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40 Hastings L. J. 863 (1988-1989)
Precertification Settlement of Class Actions: Will California Follow the Federal Lead

handle is hein.journals/hastlj40 and id is 889 raw text is: Precertification Settlement of Class
Actions: Will California Follow the
Federal Lead?
The captioned parties to proposed class action lawsuits often find it
mutually advantageous to settle their individual claims long before a trial
on the merits is ever contemplated seriously.' The expense of notifying
absent class members of a proposed settlement and the cumbersome pro-
cedures that accompany the dismissal of a certified class action suit en-
courage class action attorneys to negotiate settlements of the named
plaintiffs' individual claims prior to judicial recognition of the class. The
state and federal courts that have monitored this circumvention of the
conventional certification process have done so in a vast procedural vac-
uum. Unfortunately, the solutions devised by these courts often have
exacerbated existing problems.
The allure of these precertification settlements2 is not difficult to
conceptualize: a defendant, believing that the plaintiffs initiating the suit
*   A.B., University of California, Berkeley, 1986; Member, Third Year Class.
1. [I]n practice, few class actions are fully litigated. Most class actions for damages are
either dismissed before trial or settled. Developments in the Law: ClassActions, 89 HARV. L.
REv. 1318, 1373 (1976) [hereinafter Harvard Study].
One empirical study of class and derivative actions brought against the 190 largest pub-
licly held corporations, as determined by Fortune magazine's 1975 survey, concluded that 71%
of all suits filed were settled before reaching a trial on the merits. An additional 17% were
dismissed, and 4% were denied class status. According to the study, only a paltry 4% of all
class actions and shareholder derivative suits filed were litigated fully. Jones, An Empirical
Examination of the Resolution of Shareholder Derivative and Class Action Lawsuits, 60 B.U.L.
RFV. 542, 544-47 (1980).
An earlier study of class actions filed in the federal courts in the District of Columbia
revealed that 63% of the cases were settled or dismissed prior to the certification decision. Of
those cases that proceeded beyond the certification stage, 55% were disposed of on preliminary
motions in favor of the defendant. See Note, The Rule 23(b)(3) Class Action: An Empirical
Study, 62 GEO. L.J. 1123, 1135-38 (1974) (authored by Bruce I. Burtelson, Mary S. Calfee,
and Gerald W. Connor).
2. In this Note, the term precertification settlement refers only to settlements or com-
promises of the claims of individual members of the alleged class negotiated prior to certifica-
tion. Such settlements typically involve only the captioned parties and are without prejudice
to the absent putative class members.
The term is not used to refer to class-wide settlements, the purpose of which is to bind


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