Preventing Class-Action Sellouts

Ittai Paldor, Yuval Procaccia and Eyal Winter

The Journal of Legal Studies, 2025, vol. 54, issue 2, 453 - 489

Abstract: When class actions settle, the defendant and class counsel have a strong joint incentive to appropriate part of the class’s entitlement. The problem is long recognized, but neither existing mechanisms nor those suggested in the literature address it effectively. The current article proposes a market-based solution to the problem: Once a settlement is struck, any attorney of the plaintiffs’ bar may replace the original class counsel, nullify the settlement, and litigate the case. This is done by paying the original class counsel the fees stipulated in the settlement. When litigation concludes, the new class counsel is rewarded on the basis of the percentage increase in the class’s remuneration. The mechanism deters the formation of any settlement detrimental to the class while preserving the incentives to reach all socially desirable settlements.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1086/733508 (application/pdf)
http://dx.doi.org/10.1086/733508 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlstud:doi:10.1086/733508

Access Statistics for this article

More articles in The Journal of Legal Studies from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().