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 Class Action and Multidistrict Litigation

 

December 2018

 

NEW AMENDMENTS TO RULE 23: THE RULE CATCHES UP WITH REALITY

 

By

Bo Phillips and Gillian Clow

Alston & Bird

San Francisco / Los Angeles

 

Effective December 1, 2018, Rule 23 of the Federal Rules of Civil Procedure has been updated in several important ways.  The changes will clarify and modify class action practice, particularly with respect to settlement approval and related issues regarding notice and criteria for assessing fairness.

Revised Rule 23(e)(2) requires the court to determine adequacy of representation and that a settlement proposal was negotiated at arm’s length. It also requires the parties to demonstrate the fairness of the class relief as well as the terms of the fee award.  The Advisory Committee commentary places new emphasis on requiring courts to determine that the form and measure of relief is consistent with the basic certification standards in 23(a) and 23(b), and Rule 23(e)(2)(D) expressly requires that the settlement proposal “treats class members equitably relative to each other.”  These changes will advance the recent trend of more rigorous scrutiny by federal courts of the adequacy of class relief and the appropriateness of the form and magnitude of relief.

Revised Rule 23(c)(2) updates the requirements for notice to the settlement class, including new language that recognizes that electronic or web-based notice may be “the best notice that is practicable under the circumstances.”  These changes will allow courts to fashion more customized approaches to notice, particularly in consumer class actions where identifying and reaching class members may be difficult.  Corporate defendants can expect more pressure from the courts to use web-based forms of notice under the new rule, and the earlier preferences for publication in newspapers and magazines will become less prevalent.  The new rule also requires that “notice must clearly and concisely state in plain, easily understood language” the terms of the proposal.

Perhaps the most significant practical impact of the amendment relates to objections to a proposed settlement.  Over the past two decades, the objection process has been abused at times by “serial objectors” and their lawyers, essentially using the process to extract payments from the parties in exchange for dropping their objections.  Often times, such payments have been made without notice to the court.  Amended Rule 23(e)(5) is intended to prohibit such “shakedowns.”  It provides that “Unless approved by the court after a hearing, no payment or other consideration may be provided in connection with forgoing or withdrawing an objection…” This new requirement of notice to the court and approval by the court of any payments to objectors should reduce significantly the number of objections to fairly negotiated proposals.

Finally, in another change that should streamline the approval process after the preliminary approval hearing, Rule 23(f) has been amended to disallow an appeal of an order of preliminary approval.  While such appeals have not been common in recent years, they occasionally arise in connection with issues around the form and adequacy of notice to the class of the proposed settlement.  The new rule makes clear that any such challenge must await an order of final approval.

These amendments to Rule 23 should bring more consistency throughout the federal courts on matters involving notice and will require, in many instances, a more robust record on the fairness factors prior to approval.  For class action defense practitioners, these new rules may require more work up front in the approval process, but they also should provide greater predictability and much less risk of interference by abusive, self-interested objectors.  Seasoned class action veterans should welcome these changes and use them to reduce the risks of having a fairly negotiated resolution delayed or upended at the end of hard fought litigation.

 

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 September 2018

 

Winter Meeting in Austin –

Please mark your calendars for March 3/24/2019 - 3/28/2019 2019 FDCC Winter Meeting - Austin, Texas.  We will be teaming up for our section meeting with the Drug and Device and Products Sections to present on a topic related to litigation getting ahead of science in the context of mass actions such as MDLs and class actions.  We hope that this topic will be interesting and helpful to the members of all three sections, and we hope to see you there.

Membership Additions –


As you have probably heard, the FDCC is making efforts to add new qualified members to our group.  President Don Myles has made this a priority, and we all have a duty to try to broaden and improve our great organization in this way.  Please give some thought to who might be not only future members, but future leaders of the FDCC. We would obviously like to strengthen the corporate counsel participation as well as the diversity of our group in this process.  Please pass along your ideas in this regard to me or one of our vice chairs (Rachel Reynolds, Bo Phillips, and Wystan Ackerman).

Publications and Podcasts –

Our members have the opportunity to get published and provide helpful content to the FDCC in upcoming editions of FDCC Insights.  Further, there is a new project underway for FDCC podcasts on substantive issues. If you have ideas for either of these opportunities, please let me know and we can work to get you to the front of the line.  

Substance –

An interesting class action settlement case is currently before the Supreme Court of the United States.  The case is Frank v. Gaos 17-961, being appealed from the Ninth Circuit. Per the summary on www.scotusblog.com, the issue is: “Whether, or in what circumstances, a cy pres award of class action proceeds that provides no direct relief to class members supports class certification and comports with the requirement that a settlement binding class members must be ‘fair, reasonable, and adequate.’”  The case is set for argument on October 31, 2018. Stay tuned.

We will try to schedule a section call soon as we prepare for Austin.  


Andy Johnson – Chair

more Calendar

3/24/2019 » 3/28/2019
2019 FDCC Winter Meeting - Austin, Texas

Featured Members
Charles MeyerO'Hagan Meyer, PLLC, Richmond, VA

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