## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it

N os. 12- 1157, 12

- 1158 , 12

- 1186 , 12- 1730 , 12

- 1753 & 12

- 1764 S A F E CO I NSURANCE C OM PANY OF A MERI CA, e tal ., P laint if fs -App el lants , and

L IBERTY M UTUAL I NSURANCE C O ., e tal ., C ounter claim ants-A ppell ants , and

AC E I NA H OLDI NGS, I NC ., e tal ., Interv enin g P la intif

fs-A pp ellees/ D efend a nts-A pp ellees , v.

A MERI CAN I NTERNATI ONA L G R OUP, I NC ., e tal .,

D efend a nts-A pp ellees/Pla intif fs-A pp ellees/ C o un terdefen da nts-A pp ellees

.

A pp ealsfr o m the United S t ates Di strictC our t fo r the N o rthernDi stricto f Illino is, Eas tern Div isi on. No s. 07 C 2898 &09 C2026

—Robert W . G ettleman, Ju dge

.2 N os . 12-1 15 7, etal. A RG UE D N OVE MBE R 29, 2012

— D ECI DE D M AR CH 25, 2013

Befo re E A S T E RB R OO K, Chi e f Judg e, a nd P OSNERa nd M A NI ON, C ircu it Judges . E A S T E RB R OO K, C hief Ju dge

. About 45 days afterthes e appeals h ad bee n ar gued, the appell ants ask ed us to di smi ss the m , s ee F ed. R. A p p . P. 4 2(b) , i nf o r m i ngthe cour t that the di spute had bee n set tl ed. A l l but one of the a pp el l ees ( A CE I N A H ol dings ) j oined a sti pu l ati on of d ism iss al; A C E d id n ot j oin it, b u t n eit h er d oe s it o ppo se dism iss al

. Be ca us e th e l i ti g at i o n i s a cl as s ac ti o n, ho wev er, we wer e co nc erne d tha t th e se tt l ementmight ha ve ad verse effects on other m em bers of th e class. So w e a ske d for a dd i ti onalm em or anda. These have been fi l ed, a nd i n the t wo months tha t ha ve e l aps ed sinc e th e n ot ice n o m em b er of t h e c las s h as ex p re ss ed op p os iti on. H avi ng co ncl ud ed that the s ett l em ent doe s no t j e o p a r d i z e the i n t e r e s t s o fth e u n r e p r e s e n t e d c l a s s me mber s, we dism i ss the a pp eal s. T h e firs t s en te n c e o f R u l e 4 2(b ) p ro vid es th at, i f all parti es agr ee to an a pp eal ’ s di sm i ssa l, then the c l er k o f co ur t m ayc l ose the pr o ce edingwi th o utj udi ci ala ct i o n. A CE di d not j oi n the sti pulat i on, so t h e seco nd se ntence ofRule 42 ( b) appli es: “An appealm ay be di sm i sse d on the a pp el l ant’s m ot i on o n ter m s a gr eed to by the parti es orfi xed by the co urt. ” Thi s s entence uses “m ay” r ather than “m ust” so that th e j ud ges can prot ect the r i ghts ofanyo ne w ho did not conse nt to the dism i ssa l

. A l thoughN os . 12-1 15 7, etal. 3 the m em ber s o fthe cl ass ar e no t t echni cal l y par ti es, they have l ega l l y e nfo rce abl e i nter est s. S ee D e vl in v

