Class Action Settlements: An Opt-In Proposal

Abstract

The outcome of a class action binds all class members except the few who take the trouble to opt out. This default rule enables plaintiffs' lawyers and defendants to settle class lawsuits on mutually beneficial terms that exploit class members. Judges approve such settlements because, among other things, they have a strong incentive to clear their dockets. This article suggests changing the default rule so that class settlements include only those who assent expressly to the terms of the settlement by opting in. This change would, ideally, decrease the incentive to settle collusively, discourage frivolous class lawsuits, and reward those plaintiffs who have the most meritorious claims.

Keywords: collusion, opt-out, attorney's fees, default rules, notice