Frequently, a class action complaint will set forth an elaborate theory of why the defendant’s actions were negligent or wrongful, but fall short when trying to identify how that conduct has harmed the class members.  This kind of complaint invites a motion to dismiss on the grounds that the plaintiff has failed to demonstrate constitutional standing by identifying a “concrete, particularized, and actual or imminent” injury traceable to the defendant’s actions.

When these motions are successful, it’s a great day for the defense, but court dockets are littered with denied (or simply undecided) Rule 12(b)(6) motions challenging a plaintiff’s constitutional standing.  In those cases, negotiating a settlement may become the most prudent course of action.  And at that point, that motion to dismiss brief that you stayed up late drafting last spring can become an obstacle to structuring a lasting settlement in autumn—particularly when there’s a shortage of claimants who can sufficiently document damages to obtain relief from a compensatory settlement fund.

So how do parties structure a settlement that will avoid the objectors’ wrath after the defendant is already on record arguing that the class members haven’t suffered any real injury?  The traditional method has been to establish a cy pres award that will distribute residual funds to a charity related to the subject matter of the action or a legal services organization. Of course, these awards have met their share of criticism in recent years.

Notably, another tool settling parties have embraced is structuring settlements in a manner that provides alternative benefits directly to class members in addition to the traditional compensatory fund.

This has recently popped up in the data breach class action context, where consumers allege their personal information was stolen after making a credit card purchase from the defendant-retailer.  These claims frequently prompt a “no concrete injury” argument, particularly when the putative class representative’s financial institution has already reimbursed any fraudulent charges made on the card.

Thus, when one of these cases settles, the parties may opt to establish additional remedies for class members above and beyond the traditional fund to reimburse any documented out-of-pocket losses.  This was the case in both In re: The Home Depot, Inc., Customer Data Security Breach Litigation, No. 1:14-md-02583-TWT (N.D. Ga.) and In re: Target Corporation Customer Data Security Breach Litigation, No. 1:14-md-2522-PAM (D. Minn).

By way of example, the settlement in the Home Depot class action established a fund dedicated to providing several months of identity protection services to anyone whose data was compromised by the security breach.  Accordingly, any class member who did not suffer out-of-pocket losses, or could not sufficiently document them, was still eligible to receive a tangible benefit.

These types of settlements may also include other forward-looking commitments by the defendant such as establishing information security officers at the executive level, maintaining a written information security program, performing routine data risk assessments, providing security training to employees, and upgrading card-payment technology.

The upshot of these multi-faceted settlements is that even if class members have difficulty demonstrating out-of-pocket losses to make a claim on the fund, they still receive benefits in the form of identity protection and credit monitoring services, which may serve to head off potential objectors.  While objections to the measures of relief afforded by settlements will undoubtedly continue to surface, parties have emphasized these extra benefits when responding to objectors in successful motions for final approval of settlement.

This settlement tool, increasingly common in data breach class actions, merits consideration in settling other types of class actions in which the defendant has previously argued that the plaintiffs have failed to show a concrete, particularized, and actual or imminent injury.