. Scardel le tt i, 536 U

. S. 1 ( 2002 ). C om p an ies un d erw riti ng w orkers’ com p en sation insu rance parti ci pate i n a re i nsurance po ol ad m i ni ste re d by the Nati onalW or ker s C om pensati on Rei nsurance A ssociation (th e A ssociation). I ns ure rs sha re i n th e po ol’ s pr o fi to r l o s s a c c o r di ngt o the v o l ume o fb us i ne s s they und er w ri te. W hen the pooli s pro fi tabl e, i t i s be n efic i al to have a l ar gerbo ok ofbusi ness; wh en the pooll ose s m oney, a sm al l erbo ok m eans that the underwriter n ee d s to c on tr ibu te les s tow ar d th e loss es . T h e clas s in th i s su i t co nt ends th atAm er i ca n Int erna ti o na l Gr o up ( AI G) unde r r epo r te d the s i ze o fi ts b us i ne ss i n l o sing years, caus ing the pool’s other m em b e r s t o bear a d isp ro port i onate shar e o fthe l oss es. The cl ass as ked f o r abo ut$ 3. 1 bi l l i o n. So m e o fthe i nsurer s had o therb u siness deal i ngs. Libe rty M utual and its affi l i ate s, i ncl ud i ng S afeco , have i nd e pe nd e ntc l a i ms a g a i ns tAI G. F o r its p a r t, AI G a dva nc ed c lai m s ag ains t Libe r tyM ut ua l ( as we ca l l the enti re gr oup). W hen Lib er ty M utual c au se d Safeco to co m m en ce th i s cl as s ac ti o n a s th e r epr es en ta ti ve pl aintiff, th es e o th er cla im s c om p lic at ed th e litig at ion . On c e it b ec am e e vid en t th at L ibe rt y M u tu al h ad u n ac c ep ta b le confl i cts, A CE I N A H ol dings inte rv ened, with s eve ra l othe r i ns ur e r s , t o t a k e o v e r a s the c l a s s ’ s r e pr e s e nt a t i v e s. St i l l, Liber ty M utual so ught t o use the cl as s su i t a s a c l u b t o in d u c e A I G t o p a y mo r e o n i t s s e p a r a t e c l a i ms ag ains t AI G , w hi l e AI G s o ug htt o min i m i ze the s um4 N os . 12-1 15 7, etal. ofwh at i t pai d the cl ass pl us w hat i t o w ed Libe rty M utual se parat el y. AC E ( a n d th e o th e r n e w r e p r e s e n t a t i v e s , wh i c h we i g n o r e fr o m h e r e o n ) e v e n t ua l l y s e t t l e d th e c l a s s c l a i ms aga i nst AIG f or$4 50 m i l l i on. The se ttl em ent incl ud es re l eas es ofal l cl ai m s that poo l m em ber s hel d agai nst AIG i n al l l in es o fbusi ness ( not j ust r ei nsurance ofworke rs ’ c o mp e n s a t i o n p o l i c i e s ) , p l u s r e l e a s e s o fA I G ’ s c l a i ms a g a i ns tthe c l a s s ’ s me mbe r s . L i ber t y Mut ua l p r o t e s t e d; i t co nt en ded th ati ts 22 % s ha r e o fthe s et tl ement ( s o me $ 9 9 mi l l i o n) i s t o o s mal l, g i v e n the v a l ue o fi ts i nd ependent cl ai m s ag ai nst AIG. The se ttl em ent pr ovid es th at a n y c las s m em b er ca n op t o u t, an d A C E an tic ipated tha t Libe r tyM ut ua l woul d do s o . The s et tl ement a g r e e men tp r o v i de s tha t, i fLib e r t y Mut ua l we r e t o o pt o ut, AI G’ s pay m en t woul d b e r edu ce d t o $ 35 1 m i l l i o n. L ibe rt y M u tu al e lec te d to st ay in t h e c las s. So d id all buto ne o th eri ns ur er . The di st r i ctj udg e appr o ve d the set tl em ent a ftera hear i ng und erFe d. R. Ci v. P. 23 ( e)

. 20 12 U .S. D ist . L EXIS25 265 ( N

. D. I l l

. Fe b. 28 , 20 12)

. Liber ty M utual then appeal ed, ar gui ng i n thi s co urt that i ts sh ar e o f th e s et tle m en t d o es n ot co m p en sa te it a d e q u a t e l y f o r th e va l u e o fi t s s t a n d

- a l o n e c l a i ms aga i nst AIG. I t a l so cont en d ed thatthe confl i cts of i nter estwithi n the re i nsurance poolm eant that the c ase ne ve r s ho ul d ha ve b ee n c er ti fi ed as a c l as s. ( Thi s ar g um en t appe ar s i n S afec o ’ s briefr athe r tha n Libe r tyM ut ua l ’ s , b ut a s the y a r e un de r j o i nt c o nt r o l the mai n ef f ect offi l i ng s e pa r a t e b r i e f s i s t o g e t e xt r a wo r ds

. No ne o f the o therpart i es conte n d s that Safeco sho uld be vi ew edN os . 12-1 15 7, etal. 5

as i nd ep en d en t of i ts parent; afteral l, thi s i s why Safeco w as not a s ati sf acto rycl ass r epres entat i ve. ) A pp el l an ts m ade so m e o ther a rgum ents, wh i ch need notbe descr ibed. N one ofthe i nsurer s o u ts ide the Libe rty M utual g r o up c o m plai ne d abo utthe c l as s ce r ti fi ca ti o n o r the settlem en t, an d the A ssociation, on beh alfof th e ent ire po o l, s uppo r te d the di st r i ctc o ur t’ s dec i si o n. Af t e r a r g ume nt, Lib e r t y Mut ua l s e t t l e d w i th AI G. The ter m s o fthe set tl em ent do n ot m att erto the othe r m embe r s o fthe cl as s, who s ti l l s pl i t $3 51 mil l i o n a m o ng them

. A CE and t h e otherr epres entat i ves ar e co ntent. N ei therthe A sso ci ati on ( w hi ch m anage s th e pool ) nor an y m em b er o ft h e cla ss h as p ro te st ed . I t is ac c or d in gly hard to se e ho w a l i ve controv er sy re m ai ns, and cour ts shoul d no t i ssue opi ni ons re sol vi ng l i ti gat i on th at the par ti es no l onge r w ant t o pu rs ue. S i nce no one now w ants us to adj ud i cate thi s di spute

— orev en sugg est s that ther e i s a “disp u te” l eft t o adj ud i cate

— di smi ss i ng the appeal s i s i n or der. C f. U

. S. Banc orp M or tgageCo. v. B onner M all P artne rs hip , 513 U

. S. 18 (1994). W e ha ve con side red , in th e sp iri t of R ule 2 3 (e), whethe r th i s se tt l ement ha s an y po te nt i al to i nj ure no npar ticipa nt s. Ye t al l o fthe po o l ’ s m embe r s o ut si de th e Libe rty M utual gr oup sti l l ge t e xactl y what they acc ep ted before

