A better illustration of the importance of fairness hearings

About a month ago, I posted about the importance of class action fairness hearing in the context of a class action again the makers of Nutella.  In a nut-shell, the class action mechanism creates a potential for plaintiffs’ counsel or the lead plaintiff to work with defence counsel to settle a case for relatively cheap but in a manner that still enriches the attorneys.  This is particularly troublesome because in many class actions the class members will be barred from pursuing individual claims unless they take an affirmative step to opt out within the time period set by the court.  Two things that protect against this abuse are the need to get judicial approval of class action settlements and a fairness hearing in which class members are invited to raise any objections.

In the Nutella case, I sympathised with the plaintiffs’ attorneys because they actually obtain a darn good result for the class.  No so in a recent case against Sprint.  Apparently, Sprint was imposing unlawful contract termination fees on its customers.  Sprint settled the case in a manner that wouldn’t have resulted in class members getting paid because the parties agreed that Sprint going through its records was to much to ask of the telecom.  The objectors showed up and even appealed, whereupon the Third Circuit upended the settlement.

Not only was this a good result, but it does the good plaintiffs’ attorney a service.  There is always pressure to take less money to settle a case sooner rather than later.   And sometimes the client or class is better served with a speedy compromise than a hard fought and risky war of attrition.  However, the potential for objectors to give everyone a black eye – and delay disbursement – is a pressure that drives the value of settlements up regardless of when they settle.

Sprint Class-Action Settlement Upended by U.S. Appeals Court.

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