the court doesn’t approve the settlement, the agreement will be null and void, they will be returned to the status quo ante, and neither side will be deemed to have admitted anything regarding the appropriateness of class certification or the existence or extent of liability.

  16. Consent to entry of judgment and covenant not to sue. Plaintiffs will want the consent to judgment, and defendants may require a covenant not to sue (in addition to the release).

  17. Include the standard boilerplate. Such provisions may include a representation that the persons signing the settlement agreement are authorized to do so, an integration clause, a requirement that any amendments or modifications be in writing, a provision that ambiguities are not to be construed against either side, and a choice-of-law clause, among other items.

  18. Draft motion for preliminary approval. This burden generally falls on plaintiffs, but defendants will want to have input.

  19. Draft preliminary and final approval orders. The final approval order should dismiss the case with prejudice and provide that the court retains jurisdiction if disputes arise.

  20. Prepare the CAFA notice. This requirement of the Class Action Fairness Act applies to all federal court settlements, and requires prompt action, as the deadline is ten days after the preliminary approval motion is filed.

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About this Author

Don Frederico, Litigation Attorney, Pierce Atwood Law Firm, Class Action Defense
Partner

Don Frederico leads Pierce Atwood's class action defense practice, which received a National Tier One ranking in the 2017 and 2018 U.S. News-Best Lawyers "Best Law Firms" reports. A senior trial attorney with more than three decades of courtroom experience, Don has represented defendants in a wide array of class actions in federal and state court, including in such areas as consumer fraud, product liability, labor and employment, environmental and toxic torts, antitrust, and civil RICO. 

Don has represented clients in such industries as...

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