Kroll Settlement Administration: FAQs

The use of a settlement website has a lot to do with how you’ve built the settlement agreement. An experienced settlement administrator can help to assess a settlement and determine whether a settlement website is necessary. It should be noted that the 2018 Northern District of California guidelines stress the importance of using a settlement website, regardless of whether or not the settlement agreement calls for online claim filing. A class action claims administrator’s job often begins with setting up a case website to provide potential class members with important information related to the settlement and resolution of the litigation. The case website houses important documentation for class members, highlights claims deadlines, defines the class, and more. Essentially, it’s where a class member can find the most information about how to claim their benefits (and whether or not they qualify).

Important Settlement Website Information

Settlement websites generally provide the following pertinent details:

• Links to the notice
• Motions for approval
• Other important case documents
• Instructions regarding access to the case docket via PACER or in court
• The date for the final approval hearing, along with a disclosure that the date is subject to change
• An estimated claim amount for individual class members

Settlement Websites and Northern District Guidelines

The Northern District of California guidelines dictate that within 21 days of the settlement fund and fee distribution, key settlement statistics must be made publicly available on the settlement website. The guidelines require the following to be posted:

• Total settlement fund
• Total number of class members notified and not returned as undeliverable
• Number and percenter of claim forms submitted
• Number and percentage of opt-outs
• Number and percentage of objections
• Average and median recovery per claimant
• Largest and smallest amounts paid to class members
• Methods of notice
• Methods of payment
• Number and value of checks not cashed
• Amount distributed to each cy pres recipient
• Administrative costs
• Attorney fees and costs
• Attorney fees in terms of percentage of the settlement fund and the multiplier, if any

There are several ways to set up a class action settlement fund, which dictate both distribution and reward. There are common funds, claims made, pro rata, voucher, and non-monetary. A structure should be chosen within the settlement agreement, prior to filing for preliminary approval.

Common-Fund Settlement – These settlements are typical of antitrust, securities, and employment class actions. Claimants receive pro rata shares of the common settlement fund to some set formula. The amount each claimant receives is a function of the number of claims, and the entire fund is distributed. Class counsel fees are determined as a percentage of the common fund. Uncashed checks are typically paid to cy pres recipients (those who are as close to the donor’s intention as possible).

Claims Made Settlement – Claims-made settlements are based upon the alleged injury or grievance, with a recovery amount based upon the damages suffered. This is often common in consumer cases and may require proof of damages from the class member. If the value of the claim exceeds the fixed amount, an adjustment of the payment amounts (a pro rata reduction) can be made out of the unclaimed funds based on court approval. Class counsel fees and expenses are generally paid separately.

Pro Rata Settlement – The term “pro rata” means “proportionate.” Similar to common fund settlements, this allocation method divides the pool of money proportionately based upon the number of class members. That means shareholders get back what they put in. Often this is the same amount, but in the case of investments it could be more or less than the next claimant. The amount could also vary based on the number of claimants the total amount is divided among. In these cases, a class action notice will typically include an expected recovery amount per class member, with qualifying language that explains that the amount may change depending upon how many class members make a claim.

Voucher Settlement – Voucher settlements are less common and include non-cash offers to class members. There are several ways to structure this allocation, including coupons or discounts. Voucher settlements are less common with the Courts because they require class members to spend money and continue using the defendant’s goods or services to obtain the benefit. Exceptions can be made if the coupon or discount directly addresses the claims raised in the settlement. In any case, these offers need to be made without restrictions or expiration.

Non-monetary Settlement – With this type of class action settlement, the shareholder class agrees to drop their class action lawsuit against a company in exchange for equitable relief in the form of disclosure, governance reform, or payment of attorney fees. Most routinely, the defendant agrees to cease problematic business practices, curb misconduct, engage in greater transparency, and take corrective steps to benefit shareholder interests.

Federal Rule 23 went into effect on December 1, 2018. In part, the rule governing class action lawsuits and settlements allows class members to opt-out of a class action lawsuit, instead of opt-in. The rule also dictates when a class can be certified, what type of notice (if any) is required to class members if certified, and what procedures and processes must be adhered to with regard to class certification.

Email Notice

Many companies today prefer to contact consumers via email, text messages, social media, and web advertisements. The rule retains the right of the court to “direct to class members the best notice that is practicable under the circumstances,” but now states that a notice can be made by “mail, electronic means, or other appropriate means.”

Preliminary Approval

The settlement process generally moves from preliminary approval and class notice to a fairness hearing and final approval. Rule 23 standardizes the preliminary approval process by recommending that parties “should ordinarily provide the court with all available materials they intend to submit” in seeking preliminary approval.

