A federal court recently issued a decision approving a class action settlement resolving litigation stemming from five Yahoo! data breaches that occurred from 2012 to 2016 and affected at least 194 million Yahoo! customers. The company agreed to establish a
Factors Considered in Evaluating the Settlement
In evaluating a proposed class action settlement pursuant to Federal Rule of Civil Procedure 23(e), a district court must determine if a settlement "is fundamentally fair, adequate and reasonable." In doing so, courts may consider, among other factors, the strength of plaintiffs' case, the risks, expenses, complexity, and duration of further litigation, and the total settlement amount. In Yahoo!, the Court found that all of these factors supported the approval of the settlement. Specifically, with respect to the risk, expense, and complexity, the Court noted that the parties reached a settlement prior to the Court's ruling on hot-button issues, namely class certification and the filing of any Daubert motions. Thus, the Court was convinced that settlement avoided significant further litigation and provided the class "with timely and certain recovery."
Comparison of Settlement Amount to Other Data Breach Settlements
In addition, the Court undertook a careful review of the overall settlement amount as compared to the prior in-district settlement associated with
Comparing Yahoo!'s
The Court also explained that the Yahoo! settlement "compares favorably [to Anthem] in some respects but unfavorably in others." For example, Yahoo! provided two years of credit monitoring while Anthem provided six years, but Yahoo! capped out-of-pocket expenses at
Conclusion
Yahoo! makes clear that judicial review of the adequacy and reasonableness of large class action settlements does not take place in a vacuum. To the contrary, the case serves as a reminder that courts rely on prior in-district settlements as points of reference for evaluation of reasonableness, and that ultimately, judges are inclined to approve a settlement if they find that class members will receive an adequate recovery.
Is Your Class Action Settlement Reasonable? A Look Inside The Court's Approval Of The Yahoo! Data Breach Settlement May Shed Some Light
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