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July 27, 2017 by Mindee J. ReubenDownload PDF

Proposed Amendments to Federal Rules Governing Class Action SettlementsMindee J. Reuben

Currently under consideration by the Civil Rules Advisory Committee (“Advisory Committee”), the Committee on Rules of Practice and Procedure, the Judicial Conference, and the Supreme Court, are proposed amendments to Federal Rule of Civil Procedure 23(e), relating to class action settlements.

The current formulation of Rule 23(e) is rather brief and does not give any detailed guidance on this issue, particularly when a class has not been certified.¹ While the central concern remains whether the settlement is fair, reasonable and adequate, the proposed amendments generally require that “[t]he parties must provide the court with information sufficient to enable it to determine whether to give notice of the proposal to the class.” Proposed Rule 23(e)(1)(A). The amendments also identify specific factors that should be considered in the absence of a certified litigation class:

• The adequacy of representation by class representatives and counsel (proposed (e)(2)(A));
• Whether settlement negotiations were conducted at arm’s length (proposed (e)(2)(B));
• The adequacy of the proposed relief, including: the costs, risks and delay of trial and appeal; the effectiveness of the proposed method of distributing relief, including the processing of claims; the terms of any proposed award of attorneys’ fees, including timing of any payment (proposed(e)(2)(C)); and
• Whether class members are treated equitably relative to each other (proposed (e)(2)(D)).
With regard to Proposed Rule 23(e)(1)(A), the Committee Note indicates that the basic focus should be on “the extent and type of benefits that the settlement will confer on the members of the class.” Nothing specific is suggested, but examples of appropriate information are given in the Committee Notes to both Subdivisions (e)(1) and (e)(2).
With regard to Proposed Rule 23(e)(2), and despite the addition of specific factors, the purpose of the proposed changes is not to make the process of seeking settlement certification more onerous. The Committee Note suggests that, while a particular Circuit may have a long litany of factors that should be considered before granting settlement certification (the Third Circuit has nine), the courts and counsel have become preoccupied with addressing every factor, even if some may not be relevant in a particular case. The intent of the proposed amendment is not to supplant a set of court-created factors, “but rather to focus the court and the lawyers on the core concerns of procedure and substance that should guide the decision whether to approve the proposal.”

Proposed Rule 23(e)(5) addresses objections to the settlement by class members. Subdivision (5)(A) requires the objector to state whether the objection is on behalf of the individual, a subset of the class, or the entire class. The objection must also be stated with specificity.

Currently, an objection may be withdrawn only with court approval. Under the proposed amendments, before payment or other consideration is paid to the objector or the objector’s counsel in connection with either withdrawing an objection, or withdrawing an appeal after settlement approval, there must be a hearing and court approval. See Proposed Rule 23(e)(B)(i). This provision is an attempt to balance the problem of serial objectors (rather than legitimate objectors) with the need to avoid the delay produced by objections so that the class may receive relief. Committee Note, Subdivision (e)(5)(B).

Although the time for public comment and hearings has ended, comments and testimony on the proposed amendments can be found at here.
¹If a class has already been certified, minimal information is required (e.g., change in the class certified or claim/defenses/issues on which certification has been granted).