— and the di str i ct c ourtf ou n d that r eso l ut i o n f ai r . Liber tyM ut ua l ’ s appe alpr i nc i pal l y c o nc e r n s th e wa y th e d i s t r i c tc o u r t ’ s o r d e r a ff e c t s i t s o wn cl ai m s aga i nst A I G. That’ s som ethi ng Libe rty M utual had every r ight to re sol ve i nd ependentl y b y o pti ng o ut. A se tt lem en t b et w ee n L ibe rt y M u tu al a n d A IG w h ile6 N os . 12-1 15 7, etal. the a pp ealwas pend i ng works as a bel ate d opt- out, w hic h h as no g re ate r potenti alto i nj ure the poo l ’ s o ther m em ber s than an o pt-o ut befor e the di str i ct c ourtact ed w oul d have done. I f, under the se ttl em ent, op t- out by Libe r tyM ut ua l mean t un d oin gthe pa cta nd c o nt i nui ng the l i ti gat i on, th en a de f acto o pt- o uto n a ppea l might j usti fy a r em and. Bu t the poss ibi l i ty ofLiber ty M utual opti ng o ut and re achi ng a si d e deal with AIG was provi ded f ori n the set tl em ent i tse l f

. That thi s pos sibi l i ty no w has b ee n r ea l i ze d do es no t ca l l i nt o que st i o n the set tl em ent’ s f ai rnes s t o the poo l ’ s o therm em ber s. Could Liber ty M utual ’ s a pp eali tse l fhave i nj ured othe r m em ber s o fthe cl ass

— perhaps b y lead i ng the m to t h i n k t h at th ey n ee d n ’t file t h eir ow n ap p ea ls? T h at is ver y unl i kel y, f orthr ee re aso ns. Fi rs t, wh at i ssue s w oul d othercl ass m em ber s hav e ra i sed o n appeal ? N one had com pla i ned about the s ettlem en t, so there w as no a dvers e deci si on t o appeal f r om . Se cond , w h y would Liber ty M utual ’ s a pp ealhave di ssu ad ed anot he r i ns ure r from ap p ealin g ? A ny other fi rm co ul d s ee tha t Libe r tyM ut ua l was a ppea l i ngt o de f en d i ts separ at e inter est s; none w oul d have r el i ed on Liber ty M ut u al. The est abl i shed confl i ct b etween Lib er ty M utual and the r esto fthe clas s is w h y AC E i nter vened to ta ke o ve r a s th e r epr es en ta ti ve pl aint i ff

. Othe r mem be r s o fthe c las s w ou ld h av e s ee n L ibe rt y M u tu al a s a th re at to th eir i nter est s, notas a cham pio n they coul d re l y on f orpro tecti o n. Re ca l l tha t Libe r tyM ut ua l a sk ed us to abr o g at e th e class c er ti fi ca ti o n, a s te p tha t woul d ha ve e l i m i na te d the othe r i nsurer s’ r eco ver i es.N os . 12-1 15 7, etal. 7 Thi r d, Libe r tyM ut ua l wai ted un ti l the e nd o fthe wi ndow f orappeal

. The j ud gm ent w as e nter ed on F ebruar y 2 8, 20 12, a n d t h e a pp eal s were fi l ed on M ar ch 27. N o othe r i nsurerco uld have bee n safe i n w ai ti ng to see wh et her Libe rty M utual would appeal ; a pool m em berthatwanted app ella te re vi ew would have ac te d on its ow n be for e M ar c h 27 . L ibe rt y M u t u al w ou ld no t ha ve vi o l at ed an y o th er i ns ur er ’ s r i g ht s by se tt l i ng wi thAI G o n Mar ch2 6 an d nev erfi l i nga n a ppea l ; fi l i ng ana ppea l a t th e en d o fthe a va i l ab l e t im e and s et tl i ng later has n o greater p o t e n tial to inj ure other m em bers ofthe cl ass . A l though we appreci ate thatco nfl i cts ofi nter est betw een repres en tati ve p lai nt iffs and class m em bers ca n l ea d the r epr es en ta ti ve s to s el l o utf o r t o o l i tt l e, no o ne ha s ac cus ed AC E o fyi el di ngt o tha t te m pta ti o n. A l l m em b er s o fthe cl ass ar e l ar ge and sophi sti cate d bus i ne ss es, m any wi thmil l i o ns o n the l i ne a nd l ega l st aff s t o prot ect thei r i nter est s. Even the sm al l er i nsurer s r ecei ve m or e than $100 ,00 0 fr om the set tl em ent, and i fthe re pr es en tati ves had been abl e t o nego ti ate f orthe $3 bi l l i on the cl ass i ni ti al l y s ou gh t, the a ver age r etur n p er i nsurerwould have exceeded $2 m i l l i on ( and about $7 50, 000 api ece f orthe sm al l er i nsurer s)

