N.D. Cal. Releases Comprehensive Procedural Guidance For Class Action Settlements

Author:Mr Michael Scarborough and Nadezhda Nikonova
Profession:Sheppard Mullin Richter & Hampton

On November 1, 2018, the Northern District of California updated its Procedural Guidance for Class Action Settlements, requiring increased disclosures for settlement preliminary and final approval, and more transparency in post-distribution accounting. Failure to follow the Guidance may result in delay or denial of settlement approval. This article highlights the most significant updated rules affecting class action settlements in the Northern District.

Preliminary Approval The Procedural Guidance details twelve buckets of information (many with subparts) parties must provide to the Court to obtain preliminary approval for a class action settlement, frontloading and expanding many of the required disclosures regarding the settlement, attorneys' fees and administrative issues. Indeed, the Guidance recommends parties to take these requirements into account "during settlement negotiations" and when drafting class notices.

Parties must disclose the following information about the proposed settlement during the preliminary approval process:

Settlement fund and allocation plan to class members; Any differences between the settlement class and the proposed or certified class, as well as differences between the original claims in the complaint and the claims to be released in the settlement; Process used to select the settlement administrator and anticipated administrative costs; Class notice and instructions for opt-outs or objections; Attorneys' fees, including lodestar calculation, and incentive awards; Cy pres recipients and potential conflicts. Final Approval The new Guidelines require class counsel to disclose "detailed lodestar information" in all fee requests, "even if the requested amount is based on a percentage of the settlement fund." Loadstar billing calculates attorneys' fees by multiplying the reasonable hours worked by lawyers' hourly rates. Judges in the Norther District of California increasingly have been relying on lodestar information as a check on the reasonableness of attorneys' fees in large class action settlements. The new requirement for detailed lodestar information may signal increased scrutiny and benchmarking of class counsels' fees.

Motions for final approval must also disclose data on submitted claims, undeliverable class notices, opt-outs and objectors.

Post-Distribution Accounting Parties are now required to file a post-distribution accounting 21 days after settlement funds have been distributed and...

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