Twice in recent weeks, Uber Technologies Inc. saw legal settlements rejected, including a $100 million deal to end labor practice claims, in decisions that serve as a stark reminder that judges aren’t going to just rubber-stamp settlements in class actions.
Last Tuesday, a California federal judge rejected a $28.5 million settlement that would have resolved claims that the ride-hailing company misled consumers about one of its fees and the quality of its driver background checks. Two weeks earlier, in the same San Francisco courthouse, another judge refused to sign off on a proposed $100 million deal that would have put to bed accusations that Uber stiffed drivers on tips and work expenses.
Although attorneys said it’s somewhat rare for a judge to reject a settlement, the decisions are another reminder that judges will closely scrutinize class action deals before they are willing to give their blessing.
“The biggest mistake that a plaintiff’s lawyer can make when submitting a class settlement for court approval is assuming the judge will just rubber-stamp it,” said Justin Swartz, co-chair of the class action practice group at Outten & Golden LLP. “Judges play a very important role in the class action settlement process, and they’re absolutely right to take that responsibility seriously.”
Here, veteran plaintiff’s attorneys share some tips on how to facilitate approval of a class action settlement.
From the plaintiff’s perspective, the goal of any settlement is to get as close as possible to the maximum potential value of the claims. But rarely does that happen, according to Michael Strauss of Strauss & Strauss APC.
When it comes time to bring the deal to court, the judge will want to know what the best possible outcome would be if everything went right for the plaintiffs, how the two sides reached the agreed-upon number and why it is reasonable.
“It’s the plaintiffs lawyer’s job to walk the court through the thought process of how various overlapping risks decrease the expected value of the case,” Swartz said.
Attorneys would be making a big mistake if they tried to obscure the potential value of the case, he said. It’s important to be upfront and transparent with the court about the best outcome that could have been achieved.
“If you hide that information from the judge, you’re asking for an even closer examination of the settlement as a whole,” Swartz said. “The court deserves to know what the plaintiffs’ best possible day is.”
Negotiate a Fair Deal
When U.S. District Judge Edward M. Chen rejected Uber’s $100 million deal with drivers over labor claims on Aug. 18, the judge took issue with, among other things, the value of a claim under the state’s Private Attorneys General Act. The settlement would have resolved the claim for $1 million, though plaintiffs attorneys had argued earlier that such a claim would be worth $1 billion.
Attorneys said a settlement that recovers a small percentage of the total potential value of a claim isn’t automatically bad. In fact, it can be entirely appropriate if the risks involved with the case justify it, some said.
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Talk With Objectors
Another factor courts take into consideration is the class members’ reaction to the settlement.
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Simply negotiating a good settlement goes a long way toward quelling class members’ concerns, attorneys said. That being said, even the best settlements can have objectors from time to time.
Swartz said it’s important to take their concerns seriously and not be condescending. Plaintiffs lawyers shouldn’t forget that objectors are among the people they’re trying to help, he said.
“Nine times out of 10, objectors aren’t objecting for a bad reason,” he said. “They’re objecting because they are seeing some injustice not fixed by the settlement.”
Sometimes, though, objectors will raise issues about things the lawsuit was never intended to address. For example, workers in a lawsuit over back wages might not like the deal because it doesn’t fix everything about their workplace.
In these situations, Swartz said it’s important to talk with the objectors and try to help them understand what the lawsuit was intended to achieve.
“Explain to them that the other problems in their workplace are real, but there are different avenues to address them,” he said. “And try to help the objectors understand this is part of the battle. It’s not the entire war.”
Know the Court
Some courts have specific guidelines for what they look for in a settlement. In the Northern District of California, for instance, courts have laid out their expectations for parties seeking preliminary settlement approval in a three-page outline.
Among other things, the judges ask for information about the settlement, including the likely recovery per plaintiff. Judges also encourage attorneys to include information about the fees and incentive awards that they intend to request.
But not all courts have the same guidelines, and others might have their own checklists that attorneys are expected to follow.
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Tidy Your Papers
Along those same lines, Swartz said a lawyer who goes before a judge with a settlement in hand is, in essence, asking the judge to trust that they are doing something good for the class. Showing up with sloppy settlement papers will likely make a judge start to question whether that’s true.
“It’s very important for plaintiffs lawyers to make settlement papers robust and mistake-free,” he said.
Everything is magnified in the settlement approval context, attorneys said. Anything that a lawyer appears not to be upfront about can cast doubt on the entire deal. Even something as seemingly innocuous as typos in the approval brief can start to raise questions from the judge.
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