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Class Action Settlements — SIB Whitepaper

In the current business environment, it is important that companies be diligent and attentive with regard to class action settlements. In this paper, we offer a succinct guide to both the benefits of working to file class action settlement claims and the pitfalls that often hold companies back from doing so. Class action settlements are a source of funds that is often overlooked because of their seeming remoteness from businesses’ everyday operations and the inordinate amount of time and work receiving compensation from such settlements may sometimes require. It takes a rigorous and adaptive mindset to view investigating and filing for class action settlements as a relatively routine pursuit. But making a switch to the kind of
mentality that sees savings opportunities where other companies see simply fixed and intransigent costs can open your organization to transformative possibilities. In the current
landscape, flexibility can compensate you as much as revenue.

What are class action settlements?
The mechanics behind class action litigation and settlements are relatively simple: a small group of plaintiffs pursues damages against a defendant on behalf of a much larger group whose interests they represent. If the suit settles before or during trial, or if the defendant is found to be guilty, all members of the class are entitled to compensation. This compensation is distributed on a simple or prorated basis or, depending on the complexity and size of the class and the existence of sub-classes, by more complex distribution methods that calculate damages by tiers or factors. Class proceedings have been part of the American judicial system since the mid-19th century, but they only came to public prominence in the Civil Rights Era, with blockbuster rulings becoming instruments for sweeping reform that altered the legal status of millions of people.
In more recent decades, especially since the 1960s and an amendment to the Federal Rules of Civil Procedure1, the class action process has broadly taken a different turn. It is now used primarily to secure settlements for consumers and investors who have been victimized by illegal actions or misrepresentations on the part of corporations. The Class Action Fairness Act of 2005 codified the implications of this shift2. Two major consequences have ensued from this corporatization of class action. First, more class actions than ever are being filed on behalf of organizations in virtually every industry, major and minor. They encompasses such critical sectors as health care, telecommunications, and the financial services industry, and such relatively unknown or innocuous-seeming ones as potato farming and cathode ray tubes. Second, a specialized legal industry solely focused on bringing class action proceedings has developed, breeding both benefits and controversy: while legal teams often end up charging tens or even hundreds of millions of dollars in fees for successfully litigated cases, the constant threat of class action suits unquestionably provides a much more intensive form of protection for organizations than is possible from regulatory agencies like the FCC or SEC acting alone.

Most important, in any case, is that class actions have proliferated in the past few decades to the extent that they deserve the attention of businesses disciplined enough to pursue them. That is to say, enough class action suits have been brought in enough sectors to virtually ensure that most businesses, especially those with multiple locations or units, have been entitled to compensation in relation to some aspect of their operations. It takes organization, consistency, and more than a little patience to secure a share of the ever-expanding landscape of class action suits being litigated. But the return on this investment of time and energy can be formidable. For a business, the idea of missing out on money that is available simply through effective organization should feel alien. A mindful company shouldn’t view pursuing relevant class action compensation as anything but a standard aspect of its savings repertoire. Such a pursuit does not even require enlisting the services of an attorney.

When a consumer or company files to receive funds for a class action suit, a case has already been pursued on behalf of a plaintiff, the judge has decided that the plaintiff represents all or many people or groups in similar circumstances (called class certification), and, either before or during trial, the defendant has agreed to release a pool of money that a judge consents to as adequate to compensate those damaged by the defendant’s malfeasance.

It would seem, then, that at the point at which you, as a member of a wronged class awarded damages, enter into the class action process, most of the work has already been done. This is both true and untrue. Class action litigation is certainly long and complex, even without the addition of major amounts of money and corporate reputations at stake3. The professionalization of class action suits has in fact introduced even more complexity into these behemoth cases: if there are attorneys and firms who now exclusively focus on bringing and litigating class action suits, there are now also what are referred to in common parlance as “professional objectors,” who introduce needless motions and obstructions into the ongoing course of class action cases and the recuperation of settlements until they are essentially paid to go away. Despite the disreputable nature of this practice – serial abusers can be disbarred, and often have to act through intermediaries – series of extortionate objections can tie up cases for months or years, preventing claimants from receiving damages that would have long since been distributed.

