Class Action Settlements as Contracts?

58 Pages Posted: 3 Apr 2023 Last revised: 16 Jan 2024

See all articles by Howard M. Erichson

Howard M. Erichson

Fordham University School of Law

Ethan J. Leib

Fordham University School of Law

Date Written: March 22, 2023

Abstract

Courts routinely declare that class action settlement agreements are contracts, and when called on to interpret and enforce such settlements, courts invoke principles of contract law. But is a class action settlement really a contract? The relevant agreement in a class settlement is struck between a defendant and class counsel or class representatives; it is not an agreement with class members. What binds class members to the deal is not that they agreed to it, nor even that they agreed to be represented, but rather that a judge found the matter suitable for class treatment and entered judgment approving the proposed settlement terms. It is the law of judgments, not the law of contracts, that prevents class members from pursuing claims released in a class action settlement. Although certain aspects of contract law are apt, the nature of class settlements calls for an interpretive regime that places less emphasis on intent of the parties and more emphasis on the scope of the deal that a judge saw fit to approve. This Article explores how courts should interpret the language of class action settlement agreements. It offers a framework that attends to the dual nature of class settlements and the agency risks that inhere in their negotiation. It encourages courts to stop reflexively treating class settlement disputes as contract disputes, but ultimately, whether courts call a class settlement a “contract” is less important than whether they understand the nature of these instruments and the modes of enforcement, interpretation, and construction that are appropriate to their implementation. Just as courts have deployed distinctive interpretive frameworks to shape contract law for other transactional contexts, they can similarly bring more thoughtful justice to the domain of class action settlement agreements.

Keywords: Class action, contract, settlement, claim preclusion, contract interpretation

Suggested Citation

Erichson, Howard M. and Leib, Ethan J., Class Action Settlements as Contracts? (March 22, 2023). 102 North Carolina L. Rev. 73 (2024), Fordham Law Legal Studies Research Paper No. 4397254, Available at SSRN: https://ssrn.com/abstract=4397254 or http://dx.doi.org/10.2139/ssrn.4397254

Howard M. Erichson (Contact Author)

Fordham University School of Law ( email )

150 West 62nd Street
New York, NY 10023
United States
646-312-8233 (Phone)

Ethan J. Leib

Fordham University School of Law ( email )

150 West 62nd Street
New York, NY 10023
United States

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