By a single vote on October 22, 2003, the Senate declined to approve a cloture motion that would have ended a Democratic filibuster and sent the Class Action Fairness Act to a vote on the Senate floor. If passed, this class action reform legislation would have loosened the diversity requirements granting federal courts jurisdiction over class action suits.

Nevertheless, several significant amendments to Rule 23 (focusing on the process by which class actions are litigated in federal court) took effect on December 1, 2003. These changes include:

  • Rule 23(c)(1)(A) requires the district court to decide whether to certify a class action "at an early practicable time." The Committee Note states that this language (which replaced "as soon as practicable") directs the court to conduct careful discovery relating to the suitability of class treatment before reaching a deliberate decision as to class certification.
  • Rule 23(c)(2) requires that notice to class members be articulated in "plain, easily understood language" and sets forth more specifically the requisite content of such notice: (1) the nature of the action; (2) the definition of the class certified; (3) the class claims, issues or defenses; (4) notice that a class member may enter an appearance through counsel if desired; (5) notice that the court will exclude from the class any member who requests such exclusion, including when and how members may elect such exclusion; and (6) notice of the binding effect of class judgment on class members.
  • Rule 23(e)(1) requires the court’s approval not only of voluntary dismissals or compromise of claims, issues or defenses of a certified class, but also of any settlement. Before granting such approval, the court now must hold a hearing and find that the proposed settlement, voluntary dismissal or compromise is "fair, reasonable and accurate."
  • Rule 23(e)(1)(B) eliminates the requirement of mandatory notice to all class members in Rule 23(b)(1) class actions (maintainable due to the potential risks posed by prosecution through separate actions) and Rule 23(b)(2) class actions (maintainable because nature of opposing party’s conduct renders class relief appropriate). Instead, parties are required to provide "reasonable" notice to these class members. Mandatory notice requirements remain in effect as to Rule 23(b)(3) class actions (maintainable because common questions of law or fact among class members predominate over those questions affecting only individual class members).
  • Rule 23(e)(2) is a new subsection of Rule 23(e). It requires parties seeking approval of a settlement, voluntary dismissal, or compromise to file a statement with the court disclosing any agreements created in connection with such proposed changes.
  • Rule 23(e)(3) is a new (and some-what controversial) subsection of Rule 23(e). It allows the district court to reject a settlement unless individual class members are afforded a second opportunity to opt-out of the class upon review of the settlement terms. Significantly, this second opt-out opportunity, granted at the discretion of the court, is reserved for class members that have declined an earlier opportunity to request exclusion. 
  • Rule 23(e)(4) also is a new subsection of Rule 23(e). It allows any class member to object to a settlement, voluntary dismissal or compromise, but withdrawal of such objection requires court approval.
  • Rule 23(g) is an entirely new section to Rule 23. Specifically, it requires the court upon class certification to appoint class counsel based in part on a specified series of criteria demonstrating the attorney’s ability to fairly and adequately represent the interests of the class. These criteria include: (1) the work performed by counsel to identify and investigate potential claims in the action; (2) counsel’s prior experience with overseeing class actions and the particular claims at issue; (3) counsel’s knowledge of the applicable law; and (4) resources available to counsel for use in representing the class. The court also is permitted to appoint interim counsel prior to class certification where necessary to protect the interests of class members.
  • Rule 23(h) is also an entirely new section to Rule 23. It sets forth the procedure by which the court may award "reasonable" attorney fees and nontaxable costs. This process requires the filing of a Motion for Award of Attorney Fees, allows for a class member or party’s objections to such a motion, specifically requires the court to articulate its findings of fact and conclusions of law, and permits the court to refer issues relating to the amount of the award to a special master or magistrate judge. The adoption of these modifications constituted the most ambitious reform to federal class action procedure since the enactment of Rule 23 in 1966. 

This article is presented for informational purposes only and is not intended to constitute legal advice.