Top 5 Tips for Lawyers Working with Settlement Administrators
Highlights from the Fifth Annual Western Alliance Bank Class Action Law Forum, held in collaboration with University of San Diego Law School
July 03, 2023
Settlement administrators are the backbone of any successful class action settlement. They play a critical role in providing notice, evaluating claims, managing funds, distributing monies to eligible class members, and so much more. The relationship between attorneys involved with class actions and the settlement administrator is critical and can have a big impact on how efficiently claimants join the class and receive settlement funds.
So, what is the most effective way to work with settlement administrators to simplify the process, save money and time, while ensuring the best possible outcome for class members?
The question isn’t how soon you should start working with settlement administrators—the right question is, how soon can you? Earlier is always better. Every case has unique variables and pitfalls, and experienced settlement administrators can often identify those before they become problematic, and/or expensive.
Settlement administrators are typically handling hundreds (if not thousands) of settlements at any one time—they’ve seen it all and know what works and what doesn’t. Their experience and independence make them uniquely qualified to work with counsel to find the most effective and efficient ways to effectuate the terms of the parties’ agreement. Counsel will serve their clients well by seeking out that expertise early in the settlement process.
#2 Trust administrators’ expertise around fake claims
While there have always been issues with ineligible individuals improperly filing claims, this problem has gone high-tech with bots and other bad actors quickly filing a staggering numbers of fake claims. Administrators see these types of issues every day and are attuned to the latest scams, whether those use technology or more old-fashioned methods such as using a single mailing address for thousands of claims. For example, many administrators have a proprietary “do not pay” list for repeat offenders. Approved claimants are checked against these lists before payments are made to ensure that class money goes where it ought to go: eligible class members with valid claims.
#3 Spend administration dollars smartly
Settlement administrators can help to ensure that resources are being spent wisely and the class is getting the highest possible rate of return. Working closely with settlement administrators to ensure that processes are efficient, documentation is complete and validation is thorough can save many dollars and hours. For example, on one panel, a distinguished industry veteran described that it doesn’t make sense to pay $50 in administration costs to process a claim for $10.
It is also important to keep in mind that the lowest bidder may not ultimately cost the least. Expertise and experience can help avoid unexpected administration issues that increase costs. Moreover, sometimes in a competitive bid process, not all settlement administrators make the same assumptions that drive costs. For example, one bid might look lower than another with respect to running a call center, but that could be because of the assumptions the bidders made with respect to call volumes. Look for the per-unit costs to see which offer is better, not just the total, because the number of calls received will likely be about the same regardless of which administrator you choose. A race to the bottom in terms of estimated cost may not yield the best results.
#4 Let them embrace creativity
The world of notice and payments has changed. Gone are the days where the only option to notify potential class members was to mail flyers, and the only way to pay them was through paper checks. In today’s world, most people have near-constant access to electronic devices and are inundated with electronic messages. An experienced settlement administrator will help to illuminate the options that exist and are most effective for each matter and each audience.
The notice process can be thought of like a sophisticated marketing campaign. For example, some simple, eye-catching but surprising imagery can often be highly effective. If a class action case involves a fitness drink, it may be tempting to target potential class members online with an image of someone drinking out of a bottle while working out. But these types of class members may already be targeted with multiple ads with similar imagery, so something less expected may be more effective at cutting through the noise.
The payment process has matured as well. Payment success rates are now much higher when claimants are offered a menu of digital payment options, rather than just a paper check.
#5 Administrators are devoted professionals, but they can’t control every aspect of the administration
Settlement administrators can be extraordinarily effective in their roles, but it’s important to understand not every aspect of an administration is within their control. During one panel, a participant shared a story about a high-profile matter where a prominent politician held a press conference to tout the successful prosecution of a series of related scams, each of which was handled by a different administrator. But when he described how victims of those scams could make a claim, he only provided the toll-free number for one of the administrators. That administrator was inundated with tens of thousands of calls about cases it was not handling, driving the budget for its case through the roof. No one could have predicted this development.
Settlement administrators rely on their wealth of experience to provide counsel with their best estimates of administration outcomes—how many claims will be filed, how many will be approved, how many phone calls will the call center receive, etc. But as the above example illustrates, despite ample experience and best efforts, administration programs don’t always go exactly as planned.
Reputable settlement administrators take their role as a neutral seriously, ensuring the parties’ agreement, as approved by the Court, is enforced. By following these tips and taking advantage of an administrator’s professionalism and experience, class action lawyers can ensure their settlements are administered fairly and cost effectively, achieving the best results for their clients.