Date: July 17, 2020

On July 14, Judge Alvin Hellerstein of the Southern District of New York rejected a proposed $46.8 million settlement, which likely would have resolved civil suits against Harvey Weinstein and his company for sexual misconduct. When one reviews the details of the proposed settlement, it is clear why the Court reached this decision.

Judge Hellerstein found that the proposed class action was unsuitable for class treatment and that the settlement would have treated all victims the same regardless of each person’s specific allegations of sexual assault. While the proposed settlement called for the appointment of a special master to evaluate each claim and assign a monetary value, Judge Hellerstein rejected that approach because it would abdicate the Court’s responsibility.

Part of the settlement called for $18.9 million for the class and an additional $5.4 million for individual plaintiffs. Certain plaintiffs objected because all of those proceeds were to be paid by insurance and not Weinstein. The settlement also proposed $7.3 million to be paid to the bankruptcy estate of The Weinstein Company to cover administrative and general unsecured claims of creditors in the bankruptcy proceeding. Those unsecured creditors included Weinstein himself, as well as his brother and former Weinstein Company directors. After paying legal fees, litigation and settlement costs, the plaintiffs stood to gain less than the money earmarked in the settlement to Weinstein and The Weinstein Company for legal fees.

Class actions are unique under the law because they provide for court approval of settlements. Here, the court properly exercised its discretion to protect class members.