What should you do about a class action settlement?

Recently, emails were sent out to millions of Facebook users informing them that they are part of a class action and are entitled to submit a claim for an award of up to $10. In this age of spam, many users were understandably skeptical about the email. However, as was reported by various media outlets (see here, here, and here), the email was not a scam. It was a legitimate notice approved by a court informing Facebook users that they are members of a class action settlement and will lose their rights if they don’t act. The settlement arose out of a lawsuit in California claiming that Facebook violated user’s privacy rights by unwittingly linking their names to sponsor’s products as part of its “Sponsored Stories” campaign. The settlement gives each user an opportunity to claim a $10 share of a $20 million settlement. That is, if there is enough money to go around. If too many users make a claim, all the money left over after administrative costs and, of course, the plaintiffs’ attorneys’ fees, will go to charity.

Email is becoming an increasingly common method of distributing class action notice, especially in cases like the one against Facebook where the class consists of known computer users. Email is an inexpensive way to transmit notice, but given the ubiquitous nature of spam, it is easy to mistake an email notice for junk mail. Worse, unlike paper junk mail, users may be afraid to even open a class action settlement email, for fear it contains some sort of virus or is part of a phishing scam. So, lawyers will find themselves increasingly being asked by clients, colleagues, friends, and family whether an email like this is legit.

Class Action Notice or Phishing Scam?

There is no failsafe way to tell just by looking at an email about a class action whether it is for real. But, a little Internet research can usually answer the question. If the case is high-profile enough, there should be some news articles about the history of the case leading up to the settlement. Also, the notice should describe the court that has preliminarily approved the settlement. Many courts have online dockets that you can search to see if the notice is describing a real case and what the status of the case is. If not, you can always locate the court clerk’s number and call to see if the case is real. Most class action settlement notice programs will utilize a website and toll-free number. In the case of the Facebook “Sponsored Stories” settlement, the website is: http://www.fraleyfacebooksettlement.com. The fact that a website exists, by itself, doesn’t tell you that the settlement is legit, however, so if there is any doubt, you’ll probably want to verify that the settlement is real before you start surfing the website address listed in the email (after all, that’s exactly how a phishing scam would work!).

Opting out, objecting, filing a claim, or doing nothing

If the settlement is real, the class member will have some options. A good class action settlement notice will describe these options in language that a nonlawyer can understand, but unfortunately, not all class action settlement notices are in straightforward, plain language. In most cases, the class member has a series of decisions to make. The first decision is to either stay in the settlement or opt out. Opting out of a class action settlement typically requires a class member to send a notice back to the settlement administrator saying that the person doesn’t want to be included in the settlement. A person who opts out keeps his or her rights to sue individually. If a class member stays in the settlement, then there are often two more options: 1) make a claim for benefits; or 2) do nothing, get no benefits. Benefits in some cases are automatic, but in many cases a class member has to mail in a claim form or fill one out online. Doing nothing doesn’t expose a class member to have to pay anything relating to the settlement, but failing to either opt out or file a claim where one is required will cause the person to lose any right to sue in the future. A final option, available only to those class members who stay in the settlement, is to file an objection with the court. The court has to take all objections into account, but objections are usually overruled. So, if a class member has an objection but still wants to take advantage of the benefits of the settlement, he or she has to file a claim (if required) in addition to making the objection. The notice documents, usually available on the settlement website, should describe in detail how to take advantage of each of these options and what the deadlines are.

Claims aggregators – Paying someone to do the work for you

In addition to the notice itself, settlement class members may receive solicitations from organizations offering to file a class action settlement claim for you. This is a relatively recent phenomenon, and it raises another host of questions: Is the email legit? Is the organization reputable? Should I take them up on the offer? As with most things in law, the answers to all of these questions are most definitely maybe.

Settlement claims aggregators, also called “bulk filers” or “third party claims filers” offer services to assist class members with filing their claims in exchange for a fee, usually a percentage of the recovery. In the past few years, new business have cropped up all over the country offering these services. Their target audience are usually institutional class members in securities and antitrust class actions. For example, many businesses who were part of the recent Visa/Mastercard Payment Card Exchange Fee Settlement received solicitations from claims aggregators offering to undertake the role of tracking the settlement and filing a claim for benefits. Whether this service is worthwhile in an individual case depends on a number of factors, including the complexity of filling out the claim form, the dollar amount of a likely claim. For most institutional class members, it is probably worthwhile to at least review the settlement documents and the claim form to decide how much effort would be required for the class member to simply file the claim without outside help. For institutional investors, claims aggregators offer tracking services to allow them to make claims in multiple securities class action settlements, which potentially increases the utility of the service.

Of course, if you encounter a notice that you simply can’t make heads or tails out of, you can always consult with an attorney who focuses on class action law!


Paul Karlsgodt, Esq. is editor and primary contributor to the legal blog, www.ClassActionBlawg.com, which covers a variety of class action-related issues, including decisions, trends, best practices, news and reform, both in the U.S. and throughout the world. He is an active member of the Class Actions and Derivative Suits (CADS) Committee of the ABA Section of Litigation, serving on the Social Media subcommittee. He also founded and served as the first Chair of the Class Actions, Derivative Suits and Mass Torts Subsection of the Litigation Section of the Colorado Bar Association, in which he remains an active member.

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