. The pooli s a m ult i

-bi l l i on- dollarbusi ness; its m an ag er , w h ich look s o u t fo r th e a gg re ga te of all m em ber s’ i nter est s, supports b oth the o ri gi nal se ttl em en t an d the di smi ss alo fLibe r tyM ut ua l ’ s appe al

. The M anu al f

orCom pl e x L i t igat i on §21.61 (4th ed

. 200 4), provi des a l i st ofev ents that m ay ti p offthe j ud i ci ar y t o8 N os . 12-1 15 7, etal. a probl em ; none ofthe thi ngs to w at c h f orhas occur re d i n thi s s uit

. Because there i s no pro spect of i nj ury to any o ther cl ass m em ber, we need not dis c u ss at l ength thi s s tat em ent in the com m i tte e no te to th e 20 03 am endm ent t o Rul e 23 ( e) : “ Once a n o bj ec to r ap p eal s, c o nt r o l o fthe proce edi ng l i es i n the cour t o fappeal s. The co urt of appeal s m ay u n d ertak e r evi ew and approva l o fa set

tl em ent with the o b j ector, per haps as part ofappeal set tl em ent proce du re s, or m ay re m and t o th e d i str i ct c ou rtto ta ke ad v an ta ge of th e d ist ric t c ou rt ’s fa m ili a r i t y w i th th e a c t i o n a n d s e t t l e me n t

. ” T h e c o mm i tte e no te d oes notdi scuss any par ti cul arl anguage i n Ru l e 2 3 , wh i c h l i k e the o the r c i v i l r ul e s de a l s wi th pr o c e e di ng s i n di s t r i c tc o ur t s r a the r tha n c ourt s ofa ppeal s. A l l the c om m i tte e’ s s tat em ent doe s i s r eco gni ze that the c ourto fappeal s wil l deci de w hat to do. F o r the r ea so ns we ha ve given , we do no t th i nka ny furtherpro ceedi ngs ne cess ar y. I fdespi te appearance s thi s s ett l em ent m ake s o ther c las s m em b er s w o r se off or d isa p p oin ts th eir rea so n ab le ex pec ta ti o ns , a c l as s m embe r c o ul d fil e a mot i o n i n the dist ri ct c ourtunde r Fe d

. R. Ci v. P. 60 ( b) ( 3) ( m i sco nd uct by an o pp osing par ty) o r 60(b) ( 6) ( “any othe r re aso n tha tj us t i fi e s r e l i ef ” )

. I fs uc h a mo t i o n we r e t o b e fi l e d, a co nc r et e co nt r o ve r sywoul d c al lf o r j udi ci alr es o l uti on. A t the m om en t, however, none ofthe parti es wants t o fight, a nd no ne o fthe c l as s m embe r s ha s ex p re ss ed d iss a t i s fac tio n . A n y fu rt h er p ro c ee d in gs w ou ld b e g r a t ui t o us . T he a pp e a l s a r e di s mi s s e d.N os . 12-1 15 7, etal. 9 P OSNER, Cir cu i tJudg e, di ssenting. Di smi ss alo fthe appeal i n thi s cl ass act i on s uiti s pre m atur e. I t i s ba sed on s pecula ti on r at her than o n evi dence, i s i nsensi ti ve to the r i sks o fcl ass act i on s el l

- ou t, an d m ake s cr i ti cal er ro rs . W e don’ t know the ter m s o fth e s ett l em ent o n w hi ch di smi ss ali s pr edi ca te d, s o we do n’ t k no w w he th erthe se tt lem en t sells ou t th e int er es ts of th e clas s. B u t it m ay. I n dis counti ng tha t pos sibi l i ty the m aj or i ty opi ni o n mak e s t wo c r i t i c a l e r r o r s . T he fi r s ti s t o sa y th at “an y othe r firm [ t h at is, any oth er class m em ber] co ul d s ee tha t Libe r tyM ut ua l was a ppea l i ngt o de f en d i ts separ ate i nter ests; none w oul d have r el i ed on Libe rty M utual

. ” Yet tw o subsi diar i es of L iber ty had su bmi tt ed a se par at e appe l l at e br i ef, ar g ui ng th at the c on flict be tw ee n cla ss m em b er s t h at w e r e s u ed by A IG and those thatweren’t requir ed div i si on o fthe cl ass i nto subcl ass es, ea ch w i th se p arate counsel

. That was a n a r g um en t o n b eh al fo fc l as s m embe r s who we r e u nr e l a t e d t o the Lib e r t y g r o up . Th e s e c o nd m i sta k e i n the maj o r i t y o pi ni o n i s r e l a t e d: it i s the statem en t tha t “allm e m b e rs of th e class are l a r g e a n d s o p h i s t i c a t e d b u s i n e s s e s , ma n y wi th mi l l i o ns on the l i ne a nd l e g a l s t a ff s t o pr o t e c t the i r i nt e r e s t s. Even the s mal l e r i ns ur e r s r e c e i v e mo r e tha n $ 1 0 0 , 0 0 0 fr om th e s e t tle m en t, an d if th e re p re se n ta tiv es h ad be en ab le to nego ti ate f orthe $3 bi l l i on the cl ass in iti al l y s ought, the a ver age r etur n peri nsurerwould have exceeded $2 m i l l i on ( and about $750 , 000 a p i ece f orthe sm al l er i ns ur er s)

