For the first time in 15 years, Federal Rule of Civil Procedure Rule 23, which governs class actions, has been amended. The changes went into effect December 1, 2018 (2018 Amendments). The U.S. Supreme Court approved the amendments in an effort to “address issues related to settlement, and also to take into account  issues that have emerged since the rule was last amended in 2003.”
The 2018 Amendments purport mainly to (1) update the requirements for notice given to class members to account for technological advances, (2) create new notice requirements for proposed class settlements, (3) attempt to reduce vexatious objections to class settlements and (4) clarify that appealing orders directing notice of a proposed settlement are no longer permitted. In light of these changes, the Northern District of California issued comprehensive procedural guidance for class action settlements, paving the way for other federal courts to follow.
I. Updated Notice Requirements Incorporating Technological Advances
The 2018 Amendments to Rule 23 recognize the need for modernizing class notice.
The 2018 Amendments did not change the existing requirement that the court must direct to class members “the best notice that is practicable under the circumstances” or the requirement that “individual notice” must be given to all class members identified through a reasonable effort.
The 2018 Amendments simply recognize additional forms of notice—namely, electronic notice—that are also appropriate to consider. Specifically, the rule now authorizes notice by “United States mail, electronic means, or other appropriate means.”
At the same time, the 2018 Advisory Committee cautions against using electronic means as a default mode by suggesting that parties and courts consider what means of notice is most appropriate under the circumstances. In other words, while there is technically no preference for “any one means of notice,” parties and courts must take into account “the means or combination of means most likely to be effective in the case before the court.”
II. New Notice Requirements for Proposed Class Settlements
The 2018 Amendments establish specific procedures for proposed class settlements.
Before the recent amendments, Rule 23 required courts to approve a class action settlement only upon the satisfaction of “a hearing and on finding that it is fair, reasonable, and adequate.” This language left open for interpretation how individual courts would make the determination, resulting in some courts weighing a dozen or more factors before issuing a decision. Over time, courts developed substantive and procedural rules governing this process, though they often varied among jurisdictions. The 2018 Amendments establish a more formalized process for presenting a proposed class settlement to the court.
The Advisory Committee highlighted several factors to assist district courts in making the determination whether to approve a settlement:
- The adequacy of the representation by class representatives and class counsel;
- Whether the settlement was negotiated fairly;
- The adequacy of the relief provided to the class; and
- Whether class members were treated equitably relative to one another.
Though this is not an exhaustive list, the intention was to provide courts with a core set of factors to create a more unified and streamlined process for determining whether to approve settlements.
III. Reducing Vexation Objections to Class Settlements
Proper, good faith objections to proposed settlement agreements serve to protect the interests of class members, and therefore play a valuable role in the class action process. But bad faith objectors—also known as “professional objectors”—have filed objections merely to extract a monetary settlement in exchange for withdrawing their objections.
To address this problem, the 2018 Amendments now clarify the necessary format and substance of the objections. 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.” Further, any “payment in connection with an objection” must be disclosed and approved by the court. Together, these two new requirements are designed to highlight good faith objections while dissuading vexatious objections.
IV. Appeals of Orders Directing Notice of a Proposed Settlement No Longer Permitted
The 2018 Amendments provide that no appeal may be taken from an order to provide notice to a class of a proposed settlement. It also gives the United States additional time—specifically, 45 days—to file a petition for permission to appeal from an order granting or denying class certification (compared to the 14 days allowable by any other party). The reason behind the straightforward change is to make it clear “that an appeal under this rule is not permitted until the district court decides whether to certify the class.”
V. Trendsetting: The Northern District of California Issues Comprehensive Procedural Guidance for Class Action Settlements
It appears that the Northern District of California is the only federal court to date that has issued its own comprehensive guidance for class action settlements. In addition to conforming to account for the 2018 Amendments, the Northern District provides additional useful information to assist parties in negotiating, and courts in approving, settlements. If parties fail to comply with the guidance, the potential consequences include delay or denial of settlement approval altogether.
Most notably, the Northern District’s comprehensive guidance requires parties to provide the court with a substantial amount of information to gain preliminary approval for a class settlement. In addition, during the final approval phase, counsel is required to submit detailed information related to attorneys’ fees. This information, though aligned with the 2018 Amendments, is in some instances considerably more comprehensive. It appears that no other federal district court has issued its own comprehensive guidance, so the Northern District may have paved the way for other federal courts to follow.