Class Action Perspectives
Anticipating Claims Filing Rates in Class Action Settlements
Among the most common questions asked of a settlement administrator during pre-settlement consultation is “How many claims should we expect?” As counsel prepares for the settlement of a class action lawsuit and the subsequent administration, the defendant company, counsel for both sides and the settlement administrator alike want to determine the likely claim-filing rates. The information is useful to the parties in structuring a claims program or preparing to fund a settlement account and to the administrator’s ramp-up process.
While there is no perfect way to predict claims-filing rates for any particular settlement, there are certain factors that allow for relatively accurate estimates. The answers to the following questions provide much of the information necessary to estimate how many claims may be filed.
- What type of case is being settled?
- Is the case likely to attract unpaid media attention
- What type and value of benefits will be distributed
- How are the notice program and claim form designed?
- How is the claim process structured?
Case Type
By examining historical claims-filing rates organized by case type, certain trends can be identified and used to help predict response rates for settlements of similar type and scope. While other factors (some of which are addressed within this paper) specific to any particular settlement may have more impact than case type, leaving a sometimes broad range of response rates even within otherwise similar cases, even these ranges provide useful information.
A typical securities settlement may conclude with between 20 and 35 percent of class members having filed claims. For labor and employment settlements, the number tends to be from 20 to as high as 85 percent.
With their broad range of subject matter, benefit types and amounts, and class member demographics, as well as the “hit-or-miss” availability of mailing lists, consumer settlements can draw a filing rate between two and 20 percent. An equally wide variety of claims-filing rates occurs across property-related settlements, due in large part to the supporting documents required to file claims.
The Effects of Unpaid Media
Any customer service representative working for a settlement administrator can explain the effects of unpaid media. Unpaid media, or “earned” media, means coverage of a settlement by any newspaper, magazine, website, radio or television station that was not purchased as a part of that settlement’s media notice campaign.
The first result of such media coverage, especially when it comes in the “hot media” forms of the Internet, radio or television, is a barrage of calls to the claims administrator’s toll-free number. But within a few days of the coverage, the number of incoming claim forms often increases dramatically. The effect from a single instance of media coverage may be short-lived and minimal in the overall scope of the settlement, but repeated instances can dramatically increase the number of claims filed.
As the filing deadline in the settlement of In re Compact Disc Minimum Advertised Price Antitrust Litigation, MDL No. 1361 (D.Me.) approached, the website msnbc.com placed a story about the settlement on its homepage. In a single day, more than 200,000 users viewed the settlement website and 140,000 filed claims—4.1 percent of all claims filed on the settlement.
It is impossible to determine precisely what settlements the media will choose to cover. However, typically large settlements with well-known defendants receive coverage. Additionally, new and unusual settlement types and settlements dealing with sensitive issues are more likely to receive unpaid media attention.
Benefit Type and Value
In short, class members want to receive as much cash as possible. Settlements offering class members a cash benefit are more likely to see high claims-filing rates than those offering other benefits, such as products, services, discounts on future purchases or vouchers for reimbursement on future purchases.
The value, or perceived value, of settlement benefits to class members is another key driver of claims-filing rates. A class member must feel the benefits being offered are worth the time and effort required to file a claim. So while cash attracts many class members, a 10-page claim form that results in a $10 award, for example, does not. Professional, relatively wealthy class members typically would consider certain benefits too small to be worth the time required to file a claim. The converse is often also true.
Notice Design and Scope
For a class member to decide whether the effort required to file a claim and thus receive a benefit is worthwhile, he or she must first receive and understand the available options. The scope of the notice program and design of the notice itself play heavily into that decision, and thus into the eventual claims-filing rate.
With a direct mail campaign, the possession and use of a complete, up-to-date and accurate list of class members’ addresses naturally increases claims-filing rates. Accurate record-keeping helps explain the disparity in claims-filing rates within consumer settlements. Consumer settlements involving certain types of industries—insurance, for example—are more likely to include client lists than those involving commercial products purchased from a retail store. With class members purchasing the product at issue from a retailer, the defendant company is not likely to have substantial information on the end-purchasers for use in the creation of a mailing list. The parties and administrator therefore cannot rely on direct mailing, and must focus on a media notice campaign.
Within media notice campaigns, the use of “plain language” notice can help drive up claims-filing rates. According to Kinsella Media, LLC, an advertising firm specializing plain language in media placement for class action settlements, the use of plain language in legal documents means the organization of information, presentation, design and layout as much as clear and effective writing. For example, a publication notice written according to the principles of plain language may use the headline “Did You Purchase [Product] Between [Date] and [Date]?” while a version of the same publication notice written in a more traditional style may open with the case caption. Plain language draws in readers and helps them better understand the material being presented and its potential impact on them, and can lead to increased participation and claims-filing.
In addition, the media selected to reach the class must be based on the demographic make-up of class members and be of sufficient weight to penetrate the target audience and allow multiple exposures to the notice. Using advertising measurements based on certified consumer surveys allows the reach of the class and the frequency of notice exposures to be calculated across the media program. Obviously, notice programs with a low reach or lack of proper demographic targeting will depress claims filing rates. Selecting sufficient media weight and the right media vehicles to reach class members is key in determining claims filing rates.
Claim Form Design and Process
It stands to reason that the design of the claim form follows some of the same ideas listed above. The design of the claim form can help or hinder a class member trying to decide whether to file a claim. A claim form with instructions written according to plain language principles makes it easier for a class member to decide whether the benefit being provided is worth his or her time. Further, when the claim form is laid out clearly, it simplifies filling out the form.
Regardless of plain language, the simpler the claim form and process, the more likely class members are to complete and submit the claim form. A settlement that requires claimants simply to sign a form will likely have a higher claims-filing rate than one requiring claimants to provide narrative responses to questions and attach documentation, all other things being equal. This is one primary reason it is difficult to provide an estimate regarding property-related settlements: the documentation required to determine class membership or benefit eligibility varies greatly from settlement to settlement, and such documentation is often directly tied to clams-filing rates.
Settlements incorporating multi-step claims processes are also less likely to produce high claims-filing rates. Simple, one-step processes are convenient for class members, making them more likely to complete the process even when the benefit value may be low. For example, in Broder v. MBNA Corp., No. 98/605153 (N.Y. Sup. Ct., County of New York), nearly 38 percent (more than 1.4 million class members from a group of 3.7 million) filed a claim form requiring just a signature despite the clear indication of the eventual benefit being a check worth slightly over $3.
The increasing use of online claims is proving to be another method of predicting claims rates. In situations when the defendant can provide or match certain class member data to online claims, or when there is no documentation required of the class member, online claims-filing tends to increase the overall claims rate, as it is a convenient option for class members of many demographics.
Summary
Claims-filing rates will never be entirely predictable. For each predictor that indicates one thing, there is one indicating another, and industry trends change over time as counsel and defendants develop new types of settlements and class members grow used to other type of settlements or gravitate toward different methods of claims submission. However, there are certain factors that traditionally have influenced rates, including case type, unpaid media coverage, benefit value and type, notice design and program, and claim form design and process. By monitoring trends over time and tapping into industry expertise, one can make reasonable assumptions while predicting claims-filing rates for upcoming settlements.
By Tiffaney Allen, Principal Consultant, Nov. 2008