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Rejected Class Action Settlement Highlights Court’s Role in Protecting Class Members

In an unusual turn of events, this week a federal judge in the Northern District of California rejected a settlement proposed by both the plaintiffs and defendants in a major antitrust class action involving many of the nation’s largest tech companies. The settlement would have distributed over $300 million from the defendants to the class members, but represented a substantial discount from the potential $9 billion in damages the plaintiffs have been seeking.

NY Times Story on Rejected Settlement

Judicial rejection of a proposed class action settlement is somewhat rare–particularly in a case of this magnitude–but the court’s meticulous scrutiny of the proposal is specifically mandated by Rule 23 of the Federal Rules of Civil Procedure. Judges stand as caretakers of the rights of absent class members and are called upon to ensure that those rights are not violated by the settlement process. It appears that, in this case, the federal judge did not feel as if she could reach that conclusion.

The court’s role in approving (or rejecting) proposed class action settlements provides class action lawyers with additional incentive to doggedly litigate their clients’ claims. If an extraordinary effort and/or an excellent settlement value can be shown to the reviewing court, judicial approval of a class action settlement is much more likely to occur.

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