b'Fall/Winter 2020Page 11 Pitfalls in Class SettlementsCy Pres Recipients must be closely tied to the purpose of the litigation: (Continued from page 10)Cypresrecipientsinclassactionsettle-ing approval of any class settlement. ments have long been preferred over provi-sions that revert unclaimed funds to the de-ClearSailingProvisionsWillDrawfendant (i.e., reversionary clauses). 11Heightened Scrutiny: But courts have increasingly required par-UnderRule23,thepartiesmustdemonstratetiestoidentifycypresrecipientswhose that a class action settlement resulted from angoals are closely tied to the purpose of the armslengthnegotiationvoidofcollusion.Alawsuit.Forinstance,inJohnsonv. clearsailingprovisionisanagreementbe- Rausch,Sturm,Israel,Enerson&Hornik, tween the parties that defendant will not chal- LLP , a district court in New York required lengeplaintiffsrequestforattorneyfeesinathe parties in an FDCPA lawsuit to provide classactionsettlementuptoasetamount. additionalinformationregardinghowthe While such provisions are not prohibited, theypartiesdesignatedcypresrecipient,the willdrawincreasedscrutinyoftheplaintiffsNationalConsumerLawCenter,aligned feerequest.AstheNinthCircuitexplained,with the litigations purpose before granting clear sailing provisions are important warn- preliminary approval. 12Indeed, legal ser-ing signs of collusion be- vices organizations, even ones that provide [P]ractitionerscausetheyincreasethegenerallegalaid,maybeinsufficientcy must identifylikelihood that class coun- presrecipientsunlesstheydoworkthat specific factsselwillhavebargainedaligns with the subject matter of the litiga-demonstratingawaysomethingofvaluetion. 13 the settlementtotheclass. 5 Adistrict courtsfailuretoade- Parties should therefore select a cy pres re-resulted from faircipient that is closely aligned to the litiga-negotiations.quatelyscrutinizesettle-mentagreementsthattionspurposeandbepreparedtoexplain contain clear sailing pro- this connection to the Court on preliminary visionsisreversibleerror. 6 Tosurvivethisapproval.scrutiny,practitionersmustidentifyspecificClassRepresentativeIncentivePay-factsdemonstratingthesettlementresultedmentsMustBeProportionalandRe-from fair negotiations.late to The Work Performed:ExampleoffactsthathaveappeasedcourtsClass representatives almost always receive concerns of collusion when the agreement con- incentiveawardsascompensationforthe tains a clear sailing provision include: (1) thework they performed on behalf of the class settlementresultedfromamediatorspro- and the risk they undertook in bringing the posal; 7(2) the fee demand was within the rangelawsuit.When evaluating class action set-the Circuit court previously held was accepta- tlements, courts must scrutinize these pay-ble; 8 and (3) the fee request fell below counselsmentscarefullytoensuretheydonotun-lodestaramount. 9 Themostconservativeop- derminetheadequacyoftheclassrepre-tion, of course, would be to omit the provision all together. 10 (Continued on page 12)'