Second Circuit Decision Underscores Risk Of Aggressive Settlement Class Notice Programs

Although defendants settle class actions to “buy peace” through class-wide releases, it is well-established that class releases will not be enforced in certain situations, such as when notice to the settlement class was constitutionally inadequate. In Hecht v. United Collection Bureau, 2012 U.S. App. LEXIS 17374 (2d Cir. Aug. 17, 2012), the Second Circuit recently highlighted that risk, finding that a class settlement did not bar a claim under the federal Fair Debt Collection Practices Act (“FDCPA”) because notice of the settlement solely through a single advertisement in USA Today was insufficient. While the general principle reiterated in Hecht is not new, the Second Circuit’s analysis of how much notice was required to satisfy due process in that case likely will discourage parties from settling class actions at least in some circumstances.

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