On December 1, 2018, four amendments to the Federal Rules of Civil Procedure became effective. The amendments to Rules 23, 5, 62, and 65.1 by no means constitute earth-shattering changes to existing procedures. They do, however, reflect the commitment of the Advisory Committee on Civil Rules (Advisory Committee) to adapt the federal rules to meet modern realities—for example, the fact that once-rare communication methods have become essential parts of our day-to-day lives. The amendments also reflect the Advisory Committee’s long-standing commitment to promoting judicial efficiency and fair and reasonable settlements.
Rule 23 – Class Action Litigation
The new amendments to Rule 23 strive to improve efficiency in class-action settlement procedures by (i) expanding methods for providing notice to class members; (ii) re-evaluating factors that a district court must consider in approving a proposed settlement; (iii) allowing objectors to withdraw their objections without court approval; and (iv) reaffirming the finality of a district court’s approval of procedures governing notice to the class.
First, the amendments to Rule 23(c)(2)(B) expand notice of a proposed settlement to include electronic or “other appropriate” means. The Advisory Committee Note recognizes that “first class mail may often be the preferred primary method of giving notice,” but acknowledges the reality that courts and practitioners have already started to use new technologies to make notice more effective. Although Rule 23(c)(2)(B) continues to call for providing class members with “the best notice that is practicable,” there is no preference for one method over another. In fact, the amendment promotes the use of any means of communication—or even a combination of multiple means of communication—that is likely to ensure reliable notice. Courts maintain broad discretion to determine the appropriate means of notice.
Second, the amendment to Rule 23(e) reforms the process around preliminary approval of a class action settlement and notice to the proposed settlement class. Since notice can be expensive, the amendment requires courts to determine whether the likelihood of approval of the settlement is high enough to warrant the time and cost. The Advisory Committee Note explains that the decision to give notice “should be based on a solid record supporting the conclusion that the proposed settlement will likely earn final approval” and that it is the parties’ responsibility to provide sufficient information for the court to make that determination. The amendment offers several factors that a court should consider regarding the proposed settlement, including but not limited to the type of benefits the settlement will confer, plans for unclaimed funds, the existence of other pending or anticipated litigation, and the anticipated attorneys’ fees.
If a class has not yet been certified, the amended rule and the Advisory Committee Note make clear that it is the parties’ responsibility to ensure that the court has a reasonable basis to conclude that there are sufficient grounds to certify the class. The amended rule and Advisory Committee Note provide that there should be no notice to the class unless the parties have sufficiently demonstrated that both class certification and final approval of the settlement are likely after a final hearing.
Third, the amendment to Rule 23(e)(5) addresses the ability of objectors to impact the fairness of class-action settlements, and specifically the ability of objectors to slow down or completely derail implementation of a class-action settlement. The amendment focuses on “bad objectors” who object for seemingly illegitimate reasons, and in the process disrupt the prospective relief sought by the class. The amendment removes the requirement of court approval for every withdrawal of an objection, promoting efficiency in the settlement process and supporting the court’s policy of promoting fair, reasonable settlements. Good faith objections can help a court decide whether to approve a proposed class-action settlement, and even the Advisory Committee Note recognizes the appropriateness of objectors seeking payment for providing assistance. However, the changes to Rule 23 seek to discourage objectors who seek “only personal gain” and use “objections to obtain benefits for themselves rather than assisting in the settlement-review process” by requiring approval by the court of any consideration/settlement provided to an objector for withdrawing an objection before or after an appeal is taken.
Finally, the amendment to Rule 23(f) provides that no appeal may be taken from an order under Rule 23(e)(1) concerning the form of notice to a class of a proposed settlement.
Rule 5 – Filing
The changes to Rule 5 (Serving and Filing Pleadings and Other Papers) fully embrace electronic filing, while maintaining certain safeguards. For parties represented by an attorney, electronic filing is now standard practice nationwide. Amended Rule 5 explicitly states that electronic filing is required absent good cause or an applicable local rule that allows or requires non-electronic filing. Although the amended rule expressly authorizes filing through the court’s electronic filing system, and does not require a certificate of service when using that method, the Advisory Committee Note also provides that electronic service can be made through other means with the consent of the person served. The parties may agree, for instance, that service is accepted via email to a certain address. However, if a party tries to serve something via email but learns that it never reached the person to be served, the serving party is responsible for ensuring effective service—even when service was to a consented email address.
For pro se parties, though, amended Rule 5 maintains certain protections that were in place in the prior version, recognizing that courts simply cannot assume that pro se litigants will have consistent access to or familiarity with electronic communication. Amended Rule 5 states that a pro se litigant may file electronically only if allowed by a court order or permitted by a local rule, and that the litigant may only be required to serve electronically for the same reasons. The Committee Note expresses a concern that over-reliance on electronic filing could very well impede access to the court for unrepresented parties, such that any order to file electronically should be made with care. Rules 62 and 65.1 – Stay After Judgment
The amendments to Rules 62 and 65.1 streamline the rules and resolve confusing timing issues created by the prior versions. Specifically, amended Rule 62 extends the automatic stay from 14 to 30 days following entry of a judgment. This change resolves what the Advisory Committee called an “apparent gap” between the expiration of the automatic stay after judgment and the time for filing most appeals. Expanding the automatic stay period to 30 days better coincides with the time to file most appeals and means that parties can now rely on the Rule 62 automatic stay during this time period.
However, amended Rule 62 now permits the court to dissolve the automatic stay by court order. An example provided in the Advisory Committee Note is when there is a risk that the judgment debtor’s assets could be dissipated absent immediate enforcement of the judgment. The amended rule also permits any party to obtain a stay by posting some form of security, which is no longer limited to a bond.
Finally, amended Rule 65.1 simply reflects conforming changes to those made to Rule 62, allowing a party to obtain a stay of judgment “by providing a bond or other security.”
The 2018 amendments share a common theme in that they clarify and reaffirm the need to consider the role that technology plays in the areas of electronic filing and providing more efficient notice to class action members. In addition, the Advisory Committee takes new proactive steps to streamline and eliminate unnecessary delays in litigation and settlement, for example, by creating a mechanism to deter “bad objectors” from delaying class-action settlements for self-serving reasons. The new amendments not only embrace and include new technology, but also conform to actual practices of the modern-day lawyer.