How Will the Administration of Your Class Action Settlement be Impacted by the New Northern District Guidelines? Class Action

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How Will the Administration of Your Class Action Settlement be Impacted by the New Northern District Guidelines?

A question and answer session with industry veterans Jim Prutsman and Ed Radetich.

As most class action practitioners are aware, the Northern District of California issued new procedural guidance for class action settlements on November 1 of last year. These guidelines, which are the most detailed in any court system in the country, outline expectations for settlement administrators as well as class counsel. The guidelines standardize the settlement and administration reporting process, making it more consistent and memorializing the call for detailed transparency. The guidelines formalize requests some judges were already making.

The guidelines imply increased critical examination by the court for settlement administrators in both the selection process and in the administration process. In what ways does this impact settlement administrators and the industry as a whole?

“In the motion for preliminary approval, the parties should identify the proposed settlement administrator, the settlement selection process, how many settlement administrators submitted proposals, what methods of notice and claims payment were proposed, and the lead class counsel’s firms’ history of engagements with the settlement administrator over the last two years.”

We always expect to compete, and we encourage an open and fair marketplace where counsel selects a claims administrator based on who is the most qualified. The new guidelines require additional information in our proposals to increase transparency, which is good news for qualified settlement administrators who can back up their qualifications with historical data and experience.

The guidelines standardize what information the Court is looking for so that it can evaluate and compare to other similar types of cases in deciding whether to approve a settlement or not. This may require administrators to more accurately track information they may not have been previously tracking.

The court is formally calling for transparency in preliminary approval by asking counsel to explain the proposal process and how competitive it was, and what types of notice and administration programs were rejected in favor of the bid winner. In doing this, the courts are hoping to ensure a fair process in which the class is protected by a sound notice and administration plan.

New guidelines require posting a lot of new information on the settlement website in what the courts are calling post-distribution accounting. Is this feasible for administrators?

Here, the new guidelines regarding post-distribution accounting are much more rigid for claims administrators. It asks that distribution information be tallied and posted online within 21 days of distribution, including information about the settlement fund, the number of checks not cashed, average recovery per claimant, the amounts distributed to each cy pres recipient, and more.

Unfortunately, 21 days is too short of a time period to reflect accurate numbers. It’s not enough time to receive returned mail and rectify addresses, or employ re-targeting efforts, or even to see what checks have cleared. The 21-day timeline should be looked at by the courts as an update, and not a final report.

However, reconciling and reporting on these numbers is a significant effort, which means there’s a cost implication in imposing such a slim time frame for reporting.

You can’t speed up human behavior, and often settlement checks will go uncashed for a relatively long period of time. If the court (rightfully) asks administrators to consider class behavior in notice and distribution plans, the same should be done for the benefit recovery process.

The Northern District indicates the court may not approve the amount of the cost awarded to the settlement administrator until the final approval hearing. Is this a new practice?

“The parties should also address the anticipated administrative costs, the reasonableness of those costs in relation to the value of the settlement, and who will pay the costs. The court may not approve the amount of the cost award to the settlement administrator until the final approval hearing.”

We don’t feel this is a new practice. It’s just a formal reminder that the Court holds the ultimate decision on fees and expenses.

The risk for settlement administrators is that the fees and expenses we set in our proposals may be different than what we’re awarded in the end. In large part, those proposed fees are based upon estimated class size, which is often very different than what was anticipated during the proposal process. It’s a reality of which administrators are always aware.

We don’t interpret this as meaning that the Courts will not approve interim fee and expense requests, especially in larger cases where there are substantial upfront costs.

If the case has a claims form, how difficult is it to provide an estimate of the number and/or percentage of class members you would expect to submit a claim?

“If there is a claim form, an estimate of the number and/or percentage of class members who are expected to submit a claim in light of the experience of the selected claims administrator and/or counsel from other recent settlements of similar cases, the identity of the examples used for the estimate, and the reason for the selection of those examples.”

Unfortunately, there are unforeseeable factors that can impact claim rates. History is not a guarantee of future claims filings. With that said, experience with similar cases, an understanding of the class demographics and behavior, and knowledge of the media landscape all help to shape a good administration strategy. But there are many challenges when it comes to predicting a response rate. Simply put: we don’t know what we don’t know.

How Will the Administration of Your Class Action Settlement be Impacted by the New Northern District Guidelines? 2019-02-19T05:00:00.0000000 /insights/publications/class-action/class-action-settlement-northern-district /-/media/heffler/publications/featured-images/hand-gavel-courtroom.jpg publication {A40581A3-C3BF-4BF8-93D8-A480A621546D}

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