A class settlement binds people who never appeared, so it requires judicial approval on findings that the settlement is fair, reasonable and adequate.
Preliminary approval authorises notice. Courts increasingly require a substantive showing at this stage, including that the class will likely be certified and that the settlement is within the range of possible approval.
Notice must be the best practicable under the circumstances, with content that a lay reader can act on: the claims, the terms, the release, how to object or opt out, the fee request, and the hearing date.
Fairness factors. The adequacy of representation; arm’s-length negotiation; adequacy of relief considering costs, risks and delay, the effectiveness of the distribution method, the terms of any fee award, and any side agreements; and equitable treatment of class members relative to one another.
Red flags. Clear sailing agreements on fees; reversion of unclaimed funds to the defendant; disproportionate incentive awards; claims processes with low expected participation; and coupon relief.
Objectors have a role, and courts scrutinise both objections and their withdrawal.
Cy pres distribution of residual funds must bear a substantial nexus to the class’s interests and is increasingly restricted.
Release scope. A release broader than the claims litigated draws scrutiny, since absent members lose claims that were never adjudicated or valued.