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Selecting the most appropriate structure for a class action settlement is a critical part of settlement negotiations, and the structure must be acceptable to the court that will eventu- ally approve the settlement.1 The best settlement structure for a class action depends upon a variety of factors including the likely number of claimants, what a claimant is required to do to make a claim, how the accuracy of the claims can be determined, how disputes over claims will be resolved, whether nonmonetary relief is appropriate, administrative costs, problems associated with unclaimed funds, and ultimately the total cost of the settlement including attorneys' fees.
This Article provides an overview of each of the six different types of class action settlement structures that are commonly used when a class action lawsuit is settled. They are: (1) "automatic" monetary awards; (2) "claims made" settlements; (3) "limited fund" or fixed payment settlements; (4) "coupon" settlements; (5) "cy près"; and (6) settlements that provide only nonmonetary relief. Hybrid structures combining one or more of these basic structures are also used. For example, a fixed payment settlement may include a payout provision that is an "automatic" monetary award or the payout might be based on a "claims made" process. "Cy près" provisions are common features in settlements where uncollected funds are anticipated. Coupon-type settlements may include equitable or injunctive relief.
The first four parts of this Article describe, in turn, each of the first four structures. Sub- parts delineate the common objections to the structure, the advantages and disadvantages for the defendant, the usual method for determining attorneys' fees, and factors to consider regarding uncollected settlement funds. Part V explains "cy près" settlements and provisions and includes a discussion of recent case law that must be considered when structuring a "cy près" settlement or using a "cy près" provision for uncollected funds. Nonmonetary relief is the focus of Part VI which also covers recent case law regarding réévaluation of class members' prior transactions with the defendant.
Because most large class actions are litigated in federal court under the Class Action Fairness Act of 20052 and many states have largely adopted the federal class action rules and follow, at least in substantial part, the federal case law on class certification, this...