California Residents May Have an Interest in Trust Litigation They Don’t Know About

Class action lawsuits often result in settlements that remain in trust for the benefit of the class members. While this might seem the end of the story, it is far from it. The trustee is often invested with the discretion to determine settlement amounts for each class member and when to make their distributions. In some cases, the trustee even has the authority to invest trust funds to increase distributions (or to fund charitable causes pertinent to the settlement). This authority can affect the legal and financial rights of class members.

In some cases, a trust litigator must intercede on behalf of class members to protect their interests. The experienced Los Angeles trust litigation attorneys at Hackard Law also serve trust beneficiaries throughout California, including Sacramento, San Francisco, Alameda, and Santa Clara.

Things To Know About Class Action Settlements

To understand legal interests in a settlement trust, we must first understand class action lawsuits. This is a specific type of lawsuit filed by an entire group of people who have suffered the same harm as the result of negligence by one or more defendants. Because the same theories of liability are involved, it is more time- and cost-effective to litigate a single case than to litigate hundreds (or even thousands) of individual lawsuits. A class action lawsuit is common in products liability lawsuits against manufacturers of medications, foods, vehicles, and other consumer goods. They are also common when multiple trust beneficiaries pursue a case against a trustee.

To proceed with a class action lawsuit, the court must certify the class. This means that the court agrees that the class meets the requirements of the Federal Rules of Civil Procedure. Rule 23 requires that (1) the class be so numerous as to make joining individual members impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the class representatives are typical of those of all class members, and (4) the class representatives will fairly and adequately protect the interests of the class. If a class meets these requirements, the court will issue a class certification order. The case may then proceed as a class action lawsuit.

The class representatives are named plaintiffs who are members of the class and represent the claims and defenses of all class members throughout the case. This role places a great amount of trust in the representative, who is responsible for protecting all class members. The added time, expense, and responsibility of a class representative often results in a higher proportional settlement award to the class representative.

Once class representatives have filed a lawsuit and the court has certified the class, the representatives must begin the process of notifying potential class members. They can accomplish this through television or newspaper ads, billboards, direct mailing, or email. The defendants are often required to provide customer data for this particular purpose. Notified class members then have the opportunity to opt out of the lawsuit. If they follow the required procedure and effectively opt out, they then have the option of pursuing their own claim against the defendants. Class members who fail to opt out effectively are bound to the terms of the class action settlement. Note that this process may not result in actual notice to all defendants. If ads were placed and mailers sent, the representatives have met their duty. Class members, therefore, may have a legal interest in the lawsuit without knowing it.

After class members are notified, the case proceeds in much the same manner as other products liability cases. The parties’ attorneys conduct discovery to find evidence of negligence or defenses to theories of liability. This may include written interrogatories, oral depositions, or collection of documents and data. The parties can use the collected evidence to encourage each other to come to a settlement offer. The court must approve any settlement. If it does so, the funds will go into a trust for distribution to the class members. If the parties cannot settle the case during early litigation proceedings, the case will proceed to trial. Any jury award to the class is then placed in a trust for the benefit of all class members who have not opted out.

Issues With the Administration of a Class Action Trust

All trusts have a trustee with the legal obligation to protect the beneficiaries’ interest in the trust. Among other things, this means that a trustee cannot engage in self-dealing or other actions that profit the trustee at the expense of the trust beneficiaries. The trustee must also act reasonably and prudently in investing trust assets or making distributions to trustees. These duties apply to trustees of class action trusts as well. Failure to meet these certain obligations could result in the removal of the trustee. Trust beneficiaries may also hold trustees liable for any financial losses that they can attribute to the trustee’s misconduct.

Consider the implications for class members in recent class action lawsuits. Reuters reports that Facebook and Cambridge Analytica already face a proposed class action that alleges a breach of 50 million Facebook users’ personal data by Cambridge Analytica to influence the outcome of the 2016 U.S. presidential election. If the class is approved, every Facebook user would have a potential legal interest in any settlement or jury verdict awarded in the case. Millions of Facebook users may not even know about any litigation related to the matter. They would not know of the funds to which they were entitled, and therefore unable to hold a trustee accountable for the proper management of those finds.

The Right Trust Litigation Attorneys to Protect a Wide Variety of Legal Interests

Trusts involving class action settlements and other large-scale legal interests are often neglected, so understand your rights in such a trust.

Our seasoned trust litigators know how to hold trustees accountable for meeting their legal obligations. Call (916) 313-3030 from Santa Clara or (213) 357-5200 from Los Angeles (or call us from anywhere in California), or write to us online to schedule your free consultation with one of the experienced trust litigation attorneys at Hackard Law.