Proposed amendments to the class action settlement process in Federal Rule of Civil Procedure 23(e) are scheduled to take effect on Dec. 1, 2018. One of the proposed amendments requires that “[t]he parties must provide the court with information sufficient to enable it to determine whether to give notice of the proposal to the class.” Proposed Rule 23(e)(1)(A). Under the new rule, the court must direct notice if the parties show the court that it will likely be able to (1) approve the settlement proposal and (2) certify the class for purposes of judgment on the proposal. At first glance, this appears to be a significant change to Rule 23(e), requiring settling parties to provide significantly more information at the preliminary approval stage than Rule 23 previously required. In practice, however, this is probably just the codification of the status quo for many courts and class counsel.
The comments to the amendments show the type of information that might appropriately be provided to the court at the preliminary approval stage:
- The extent and type of benefits that the settlement will confer on the members of the class.
- Details of the contemplated claims process and the anticipated rate of claims by class members.
- Planned distribution of unclaimed funds.
- Information about the likely range of litigated outcomes and the risks that might attend full litigation.
- Information about the extent of discovery completed in the litigation or in parallel actions.
- Information about the existence of other pending or anticipated litigation on behalf of class members involving claims that would be released under the proposal.
- Proposed handling of an attorney fees award, in some cases relating the amount of the award to the expected benefits to the class.
- Identification of any agreement made in connection with the proposal.
Experienced class counsel already provide much of this information at the preliminary approval stage. Why? Because federal courts are often reluctant to grant preliminary approval of a class settlement, triggering the requirement to give notice of the settlement to the class, without basic information about the class settlement. For example, in 2015, the Northern District of California not only requested that the parties provide additional information at the preliminary approval stage but also ultimately reduced the class counsel’s fee by 20 percent, in part because the class counsel failed to provide the court with basic information essential to granting preliminary approval. In re Celera Corp. Sec. Litig., No. 5:10-CV-02604-EJD, 2015 WL 7351449, at *8 (N.D. Cal. Nov. 20, 2015). In Celera, the court was critical of class counsel failing to provide the court with the following information at the preliminary approval stage: “the estimated class size, an itemized listing of how the settlement fund would be distributed, an estimated amount per share that claimants would receive, the identity of the cy pres recipient, a detailed notice plan, and a ‘mock-up’ of the notice, summary notice and claim.” Id. The court critically noted that “a skilled class counsel would have included [all of the above] in Plaintiff’s original preliminary approval motion.” Id.
Other courts have similarly denied or deferred ruling on preliminary approval motions when parties fail to provide sufficient information to allow the court to evaluate the settlement. See Adams v. Benton Cty. Sheriff Kelly Cradduck, No. 5:13-CV-05074, 2014 WL 12639862, at *3 (W.D. Ark. Aug. 1, 2014) (parties failed to provide sufficient information for the court to determine the fairness of the proposed settlement, including the strengths of the case and the relative value of the proposed settlement to the class); Martin v. Cargill, Inc., 295 F.R.D. 380, 384 (D. Minn. 2013) (denying preliminary approval where the parties provided “almost no information enabling the Court to gauge the value of the proposed class’s claims and, hence, the fairness and adequacy of the settlement); Douglas v. Arcadia Health Servs., Inc., No. C 11-3552 SBA, 2011 WL 13177621, at *2 (N.D. Cal. Dec. 12, 2011) (plaintiff provided no information about the parties’ negotiations leading to the settlement and insufficient information to determine whether the settlement fell within the range of possible approval); see also O’Connor v. Uber Techs., Inc., No. 13-CV-03826-EMC, 2016 WL 3548370, at *5–9 (N.D. Cal. June 30, 2016).
In light of this case law, parties submitting bare-bone motions for preliminary approval do so at their own peril, even under the current rules. Nevertheless, the proposed amendment makes mandatory that which many federal courts are doing already, thus promoting uniformity in federal court.