On November 1, the Northern District of California announced new Procedural Guidance for Class Action Settlements, aimed at increasing transparency in class settlements and the disbursement of class settlement funds. The Guidance is consistent with, but broader than, the latest amendments to Rule 23 of the Federal Rules of Civil Procedure, effective December 1, 2018.
Key provisions of the Guidance include:
- Motions for preliminary approval of class settlements must provide:
- An explanation of any changes to the class definition;
- An explanation of any differences between the released claims and the claims alleged in the complaint;
- A detailed description of potential class recovery, including the anticipated claims rate supported by specific examples from similar settlements; and
- Requested attorneys’ fees, including lodestar calculation.
- After final approval, parties must file a post-distribution accounting that contains details of how the settlement funds were disbursed, including:
- Amount of total settlement fund;
- Resulting claims rate (number and percentage of claim forms submitted);
- Average, median, largest, and smallest recovery per claimant; and
- Number and value of checks not cashed.
While the Guidance will unquestionably result in more transparency with class action settlements, it is less clear what practical effect it will have on the actual terms of class settlements. The Court warns that failure to adhere to the Guidance will result in unnecessary delay or denial of class action settlement approval but does not explain how judges will use the newly required information. For example, the Guidance does not explain what impact previous claims rates and class participation will have on future settlements or whether parties will continue to be allowed to expand the original class definition and/or disputed claims for purposes of settlement. Similarly, the Guidance allows judges to hold a hearing after receiving the parties’ post-distribution accounting but does not explain how such proceedings would affect the previously approved class settlement.
When settling a class action in the Northern District of California, parties should ensure compliance with these new requirements and expect to see increased scrutiny of class settlements.