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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - PREVENTING CLASS ACTION SELLOUTS
AU - Paldor, Ittai
AU - Procaccia, Yuval
AU - Winter, Eyal
PY - 2024/9/25
Y1 - 2024/9/25
N2 - 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 original class counsel, nullify the settlement, and litigate the case. This is done by paying original class counsel the fees stipulated in the settlement. When litigation concludes, new class counsel is rewarded based on the percentage-increase in the class’s remuneration. The mechanism deters the formation of any settlement that is detrimental to the class, while preserving the incentives to reach all socially desirable settlements.
AB - 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 original class counsel, nullify the settlement, and litigate the case. This is done by paying original class counsel the fees stipulated in the settlement. When litigation concludes, new class counsel is rewarded based on the percentage-increase in the class’s remuneration. The mechanism deters the formation of any settlement that is detrimental to the class, while preserving the incentives to reach all socially desirable settlements.
M3 - Journal article
JO - The Journal of legal Studies
JF - The Journal of legal Studies
ER -