In August, while we were all on vacation, beating the heat, or recovering from a busy first half of 2016, the Advisory Committee published the new proposed Rule 23 for public comment.
The proposed changes here fall into several categories:
Notice. Rule 23’s notice provision gets amended to allow for technological change.
Preliminary approval. Preliminary approval is dead. Long live preliminary approval! In other words, the Committee has taken a stand (in its Comment) that the moniker “preliminary approval” is misleading. But it has explicitly enshrined a reference to the initial hearing where the court determines whether the likelihood of settlement approval justifies certifying the class for settlement purposes and sending out notice to the class members. In addition, it identifies much of the information that the parties should provide before the court makes its notice determination.
Settlement criteria. In addition to reiterating the need to find a settlement “fair, reasonable, and adequate,” Rule 23(e) would be amended to require the court consider the following factors:
(A) the class representatives and class counsel have adequately represented the class;
(B) the proposal was negotiated at arm’s length;
(C) the relief provided for the class is adequate, taking into account:
(i) the costs, risks, and delay of trial and appeal;
(ii) the effectiveness of the proposed method of distributing relief to the class, including the method of processing class-member claims, if required;
(iii) the terms of any proposed award of attorney’s fees, including timing of payment; and
(iv) any agreement required to be identified under Rule 23(e)(3); and
(D) class members are treated equitably relative to each other.
Objectors. The Rule now explicitly recognizes objectors, places several limitations on their withdrawal of claims in exchange for money, and provides a mechanism for successful objectors to get paid.
I’m sure I’ll have more thoughts about the proposed amendments as the public hearing period progresses, but it’s interesting to me that the only proposals that survived the town hall tour and rounds of comments so far were those involving settlement. Politically, it makes sense: settlements are where the harm to class members is clearest when a class action goes bad, and absent class members are the one group that does not receive pointed criticism for naked, monetary self-interest. I’ve consistently argued that the best way to guard against bad settlements is to guard against bad class actions. But even if the Advisory Committee is focused on the symptoms rather than the root pathology, at least they are paying attention to the problem.
The public comment period is open until February 15, 2017, and includes several public hearings. If you care about the proposed changes, make sure you get heard.