What remains once a settlement has been defined is the work of contacting every member or many members – a figure sometimes in millions – of the class delineated by the suit, notifying them of their right to claim a portion of the funds and laying out the procedures for doing so4. This does not at all guarantee, however, that companies are given adequate notice of their eligibility to file. Claims administration is a variable practice, and administrators use a variety of physical and digital formats to reach out to potential claimants. The
requirements for notifying all relevant parties differ depending on the case. For instance, this may include publishing an announcement in a national newspaper, or distributing a mailing electronically that could conceivably land in a person’s spam folder where it may not be seen in time.

Cases
Before discussing best practices for setting your company up to claim funds due from class action settlements – and some of the difficulties involved in this process – let’s discuss some of our own recent cases to define what makes a company successful in securing these claims. In 2016, after litigation that began in 2014, an Ohio judge ruled in favor of a certified
class against a consortium of manufacturers of polyurethane foam, used most commonly in mattresses and other furniture products. The manufacturers were alleged to have colluded to
fix prices. With our mandate to find all possible savings for our clients, we sprang into action on behalf of those in affected industries, especially those in hospitality: we gathered and organized purchase records and invoices, contacted claims administrators to clarify exactly what they required to verify our clients’ membership in the plaintiff class, and, uniquely to this case, we did intensive work, based on product usage and turnover rates, to project reasonable estimates of clients’ spending on polyurethane products when clients had gaps in their documentation. For this, we had to mobilize dense industry knowledge and data. It took a serious allocation of time to do this on behalf of hundreds of large clients, but we succeeded in securing funds for almost all of them. Importantly, in this case, scale mattered for the damages secured. While individual consumers would have been entitled to a nominal amount of the settlement pool – basically a symbolic restitution – the damages reclaimed by our clients were profound. This case illustrates that class actions on the business and corporate side are vastly different and frequently much more remunerative than those on the consumer side – though filing their claims is, concomitantly, a much more time-intensive
process.

Imagine the difference, for instance, in another recent class action case for which we have filed on behalf of our clients. Another ruling in 2016 entitled Illinois purchasers of flat-screen LCD televisions and other devices to damages based on a similar instance of price-fixing. In this case, a specific dollar amount of restitution, ranging from $20 to $270, was awarded per device purchased over the preceding ten years. Compare the damages for an individual consumer, who had perhaps purchased three such devices during that time period, and one of our clients, who had purchased thousands. Moreover, in this specific case, due to a dearth of claims filed in relation to the settlement pool, damages were awarded to claimants beyond initial expectations; for, once defined, all funds from a settlement must be distributed. The result was a transformative success for a client that had not even been initially aware of the class action suit.

We can take a few crucial insights from these case outlines. First, class action suits are diverse and unpredictable. It requires vigilance to be aware of pertinent suits in the first place, and it takes a major investment in time to develop a plan for filing claims in relation to the expectations and requirements of claims administrators. Second, and relatedly, both the difficulty and the rewards of class action suits are magnified when the claimant is a large and complex business rather than an individual consumer.

Waiting It Out
Part of the explanation for these difficulties comes, unfortunately, from the fact that claims administration practices for class action settlements are somewhat variable. They are frequently overseen by claims administrators with their own notification practices and documentation requirements. These also change, of course, in relation to the specific nature of each suit. Providing notice to potential claimants involves procedures that are somewhat standardized by the relatively stringent guidelines set by law (McGovern 2009:124-125). Nevertheless, it is often the case that the full range of options by which claimants may be informed of and given access to resources and documentation relevant to filing as class members is not always taken advantage of by those administering settlements. The result can be a difficult tangle of printed and online information that is distributed to many but not all members of a class with rights to claim settlement funds. This distribution takes place in the form of documents that class members often have difficulty understanding or properly completing by deadlines determined in the settlement process and by claims administrators. Every case has class members mistakenly opting out by completing forms in an erroneous manner, or unable to collect the documents necessary to establish their class status in time to reach the deadline, or who are simply confused about what their class status means.
Adding to these difficulties general to filing as a class member is the fact that class action suits cover virtually every consumer interaction, meaning that class membership entails procuring documentation that could involve hundreds of different kinds of records, including receipts, invoices, contracts, End User License Agreements, and prescriptions or medical records, to name just a few. Each claim requires detailed documentation from a different segment of the life of a person or company, which, without significant time and resources, can be extraordinarily difficult to successfully retrieve and submit on time. If the explosion in class action suits has largely expanded the rights of businesses and other groups, it has also made the process of pursuing settlement claims an infinitely more complex task.

