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Long Term Planning for Class Action Settlements

While class action settlements are often the most efficient way to deliver quick relief to similarly situated class members, complexities arise when these settlements do not offer immediate relief.  For example, there are instances when the subject of a product liability class action is a product that a potential class member may not even know they own.  This could range from a vehicle part, to a plumbing fixture to roofing material.  When the product is fungible, or when a class member may have no reason to know they have a qualifying product, the settlement agreement should take this into account and allow for a longer period for the discovery and subsequent claim filing for a qualifying product.

Long Term Class Action

Creating a settlement framework for such situations can be difficult, as there are concerns over timing of settlement funding, providing proper notice to potential class members, and ultimately the amount of recovery available to individual class members.  This includes the calculation of the total settlement amount and equal or pro rata distribution to qualified claimants.  While a fixed award for similar claims can expedite the processing and payment of claims, there needs to be enough funding to allow for the potential size of the class prior to establishing the award amount.  A percentage of total damage could also be an equitable solution.  However, if this solution is chosen, the calculation needs to be enough to be meaningful to the class member, while also preserving funds for future claims.  As the class size is often unknown, due to class members being unaware they own a defective product, the determination and calculation of recovery often falls to the administrator. 

In order to balance the need for quick financial relief with the need to preserve the settlement funds for future claimants, settlements disbursing over years require skilled administrative oversight.  Claim rates and amounts need to be analyzed to identify trends.  Award amounts need to be calculated factoring in the number of claims submitted per claim year, the expected number of claims over the life of the settlement, the average amount of a claim, and whether claim amounts or numbers will trend upward or downward.

Long settlements must also contemplate the satisfaction of notice requirements to parties who may become class members in the future.  If a class member is not aware that they have a qualifying product at the time of settlement, they most likely will not take any interest in the terms of that settlement.  If, however, they later discover that they are in fact affected by the terms of the settlement they may argue that their rights have been impacted without their knowledge or consent.  This is especially true in situations where the opt-out or objection deadline for the settlement has passed.

Lastly, settlements with these structures can attract the attention of third party claims providers, claims aggregators, and in many cases, insurers and their counsel.  As these parties become increasingly familiar with the terms of the settlements and the subject products they tend to perfect their claims and become more efficient in identifying additional filings. This can drastically affect the amount of funds available for disbursements in later years of the administration. In order to maintain the settlement fund over the course of years and give claimants similar recoveries, it is important to identify the potential involvement of such parties and plan disbursements of the settlement fund accordingly.

A well drafted settlement agreement can mitigate many of these concerns from the start.  However, when the class is open or the amount of product in the m arket is not known or trackable, accurate monitoring of the claims data, trends, claimed losses and even the parties making claims will make all the difference in a successful administration. 

Zach Lebovits is a project manager for the class action, mass tort, and claims administration business unit at Epiq, specializing in buildings materials class action settlements. As a project manager, Lebovits is responsible for overseeing all aspects of case administration, including counsel and court coordination, settlement or judgment implementation, noticing, claims processing, disbursement, budgeting, personnel management, and quality assurance.  He has a JD from Loyola Law School, Los Angeles, and a BA in Politics, with distinction, from Occidental College.

Filed under: class action, settlement

The contents of this article are intended to convey general information only and not to provide legal advice or opinions.

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