. ” The r e ar e 13 63 c l as s m embe r s, a nd 5 5 per ce nt o f th e se tt l ement g o es to j us t f o ur o f th em, l ea vi ng10 N os . 12-1 15 7, etal. $2 02 m illion to be d ivid ed am on g t h e o t h e r 13 59 . Th at is an aver age of onl y $148 , 638. 87 api ece. I t i m pli es th at m an y of t h e c la i m s p ro b ab ly a re m u c h sm alle r. T h er e is n o b as is for th e a ss er tio nth at all th e i n s u re rs w ill re c eiv e a t le as t $1 00 ,00 0 fro m t h e s et tle m en t, an d n o b as is f ores ti m ati ng the m axi m um l i kel y s ett l em ent. S o me c l a s s me mbe r s h a d b e e n c o un ter sue d b y AI G, bu t othe rs had not bee n. T h e brieffil ed by L iberty’s subsi diar i es ar gued that thos e who had not b een had been und er com pensated bythe set tl em ent b ecause th e r e wa s n o r e a s o n t o o ff s e tth e i r c l a i ms b y AI G co unter cl ai m s. Those cl ass m em ber s m i ght ha ve re l i ed on th e b rie f of L ibe rt y’s su b sid iar ies to ad va n c e th is a r g u me n t, f o r e g o i n gt h e e x p e n s e o ffi l i n gth e i r o wn appeal s fro m the cl ass act i on a nd thei r own appeal bri ef s be cause thei r own cl ai m s m ay not have been l ar ge enough t o j usti fy the expense

— a n d a n y wa y why i ncur i t when they had a cham pio n, nam el y Liber ty? An d r e memb e r th a t, a s f a r a s w e kn o w, th e c l a s s me mbe r s ha ve no t be eni nf o r m ed o f th e se tt l emento fthe appeals or o fthe mot i o n t o di smi ss the m . And s o the ap p e l l a te se tt lem en t m ay be a d ev ice by w h ich A IG p aid L ibe rt y t o d es er t t h e c l a s s on w h os e b eh alf (a s w ell as i ts own ) i t purpor ted to be appeal i ng. Ru l e 4 2 ( b ) o f the a pp e l l a t e r ul e s do e s not r equire di smi s s a l i f the r ul e ’ s c o nd i t i o ns f o r di s mi s s a l a re sa ti s fi e d; i t s ays the cour t “ m ay” di sm i ss i ftheyar e. Fur th er proce ss i s nec ess ar y in thi s ca se bef or e di sm i ssa l can be co ns i d e r e d th e r e s p o n s ib l e c o u r s e f o r u s t o t a k e . T he cl ass act i on d evi ce, as a substi tute f ori nd i vi du alsui ts or co n ve n tio n al join d er , ca n ac h iev e e c on om ies in m u lti-N os . 12-1 15 7, etal. 11 partyl i ti gat i on a nd al l ow vic tim s o fwrongful acts to o b t a i n l e g a l r e l i e f th e y c o u l d n ’ t o th e r wi s e o b t a i n. But cl as s ac ti o ns a r e also r i f e wi thdi st o r te d i nc en ti ve s an d confl i cts ofi nter est, wh i ch m ake s j ud i cialr evi ew o f c l a s s a c t i o n s e t t l e men t s , wh e the r a tthe t r i a l o r the a pp ella te lev el, vit al. Thi s cl as s ac ti o n sui t ch ar g ed AI G wi thha vi ng cheate d otherco m panie s that wri te w or ker s’ co m pensati on i nsurance ( the c l ass m em b ers) and ar e r equi re d by sta te sta tutes to co ntribute t o a w or ker s’ co m pensati on i nsurance l i abi l i ty pool( anal ogo us to an a ssi gned-risk po o l f o r a ut o m obile l i ab i l i tyins ur an ce )

. Em pl o y er s who cannot fi nd an insurerwil l i ng to w rite them a w or ker s’ com pensati on i nsurance pol i cy because thei r busi ness i nvol ves a hi gh r i sk ofi nj ury to thei r em plo yee s o bta in ins u ra n c e fro m th e p oo l. A l l oca ti on o fthe cos t o fthe liab il i ty poolam ong i ts m em ber s i s ba s e d on the am ount o fworke rs ’ co m pensati on in su ra n c e t h at ea c h m em b er w rit es w illing ly. T h e s u it charg ed that A I G che ate d the othe r m em ber s of the poolby unde r r epor tingthe pr emi um s i t r ec ei ve d f o r the w or ke rs ’ co m p en sa tio n ins u ra n c e t h atit w ro te w illi ng l y . I t s u n d e r r e p o r t i n gi s a l l e g e d t o h a v e c a u s e d the cl as s me mbe r s t o p a y a p o r t i o n o fwh a ts ho ul d h ave be enAI G’ s co nt r ibut i o n t o the po o l

