On December 1, 2018, the amendments to Fed. R. Civ. P. 23 took effect, principally altering portions of the Rule governing class action notice, settlement, and appeals. Although the amendments were approved earlier in 2018 by the United States Supreme Court, they had been in the works for some time.
In 2014, a subcommittee of the Advisory Committee on Civil Rules met with class action attorneys from both the plaintiffs’ and defense bar all across the country in a series of meetings, seeking input on amendments to Rule 23. One such meeting was held in October 2014 during the ABA’s National Institute on Class Actions, a two-day conference well-attended by counsel in private practice, in-house counsel, academics, and reporters from class action news services. Those of us in attendance had the opportunity to offer the subcommittee suggestions on how to amend the Rule to better address problems we encounter in practice, such as cy pres awards, professional objectors, and issue classes. Fast-forward four years later, and the amendments now address one of these topics, as well as others. Below is a summary of the recent Rule changes:
Notice to Class Members
Rule 23(c)(2)(B) as amended now clarifies that notice by electronic means – a method many attorneys and claims administrators have been using for some time – may be “the best notice that is practicable under the circumstances…” The Committee Notes suggest that “when selecting a method or methods of giving notice courts should consider the capacity and limits of current technology, including class members’ likely access to technology.” This amendment ushered the Rule into the 21st century, where the landscape of technology and social media has changed rapidly in the past fifteen years.
Rule 23(e) was amended to add a new requirement that parties seeking preliminary approval of a proposed class settlement “provide the court with information sufficient to enable it to determine whether to give notice of the proposal to the class.” Parties must show that the court is able to (i) approve the proposed settlement and, (ii) if a class has not been certified, that the court will be able to certify the class for purposes of judgment on the proposal. Defendants need not worry that taking the position that the class is certifiable will be held against them later if the litigation proceeds, as the Committee Notes state “If the settlement is not approved, the parties’ positions regarding certification for settlement should not be considered if certification is later sought for purposes of litigation.”
The amended Rule 23(e) now also includes a list of factors courts should consider in determining whether a proposed class settlement is fair, reasonable, and adequate. Those factors are whether (1) class representatives and class counsel have adequately represented the class, (2) the proposed settlement was negotiated at arm’s length, (3) the relief provided for the class is adequate, taking into account the costs, risks, and delay of trial and appeal, the effectiveness of the proposed method of distributing relief to the class, including the method of processing claims, the terms of any proposed award of attorney’s fees, and any agreement required to be identified under Rule 23(e)(3), and (4) the settlement proposal treats class members equitably relative to each other. This amendment is designed to codify a uniform set of factors across all federal circuits that courts should consider in deciding whether to approve a settlement.
Finally, amendments of Rule 23(e)(5) were implemented to combat the rise in “professional objectors,” a pestilence which has increasingly plagued both plaintiffs’ and defense counsel in recent years. Under the amended Rule, any 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.” Further, no payments may be made in connection with an objection unless court approval is obtained. The new Rule attempts to weed out bad-faith objections brought by objectors seeking a pay-off from objections brought in good faith.
Rule 23(f) was amended to clarify that parties may only seek interlocutory appeal of orders denying or granting class certification, and not of decisions to give notice to a class of a proposed settlement (often referred to colloquially as “preliminary approval orders”). The amended Rule also provides 45 days, instead of 14 days, for United States government, agency, or officer or employee parties to file a Rule 23(f) petition for interlocutory appeal.