New Year, New Rule: Refining FRCP 23
Important amendments to Rule 23, the Federal Rule of Civil Procedure governing class actions, have been implemented for the first time in over fifteen years. Class action practitioners, take note of the following key changes:
Expanded Notice Options Under 23(c)(2)(B)
Prior to Amendment… Rule 23 directed attorneys to provide “the best notice . . . practicable under the circumstances,” requiring individual notice to be given to all class members who could be identified with reasonable effort. Practically, this meant notice was almost always given by U.S. mail.
As Amended… Rule 23 now recognizes electronic means of communication, such as email or text message, may be equally practical methods by which notice is provided to class members. By opening the door to “other appropriate means” as well, the new Rule directs courts and counsel to determine which method of communication is most likely to reach the intended audience in light of the characteristics of the class and the case.
And in the California Superior Courts? California courts consider seven factors when determining whether a proposed method of notice is appropriate in any given case. Among the relevant factors are the interests of the class, the cost of notifying class members, and the resources of each party.
Approving Proposed Settlements Under 23(e)(2)
A court may approve a class action settlement if it is “fair, reasonable, and adequate.”
Prior to Amendment… Each circuit court had adopted a unique test for determining when to approve a settlement agreement.
As Amended… Rule 23 provides a uniform set of core considerations that district courts should take into account when considering whether a settlement embodies fairness, reasonableness, and adequacy:
- The adequacy of representation by class representatives and class counsel
- Whether the settlement was negotiated fairly
- The adequacy of the relief provided to the class
- Whether class members were treated equitably relative to each other
As indicated by the Advisory Committee Notes, these factors are not intended to displace each circuit’s individual test, but rather, to help streamline the approval process for litigants.
And in the California Superior Courts? Before a settlement is finalized in California, it must be approved by the trial court. The court conducts a fairness hearing in which it considers the interests of all members in the class on the basis of various factors, such as the strength of plaintiff’s case, the amount offered in settlement, and the reaction of class members to the proposed settlement.
Notice to Class & Appeal of Preliminary Settlement Approval Under 23(e)(1),(f)
Prior to Amendment… Rule 23 did not require any notice of a proposed settlement pertaining to a class not yet certified.
As Amended… Rule 23 now requires parties seeking settlement approval to provide the court with information “sufficient to enable it to determine whether to give notice of the proposal to the class.” In making this showing, the parties must demonstrate that the court will be able to approve the settlement proposal and, if it has not previously certified a class, “certify the class for purposes of judgment on the [settlement] proposal.” Additionally, Rule 23 specifies that no appeal may be taken from an order under Rule 23(e)(1) to provide notice to a class of a proposed settlement.
And in the California Superior Courts? If the court has provisionally certified the action as a class action, notice of the final approval hearing must be given to the class members in the manner specified by the court.
Discouraging Bad-Faith Settlement Objectors Under 23(e)(5)
Prior to Amendment… Any member could object to a proposed settlement agreement.
As Amended… Any member may object to a proposed settlement agreement, but, to do so, the objection must “state whether it applies only to the objector, to a specific subset of the class, or to the entire class, and also state with specificity the grounds for the objection.” Additionally, payments made in connection with the withdrawal of an objection must be disclosed to the court. Simply, the new requirement acts as a safeguard against bad-faith or “professional” settlement objectors.
And in the California Superior Courts? To discourage meritless objectors, California requires objectors to formally intervene or file a motion to vacate to have the right to appeal the proposed settlement agreement.
While these changes are not as significant as the 2003 amendments, they are meaningful and consequential. We anticipate that these changes will be applied in and evolve through federal decisions during 2019 and beyond.
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