Seventh Circuit throws out consumer class-action settlement in a far-ranging opinion

by Brian Wolfman

In Eubank v. Pella Corporation, No. 13-2091 (June 2, 2014), Judge Richard Posner makes so many useful points about class-action settlements that it's not sensible to try to summarize them here. Read the opinion for yourself!

Just one point for now: As I've mentioned before, class-action settlement proponents often argue that one sign of a good settlement is a low number of opt-outs. But in small-claims class actions that's nonsense. The whole point of a small-claims class action is that it aggregates claims that, generally speaking, no plaintiff (or lawyer) could afford to bring on a non-class basis. So, generally, it makes no sense to opt out in a small-claims class action. Yet, settlement proponents continue to advance this argument, and, sadly, some courts have accepted it. On the other hand, some courts have understood just how weak the argument is. None has put it quite as bluntly as Judge Posner put it in Eubank. After citing emprical work showing that opt-out rates typically are very low, he declared: "a low opt out rate is no evidence that a class action settlement was 'fair' to the members of the class."

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