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CAN GOVERNMENT AGENCIES OBJECT TO CLASS ACTION SETTLEMENTS?Bruce D. Greenberg

The so-called Class Action Fairness Act of 2005 (“so-called” since it is heavily weighted in favor of class action defendants, though that’s a subject for another post), known as CAFA, requires that when a settlement of a class action is proposed, defendants must give notice of that settlement to “appropriate state and federal officials.” 28 U.S.C. §1715. In general, the “appropriate” officials are those who have “regulatory or supervisory responsibility with respect to the defendant.”

There is a dispute as to whether section 1715’s requirement of notice to appropriate state and federal officials allows those officials to object to a settlement. The settled rule is that only class members can object to a class action settlement. And CAFA itself is silent as to any right of government officials to object, as opposed to the right to receive notice.

A Senate report regarding CAFA stated that the notice requirement exists so that the appropriate officials “may voice concerns if they believe that the class action settlement is not in the best interest of their citizens.” But elsewhere in the legislative history and, more importantly, in section 1715(f) of CAFA itself, appears the statement that “[n]othing in this section shall be construed to expand the authority of … Federal or State officials.” That language would seem to preclude the argument that CAFA extends to such officials, who are not class members, the right to object, which has long been reserved to class members alone..

It is relatively rare for government officials to attempt to object to class action settlements, since most such settlements are fair, reasonable, and adequate and therefore not objectionable. In some cases, attorneys generals, who are usually the “appropriate officials,” have stepped forward to object to settlements, and those objections have been considered. A leading example of that is Figueroa v. Sharper Image Corp., 517 F. Supp. 2d 1292 (S.D. Fla. 2007). There, attorneys general from 35 states and the District of Columbia filed objections to a settlement. The court not only permitted those objections, but relied on their “vigor and substance” in rejecting the settlement.

Other cases, however, from around the country have ruled that CAFA does not entitle government officials to object. E.g., In re American Int’l Group, Inc. Sec. Litig., 916 F. Supp. 2d 454, 462 (S.D.N.Y. 2013). Those cases rely on the fact that CAFA does not expressly authorize government officials to object, even though Congress certainly knew how to do that if that were its intent, and on the language of section 1715(f) that section 1715 does not “expand the authority” of federal and state officials who are to receive notice under that section. Since only class members can object to class action settlements, allowing government officials the right to do that would “expand the[ir] authority,” in contravention of CAFA.

To date, the cases on this issue are all from District Courts. It will be interesting to see what an appellate court has to say about this issue, if and when the question is presented on an appeal.