Are You Doing Enough to Drive Claim Rates?

A high claim filing rate is one indicator that Courts are increasingly looking at when deciding whether or not to approve a class action settlement. Judges often interpret high claim rates as a means of measuring meaningful relief for class members. With that in mind, the Federal Trade Commission (FTC) is paying increased attention after releasing a report that found most consumer class actions have average claim rates of 9 percent or less when looking at cases with some form of direct notice. It’s expected the number is even lower in cases where class members don’t receive direct notice.

The report examined 149 consumer class actions from seven claims administrators and is considered the largest study of its kind. While the report did not identify specific solutions, it did identify weaknesses in the notice and administration process that both administrators and attorneys should pay close attention to. Here are just a few key takeaways from the FTC’s report on Consumers and Class Actions.

Don’t Underestimate How Much Time It Takes to Plan

Prior to finalizing the settlement agreement, it’s important for counsel and administrators to have a serious discussion about expected claim rates and what it takes to reach the goal. There are many steps that can and should be taken through the notice and settlement administration process, and they all take careful analysis and planning.

In today’s world, courts are looking for a notice program to reach at least 75-90 percent of the class. However, courts are also increasingly looking to response rates in addition to reach, which may require more effort. The FTC report made several findings regarding class notice efforts, looking at both reach and response rate. These efforts should be considered when planning your settlement timeline, especially when considering the time it takes to plan an effective campaign in the space between signing the settlement agreement and beginning the notice program.

Some of the report findings impacting planning are as follows:

• Cases with multiple rounds of notice across multiple channels produced a median claims rate more than double the claims rate in cases with one communication attempt.
• Low response rates to email notification indicate postal mail is still king. It’s important to keep in mind that mail programs take longer to execute, and longer timelines should be built into the notice program.
• Putting time into planning a campaign that utilizes plain language is crucial to expanding response.

With the report’s data in mind, it’s important for attorneys to build enough time into the settlement agreement for important steps such as multiple notice touches. A cookie-cutter approach to settlement planning will likely yield the same small claim rates as found in the FTC report. Any notice and administration plan should consider things like class member behavior, demographics, the complexities of the case itself and how that will be effectively communicated with the class, how and when to leverage the media, and so much more in order to boost claim rates.

Notice Language is Never Plain Enough

All communications with potential class members should be clear, concise, free from jargon, and delivered at the anticipated reading level of the recipients. Plain language is not just a suggestion – it’s a mandatory rule (Rule 23b in the Federal Rules of Civil Procedure). But the FTC suggests in its report that the standards set by Rule 23 don’t take plain language far enough. The goal is to ensure class members understand not only what their rights are, but exactly how they can make a claim, both in the notice and on the claim form.

Of everything the FTC examined in notice and claim form efforts, plain language had the highest relationship to high claim rates. Whether you’re sending direct mail or directing class members to your website, potential claimants should be able to immediately understand the nature of the action, class definitions, their right to counsel or exclusion, the timeframe for requesting inclusion or exclusion, and the binding effect of a class judgment on members. Speak plainly so your recipients understand the connection of your settlement offer to their lives and self-interests, and they can decide whether to act or not.

Every Case is Different. Notice and Administration Should Be Different Too

No two cases are the same, so why try to mirror your notice and administration plan against previous cases?

Consider two separate product mislabeling cases: one relates to a general daily multivitamin, while another relates to a multivitamin with added calcium. While the cases both address one defendant and one brand, a general multivitamin would tend to have a wider range of age demographics when compared to a possibly older audience for vitamins with added calcium.

That generational difference could mean the notice plan should use social media in one and lean heavily on traditional press and mail in another. Different rewards between the cases can certainly drive the notice and settlement administration plans in two different directions. Even something as seemingly irrelevant as loyalty to the type of vitamin could make class members feel less inclined to file a claim, meaning notice and administration have to function differently to drive claim rates higher.

Understanding the data put forth by the FTC Report on Consumers and Class Actions should lead to an industry-wide discussion about new and unique ways attorneys and administrators can work together to drive claim rates.

The larger solution circles back to leaving enough time to plan and understand the case, and the class. Working with a notice expert and a settlement administrator early in the process allows for expert consultation and highly effective campaigns. Contact Kroll Settlement Administration for more advice on how to increase claimant participation and for a free quote on our full range of business services.