United States: The New New Proposed Amendments To Rule 23

Last Updated: October 26 2015
Article by Andrew J. Trask

Last week, the Rule 23 Subcommittee released its latest draft proposal for amending Rule 23.  ( 2015-1105 Rule 23 Subcommittee Report)

The Subcommittee has abandoned (or in a few cases, placed "on hold") several of its proposed amendments.  Among them:

  • There is no longer an attempt to amend Rule 23(c)(4) to specify that it trumps Rule 23(b)(3).
  • There is no longer any attempt to enshrine cy pres relief in Rule 23.
  • The attempt to add an explicit ascertainability requirement has been placed on hold.
  • The attempt to except Rule 23 from the Rule 68 offer of judgment has been placed on hold.

For the most part, this set of developments is good news.  The Rule 23(c)(4) proposal would have significantly changed certification practice, and would have undermined one of the fundamental methods of protecting due process in an opt-out class action.  Enshrining cy pres relief in the Rule would very likely have violated the Rules Enabling Act, a risk that would not have justified the additional flexibility the amendment might have offered to settling parties.  And, while I still believe that the ascertainability requirement should be explicit rather than implicit, the "minimalist approach the Subcommittee had had proposed (which would have reduced a judicially-recognized "threshold requirement" to an optional "management tool") is no longer a danger.  I'm personally happy to maintain a strong implicit requirement rather than a watered-down "explicit" provision.  And the Rule 68 offer issue will be decided this year by the Supreme Court.

So what does that leave?  The following six proposals, some of which are new:

1.   "Frontloading."   The Subcommittee defines "frontloading" as " provid[ing] [relevant]{sufficient} information about the proposed settlement" at the preliminary evaluation stage.  The Subcommittee has eliminated its "laundry list," which leaves a fairly vague standard that, hopefully, courts can fill in.  (Careful readers will note that the last time I wrote about this, I complained about the laundry list.  And all I can say is, yes, I know.  I'm still ambivalent about whether the better response to strategic lawyering is a list of factors or a vaguer standard.  Looks like we'll find out.)

2.   Excluding "preliminary approvals" of class certification and orders regarding notice to the class about possible settlements from immediate appeal under Rule 23(f).   I'm presuming this is an attempt to reduce appeals by "bad" objectors looking for a payoff to leave.  (It might also reduce appeals of denials of preliminary approval.)  I personally haven't experienced this tactic in either form, but I'm hard-pressed to see how it could be abused.

3.   Clarifying Rule 23(c)(2)(B) to state that Rule 23(e)(1) notice triggers the opt-out period.   The Subcommittee's justification here is that this will reduce repeated notices to the class.  Assuming that "front-loading" includes full information about both the relief the class members will receive and the fees their counsel are taking, I don't see an issue here.  But starting the clock on opt-outs (and, presumably, objections) without full information could encourage further abusive settlement practices.

4.   Notice to unnamed class members.   This is the "email"/"appropriate technology" provision.  As I've said before, you'd pretty much need to be a Luddite to not want to reduce notice costs with reliable technology.

5.   Handling objections by class members to proposed settlements.   The Subcommittee proposes a two-part addition to Rule 23(e): proposed Rule 23(e)(5)(A) would require objectors to state the grounds of their objection; proposed Rule 23(e)(5)(B) would require court approval of any withdrawn objection, and disclosure of any side payments.  (There are some variations in the proposed language, but this is the gist.)  So we're really talking about front-loading objections like we do settlements, and adding transparency to the process.  Good ideas both.

6.   Criteria for judicial approval of class-action settlements.   The Subcommittee would replace the infamous "fair, reasonable, and adequate" with either language allowing the court to disapprove the settlement for any reason, or language further specifying the factors the court must find to approve a settlement.  While I'm confident these provisions by themselves won't eliminate abusive settlements, they will at least provide more guidance to the courts.  More importantly, I don't see the provisions doing much harm.  (I do worry a little, in the second alternative, about providing a "catch all" for the court to come up with new reasons for justifying settlements, unless the Rule makes very clear that you still have to find the other mandatory factors.)

Finally, the Subcommittee is submitting without endorsing a proposal for a Rule 23(b)(4) that would allow courts to ignore predominance when certifying settlement classes.  The Subcommittee notes that it was advised to leave this issue alone, advice I wholeheartedly agree with.

It's possible to notice two trends here.  First, the "big" "sexy" Rule 23 ideas are rapidly getting winnowed out of these proposals, most likely because there is little if any area of agreement between plaintiffs' and defense counsel on which ones will work in practice.  Second, what are left are largely technical, largely incremental reforms.  That's for the good, I believe.  Trying for sweeping reforms is certainly tempting (hey, I recommended my own), but it's far better to reflect the trends in litigation, rather than set them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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