Objections to Class Settlements

Coupons, Clear Sailing, and Reverters: Another Settlement Bites the Dust in the 9th Circuit

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In another of what seems like a string of decisions reversing district court approvals of class action settlements, the 9th Circuit, applying a three-factor test, held that vouchers offered as consideration to class members were coupons within the meaning of the Class Action Fairness Act, and that any award of attorneys’ fees must be based on the redeemed value rather than the face value of the vouchers. In McKinney-Drobnis v. Massage Envy Franchising, LLC, the court also characterized a provision allowing a defendant to retain excess amounts it had been willing to pay for attorneys’ fees as a disfavored “kicker” or “reverter,” a characterization that is consistent with 9th Circuit precedent but that may be inconsistent with how those terms are understood in other venues. Co-host Adam Polk and I discuss the court’s decision in a new episode of the American Bar Association’s “Common Questions” podcast, which can be found here.

The Seventh Circuit Clears a Roadblock to Settlement

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As I have discussed in earlier posts, there are multiple stakeholders to class action settlements, including named plaintiffs, absent class members, class counsel, defendants, and the courts. Conflicts can arise within some of these groups, and perhaps most often arise among the class members themselves. A settlement that looks good to one named plaintiff or their counsel, for example, might not look good to another member of the class or their counsel. The ability of dissenting class members to object to a proposed settlement is one safeguard that can assist a court in determining whether a class action settlement satisfies Rule 23(e)(2)’s “fair, reasonable, and adequate” standard.

When an objection is brought in good faith and has merit, it can result in a better deal for the class. Unfortunately, not all objections are made in good faith. Rather, some are made with the sole objective of enriching the objector and the objector’s counsel, with no accompanying benefit to the settlement class. And often parties and their