Appellate Scrutiny of Class Action Settlements

Class actions have penetrated every sector of American commerce. Significant resources routinely are invested in resisting class certification because of the adverse economic and business management consequences that can follow from classwide relief. In those circumstances when a class is certified, the incentive to settle and avoid a classwide trial can be compelling. In other circumstances, a pre-certification settlement can be advantageous to help contain perceived risks. Once a settlement is reached, however, a targeted defendant wants it to stick. And while appellate review of class settlements is conducted under a generous abuse of discretion standard, recent appellate decisions make clear that that standard of review is not a ticket to affirmance. This article explains how class settlements have come under increased scrutiny in appellate courts. Appellate courts are looking hard at the relief that the settlements actually provide to the putative class members, and they do not hesitate to reverse a settlement if the benefits to a class do not measure up. As a result, what appellate courts have had to say when they review disputed class settlements bears a closer look so that an adequate record can be made in the district court