Settlement fund
A settlement fund is the pool of money a company agrees to pay to settle a class action, from which class payments and most costs are covered.
Also called: gross settlement fund, settlement pot, settlement amount
A settlement fund is the pool of money a company agrees to pay to settle a class action, from which class payments and most costs are covered.
What it means
A settlement fund is the pool of money a company agrees to pay to settle a class action. In most deals, the payments to class members, the cost of notice and administration, service awards to the named plaintiffs and the lawyers' fees all come out of it. In some deals, the company pays the fees separately.
The money is typically held in a separate account for the class, and a court-appointed settlement administrator manages how it is paid out once the court approves the deal. The headline number you see in news stories is normally the full fund, before any of those deductions.
Not every settlement has a fixed fund. In a claims-made deal, the company pays only for the claims that are approved, so the final cost is not known until the claims close. Some settlements also add benefits that are not part of the fund, such as changes to business practices.
What it means for you
The size of the fund is not what you will get. After the deductions, the amount left for class members is the net settlement fund. How it is split depends on the plan in the notice: a flat amount per person, shares set by a formula, or pro rata shares that shrink or grow with the number of claims.
Read the "How much will I get?" part of the notice. It should show the total fund, the amount the lawyers will ask for and an estimate of your payment. A large fund spread over millions of people can still mean small checks.
Example
Say a meal-kit company agrees to a $10 million settlement fund to resolve claims over misleading "free shipping" ads. In this deal, the amount is fixed. Court-approved fees, administration costs and service awards are paid from the fund first. What remains is divided among customers who file valid claims. The company will not pay more than $10 million, so if many customers file, each payment is smaller. The judge must approve the arrangement before any money moves.
FAQ
No. The fund is the total the company pays. Fees, costs, administration and service awards usually come out first, and the rest is divided among the class members who qualify.
Related terms
- Manual for Complex Litigation, Fourth, sections 21.312, 21.66 and 21.661 (Federal Judicial Center)
- Judges' Class Action Notice and Claims Process Checklist and Plain Language Guide (Federal Judicial Center, 2010)
- Federal Rule of Civil Procedure 23, class actions (Cornell LII)
Updated Oct 18, 2026. Plain-English definitions for general information — not legal or tax advice.