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Class Actions & Derivative Suits

Class Actions 101: Possible Amendments to Rule 23

By Robert J. Herrington – June 2, 2015


Class action practitioners should pay close attention. The Rule 23 Subcommittee of the Advisory Committee on Civil Rules recently published its draft concept amendments to Rule 23, and they contain several potentially game-changing proposals. See Rule 23 Subcommittee Report, in Agenda Book for Advisory Committee on Civil Rules, Washington, D.C., April 9–10, 2015, at 243–297. The subcommittee says that, although these concept amendments remain "preliminary," it currently intends to present draft amendments to the advisory committee by fall 2015, and the amendments could become effective as soon as December 1, 2018.


The draft concept amendments cover seven topics:


  • settlement approval criteria for class actions

  • certification of settlement classes

  • cy pres treatment

  • dealing with class settlement objectors

  • Rule 68 offers of judgment and mootness

  • issue classes under Rule 23(c)(4)

  • class settlement notice


Settlement Approval Criteria
The Rule 23 Subcommittee is proposing revisions that would largely supersede the settlement approval factors adopted by various circuits, replacing them with a "uniform set of core factors," while still providing flexibility to district courts to consider other matters that may be pertinent to settlement approval.


Certification of Settlement Classes
The subcommittee says that the purpose of the proposed revisions, which will largely overturn the Supreme Court's decision in Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997), is to make it easier to certify, for settlement purposes, proposed class actions that may not satisfy Rule 23(b)(3)'s predominance requirement. The subcommittee proposes to do this by (i) focusing on whether a proposed class settlement is superior to other methods of adjudicating the dispute and (ii) clarifying the core factors to be used in evaluating a proposed class settlement, as mentioned above.


Cy Pres Treatment
In this context, cy pres refers to distributing all or portions of the relief provided as part of a class action settlement to individuals or groups who are not part of the certified class. This issue has generated significant debate in the past few years, including Chief Justice Roberts's statement in Marek v. Lane, 134 S. Ct. 9 (2013), that the Supreme Court "may need to clarify the limits on the use of such remedies." The subcommittee is proposing amendments that would "recognize and regularize" cy pres distribution in class settlement proceedings by providing guidelines for how cy pres distributions may be approved and implemented.


Dealing with Settlement Objectors
Some practitioners have complained about those who object to class action settlements for the sole purpose of extracting some type of "tribute" payment from the parties in exchange for withdrawing the objection. The subcommittee proposes to address this issue by adding language that would (i) require the disclosure of any side agreement made with an objector in connection with withdrawing an objection and (ii) allow courts to sanction those who file frivolous objections.


Rule 68 Offers of Judgment

In some jurisdictions, a defendant may be able to moot a putative class action by making, before a motion for class certification is filed, an offer of judgment that provides the individual plaintiff with complete relief. The plaintiffs' bar has vigorously fought against these so-called pick-off attempts. The subcommittee outlines various proposals that appear to be designed to prevent, or at least limit, the use of Rule 68 in the context of putative class actions. One proposal states that "[t]his ploy [making a Rule 68 offer of judgment to the named plaintiff in a class action] should not be allowed to defeat the opportunity for class relief before the court has had an opportunity to rule on class certification."


Issue Classes
Although the proposal on Rule 68 is sure to generate debate, the proposal on issue classes is likely the most controversial. The subcommittee reports that, in the past few years, there has been a growing consensus that Rule 23(c)(4) allows courts to certify an "issue," even if the case as a whole does not satisfy the predominance requirements of Rule 23(b)(3). Many in the defense bar would disagree with this assessment, but the subcommittee proposes to add language "clarifying" that predominance is not a prerequisite to certification under Rule 23(c)(4). The proposal also seeks to allow early appellate review of any decision on a "common issue" certified under Rule 23(c)(4), rather than having to wait until final judgment.


Class Settlement Notice
The subcommittee is proposing to add language to Rule 23 that would expressly permit electronic and email notice based on technological advances in recent years that help ensure the effectiveness of this type of notice.


Conclusion
The subcommittee's proposals remain preliminary, and there is sure to be significant public comment and debate before any of these proposals find their way into Rule 23. But practitioners should keep a close eye on this process, which could have a great impact on class action practice for years to come.


Keywords: litigation, class actions, Rule 23, amendment proposals


Robert J. Herrington is a shareholder with Greenberg Traurig in its Los Angeles, California, office.


 
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