54 Pages Posted: 26 Sep 2007
Date Written: September 2007
This article proposes a simple approach to judicial review of class action settlements. The key is to recognize that courts should apply different degrees of scrutiny for different issues depending on the respective competence of the court and class counsel. For questions going to the adequacy of the settlement, where no warning signals of fraud, collusion or inadequate bargaining leverage are found, the court should employ lenient scrutiny and approve the settlement if it has a rational basis. An intermediate level of scrutiny should apply to issues implicating the fairness of the settlement, including the allocation of settlement proceeds among subgroups in the class, the presence of coupon-type relief, "shotgun" settlements occurring very early in the litigation, and settlements in overlapping class actions. Here, if the initial inquiry raises concerns, the court should demand a well-reasoned explanation for the choices made. For the issue of attorneys' fees and other questions presenting a direct conflict between the interests of class counsel and those of the class, courts should employ exacting scrutiny and require convincing evidence that the proposal is reasonable.
Suggested Citation: Suggested Citation
Macey, Jonathan R. and Miller, Geoffrey P., Judicial Review of Class Action Settlements (September 2007). NYU Law and Economics Research Paper No. 07-34. Available at SSRN: https://ssrn.com/abstract=1017266 or http://dx.doi.org/10.2139/ssrn.1017266