A Critical Reappraisal of Class Action Settlement Procedure in Search of a New Standard of Fairness


Class action settlements are most frequently agreed upon in a multi-party context where not everyone is aware of the existence of a proposed settlement or of its terms and substance. Accordingly, in this very context, class members’ interests must be closely protected. Settlements must be thoroughly scrutinized and approved by the courts in light of a standard of fairness supported by a list of factors relevant to its determination.

The reviewing judge’s reasoning and approach in using these standards and factors to assess settlement fairness, however, are rarely appreciable by others. Most court judgments fail to reveal exactly how settlement fairness is appreciated. Moreover, the standard of fairness generally accepted in North American case law and doctrine is indeterminate and subjective and has been characterized by many legal scholars as unfit to assist courts in determining whether the settlement is in fact fair 1 or unfair. In fact, there is a general tendency for courts to approve class action settlements without substantive changes, 2 in line with, perhaps, an inclination toward or preference for out-of-court settlements as opposed to often lengthy and complex traditional court adjudication.

This phenomenon cannot be considered lightly. When class action settlements are approved judicially, they are no longer interpreted as purely private contracts. 3 Their fairness concerns not just the class members who participated in negotiating the settlement but “absent” class members (i.e., those members of a putative or certified class who are not named plaintiffs) and the public in general.

This content has been updated on October 20, 2015 at 9:01 pm.