Settlement Services: Transparency and Accountability are Paramount in Class Action

  • Feb 20, 2019
Class Action Settlement Services

Everyone involved with class action litigation seeks constant improvement in their efforts to protect class members’ interests, from the first days of building a case to the final accounting of settlement distribution and even beyond.

The Class Action Mastery Forum hosted by Western Alliance Bank from Jan. 15-17 at the University of San Diego School of Law offered rare and valuable input from all corners of the class action world, from judges to claims administrators and attorneys specializing in widely varied practice areas, representing plaintiffs and defendants, to corporations and the U.S. government. Even with such a diverse range of perspectives contributing to the discussion, some key themes emerged from the event, each demonstrating how prioritizing class members’ interests is key to truly successful class actions:

Judges’ Perspectives

Judges of class action cases have extra responsibility compared with other types of litigation. They must look after the interests of thousands or even millions of participants whom they never see in their courtroom.

Several experienced California class action judges candidly described what they want attorneys in class action suits to show in order to give them confidence that class members’ interests are adequately protected.

Transparency: By asking for more transparency, one judge from California’s Northern District said his peers aren’t implying any shady dealing by attorneys. But in modern, massive class action suits, judges need to understand more detail about how attorneys have created their cases than in past years. The judges suggested attorneys present more details such as how they intend to fund massive cases, either through self-funding, litigation finance or a form of credit; risks to potential recoveries as well as concrete examples of similar work by the lead counsel.

Participation: Judges also want attorneys to find ways of boosting participation rates in class actions. Low class member participation rates are worrisome because they leave judges to doubt whether it’s the class being served or merely the attorneys.

The critical question one judge asks of every case is: “In the end, did we really serve the class?”

Making Cy Près Live up to its Name

Cy près – the insider’s word for the practice of distributing a class action award to a beneficiary apart from the class – is necessary in many cases. It can be impractical to pay class members directly, such as when a class is so large that an award would be divided to pennies, or when funds go unclaimed by class members. But it too often takes place with inadequate disclosure of how recipients were selected and too little connection between the substance of the case and the grantee of the cy près funds.

Judges at the Class Action Mastery Forum discussed how it’s built in to the definition of the term that such disbursements should be given to groups as similar as possible to the original intended recipient.

The judges noted that flaws can often emerge in the award process, with little – if any – disclosure, allowing the money to be given to attorneys’ alma maters or to charitable organizations they participate in. Even seemingly neutral or virtuous uses which are enshrined in law, such as courthouse improvement funds or legal aid, fail to live up to the intent of the doctrine.

This can be remedied by insisting that settlement awards demonstrate nexus, or a clear connection to the substance of the case. It takes greater disclosure of how potential recipients were selected, bringing any potential conflicts of interest to light. Judges could require an application process for the funds or appoint an independent third party to make award decisions to bolster the transparency and accountability of the process.

Data, Privacy and Technology

Methods for identifying and communicating with class members are multiplying rapidly. Fluency in emerging technology helps ensure that the class action community uses new communication tools to boost transparency and participation. New technologies can also lead to new types of class action cases as people are harmed in novel ways, requiring new ways of calculating appropriate settlements. As a result, the work of bringing and settling such cases must proceed at the pace of technology. The laws have not caught up with technology, leaving lawyers to work under older statutes in a newer tech context.

And while rule makers scramble to assure that new technology and practices are used judiciously, threats against personal data have never been greater. The personal information that companies collect from users and consumers is often more valuable than the product or service the company is offering. Data is traded like a kind of currency by many of those who collect, aggregate and sell it, but often without fairly compensating the people who offered it in the first place – and who stand to be harmed when companies are careless with or misuse data. And cryptocurrencies, with their multiple opportunities for deception, are a burgeoning field of potential class actions.

Even as rapidly advancing technology holds threats for consumers and creates the potential for new class actions, it also offers opportunities for attorneys and claims administrators to locate class members, communicate with them and execute settlement payments, boosting the value of these types of cases to the parties who really matter: the class.

The Western Alliance Bank Settlement Services group was pleased to contribute to the conversation about the importance of transparency and accountability from every participant in class action cases and their settlements. These values emerged again and again in presentations and panels, demonstrating a resounding commitment to protect the interest of class members above all else.

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