Blog

Administering a Class Action Settlement with No Claims Process

Structuring a settlement with no claims process means class members receive their benefit without having to submit a claim form. While the administration process will not include administration costs related to processing, reviewing and validating claims, there are other increased administration costs counsel should know about in a no claims class settlement.

Based upon our experience administering many of these types of no claims class action settlements, the administration costs saved by eliminating a claims review/validation process are largely offset by the increased check printing and postage costs of mailing checks to 100% of the class. This is because class settlements with claim forms don’t mail checks to 100% of the class, rather only class members who submit claim forms are mailed checks, typically 10-25% of the class, thereby reducing the check printing and postage costs in class settlements with claim forms.

Settlements structured with no claims process can only be administered if a class list is available containing class members’ names and addresses. In a settlement requiring that class members file claim forms, the administrator receives a recent address directly from the claimant. However, in no claims class settlements, where the administrator does not receive an address directly from each claimant, the check cashing rates are typically lower. This may mean that a significant percentage of the net settlement fund will be paid to cy pres recipients due to the increased percentage of uncashed checks.

In recent years, courts have been scrutinizing cy pres provisions. The 2018 changes to the Northern District of California Guidance for Class Action Settlements added a requirement to the motion for preliminary approval; counsel must now identify the chosen cy pres recipients, and state any relationship the parties or counsel may have with the proposed cy pres recipients. This move toward transparency is further evidence of closer judicial scrutiny to cy pres payments.

What We’ve Learned

Heffler recently administered a no claims process class settlement that resolved claims concerning alleged unpaid overtime, meal and rest periods allegedly not provided. After the stale period for settlement checks had passed, approximately 25% of the checks remained uncashed. Conversely, in class settlements with claims forms, the percentage of uncashed checks is typically 5% or less. 

The lesson from administering no claims class settlements is to go the extra mile in the efforts to locate class members, including post-distribution mail, email, and/or phone call reminders. Further, consider using more than one address search company. Address search companies have different programs that yield different results. The goal should be to distribute as much of the net settlement fund as possible to class members, thereby reducing the residual uncashed check fund available for cy pres

How to Decide

There are certainly situations in which structuring your settlement to not include a claims review or validation process. Partnering with an experienced settlement administrator with a willingness to offer pre-settlement consultation means structuring your settlement and plan of allocation in the most efficient way possible.

Mark Rapazzini
Mark Rapazzini consults with clients in the consumer, food and beverage, labor and employment, finance and mass tort practice areas. He has over 25 years of legal experience in cases ranging from individual personal injury litigation to class actions and complex mass torts. Mark also has over fourteen years of experience managing complex claims administration matters and has managed and supervised the administration of employment, securities, consumer, property, and various other types of class action settlements.


Back to Blog

Spotlight

Subscribe to our blog

[eBook]: Tools for Navigating the Class Action Settlement Process

Find Out More

[On-Demand Webinar] Navigating the Settlement Administration Process from Start to Finish

Find Out More

New to Class Action Litigation? Start With Our Free Resources

Find Out More