A settlement is a settlement. The parties agree on its terms, terminate the litigation, and move on. Right? Not always. Class actions, for example, are different. There, the courts must review the settlement to determine whether it is fair and reasonable. If it is not, the court may reject the settlement and require the parties to craft different settlement terms or resume litigation.
The U.S. Court of Appeals for the Third Circuit recently waded into the murky waters of reviewing class action settlement awards. In In re Baby Products Antitrust Litigation, No. 12-1165 (E.D. Pa. 2013), the court reviewed a settlement containing provisions for a "cy pres" distribution. Increasingly common, cy pres distributions sometimes referred to as a "fluid recovery" involve the defendant’s payment of money to nonparties, usually charities, that were not injured, but that have interests akin to those of the injured parties. Cy pres distributions are made when settlement funds are not exhausted by payments to class members who submitted claims or when it is economically irrational to distribute extremely small payments to a large number of class members.
