December 1, 2020

Five Ways To Manage A Class Action Settlement

Tedd Long is the COO of MCAG, Inc., a revenue recovery consulting firm empowering businesses to capture every recoverable dollar. 

Imagine that you’re sifting through the overnight email when you see a note from a trusted source about a class action settlement involving a service your company uses on a regular basis. In the back of your mind, you knew there was something strange about how the vendor priced certain aspects of their service, and this announcement confirms your suspicions: The vendor has settled a class action price-fixing suit.

Based on the amount of money that has gone out the door to pay for this vendor’s services over the past few years, your organization will definitely qualify as a class member in this settlement and should receive a considerable amount of money. Now what?

It’s important to know what your options are in this situation. As the COO of a company that specializes in settlements recovery, I’ve outlined five options you can consider when managing your involvement with a class action settlement:

1. Do nothing. In my experience, many businesses eligible to participate in a settlement do not file a claim because they never learn about the opportunity. While settlement administrators go to great lengths to communicate the settlement to potential class members, sometimes the notices never make it to the right person. Many organizations depend on third-party filers to monitor class action settlements and keep them informed of opportunities.

Remarkably, even after receiving notice of eligibility, many eligible entities choose not to pursue settlement opportunities. There are several reasons that could explain why. My company’s research, which is based on analytics we run on a regular basis, shows that many of those who do nothing are uncertain about the potential return of the settlement or fear that they don’t have access to the data or records needed to achieve their recovery potential. This is where some third-party filers often play their most important role. As a result of their access to relevant industry data, they can build or extrapolate required claim information if a client’s data is limited or unavailable.

2. File a claim. In order to take part in most settlements, class members must complete a claim form. They are often required to provide, or be prepared to provide, some evidence of the damages suffered (usually in the form of bills or receipts). There are settlements where class members receive a check automatically without the need to file a claim form, though automatic payment has become the exception rather than the rule these days. Again, I’ve observed that many businesses use third-party filers to complete a proof of claim on their behalf and file all the required documentation with the settlement administrator.

3. Sell your claim. Some class members might find it beneficial to monetize their claim before the settlement fund is distributed, particularly if increasing cash flow in the short term is important. I’ve observed that more class members are considering this option, so for any business that is considering a sale of their claim, it’s important to take the time to understand the projected value of their claim. I also recommend seeking multiple bids from third parties before agreeing to a final purchase offer.

4. Opt out of the settlement. Once the settlement has been granted initial approval, class members have the opportunity to opt-out of the settlement. Those who choose to opt-out will not benefit from the settlement but will retain the right to individually sue the defendant(s) at their own expense. Class members who do not exclude themselves agree to be bound by the terms of the settlement and forfeit the right to pursue their own legal action.

5. Object to the settlement. Class members can choose to object to a settlement if they believe it is unfair, inadequate or unreasonable. These objections can slow down the settlement process, but they might also help to identify terms of the settlement that are potentially problematic.

The class-action settlement arena is a multibillion-dollar revenue recovery opportunity. While many big settlements attract plenty of public attention, a majority of eligible organizations choose not to participate in these settlements, often because they don’t fully understand the opportunity. If you are making revenue recovery decisions for your organization, it’s important for you to know your options.

The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.


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