. Liberty, o ne o fthe cl ass m em ber s, bec am e the nam ed pla i nti ffand so ught t o beco m e the cl ass r ep re senta ti ve. A ctual l y i t desi gnate d tw o of its subs idiaries to be th e nam ed plaintiff s

— th e two s ub s i di a r i e s tha tfi l e d the s e pa r a t e a pp e l l a t e b ri ef tha tIme nt i o ne d.12 N os . 12-1 15 7, etal. A I G res pond ed by fi l i ng sui ts aga i nst a n u m bero f th e me mb e r s o fth e c l a s s , i n c l u d i n gL ib e r t y, c h ar g i ng th at t h ey w er e che ate rs to o, bec ause they too had und er re port ed thei r p rem i um s fro m the i nsurance th ey sol d wi l l i ng l y . Libe r tyr es po nde d b y fi l i ngc o unterclaim s against A I G i n A I G ’s suit against it. Th e cou nt erc l a i ms a c c u s e d A I G o fh a v i n gu n d e r r e p o r t e d p r e mi u ms i n a numbe r o fs ta te s no t i nv o l ve d i n the c l as s ac ti o n. Libe rty i s the o nl y m em b er ofthe cl ass thathas i nd i v i du a l a s we l l a s c l a s s c l a i ms a g a i ns tAI G. A IG ag re ed to p ay $4 50 m illion to th e c l as s t o s et tle both the cl ass cl ai m s a nd Liber ty’ s i n divi du alcl ai m s. L ib e r t y w a n t e d mo r e . I ta r g u e d tha t i t s c o u n t e r c l a i ms gave i t l eve ra ge ove r A I G that s hould m ak e A I G agr ee to a mor e g en er o us s et tl ement, b ec au se a s et tl em en t w oul d buy A I G peace i n the f or m o fa re l eas e o fth ose coun t e r c l a i ms. Lib e r t y wa nt e d t o b e c o mpe ns a t e d for s e l l i ngAI G tha tp e a c e . Bu ti tdi dn ’ twa nt j usta bi gge r sh are of $ 45 0 m i l l i o n. I t ar g ue d tha t AI G’ s o ff ert o the cl as s was f art o o l ow, a nd no t o nl y b ec au se o fthe v al ue L ibe r t y a s sig n ed to its co u n te rc laim s. It w an te d A IG to agr ee to pay $3

. 1 bi l l i on i n set tl em ent of the c l ass acti on, o fwh i ch $70 0 m i l l i on would go t o Libe rty i nstea d ofa m er e $ 99 m i l l i on , i ts shar e o fthe $450 m i l l i on ul ti m ate l y a w ar ded i n the set tl em ent. O fco urse i fA I G coul d be fo rce d to pay $3

. 1 bi l l i on, al l the cl ass m em bers

— not j u st Liber ty

— woul d b e be tt ero ff

. But A I G w as unw i l l i ng. W i th Liber ty hol ding up settl em ent by i ts i ntra nsi gence , A C E I N A H oldings , I nc . a n d six other class m em bers i nter vened i n the dist ri ct c ourt, becom i ng par ti es. TheyN os . 12-1 15 7, etal. 13

wer e appo i nt ed cl as s r epr es en ta ti ve s f o r a s et tl ement cl as s , a c c e p t e d AI G’ s $ 4 5 0 mi l l i o n s e t t l e me n to ff e r, a nd ask ed the dist ri ct j ud ge to ap p ro ve the s ett l em ent, whi c h he di d. Onl y o n e c l a s s me mb e r o b j e c t e d t o c e r t i fi c a t i o n o fthe set tl em ent c l ass and ul ti m ate l y to the s ett l em ent i tse lf

— L ibe rt y. Its ob j ec tio n s, re n ew ed in t h es e a p p ea ls that the m aj or i ty has deci ded to di sm iss bl i nd , were not o nl y tha t th e se tt l ementwas t o o s m all b uta l so , a s Imenti oned ea rl i er, thatthe al l oca ti on o fthe $450 m i l l i on am ong cl ass m em ber s ignor ed the f act that som e o fthem had been t ar get s o fco unterc l ai m s byA I G. Theirsha re o f th e se tt l ements ho ul d ha ve b ee n off se t to r efl ec t th e va l ue to the m of A I G’ s r el ea singtho se c o unt er cl ai m s, whi l e th e shar e r ece ived by the cl ass m em ber s who had not b een tar get s o fA I G ’ s co unterc l ai m s s houl d have be en co rr espondingl y incre ase d

—but were not. Inst ead the set tl em ent m oney was div i ded in p ro p or ti on t o each c l ass m em ber ’ s s hare o fthe lia b i l i ti es that i t had i ncurr ed as a r es ul t o fAI G’ s m i sc o nduc t, wi th o utany off se ts