Final Approval

The courts have made their own interpretations about what constitutes a “fair, reasonable, and adequate” class settlement. Rule 23 highlights four core issues courts must evaluate before granting final approval:

• Have the class representatives and class counsel adequately represented the class?
• Was the proposal negotiated in a neutral manner, with fair attorney fees?
• Is the relief provided for the class adequate, relative to the costs and risks of delayed trial?
• Are class members treated equitably, compared to one another?

Professional Objectors

Rule 23 seeks to combat meritless objections by requiring objectors to openly state whether the objection applies to the whole class or remains self-serving in its specificity (which could be adequate grounds of dismissal). The rule also prohibits payment to anyone in connection with “forgoing, dismissing, or abandoning an appeal from a judgment approving the settlement.” Objections can now be withdrawn at any time, without court approval.

A class action contact center is a support system that allows class members to speak to trained live agents, or to navigate the claims process via interactive voice response (IVR). Class action settlement administrators often provide the use of their contact center as part of the notice and claims administration engagement.

What Does a Class Action Contact Center Do?

The class action contact center acts as the communications hub throughout the entire administration process. Its functions are critical and include:

• Notifying potential class members by phone, email, and direct mailings.
• Assisting class members with navigating claim processes with clear, consistent directives.
• Providing important case information, including deadlines and status changes, through IVR technology and trained contact center agents.
• Answering class member questions directly through the use of trained inbound contact center agents and IVR technology.
• Tracking, recording, and reporting all information received.

Communications support is the foundation of a well-organized, successful class action settlement. A world-class contact center should have the capacity to handle call volume from as little as 5 calls to as many as 10,000 calls per day, depending on the case needs. There should be multi-lingual support, a toll-free hotline, and 24/7 staffing available. Strong leadership and active oversight are equally important in order to de-escalate issues as they develop, maintain efficiency, and streamline contact center operations.

A motion for preliminary approval is the next step after parties sign the settlement agreement. It asks the court to grant a hearing to review and approve the settlement so the notice and distribution process can proceed.

During a preliminary approval hearing, the court asks for specific information about the settlement, such as:

• Estimated class benefits
• Estimated attorney fees
• An allocation plan proposal
• The anticipated number of class members expected to submit a claim
• Whether any funds will be reverted back to the defendant.

The court will approve the allocation plan if the settlement is deemed fair and adequate for the defined class. In addition to the settlement administration, other related topics that may be covered include:

• Notice: A plan to implement a compliant notice program that will achieve the broadest possible outreach and satisfy due process.
• Case Anomalies: Procedures to manage opt-outs, possible objections, incentive awards, and cy pres awards.
• Expectations: Historical analysis of comparable class settlements are a good indicator of what’s to come and helps to manage the expectations throughout the notice and distribution period.

A class action settlement (or claims) administrator is a neutral third-party that handles the claims administration process in compliance with the court-approved settlement agreement. This blueprint spells out how to administer the settlement from start to finish, which the class action administrator helps execute.

After careful review, class counsel makes a motion to distribute settlement awards. Upon court order, the administrator distributes the settlement reward or benefit to all eligible claimants based on the plan. Auditing and data integrity checks are performed along the way. If any issues arise throughout any part of the process, claims administrators may be called upon to testify objectively in court.

The goal in working with settlement administrators is to create a settlement plan that satisfies due process ahead of preliminary approval, while maximizing class benefit, minimizing costs, and protecting brand reputation. Thanks to efficient protocols and modern technology, an experienced claims administrator plays a critical role in class action lawsuits from their very inception to their final resolution.

The class action settlement fairness hearing process is the court’s final opportunity to determine whether the proposed settlement is fair before the distribution of settlement benefits to the class.

In determining fairness, the courts will consider:

• A comparison of the strength of the plaintiff’s case against the proposed recovery.
• Objections from the defense, including the cost and risks of continued litigation.
• Any evidence of collusion between attorneys that would impact the rights of claimants.
• Class member comments, objections, or proposed alternatives.
• The amount of discovery completed.

The court’s role is to protect the interests of the class members, and so the process of compromise will be carefully scrutinized. Though a court may reject the settlement on a variety of grounds, it may not rewrite the terms.

During the hearing, class members may object to the settlement in its entirety or they may be opposed to only portions of it. Serial objectors can cause significant delays. Swift settlement approval is preferred, as it forces objectors to demonstrate the merits of their objections. Counsel will either have to adjust the agreement or let the terms stand.

If the court determines that the proposed settlement is fair, funds will be clear for distribution.

A third-party claims filer, or claims filing service provider, is a company that seeks out potential class action members and files claims on their behalf. Third-party claims filers offer to handle the entire claim submission process for a class member in exchange for a percentage of their client’s reward. The third-party filer acts as an intermediary between the class member and the class action itself – filling out all information and attaching supplementary documentation, submitting the claim, remedying any claim defects, and distributing the proceeds.

Third-party filing companies have historically focused on complex antitrust and securities settlements. Today, such companies have expanded to other practice areas including product liability, consumer finance, employment matters, and more.

