It is well-settled that once a class is certified for settlement purposes, all absent class members cease being a “theoretical construct”, and, instead, become actual clients of class counsel. Similarly, those absent class members become principals of the Administrator and the Court, who have an independent duty – that of a fiduciary – to protect the interests of those absent class members. Given these roles, it appears that the certification of a class for settlement purposes raises certain ethical obligations, requiring class counsel, the Administrator, and even the Court, to ensure that they are acting in the best interests of absent class members.
So here’s the hard question:
Since you now know that (i) fraudsters target class settlements, and (ii) those fraudsters siphon off millions of dollars of money belonging to absent class members, do you, as class counsel, violate your ethical duties to absent class members by not doing everything in your power to stop this fraud? Ditto for Administrators and, even, Judges.
Ryan Clarkson, a prominent plaintiff-side class action lawyer and the Managing Partner of Clarkson Law Firm, seemingly answered that question in two recent panel discussions – one at Western Alliance Bank’s “Class Action Law Forum”, and the other at Beard Group’s “Class Action Money and Ethics Conference”, by saying: “As class counsel, we have an ethical obligation to ensure each class member has an opportunity to make a claim in the settlement, and are able to receive the maximum payout possible for said claim. Properly mitigating fraud is a critical step to fulfilling that ethical obligation.”
And, given the fiduciary role played by the Administrator and the Court, it is likely that Mr. Clarkson’s thoughts apply, likewise, to them.
Fraud in class action settlements isn’t speculative. It’s real, and it’s increasing. Programmatic attacks file hundreds of thousands, to even millions of synthetic, duplicate, or spoofed claims that quietly pass through under the radar. Every dollar paid to those claims causes direct harm - it’s money that should have gone to legitimate class members!
We’ve talked before about where fraud prevention fits in the settlement structure, how it should be separate and apart from the Administrator's bid, and how it should not reduce class counsel’s fee, nor increase defendant’s costs. We’ve shown that the fairest place to fund true, quality fraud prevention is the net settlement fund, because it delivers a measurable return to the people it’s meant to serve - the absent class members. And, after all, isn’t that the group that everyone involved has an obligation to – whether ethical or fiduciary – in class settlements?
Consider this: as class counsel - when advocating for a fee in a class settlement - with or without a multiplier - that equates to 25% or more of the settlement fund, shouldn’t you ensure that your clients (ie. the absent class members) obtain the greatest benefit possible from that fund? In a way, doesn’t your work in securing maximum benefits for your clients (by insisting on comprehensive fraud protection and analysis), support that fee application? Said differently - in recognition of your work on behalf of the absent class members, isn’t it worth also considering a modest allocation to completely ensure that the very people that your fee is meant to benefit maximize those benefits? Is that not what lawyers are supposed to do for their clients? Mr. Clarkson certainly thinks so. As do we.
And, this responsibility doesn’t rest solely on class counsel. Court-appointed Settlement Administrators play a critical role in upholding the integrity of the process, as do the Judges who supervise the settlement. Indeed (similar to class counsel’s ethical obligations to absent class members), they, too, have a heightened, “fiduciary” duty to ensure that absent class members are properly “looked after” in class settlements. Does that duty not include using all available tools to ensure that fraud is completely rooted out of the settlement, so that absent class members can receive maximum benefit from their own settlement? Again, we believe that answer is an emphatic “yes!”.
In the end, protecting the absent class members’ settlement from fraud is a full team effort, requiring collaboration and accountability from every party entrusted with the outcome. Ethical and fiduciary obligations are shared — and so is the responsibility to act. And that means investing in the tools that make it possible.
In a world where fraudsters adapt, evolve, and organize – the ethical and fiduciary standards must evolve, too. Doing anything short of maximizing protection of the absent class members is no longer neutral. It’s incorrect.
Learn how ClaimScore helps fulfill the ethical and fiduciary duties owed to absent class members by eliminating 99.99% of fraud through its AI-powered fraud software solution.
