Peering into a Black Box: Discovery and Adequate Attorney Representation for Class Action Settlements

Peering into a Black Box: Discovery and Adequate Attorney Representation for Class Action Settlements^ The loss of litigant power over settlement options is one distinguishing characteristic of class action law. In typical litigation, the client calls the shots. Although an attorney can recommend that her client settle a lawsuit, the client must make the ultimate decision.' In class action litigation, by contrast, individual plaintiffs have little influence (or, more typically, no influence) regarding whether the lawsuit should settle.2 Instead, class counsel makes decisions for the class with respect to settlement, subject only to court oversight.3 Not even the named plaintiffs can demand that a settlement offer be accepted or rejected.4 This transfer of settlement power from class member to class attorney invites dissension from class members who object to the class attorney's decision to settle. In nonclass action suits, client control over settlement options tends to assure that all parties are satisfied with the settlement's terms. Client assent to a typical, nonclass settlement indicates that the client prefers acceptance of the settlement to continued litigation.5 Class members, however, face the possibility that the settlement will extinguish a valuable property interest,6 their legal claim, without the members' consent to the settlement terms.7 Thus, objections to class settlements arise when class members feel that the class attorney compromised the claims too cheaply-that class counsel gave the defendant a sweetheart settlement. 8 To ensure that the loss of litigant settlement power does not result in truly inadequate settlements, class action law provides class members with a number of doctrinal safeguards. In practice, however, these safeguards are often illusory and provide little real protection. For one, class members are sometimes able to opt-out of the class altogether in favor of pursuing individual litigation.9 Opting-out is often not an option,10 however, and the only recourse for class members opposed to the settlement is to object at the fairness hearing in an attempt to persuade the court to invalidate the settlement.11 At the settlement hearing, both the prerequisites for class certification12 and the various requirements for maintaining the class under the federal rules13 remain open for judicial consideration.14 Should the court find that these prerequisites or maintenance requirements have not been met, then it must take appropriate corrective action, such as adjusting the composition of the class or decertifying the class altogether.15 However, only in rare cases will courts examine these requirements with great care. Typically, the fairness hearing is a second inquiry into these requirements, the court having previously examined each of them prior to certification of the class.16 In practice, the linchpin of the fairness hearing inquiry is the adequate, and standard.17 Under this rubric, a court must assess whether the settlement adequately compensates class members; if it does not, the court must withhold judicial approval of the settlement.18 By its nature, however, the adequate, and standard is highly indeterminate, incapable of assisting the court in determining whether the settlement is fair.19 Too often, the judge is predisposed toward approval of the settlement and uses her discretion over discovery and admission of evidence to limit the facts available to objectors at the fairness hearing.20 As such, the fair, adequate, and reasonable standard often provides little more than a convenient label for the judge's largely intuitive determination, and it fails to protect class members because it fails to identify unfair settlements.21 Part I of this Note examines the effectiveness of the fair, adequate, and reasonable standard for protecting the interests of absent and objecting class members. The discussion in Part I relies heavily upon an analytical dichotomy between substantive and procedural scrutiny of a settlement's fairness. …