Class action lawsuits continue to pose substantial risks to corporate America, notwithstanding the passage of the Class Action Fairness Act and recent U.S. Supreme Court decisions, which should be reigning in these types of cases. In particular, there has been an explosion of consumer protection actions filed in the past few years. These will continue to grow since they have now begun to attract some of the more reputable members of the plaintiffs’ class action bar. While plaintiffs’ lawyers are seemingly quick to navigate around legal obstacles companies may place in their way, companies can implement a number of pre-litigation strategies, discussed below, to try to curtail the class action process. If and when a company does decide to settle, though, it has a vested interest in ensuring the settlement receives judicial approval. Given the recent trend of courts being critical of and rejecting class action settlement agreements, companies should consider retooling their approach to the settlement process to better protect their hard-fought negotiated agreements.
Taking Corrective Action
On occasion, courts reward companies for proactively identifying and resolving budding legal concerns, such as instituting a product recall or offering product refunds. For instance, just this January, Toyota prevailed against a class action in large part because it had initiated a voluntary safety recall of its vehicles to correct a defect in the anti-lock brake system.1 Finding that car owners suffered no actual injury as a result of Toyota fixing the defect through the recall, the court denied class certification. It was not Toyota’s first win of this kind, however, as a different court held last year that another of Toyota’s recalls rendered that lawsuit prudentially moot.2
