A recent article in the Los Angeles Times regarding a class action settlement by Farmers Insurance suggests that there is something improper about a class settlement that requires class members to submit a form under penalty of perjury, and allowing money that is not paid out to revert to the insurer:
Here’s how to make a $455-million consumer class-action settlement disappear.
First, require the aggrieved customers to sign and mail in a claim form comprising 10 pages of legal Esperanto before receiving any money. Make sure the customers know they’re signing “under penalty of perjury.”
Second, let the company keep any money that isn’t paid out.
I have not studied the court file or orders in this case, but the article seems to miss some key points. It’s typical for courts to require class members to submit claim forms under penalty of perjury. Courts must do their best to ensure that money goes only to people who are entitled to it — class action settlements are ripe for fraud, just like rebates that are issued by stores when you purchase a product. It’s also not uncommon for courts to allow uncollected money to revert back to the defendant. The total dollar amount of a proposed settlement is sometimes based on an estimate of what might be owed to the class, where there is no way of knowing what actually is owed.
The article seems to deride Farmers’ position but says very little about the $90 million of attorneys’ fee award. What work did plaintiffs’ counsel do to earn such a large fee? Will the actual fee take into account what the class actually receives in compensation?