In Short
The Situation: Recently amended Federal Rule of
Civil Procedure 23(e)(2) requires courts to analyze several factors
in evaluating whether to approve class settlements.
The Result: Class action settlements that would
previously glide through the approval process are facing heightened
court scrutiny, including at the preliminary approval phase, with
increased costs and risks to defendants.
Looking Ahead: In structuring class
settlements, defendants must weigh the benefits of favorable
settlement terms against the risks and costs associated with
increased judicial intervention. Parties must invest early in the
litigation, including potentially frontloading discovery and
involving a mediator, to lay the groundwork for justifying
favorable settlement terms to increasingly skeptical courts.
