This story is for you if:

1. You handle wage and hour class action cases;
2. You run into the situation where there are multiple similar actions filed against the same defendant by different plaintiffs.

Settling class action cases is typically a distributive negotiation where there is a fixed pie that gets divided up. While there is some room for creativity, for the most part it is a zero sum game in which a litigant’s gain (or loss) is balanced by the losses (or gains) of the other litigants. If the total gains of the parties are added up, and the total losses are subtracted, they will equal zero. This sets the stage for a very competitive negotiation.

Usually when there are only two parties to the negotiation we engage in a series of moves and concessions and things tend to find a range of value that is resolved through a mediator’s recommendation or some similar technique. The challenge comes when plaintiffs “back file” on each other, seeking identical claims against the same defendant. If the defendant is motivated to settle, this sets the stage for either: a) settling with one and hoping the other doesn’t object; b) the reverse auction. A competitive defendant will often try and create a reverse auction when there are multiple cases filed in order to get a better deal.

A reverse auction is a type of auction in which the roles of buyer and seller are reversed. In a class action case, the buyer is the defendant and the seller is the plaintiff. The defendant wants to pay money to eliminate an exposure. The plaintiff wants to “sell” the exposure back to the defendant. In a customary auction, buyers/defendants negotiate to obtain a settlement by offering increasingly higher prices. In a reverse auction, the sellers/plaintiffs compete to obtain settlement funds from the buyer/defendant and negotiates a price that will usually decrease as the sellers/plaintiffs undercut each other.

Read original article


Tags: class action case, Class Action Cases, reverse auction