A critical term in any class action settlement agreement is the definition of the settlement class. This term typically lists the persons and entities that are included in the settlement class, as well as those that are excluded, thereby identifying who gets a slice of the settlement pie.
In Rothstein v. American International Group, the U.S. Court of Appeals for the Second Circuit considered the definition of a settlement class in a securities class action settlement. As is common in such settlements, the settlement agreements contained a provision excluding the defendant’s “affiliates” from recovering settlement proceeds. The rationale for this exclusion was presumably to prevent alleged wrongdoers from profiting or diverting funds from alleged victims.
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