. Thati s th e basi s o fthe ar gum ent a dvanced by L iber ty’ s s ubsi diar i es i n thei r separ ate br i efthatth e j u d ge shoul d have cr eat ed tw o sub classes w ith sep arate cou ns el, one for the m em bers w ho were nam ed i n A I G ’s c ou nter cl ai m s ( and thus benefi ted fro m the re l eas e o ftho se counter cl ai m s, w h ich was p a r to fth e s e t t l e me n t ) an d t he o th e r f o r th o s e c l a s s me mbers w ho w eren ’t. Rep resen tation of a class by one p lai nt iff oro ne gro up of pla i nti ff s i s i nadequ ate under F ed. R. Ci v. P. 23 ( a) ( 4) , (g ) ( 4) i fther e i s a pote nti aldi spute be tw een f ac ti o ns wi th i n the c l as s over al l o ca ti o n o fs et tl ement p ro c ee d s. O r t iz v. Fi b r e b oar d Corp. , 52 7 U.S

. 81 5, 85 6- 5914 N os . 12-1 15 7, etal. (19 99 ); Am ch e m Pr oduc t s , Inc . v. Wi nds or, 521 U

. S. 591, 62 5- 28 an d n . 20 (1 99 7); In reLi t e r ary Works i n Ele ct r oni c D at ab as e s Copyr ightLi t igat i on , 65 4 F. 3d 242, 24 9- 53 ( 2d C ir. 2011). L iberty’s un iq u e ind ivi d ua l claim to have been un d erpai d i n the set tlem en t because i t was f or ced to r el eas e i t s c o un t e r c l a i ms a g a i ns t AI G t o o c he a pl y ha s been re so lve d by th e s e tt lem en t w ith A IG of L ibe rt y’s ap p ea l. The m one y f o r tha t se tt l ement

— th e m on ey A IG is pa yi ng to per suade Liber ty to drop i ts appeal

— w i l l not co m e o u to fth e $ 4 5 0 mi l l i o n o fc l a s s s e t t l e me nt m oney . W er e i t the o nl y c l ai m , ther ef or e, sum m ar y di sm i ssa l o fLiber ty’ s a pp ealunder F ed. R. A pp . P. 42 ( b) w oul d be pro per. But si nce i t’ s n ot t h e onl y c l ai m , to al l ow L iber ty' s subsi diar i es to w i thdraw thei r obj ecti on t o the s i ze ofthe set tl em ent a nd to the al l ege d m i sal loc atio n o fs e t t l e me n tp r o c e e d s a mo n gth e r e ma i n i n gc l a s s me mbers cou ld d en y the class a shot at a larger and m ore eq uitab ly d istribu ted sett lem en t. I f, pu rsu an t to Liberty’s subm i ssi on, A I G paid $3

. 1 bi l l i on in set tl em en t, o fwh i ch $700 m i l l i on went to Liber ty, $2

. 4 bi l l i on would go to the r e s to fthe c l a s s r a the r tha n the $ 3 5 1 mi l l i on ($4 50 m illion m in u s $ 9 9 m illion ) th at it w ill rec eiv e if the s ett l em ent a pp ro ved by the di str i ct c ourtst ands. A s a m en d ed in 2 00 3, Fe d . R. C iv. P . 23(e ) (in w h a t is now subse cti on ( e) ( 5) ) s ay s that “ an o bj ecti on [ to a cl ass ac ti o n s et tl ement ] m ay be wi th dr awn o nl y wi ththe co ur t’ s appr o va l

. ” As the c o m m i tt ee no te poi nt s o ut, the l ogi c o fthe rul e a pp l i es to the withd ra w alo fan obj ecti o n o n a ppea l

. “ O nc e ano bj ec to r a ppea l s, c o nt r o l o ftheN os . 12-1 15 7, etal. 15 proce edi ng l i es i n the cour t o fappeal s. The co urt of appeal s m ay und er tak e r evi ew and approva l o fa settl em ent with the obj ec tor, per haps as part ofappealse ttl em en t pr o ce dur es , o r may r emand to the di st r i ctcou rt to tak e a dvantage o fthe dist ri ct c ourt ’ s f am i l i ar ity with the a cti on and se ttl em ent. ” 2 003 Com m i tte e Notes to Fed. R. Ci v. P. 23 ( e)

. M y con c er n is that the o pp osi ti on ofLiber ty’ s s ubsi diar i es to the s ett l em ent m ay h ave l ed othe r m em ber s o ft h e c lass notto appealthe al l oca tion o fthe s et tl ementpr o ce eds , t r us tingtha t so m eo ne ( nam el y the Liber ty gr oup) w as car ry i ng that b al l f or th em . Cl as s co uns el, i t i s true , i s no t o bj ec tingt o the d ro p p in g of t h e a p p ea l. B u t i fc l a ss co u n se l co u ld al w ays be tr usted to be the l oya l and com petent re prese nt at i ve o fthe c l as s, the r e w oul d b e no r equi r ement that cl ass act i on s ett l em ents be s ubm i tted f orapprov al by a co urt, with a pp rova l dependent on the o utcom e o f a hea ri ng to deter m i ne the f ai rnes s o fthe settle m ent t o th e cl as s. “ W e an d o th erc o ur ts ha ve o fte n remar k ed th e i nc en ti ve o fc l as s co uns el, i n c o m pl i ci tywi th the de f en dant’s co unsel, t o se l l o ut the cl ass by ag re ei ng with the defendant to r eco m m end that th e j ud ge approve a settl em ent invol vi ng a m eag err eco ver y f orthe cl ass b ut gene rous com p en sation for the law yers

