Back to the Drawing Board: Court Rejects Class Settlement for Avoidable Mistakes
You’d think that if both sides agree to settle a lawsuit, the hard part is over. But as one recent case shows, even a perfectly negotiated deal can fall apart once it reaches the courtroom. In Kovanen v. Asset Realty LLC, 2025 U.S. Dist. LEXIS 220291 (W.D. Wash. Nov. 7, 2025), a federal judge rejected a $700,000 class action settlement over alleged real estate text messages because the agreement didn’t pass legal muster.
The court found several problems that made the deal unfair or unworkable:
Unclear class definition and notice: The settlement relied on phone area codes to identify “Washington residents,” potentially excluding actual residents with out-of-state numbers. The notice plan also wasn’t reliable enough to reach all affected consumers.
Unrealistic deadlines: The timeline didn’t leave room to fix notice or claim issues before key deadlines like attorneys’ fee submissions.
Unequal treatment: Only those with Washington area codes could get paid, while others still lost their rights to sue. The court called this an “obvious deficiency” and questioned whether the settlement treated class members equitably.
Inaccurate forms: Class notices included inconsistent payout amounts and even listed the wrong courtroom number.
Evidence concerns: The deal required deletion of data that might be relevant to future claims.
Because of these issues, the judge denied preliminary approval, meaning the settlement couldn’t even be sent to class members for notice.
The lesson for businesses is clear: a signed deal doesn’t mean a done deal. Courts don’t rubber-stamp settlements; they scrutinize every clause for fairness, accuracy, and compliance. A settlement that looks practical from a business standpoint can still collapse if the class is defined too broadly, the notice plan is unreliable, or the data is incomplete.
For companies facing class actions, this decision is a reminder to involve experienced class action counsel early. The right legal team doesn’t just negotiate the numbers; they ensure the structure, definitions, and timing can withstand judicial review. Otherwise, a “resolved” case can quickly turn into months of delay, added cost, and another trip back to the drawing board.