By Donald Beshada, Esq.
Transparency and accountability are cornerstones of the American legal system. In class action lawsuits, where a large group of individuals with similar claims join forces against a defendant, these principles are even more critical. However, a concerning trend has emerged: the exclusion of class members from settlements without proper justification or transparency. This raises serious questions about fairness, accountability, and the very foundation of evidence-based decision making.
The recent Altria Juul settlement – in which as many as 80% of the claims were likely fraudulent – highlights the necessity of robust backup data. This settlement, intended to compensate users allegedly harmed by Juul e-cigarettes, encountered a surge in what many suspect are AI-generated fraudulent claims. The influx overwhelmed the system, causing delays and raising concerns about the legitimacy of some claims.
A system that includes transparent, data-driven verification procedures would assist in effectively and efficiently addressing the suspected widespread fraud. Indeed, without clear backup data to support inclusion or exclusion decisions, it becomes difficult to ensure fairness and prevent fraudulent claims from siphoning away resources intended for legitimate victims.
Backup Data: The Missing Piece for Transparency
Backup data – verifiable evidence supporting the inclusion or exclusion of class members – is essential for ensuring fairness and preventing fraud in class action settlements. To meet the requirements of fairness and due process to absent class members – a hallmark of the class action device – that backup data should include the specific reasons why a certain individual was excluded from participating in the applicable settlement. How else can a decision be accurately assessed?
Many settlement agreements contain a “catch all” provision that allows claims to be excluded if they show “indicia of fraud.” That phrase typically goes undefined and allows for great discretion in the exclusion of claimants from class settlements. The practical result of that is, in most instances, claims are excluded based on a single criterion, rather than on a full “360” review of the claim, leaving a lot of open questions. This "group and slash" approach lacks transparency and raises red flags about the fairness of the process. How can a class member be certain they were excluded for legitimate reasons without any explanation or supporting evidence?
Backup data addresses that general “transparency” problem, and serves two crucial purposes:
- Provides Evidence: It justifies the inclusion or exclusion of class members. If a member is excluded, the data should clearly explain why, ensuring a fair and objective process.
- Transparency: Backup data demystifies the settlement process. Class members, counsel, and the judge can precisely understand the rationale behind each inclusion or exclusion.
Ideally, backup data should involve a real-time review, assessment, and analysis of each class member's claim. This provides proactive and immediate insights ensuring more informed decisions, along with a level of specificity that, candidly, is needed in class settlements. Indeed, the foundation of the judicial system is grounded in evidence. Why should that foundational element be missing in class actions, where there is a heightened standard to protect unnamed class members?
The court and plaintiffs’ counsel function as fiduciaries for the class. And each has a duty to protect the unnamed class members. Without a foundation of evidence – through backup data – that can be applied to the claims of those unnamed class members, that critical responsibility may be called into question.
Said differently, imagine a court dismissing a claim without any supporting evidence demonstrating that dismissal is appropriate? That simply does not happen in other contexts. And, given the fiduciary duties associated with class action settlements, one could argue that evidentiary justification is more important when dealing with the rights of unnamed class members.
In conclusion, the issue of claim fraud in class settlements is a pressing, serious issue for lawyers and judges. And, while it is important to address that widespread issue, it is likewise important to ensure that the solution does not exacerbate the problem. Evidentiary-based decisions, with a foundation in specific back-up data, address both the fraud issue, and the rights of unnamed class members. It provides verifiable evidence for inclusion or exclusion decisions, and is essential to ensure fairness, prevent fraud, and uphold the integrity of the class action process.
Donald Beshada is president and co-founder of ClaimScore.
