The Fairness Hearing: Adversarial and Regulatory Approaches

Abstract

At the conclusion of every class action lawsuit, a judge must hold a fairness hearing and assess the reasonableness of the outcome. The fairness hearing contains the promise of providing real monitoring of class counsel, but in practice, it has not fulfilled this promise. In this Article, I provide a sustained investigation of the fairness hearing, arguing that since it will inevitably take place, we ought to perfect not abandon it. To that end, I explore four mechanisms that might assist the judge at the fairness hearing: a devil's advocate, employed by the court to argue against the settlement; bonds, posted by the settling parties and used to pay the attorneys' fees of private objectors who raise valid concerns; labels, like the food nutrition labels, compelled by a public agency to provide more transparency to the elements and quality of the settlement; certification marks, like the Good Housekeeping Seal of Approval, created by an independent private group to signal class members and judges as to the adequacy of the settlement terms. Examining this new set of disparate proposals enables an assessment of the underlying question of institutional design: namely, whether adversarial or regulatory, public or private, approaches are likely to be most efficacious at identifying and curtailing problematic settlements and hence controlling class counsel. Given that at a fairness hearing the judge reviews two distinct sets of concerns - the process by which the settlement was achieved and the content of the settlement in light of the strengths or weaknesses of the plaintiffs' claims - I conclude that the proposed settlement of a class action should trigger a two-part process involving both a judicial assessment of the value of the claims and a regulatory assessment of the process of settlement.

Keywords: class action lawsuits, fairness hearing, assessment of outcome, mechanisms to assist investigations of fairness hearings