The structure of settlement distribution also varies widely, as seen in the above cases; some of the more complex cases must “triage” settlements, or redefine the class involved based on their level of exposure or damage from the illegal action in question in order to make out payments structured by attributes that are usually far more complicated than simple proration. Different settlements and trusts, depending on their claim administrators and the legal counsel involved in disputes, may have free reign to design the implementation of settlements, assented to by a judge. These differences can make it either very easy or very difficult for claimants to pursue them. They can even require claimants to self-select, offering a smaller, fixed settlement portion for a relatively insignificant amount of work and simultaneously other, more complex options for those with the capacity to produce more detailed records or information.

Inevitably, the option requiring the least amount of work is chosen by a majority of claimants in such cases, because the task of filing can be daunting. Moreover, settlement distributions are organic processes rather than stable, repetitive, replicable feats. Each case is different, and complex cases may transpire such that notification is initiated and revised once or multiple times. In the process, the requirements of identifying as a member of a class or subclass, and thus the documentation that a claimant must produce, may change substantially. The overall course of pursuing funds from a class action settlement can be a matter of months, but more frequently it is years, and sometimes the better part of a decade.

Best Practices
If you are organized and your mentality is one of constant pursuit rather than occasional receipt, the current landscape of proliferating class action is such that you can not only properly pursue those funds of which, as a clear class member, you might be provided adequate notification; you may also aggressively pursue funds about whose establishment you might only have limited notice or awareness.

The key is to work as both an archivist and an activist on behalf of your business. You should maintain a clear and expansive sense of your operations, expenses, and records. Codify your investments and expenditures by type; keep a searchable database of detailed transaction records with specific headings under alphabetized categories. Encrypt and archive information rather than dispensing with it when it no longer seems useful. This transition may prove difficult at first, but if you operate under the general guideline that all of your transactions might one day be mobilized to prove your membership in a class claiming damages, the means of doing so will clarify.
Similarly, you must devote time to remaining informed of ongoing suits related to all aspects of your operations, however uncertain the connection might seem. Invest in a subscription to Nexis-Uni and perform a monthly review of current class action proceedings, or peruse open-source online databases of open cases. Shift your thinking to include class action settlements as an active part of your cost-saving repertoire, rather than recoiling from their demands on time and resources. Such small shifts in thinking provide the basis for transforming your business practices in favor of creative, sustainable cost reduction.

If this seems like too much for your organization to take on, or if you do not quite have the resources to devote to it, seek effective outside help.
We have built class actions settlements into our standard savings reviews for our clients because, as we quickly discovered, large settlements have impacts far outside the boundaries of one or even a few industries. Waste Industries, for instance, recently settled for abuses in the environmental and fuel fees it charged its clients. Sysco has also recently settled for damages caused by similar practices

Proactivity, organization, and mindset constitute the key difference between those businesses, like our clients, who cash in on class action, and those who do not. In many cases, we already had the records we needed to file on clients’ behalf, based on other cost-savings projects. This means that preparation for filing class action claims is part of a broader organizational mentality: when savings are pursued, in a variety of domains, the practices required for one may carry over into others. In every case, based on previous savings projects, we could easily identify clients who had the opportunity to receive settlement funds, and assist them with the process of filing. We had years of carefully organized invoices and spending records, as well as industry- and location-specific benchmark data with which to do so, and we have long since built in settlements as a viable aspect of our clients’ broader savings strategies.

Can you say the same of your own approach? Class action settlements can certainly be lucrative, but above all, are a gauge of your dedication to pursuing all avenues of available savings. Money should never be left on the table when it is rightfully due to your company. It’s up to you to be thorough enough and well-informed when it comes to identifying and following through on those savings opportunities.

SIB Fixed Cost Reduction monitors and researches settlements that are applicable to the many industries we serve. We only pursue claims that have been settled – meaning there is already money on the table. SIB assumes the administrative burden of compiling the proper documentation, filing our clients’ claims in accordance with deadlines and extensions, and monitoring progress until funds are disbursed. Contact us now to learn about current cases or register for ongoing monitoring.
SIB Fixed Cost Reduction
843-576-3638 • www.aboutsib.com