Reviewing Reverters: The Profits of Reversionary Money in Class-Action Settlements

In any class-action settlement, the fate of unclaimed settlement money can be vital. For instance, with a common-fund settlement (with a settled amount deposited into a communal fund for delivery to class members), a noteworthy portion of the fund might remain after deliveries are made dependent on how payments are deliberate and distributed. As well as even with a “claims-made” settlement (by the amount paid totaling the sum of the entitlements filed), there will typically be several settlement checks that go uncashed. What occurs to the unclaimed otherwise undistributed cash?

unclaimed settlement money

One choice is for unclaimed funds toward revert to the defendant.

Mainly with a common-fund settlement, numerous plaintiffs’ attorneys and some courts might object to this. However, such a reversion might offer an exclusive opportunity toward resolving an otherwise inflexible case by permitting the parties to agree on a settlement sum they might not or else.

To start with a warning note, a contract that unclaimed money reverts to the defendant is measured one of the three “delicate signs” that “class recommends ha[s] permitted pursuit of their own self-interests toward infect discussions,” at least in the Ninth Circuit. The additional signs are a “clear sailing plan (i.e., an arrangement wherever defendant would not object to a definite fee request through class counsel)” and permitting class counsel to accept a disproportionate distribution of the settlement. Thus, in considering a reversionary settlement fund, counsel would do fine to minimize the existence of other supposed signs of collusion. Also, if a class has not yet been licensed, any settlement contract will be subject to delicate scrutiny for proof of conflicts plus collusion.

Reversionary funds can generate a risk that class counsel’s recovery would be disproportionate to that of the class.

In a common-fund settlement without the return of unclaimed settlement money, an award of 25% of the stock for attorneys’ fees is measured a suitable “benchmark.” But in claims-made plus reversionary settlements, law court are split as to whether lawyers’ fees should be assessed for justice by viewing them as a fraction of the total quantity that is accessible to be claimed through the class or of the quantity really paid to the class. Furthermore, the benefit to the class in such settlements could not be determined till the claims-form procedure is complete.

Thus, however not common, reversionary gross-fund settlements must not be ignored: their benefits could remove important blocks to an otherwise promising settlement.

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