California Judges Taking Hard Look At Class Action Settlements

In an effort to put more money into the hands of consumers, California judges are taking a hard look at class action settlements that may do more for lawyers than individuals.

New court guidelines have been put in place in San Francisco and Silicon Valley that are intended to require more of those who seek settlements for class action lawsuits, as opposed to taking those cases to court.

California has some of the nation’s strongest consumer protection laws, and these new guidelines are reportedly part of this focus on advocating for consumers through legal channels.

The Los Angeles Times reports that more judges are rejecting proposed class action settlements. This shift may mean that fewer class action lawsuits end in settlements, and more go to trial.

This could be a good thing for consumers because according to some judges, some settlement deals do not offer a substantial benefit for individuals harmed, and instead, offer large payouts for lawyers, incentivizing them to settle the case and not take it to court.

Additionally, big companies often benefit from settling a class action lawsuit instead of going to trial, because they spend less in a settlement than they would if a jury assigns them a costly liability when the case goes to trial.

At their best, class action settlements can help people gain compensation who would not otherwise be able or would not have the incentive to pursue litigation against a company on their own.

However, the legal community in California is now challenging if this is being achieved.

One case that faced scrutiny was the proposed $50 million settlement between consumers and Yahoo over a massive data breach.

U.S. District Judge Lucy Koh rejected this settlement, saying that the consumers’ lawyers asked for too much money in attorneys’ fees — $37.5 million, in fact.

Judge Koh also argued that Yahoo was not transparent enough about how many customers were affected by the data breach.

Some judges argue that lawyers aren’t clear enough about what the benefits of a proposed settlement deal will be for Class Members, leading deals to be struck that don’t benefit consumers enough.

One such case was a 2016 class action lawsuit that claimed that Subway sold sandwiches that were shorter than the advertised 12 inches.

In a proposed settlement deal, lawyers asked for $520,000 in fees for negotiating the settlement, while consumers would have ended up with practically nothing more than a promise that Subway would aim to “achieve better bread-length uniformity.”

A U.S. appeals court in Chicago threw out this proposed settlement, saying that it provided no value for Class Members.

In some cases, even when a proposed settlement deal does include cash for Class Members, many Class Members receive very little, if anything. A 2013 study reported that only one percent of eligible Class Members submitted claims for benefits among the 148 class action settlements included in the study.

However, the results of some class action settlements do an effective job of compensating consumers for injury they suffered because of a company’s alleged wrongdoing.

The Los Angeles Times cites a 2016 Volkswagen, Audi Emissions class action settlement as one such example.

In this case, the company bought back 500,000 vehicles with diesel engines that allegedly didn’t meet emissions requirements, spending $10 billion to do so. This reportedly provided a significant and valuable benefit for Class Members.