Trick or Treat? 5 Ways to Make Class Action Settlement Administration Proposals Less Spooky

Halloween is the perfect time of year to discuss a potentially devious goblin – settlement administration proposals. With courts around the country asking for increased transparency, it’s important for plaintiff and defense attorneys to know how to determine if there are buried caskets in the estimates you receive from administrators. A trick is never a treat when it comes to unanticipated fees.

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1. Ghoulish Hourly Rates

Hourly rates may be necessary evils in settlement administrator proposals, but you never want them lurking in the dark or buried six feet under as a footnote regarding scope. All settlements require time spent for interaction with counsel, auditing of claims, calculation of awards, and declarations to the court to name just a few items. If there are no hourly rates associated with these activities in your estimate, you might find them hiding in the dark. Out of scope or limited numbers of hourly rates act as a sort of funhouse mirror image of what the final total will be.

Find out if there are hourly rates for potential activities that aren’t stated or are listed as TBD which could be applied to your project. This can include items such as project management hours that aren’t reflected in the proposal but may come up on the final bill and feel more like a trick than a treat in the end. Also, if an administrator gives you a list of hourly rates, ask them to put in writing when these rates would apply and if these items are included in your estimate. 

2. Frightening False Assumptions

Frankenstein’s monster was a sloppy version of thrown together parts that made one terrifying mistake. Settlement proposals can sometimes function in the same way based on the assumptions made in the proposal. Look to see if the assumptions are accurate or realistic. Are there hidden tricks used to lower the estimated cost in the proposal that could raise the cost of your final bill? Being able to recognize inaccurate or unrealistic assumptions at the proposal stage can save you from last-minute frights such as unexpected fees.

Working with the correct assumptions from the start allows a class action administrator to build an accurate bid that you can easily compare with other bids. Providing the same assumptions to all administrators bidding on your project helps to ensure you get an apples-to-apples comparison when evaluating which administrator to select. If you don’t want to supply the assumptions, look for the following tricks:

  • Does the proposal heavily weigh electronic over paper claims? Electronic claims are normally less expensive; however, if you use a duplex postcard with return claim form, you most likely will get more paper claims.
  • Mailed notice is significantly more expensive than emailed notice as it requires paper, printing, and postage. Tricky administrators will heavily weigh email notice if you don’t give them numbers to use for each notice type.  Make sure to also factor in how you will process returned mail – this can significantly impact the final bill if it’s not included upfront. 
  • Is the media campaign “cheap” because it’s open to fraud and blacklisting? What safety measures are accounted for in the proposal? Media is a tricky thing. If you don’t use a veteran and proven media expert, you open yourself up to some scary scenarios. Be vigilant with the media program so that you protect your client’s reputation, meet due process, and stimulate claim response.
  • Has the administrator used a claims rate that seems ghoulishly low? If the estimated claims rate used is low, the final price will also be low. Set the claims rates you’d like to see estimated and don’t be afraid to ask for more than one estimate.

3. Hocus Pocus Language

Some words simply cast a spell on you. The hocus pocus in terms that suggest “locked in price” or “fixed, all-in pricing” are enchanting. But like most spells, it can be deceiving and go up in a cloud of smoke.

When an administrator provides a fixed fee make sure you ask about any hidden fees and get in writing what work would be considered out of scope.

4. Turn on the Flashlight

The best treat to give yourself is asking for clarity. If you notice something is missing or think the assumptions the administrator is working from are not accurate, ask the administrator to explain any discrepancies in a way that will allow you to understand if there was an honest mistake or if there is a trick being played. You can always ask an administrator to change their assumptions and representative pricing. Arm yourself with the knowledge to make sure you are always protected against devilish behavior.

5. Heffler Treat

We’ve included a treat from Heffler this Halloween to help you avoid any possible pricing tricks in your administration bids. The next time you are soliciting proposals for a class action settlement, you can use this template that lists necessary settlement services for the case. This template makes it easy to know all administrators work from the same assumptions, and helps you find the worm in any apples-to-apples comparison.

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Lori Castaneda
Lori Castaneda, who has more than 20 years of experience in the legal industry, serves as Senior Director of Heffler Claims Group (Heffler). As a highly-skilled strategist with a consultative approach to client service delivery, Ms. Castaneda has been involved in the successful administration of hundreds of high-profile class action settlements

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