FOR THE ADMINISTRATIVE OFFICE OF THE U.S. COURTS 

 _________________

In the Matter of: )

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Public Hearing on Proposed Amendments )

to the Federal Rules of Civil Procedure )

 )

Advisory Committee on Civil Rules )

 ) 

Civil Rules 5, 23, 62, and 65.1 )

________________________________________)

Sandra Day O'Connor U.S. Courthouse 

401 West Washington Street 

Phoenix, Arizona 85003 

January 4, 2017 

Official Court Reporter:

Patricia Lyons, RMR, CRR

Sandra Day O'Connor U.S. Courthouse, Ste. 312

401 West Washington Street, SPC 41

Phoenix, Arizona 85003-2150

(602) 322-7257

Proceedings Reported by Stenographic Court Reporter

Transcript Prepared with Computer-Aided Transcription

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A P P E A R A N C E S

Committee Members Attending in Person:

HON. JOHN BATES, Chair

JOHN BARKETT, Esquire

ELIZABETH CABRASER, Esquire

HON. DAVID G. CAMPBELL

PROFESSOR EDWARD COOPER

PROFESSOR DANIEL COQUILLETTE 

HON. ROBERT DOW 

HON. JOAN ERICKSEN 

PARKER FOLSE, Esquire 

HON. SARA LIOI 

PROFESSOR RICHARD MARCUS 

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I N D E X

WITNESSES: 

Jennie Lee Anderson 6

Thomas Sobol 13

Jocelyn Larkin 28

Michael Nelson 38

Annika Martin 45

Todd Hilsee 54

Paul Bland 76

James Weatherholtz 92

Scott Burnett Smith 103

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P R O C E E D I N G S

JUDGE BATES: Good morning. This is the second

public hearing we're having on draft amendments to the civil

rules that are currently out in public comment, and we've had

one hearing in November and this will be the second hearing.

This is on rules 5, 23, 62, and 65.1 of the civil rules. 

And I want to thank Judge Campbell, the chair of the

standing committee, who is here today, for making this

facility available to us for this public hearing. And we have

many of the members of the advisory committee on civil rules

and the standing committee on federal rules here today in

attendance, and some more on the telephone.

We're going to hear from ten witnesses, I believe,

today. We've allocated 12 minutes to hear the testimony of

each of the witnesses, and then some time for questioning that

may ensue for at least some of the witnesses. And we'll take

one break in the middle of the morning, but other than that I

think things should just proceed pretty regularly from one

witness to the next using the lectern here in the middle of

the courtroom for the presentation of the testimony that the

witnesses wish to present.

We are ready to start. So we'll begin with the first

witness, and that will be Jennie Lee Anderson.

0 9 : 0 2 : 5 5 MS. ANDERSON: Good morning. And thank you for the

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opportunity to address the committee. I am -- my name is

Jennie Lee Anderson with the law firm of Andrus Anderson in

San Francisco, and I am testifying today my on behalf, and

also on behalf of the American Association for Justice, where

I serve on the board of governors, and, in the past, chair of

the class action litigation group.

I'd like to limit my comments today to two of the

proposed amendments, the first being proposed amendments to

the notice provision in 23(c)(2)(B), and the second being

amendments to 23(e)(5) addressing objectors. I'll start with

the second, objectors.

First, I'd like to say we applaud the committee for

trying to address this problem of serial objectors because it

affects parties and counsel on both sides of the V, and it's a

perplexing problem.

We also recognize the importance of providing balance

and protecting the due process rights of legitimate objectors

and respect the importance legitimate objectors have for

insuring fairness of the process.

However, the issues created by serial objectors who

bog down the settlement and delay relief to the class

highlights why reform is needed here.

Specifically, I believe that the court approval

provision will have an effect of deterring some serial

0 9 : 0 4 : 2 3 objectors and is certainly worth trying. It may not be enough

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to fully remedy the situation and as such we believe it is

important for the committee to make sure the rules are working

as intended and continue to monitor those provisions and

recognize they may need some tweaking as we go forward because

they draw on some very creative, wonderfully creative ideas to

address this problem. But, therefore, to ensure they're being

implemented as intended to keep an eye on that.

It also may require changes to the federal appellate

rules, and appellate courts may issue decisions that impact

the implementation of the rules. So we look forward to seeing

how that comes into play, but we certainly support the

committees's efforts in that respect.

Second, we would also like to lend our support to the

proposed amendments to notice provisions in 23(c)(2)(B).

Specifically, we support the allowance of a mixed notice using

mail and/or electronic means. This is simply a matter of

practicality. The courts need to be flexible, and this

encourages flexibility because, as we've seen, technology is

ever changing. So to just say it's got to be mail or e-mail

isn't enough. The electronic means gives the flexibility to

address changing technologies, and also the demographics of a

class.

