Best Practices Prior to Preliminary Approval: Preparing for Class Action Settlement Administration

When a class action nears the settlement stage, there are important steps to take to ensure a smooth and efficient settlement administration process. Planning early helps identify problems before they occur, and hopefully spares return trips to the court with amended agreements.

Consulting with experts prior to filing a settlement agreement sheds light on potential obstacles you might not have considered, and leaves time to plan those solutions. Making a plan for things such as handling and verifying class data and developing a fair Plan of Allocation provides critical insight as you craft the agreement.

Pre-Settlement Consultation

Consulting with a settlement administrator prior to filing an agreement has real cost-saving value. An administrator can anticipate roadblocks and potential problems before they happen and offer cost-saving solutions to avoid problems altogether.

Demonstrating a well-thought-out plan to the court increases the chances of the settlement being granted preliminary and final approval. In addition, creating a roadmap and realistic timelines for notice and administration saves time and, ultimately, money.

There is nothing worse than showing up to court unprepared because timelines became unrealistic. Overlapping deadlines or compressed timelines may not leave enough time for an administrator to vet necessary documents, review and prepare class member data, and resolve objections. Compressed timelines often present more problems than anticipated, and ultimately lead to a longer time frame due to mistakes or court rescheduling.

Tackling tasks such as class data can be time consuming, especially if you’re working within an already compressed timeline. Class action settlement administrators have the ability to effectively clean up and format the data, and review for missing pieces and errors. Additionally, a legal notice expert can analyze available data to formulate a notice strategy that satisfies due process.

Comparing Settlement Administrator Proposals

It can be difficult to truly compare proposals from different class action settlement administrators. Often, each administrator is working from their own template, making it tough to compare line by line. And with courts around the country looking for increased transparency, it’s important for plaintiff and defense attorneys to know what to look for in these estimates, including red flags and hidden fees.

Look for hidden hourly rates. Hourly rates are often necessary, but you never want to see them buried as a footnote. All settlements require an administrator to account for time spent interacting with counsel, auditing claims, calculating awards, submitting declarations and more. If there are no hourly rates associated with these activities in the estimate, the final cost of administration has the potential to be much more than the original estimate.

Spot false assumptions. Administration estimates function based on the assumptions made in the proposal. Look to see if the assumptions are accurate or realistic. Being able to recognize inaccurate or unrealistic assumptions at the proposal stage can save you from unexpected fees.

Providing the same assumptions to all administrators bidding on your project helps to ensure you get an apples-to-apples comparison when evaluating which administrator to select. If you don’t want to supply the assumptions, ask the following questions:

• Does the proposal heavily weigh electronic over paper claims? Electronic claims are normally less expensive; however, if you use a duplex postcard with return claim form, you most likely will get more paper claims.
• Mailed notice is significantly more expensive than emailed notice as it requires paper, printing and postage. Some administrators will heavily weigh email notice if you don’t give them numbers to use for each notice type. Make sure to also factor in how you will process returned mail – this can significantly impact the final bill if it’s not included upfront.
• Is the media campaign “cheap” because it’s open to fraud and blacklisting? What safety measures are accounted for in the proposal? Media is a tricky thing. If you don’t use a veteran and proven media expert, you open yourself up to some scary scenarios. Be vigilant with the media program so that you protect your client’s reputation, meet due process, and stimulate claim response.
• Has the administrator used a claims rate that seems low? If the estimated claims rate used is low, the final price will also be too low. Set the claims rates you’d like to see estimated and don’t be afraid to ask for more than one estimate.

Beware of fixed prices. Terms that suggest “locked-in price” or “fixed, all-in pricing” are enticing, but can be deceiving. When an administrator provides a fixed fee make sure you ask about any hidden fees, and what work would be considered out of scope.

Always ask questions. Don’t be afraid to ask for clarity. If you notice something is missing or think the assumptions the administrator is working from are not accurate, ask the administrator to explain any discrepancies in a way that will allow you to understand if there was an honest mistake or not. You can always ask an administrator to change their assumptions and representative pricing. Arm yourself with the knowledge to make sure you are always protected.