Q: Are cash payments individual awards in a settlement are they divided between each class member in a lawsuit !

A: There are several different ways for class action settlement funds to be divided and distributed among class members.

The distribution method is always outlined in the settlement agreement and must be approved by the Court overseeing the case. Generally, the agreement, as well as a copy of the formal notice sent to class members will be posted on a website for the public and class members to view.

Common Fund – These types of settlements are more typical of antitrust, securities, and employment class actions. In these, claiming class members typically receive shares of the common fund pursuant to some formula, such that the amount each claimant receives is a function of the number of claims, and the entire net settlement fund is distributed. The attorneys that handled the case usually get their fees as a percentage of the common fund.

Pro Rata – This allocation method is often used in common fund settlements and simply divides the net settlement amount proportionately among the class members. A class action notice sometimes includes the estimated recovery amount per class member, with qualifying language that explains the amount may change. So if there is a $100 fund available to pay claims, and there are 100 valid claims filed, each with an equal size claim, then each class member would get $1.

Claims Made – Claims-made settlements are often used in the consumer class action context. In a claims-made settlement, the defendant will pay the class an amount equal to the total value of all the valid claims. In some cases, the defendant agrees to pay only a fixed amount, and if the value of the valid claims exceeds the fixed amount there will be a provision for an adjustment of the payment amounts, typically a pro rata reduction. Additionally, a defendant typically pays class counsels’ fees and costs separately.

Hope that helps.