We often hear critics of class action litigation complain that judges just "rubber stamp" settlements that often benefit only the lawyers, and not the class members whom the class action laws are intended to protect. Those critics must not be collecting their empirical data from Orange County. In the Orange County Superior Court's complex litigation program, the judges closely scrutinize settlements, even if the defendants and plaintiffs agree that everything is good and fair.
For example, last week, Judge Stephen Sundvold denied certification and preliminary approval of a wage and hour class action settlement in Alvarez v. Dastmalchi. In so doing, the court began by observing that "in general terms the Settlement is satisfactory," but there are some areas which need to be resolved, including:
Paragraph 12(c)(v) of the settlement agreement, which provides that enhancements for the Class Representatives are conditioned upon a general release being given by the Class Representatives. The court noted that "enhancements come out of class funds and can only be based upon efforts and risks undertaken by the representatives in performance of their duties. The enhancement cannot be consideration for a release." (He's right.)
Paragraph 12(j) of the settlement agreement probably provided for the parties to agree upon a charity for residual funds to be donated to. The judge said no. "This Court must approve the charity for any residual, even if nominated by the Parties. It is a better practice, particularly in wage cases, for any uncashed checks to be forwarded to the California State Controller's Office to be held for the Class Member's benefit and ultimately the funds can escheat to the State if unclaimed. Withholding will be taken from the funds and it is unfair to subject the Class Member to tax liability if they do not get the check, or at least have it held for their benefit for an extended period of time." (He's right.)
Paragraph 17 of the settlement agreement and paragraph II(D) of the notice to class members, the court notes, contained an overbroad release. "The only claims that can be released by the Settlement are the claims identified in the Complaint," says the Court. (Right again.)
The settlement can still be approved if the parties go back and make sure everything complies with both the letter and spirit of the law. That is as it should be.
Advocates for lawbreaking corporations who want to avoid liability by restricting class action remedies claim that frivolous class action settlements are making greedy lawyers rich while the courts rubber stamp their back room deals. It just isn't happening. The courts review these deals carefully, not just at the "big picture" issues, but the finer details, too.
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