— the de al th atprom otes the s el f

- i nt er es t o fb o thc l as s co uns ela nd the de f e nd a nt and i s the r e f o r e o pt i malfr o m t he s t a nd

poi nt o fthei r pri vate i nter est s. ” C reativ e M o ntesso ri Lea r ni ng Cen t e rs v. As hf or d Ge arLL C, 6 6 2 F

. 3 d 9 1 3 , 91 8 (7th C ir. 2011). Foral l we know, the a m ount that AIG has agreed to pay Liber ty to drop i ts appeal i s no t j ust a n est i m ate16 N os . 12-1 15 7, etal. ofthe val ue o fLiber ty’ s i nd i vi du alcl ai m bey ond i ts shar e o fthe cl ass act i on s ett l em ent, but i ncl ud es a “ bribe” giv en to L ibe rt y b y A IG to ta ke th e is su e o f eq u ita b le all ocat ion of settlem en t proc eed s am ong class m em bers o ut of c ont en ti o n b ec au se the i ss ue i ft ak enup bythe appell ate co urt ( by us, thati s) m i ght b e r eso l ved ag ains t appr o vi ngthe se tt l ement

. Iha ve po i nt ed o ut th atmem be r s o fthe c l as s w ho ar e di sa ppo i nt ed bythe exi sti ng al l oca ti on m ay have been counti ng o n Libe rty to cham pio n thei r cause i n thi s co urt. But cl ass act i on set tl em ents re quir e j ud i ci al re vi ew ( the “ f ai rnes s” hear i ng) ev enwhenthe r e ar e no obj ec to r s, i n r ec o g ni ti o n o fthe co nfl i ct s o fi nt er es t tha t per va de cl as s ac ti o n l i ti g at i o n. Fe d

. R

. C iv. P

. 23 (e), (e)(2 ); 4 W illiam B

. R u b en st ein e t al., N e wbe rg on Cl as s Act i ons §1 1: 48 ( 4th e d. 2012 ) ( “desp ite a l ack ofo pp os iti on, the cour t s houl d not l ose si ght o f its res p on sib ility to an aly ze ind ep en d en tly an d int ellige n tly th e s et tle m en t” ); Fed er al Ju d icia l C en te r, M anu al f or Com plex Litigat i on § 21 .61 (4t h ed . 200 4); c f. M i r f as i hi v. Fleet M o rtga g e C o rp . , 551 F.3d 682 , 686-87 (7th C ir. 20 08 ); In re G e n e r a l M o to rs C o rp. P ick -Up TruckFu el Ta nk P r oduc t s Li ab i l i ty L i t igat i on , 55 F. 3d 768, 81 2- 13 (3d Cir. 1995). So how shou ld w e procee d? W e co uld r em and the ca se to the di str i ct c ourtf ora deter m i nati on o fwh ether to approve the dism iss al of Liber ty’ s a pp eal

. But that w oul d i nj ect needl ess del ay . A superi oral ter nati ve w oul d be t o conduct ouro w n i nvesti gat i on o fwh ether to a ppr o ve the s et tl ementb etw een Libe r tya nd AI G. The f i r s t s t e p wo u l d b e s i mpl y t o r e q u i r e s u b mi s s i o n to us of the settlem en t agreem en t. M aybe o n rea d ing it w e’dN os . 12-1 15 7, etal. 17 concl ud e that i t i s i nnocuou s a nd di sm i ss the a pp eal s. Butmayb e no t. Acco r di ngto Libe r tyi ts i nde pen den t ( no nc las s) c laim ag ain s t A IG w as va lu ed at$2 5 m illion in the di str i ct c ourtse ttl em ent. I fLiber ty’ s a pp el l ate se tt l em ent with A I G exceeds that a m ount, th i s m ay be a cl ue thatA I G is payi ng Liber ty to d ro p obj ecti ons to th e set tle m en t th at, w er e th ey ac c ep te d , w ou l d b e n efit th e cl as s. I n tha t ev en t th e cl as s i s be i nghur t bythe bli nd w ithd raw al ofLiberty’s ap p eal un less no m ore mo n e y c a n b e s q u e e z e d o u t o fAI G, wh i c h we d o n ’ tkn o w. W e sh o ul d no t di smi ss the a ppea l wi th o ut a t le as t i nf o r m i ngo ur se l ve s o fthe t er m s o fLibe r ty ’ s se tt l ement w i th A I G. In d i sm i ssi ng the appeal s without doi ng so we a r e ac tingi n h ast e, a nd f o r no g o o d r ea so n. The mo t i o n t o d i s mi s s th e a p p ea l s was fi l e d mo r e th a n t wo m onths ago . Ratherthan arguingo verwh etherto d i s mi s s th e m we c o u l d wi th i n th i s p e r i o d h a v e c o mple ted the i nvest i gat i on th at w oul d rev ealwh ether we s ho ul d g r an t th e m o ti o n.

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