There are numerous ways that a class action may be won through an effective litigation strategy. But in some instances a corporate defendant will conclude that the most cost-effective approach is to pursue settlement rather than to take on the risks and costs of further litigation. Before going down that road, one of the first things that will need to be evaluated is whether to pursue a class-wide settlement, complete with court approval under Rule 23(e) or its state equivalent, or instead to try the simpler route of settling with the named plaintiff only.
Settling a case on a “class” basis can have both significant benefits for a defendant and significant costs. On the plus side, a class settlement entitles the defendant to a broader release and has a better chance of achieving true long-term peace on a legal problem. On the negative side, the price tag will almost always be higher – often dramatically so – with higher administrative and legal costs and a greater risk of unwelcome publicity. Here are some important questions to consider in evaluating which approach is better for a particular case:
Is an individual settlement even an option? In some situations an individual settlement is simply not an option. This will usually be true once a class has been certified. In that situation, the named plaintiff and his counsel have obligations to the class that will usually preclude a resolution that benefits them only. Any resolution of a certified class action lawsuit requires court approval, and one may expect a court to view with skepticism a proposed resolution that grants relief to the named plaintiff (and possibly also his counsel) but no one else.
In some jurisdictions, even if a class has not yet been certified, an individual settlement may require court approval if the case was originally pled as a class action.
If the company settles on an individual basis, are a host of other suits likely to follow? Whack-a-mole may be an enjoyable game for children at the county fair, but it gets old quickly in litigation, especially when new plaintiffs can simply pick up where the settling plaintiff left off. Indeed, if the original plaintiff and his counsel are too richly rewarded, that could itself encourage new lawsuits (although companies may be able to avoid disclosure of settlement amounts through confidentiality provisions in individual settlement agreements). Later claimants may even be represented by the same counsel – most states’ professional ethics rules prohibit settlements that purport to bar plaintiffs’ counsel from representing other plaintiffs on similar claims. On the other hand, if the circumstances and settlement terms are such that other suits are unlikely, an individual settlement may be an attractive option. And “repeat players” among plaintiffs’ counsel who settle a claim with a company even on an individual basis may be reticent to assert the same claim against that company again, as doing so could substantially undermine their credibility in future negotiations.
Can an individual settlement be crafted that will satisfy both the plaintiff and his counsel? For most putative class actions, the sticking point on an individual settlement is not the amount of the dollar payment to the named plaintiff. More often the problem will be the financial expectations of plaintiffs’ counsel. If early experience in discovery and other events in the case have led plaintiffs’ counsel to see the case as a bad bet, an individual settlement with only a modest fee component – or no fee payment at all – may be an acceptable face-saving option. But if class counsel genuinely believes that a hefty fee award consistent with class relief is on the horizon, it may be challenging to craft a class settlement that addresses that belief while still meeting the company’s needs (including the need to discourage other suits).
The company can still, of course, offer an individual settlement that should be attractive to the named plaintiff himself. And counsel has an ethical obligation to convey that offer to her client. But as was shown through years of ultimately fruitless efforts to defeat class actions through Offers of Judgement and similar mechanisms, even an offer that would make the named plaintiff entirely whole might not be accepted. And if the named plaintiff does accept the company’s offer but his counsel still has loftier expectations, one can expect the next lawsuit to be filed in short order.
What non-monetary relief may be needed? The plaintiff may demand a prospective change in a product or in the company’s policies or practices that will effectively represent class-wide relief. Such a term may be worthwhile, even in the absence of a class-wide release, if it “cures” the alleged problem and discourages follow-on suits. On the other hand, absent a class release, other plaintiffs might seek to change the same products, policies, or practices in different ways, while also pursuing damages for alleged past harms.