By Jason Kellogg
The DOJ’s willingness to take closer looks at private class action settlements may throw yet another roadblock in the path of the prosecution and use of class actions. In recent years, the judiciary has issued rulings limiting class action standing, have broadened the use of class action waivers and have complicated the settlement of nationwide classes. Now the executive branch adopts a policy of activating CAFA’s settlement review provisions to cast a suspicious eye on the terms of class action settlements, particularly attorney’s fees in coupon settlements. The new policy means that plaintiffs’ lawyers will not only need to negotiate a hard won settlement with their adversary, they must pass muster with the federal government.
Such a policy may result in lower fees in class action settlements, which is likely the DOJ’s intention. Larger fee awards, either in absolute value or as a proportion of coupon value, will now draw criticism from a large and powerful objector. Theoretically, the new policy could start a chilling effect on consumer class actions. That is likely what the new policy sets in its sights. But the policy may also have a negative effect on defendants who feel they have negotiated fair and favorable settlements. Those settlements could be undermined or jeopardized by a governmental agency with differing intentions or agenda, causing defendants to spend money on continued litigation.
It will be interesting to watch how the DOJ implements the new policy, and exactly what effect it will have.
You can find out more about the DOJ’s new interest in class action settlements here.
Jason Kellogg is an LKLSG partner who’s practice focuses on commercial and corporate litigation in federal and state trial and appellate courts.