Article by William D. Henderson
A clear sailing agreement (or clause) is a compromise in which a class action defendant agrees not to contest the class lawyer's petition for attorneys' fees. This Article argues that a clear sailing provision is often used to facilitate collusive settlements in cases involving nonpecuniary relief or common funds in which a defendant retains a reversionary interest. Because these types of settlements present difficult valuation problems, trial courts lack a clear benchmark for calculating attorneys' fees. Thus the defendants and the lawyer for the class can exploit this uncertainty by presenting an inflated settlement value to the court (to justify higher attorneys' fees) while simultaneously reducing the true cost to the defendant. Although courts purportedly apply “heightened scrutiny” to settlements involving clear sailing agreements, this approach rarely threatens the underlying settlement. As a result, clear sailing agreements tend to undermine the deterrence function of class action lawsuits by producing settlements that are systematically too low. This Article proposes a per se ban on settlements that rely upon clear sailing provisions. In addition, this Article recommends the appointment of a guardian ad litem to litigate the issue of attorneys' fees in all cases involving nonpecuniary relief or a claims-made reverter fund.
About the Author
William D. Henderson. Visiting Associate Professor, Chicago-Kent College of Law, Illinois Institute of Technology. J.D. University of Chicago Law School.
Citation
77 Tul. L. Rev. 813 (2003)