Aggregation As Disempowerment: Red Flags in Class Action Settlements
54 Pages Posted: 17 Apr 2016 Last revised: 14 Feb 2017
Date Written: April 10, 2016
Class action critics and proponents cling to the conventional wisdom that class actions empower claimants. Critics complain that class actions over-empower claimants and put defendants at a disadvantage, while proponents defend class actions as essential to consumer protection and rights enforcement. This article explores how class action settlements sometimes do the opposite. Aggregation empowers claimants’ lawyers by consolidating power in the lawyers’ hands. Consolidation of power allows defendants to strike deals that benefit themselves and claimants’ lawyers while disadvantaging claimants. This article considers the phenomenon of aggregation as disempowerment by looking at specific settlement features that benefit plaintiffs’ counsel and defendants without benefiting class members. Recognizing that protection of disempowered class members lies with judges who review settlement agreements, the article identifies red flags to alert judges to problematic settlements and fee requests. By showing how certain settlement features reflect defendants’ cooption of the power of aggregation, the article offers a framework for thinking about class action power dynamics in the age of settlement.
Keywords: settlement, aggregation, class action, fees, Rule 23, coupon, cy pres, clear sailing, ethics, negotiation
JEL Classification: K41
Suggested Citation: Suggested Citation