Is There A Relationship between Class Certification and Settlement?
Class Action Watch Fall 1998
October 1, 1998
Our survey asked for data respecting both the incidence of class certification and the incidence of settlement. We also asked for information regarding the length of time between class certification and settlement. We requested this information to help people assess the oft-stated opinion that certification greatly increases settlement pressures.
Figure Five compares the settlement rates for putative class actions pending in 1993 and 1998 (there were too many incomplete responses to develop any findings for 1988). Among the respondents, certified class actions seem to settle more than non-certified actions. For example, 75 percent of the certified class actions pending in 1993 resulted in settlement, as compared with 36 percent of the cases that were not certified. We see a similar disparity with cases pending in 1998; 40 percent of the certified cases settled,but only 19 percent of the non-certified cases settled.
Figure Six tracks the length of time between class certification and settlement. It appears that, among respondents, settlement is now following class certification more quickly than in the past. In 1988, 100 percent of the cases were settled more than three years after certification. In 1993, a third of the cases were settled 1-3 years after certification, and the remaining two-thirds were settled more than three years after certification. Finally, in 1998, we see a complete reversal in the trend, with 60 percent of the cases being settled less than one year after certification and the remaining 40 percent being settled within 1-4 years.
The survey asked how many of a respondent's putative class actions were settled, dismissed on a dispositive motion, or resolved by way of a verdict in favor of either the plaintiff class or the defendant. We compared figures for Texas state courts, all state courts, and all federal courts. Figure five distills the results.
The respondents reported a higher settlement rate in Texas state courts than in either state courts nationwide or in federal courts. For each of the three years in question, 90-100 percent of the pending cases that had been resolved were settled before a verdict. The settlement rate was between 40 and 66 percent in federal courts and between 41 and 65 percent in all other state courts nationwide.
Respondents overwhelmingly reported increases in Texas class action litigation between 1988 and 1998. Amidst this growth in activity, to what extent did the composition of the plaintiff classes change or remain the same? We sought to shed light on this issue by asking respondents whether plaintiff classes in pending cases were local, statewide, or nationwide in their orientation. Figure Eight sets forth the data.
The data obtained from respondents reveals that the composition of plaintiff classes has been changing. In 1988, for example, 75 percent of the plaintiff classes in pending cases were local, and 25 percent were statewide. We saw much the same in 1993, at least insofar as there were no nationwide classes. That pattern changed in 1998-18 percent of the classes were nationwide in their composition, with 51 percent local and 31 percent statewide.
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As we mentioned at the outset, the responses we have received provide a glimpse of the While it may not be representative of all or even most businesses in America, we believe the data helps to increase understanding of the area. Whenever possible, the Federalist Society's Litigation Practice Group will continue to generate data in this in order to shed further light on trends relating to class action litigation.