What Goes Into Settling a Class Action?

In order to protect the interests of all members of the class action, any settlement of a class action requires court approval. The judge must approve the fairness and appropriateness of the proposed settlement. The judge, however, does not engage in the actual settlement negotiations. Once negotiations have been completed, and a settlement agreement has been reached and presented to the court, the judge determines whether the terms of the agreement are fair and in the best interests of the class members.

In making this determination, the judge will consider certain factors including:

  • Whether the case would ultimately succeed if it went on to litigation;
  • The amount of money the members of the class could have recovered if litigation were successful compared to the amount of the settlement;
  • Whether there has been adequate notice of the proposed settlement to all the class members;
  • Whether there are any objections to the proposed settlement;
  • The complexity of the litigation;
  • The costs that would be required to proceed with litigation;
  • The proposed plan to distribute the settlement; and
  • The likelihood the proposed settlement plan will be successful.

Notice of the proposed settlement must be given to the class members, who are then entitled to object to the settlement if they disagree with the terms. Some class actions settle within 1 year of being initiated, however, they may take longer.

A settlement or judgment binds the class representatives and all other individuals who were included in the class, provided all of the requirements for maintaining the class action have been met.

Attorneys representing class action plaintiffs are paid on a contingency basis, meaning they do not receive a fee unless the case is successful. Considering the complexities of class action litigation, and the enormous costs associated with prosecuting a class action, the lawyer often risks a lot of money and time in bringing such a claim.

Generally, the attorney submits a fee petition to the court, and the court must then review and decide whether to approve the legal fee, which must be fair and equitable considering all of the facts and circumstances.

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