It’s important to engage a settlement administrator who has identified and has good relationships with reputable third-party filers.

Benefits of Third-party Claims Filing Companies

• Large corporations can use third-party filers in cases requiring a lot of specific documentation, so they can focus on the business, rather than the busy work associated with the claim.
• Busy claimants may feel more comfortable working with a third-party filer if they are involved in complex claims processes with high potential recoveries – such as securities cases.
• Third-party filers can act as a megaphone for class notification, gathering more class members.
• These companies can lighten the call volume for settlement administrators, shortening the timeline.

Potential Drawbacks of Third-party Claims Filers

• Some third-party claims filers may use misleading language to solicit class members.
• Third-party claims filers are rarely candid about the true necessity of their services.
• In the past, courts have issued orders limiting the activities of third-party filers.
• Third-party filers are notorious for submitting “placeholder claims” past deadline, slowing the process.
• Third-party filers may submit erroneous, duplicate claims already submitted by claimants themselves.

Is A Third-party Claims Filer Really Needed?

Class members do not need the assistance of third-party filers. Many class actions are manageable enough for members to efficiently file on their own especially when there is a settlement administrator available (at no additional cost) to help class members complete claims forms and answer any questions. Ultimately, it is up to individual class members to decide whether or not to engage such a service.

Congress enacted 28 U.S.C. § 1711 – 1715 – known as the Class Action Fairness Act (CAFA) – in response to perceived class action abuses by the plaintiffs’ bar. Legislators feared attorney fees were disproportionate to the relief obtained by the class. Congress felt local courts were too closely tied to the plaintiffs’ tort bar to objectively preside over the class actions. The end result was that CAFA greatly expanded the jurisdiction of federal courts over class action lawsuits.

Which Class Actions Meet the Standard for CAFA?

In order to be classified under the Class Action Fairness Act, a class action must:

• Exceed $5 million, exclusive of interest and costs.
• Have a minimum of 100 class members.
• Include at least one diverse plaintiff (a citizen of a different or foreign state than the defendant).

What Does CAFA Require for Defendants?

According to the Class Action Fairness Act:

• Within 10 days of filing for preliminary approval, all defendants of class action settlements in federal court are required to notify state and federal regulators where any class member may reside.
• If defendants are unable to determine the location of any class members, they should give notice to regulators in all fifty states and U.S. territories.
• Regulators are granted at least 90 days to review the proposed settlement before final approval is granted.

What Should Be Included in a CAFA Notice?

The contents of the CAFA notice must include:

• A copy of the complaint and all exhibits
• A list of any scheduled hearings
• A copy of the proposed notice to class members
• The proposed or final settlement agreement
• Any additional agreements between plaintiffs’ counsel and the defendant
• The proposed dismissal
• The names of class members who reside in each state
• The share or estimated share of claims members can expect
• Any written opinion relative to the settlement

Immediately after a settlement is reached, defendants must begin gathering documents and compiling a class list to remain in compliance with the law. Part of the job of a class action claims administrator is to assist counsel in preparing the notification on-time and in full compliance with the Class Action Fairness Act.

What Could Happen if the Conditions of CAFA Are Not Met?

Defendants in federal court who are unable to meet the 10-day requirement for notification face strict consequences. If a class member can prove that regulators were not notified of the settlement, any class member can then opt out of the confines of the settlement terms, causing the whole case to come undone. Additionally, a court cannot enter an order to grant final approval until 90 days after the CAFA notice is provided; while defense counsel can begin preparing this notice as settlement negotiations are ongoing, significant delays will be inevitable.

Engage a settlement administrator prior to drafting your settlement agreement. Consulting with an experienced claims administrator and legal notice expert that early can save time and money throughout the run of the case. There are five reasons why it’s better to work with a settlement administrator from the very beginning.

It’s cost-effective. Administration experts offer cost-saving solutions and proactive strategies that address major drains on resources, so parties ultimately save money.
Your timeline will be accurate. Settlement administrators help establish realistic time frames for the case before scheduling problems arise.

You have proactive support where you need it. Claims administrators serve as a partner in tackling class data, and proactively identify problems before they occur. Data security, for instance, presents a number of pitfalls if done incorrectly. Claims administrators review data for missing pieces, clean up data formatting, and inform a notice strategy that satisfies due process requirements.

Compliance counseling helps you maintain favorable brand reputation. Public class action settlements carry high visibility, meaning scrutiny from class members, and increased risk of objections. When tapped early, a settlement administrator guarantees compliance with the Class Action Fairness Act of 2005 and Rule 23. 

Working with pros early reduces the risk of fraud. Experts help safeguard against potential areas of weakness you may not otherwise consider. For example, advertising using digital bots, on niche websites, or in click-bait environments can lead to fraud and considerable damage to your client’s brand reputation. There is no substitute for human eyes on your notice campaign.