For example, there may be some classes where the

demographics are very young people or where the claims

0 9 : 0 6 : 1 2 involved internet transactions. Those may be more appropriate

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for e-mail or e-mail with combination of social media. But we

also recognize there are still many classes that may benefit

from mail notice, and this simply encourages the judge to look

at these issues with a flexible approach. And myself and AAJ

definitely support that amendment as well.

So my comments are brief. I am happy to take any

questions, but otherwise I'll cede the rest of my time to the

others testifying.

JUDGE BATES: John.

MR. BARKETT: I have a question. Did you look at any

of the other comments we received?

MS. ANDERSON: Yes.

MR. BARKETT: And did you look at those from

Mr. Hilsee?

MS. ANDERSON: Yes, I did.

MR. BARKETT: And I'd be curious as to your reactions

to some of his observations on the notice provision.

MS. ANDERSON: Well, I think, if I recall correctly,

Mr. Hilsee advocates that mail is still by far the best and

that electronic means may be used as a cheaper way to give

notice that may not be as effective.

I don't disagree that under some circumstances, U.S.

mail is the best way to go. I just think that the rules need

to acknowledge that we live in a changing environment. I

0 9 : 0 7 : 3 8 myself don't open half my mail anymore, and sometimes I don't

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even open all my e-mail.

We have to be creative to try to reach the class,

give them notice and stimulate claims and increase class

participation. That may be a combination of any number of

things, and that may be radically changing over time. And I

think the judge -- the courts need to have the flexibility and

endorsement of the rules and the notes to address that ever

changing population and technology.

For example, I know that the use of social media can

be extremely effective for both notification and claim

stimulation. I was speaking with some other colleagues, and

it was raised that reading our e-mail isn't very pleasant.

Sometimes I can't even get through my e-mail for the whole

day. But, you know, I take a break and like to go on my

social media, and people spend -- you know, are constantly

lamenting, Oh, I need to stop spending so much time on social

media, because it is a wonderful way to reach people.

I'm not a notice expert, so I can't say that I have

statistical studies or the technological know-how to

effectuate such notice and claims programs on my own. But I

do believe as a user of technology that we should be drawing

on all resources to reach as many class members as possible,

and that that can include U.S. mail, but that we would be

shortsighted to think that it must always be limited to mail.

0 9 : 0 9 : 1 6 JUDGE BATES: Other questions for Ms. Anderson?

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PROFESSOR MARCUS: One of the things that's come up

is a subject called banner ads. Have you encountered -- could

you tell me what you understand that to be and whether you've

encountered that as a means of giving notice to a class of

either class certification or proposed settlement?

MS. ANDERSON: Sure. My understanding of banner ads

is when you go to a website, perhaps the website has been

identified as a website where class members are likely to go,

whether it be a news site or maybe it's something related to

the product at issue, that there's a banner and you click on

it and it can bring you to another page where you can gain

information. Perhaps the settlement claims page, for example.

And I know that use of banner ads can be one

component to increase claims and increase notice, especially

in cases where there are unknown consumers, there's no record

of who the class members are, and you want to try to really

get word out about the settlement so that people can learn

whether they are part of the class or not.

I don't think that a banner ad alone would be

sufficient. But because we have such broad resources on the

internet, I wouldn't see why it would be a detriment or not be

a good addition to reach class members. Particularly, like I

said, if we know that class members are -- they purchased a

product that do-it-yourselfers in the home use. An ad on the

0 9 : 1 0 : 5 7 Home Depot website may be an effective means of reaching some

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of those people and advising them of the settlement.

So I think it is important to consult with people who

are really expertise in this area and come up with a plan that

really addresses the very specific needs of the class and the

type of claims and how can you most broadly reach, not only

for the due process requirement of notice but also to

encourage participation in the settlement.

MR. BARKETT: May I ask one more question?

JUDGE BATES: John.

MR. BARKETT: I'm curious whether you've experienced

situations where courts, in approving class action

settlements, have tied the payment of attorneys' fees to the

claims rate and in some fashion where the higher the claims

rate the more confident the judge is in awarding fees, and the

lower the claims rate perhaps the judge is a bit more

skeptical about awarding fees. Is that something you've

experienced in dealing with settlements over time?

MS. ANDERSON: I have not personally had that come up

as an issue in my cases. I think that there are a few issues

to consider. One, the law in most jurisdictions is the amount

made available, and that is particularly important when there

is a non-reversionary fund.

I think when the courts are most concerned is when we

have a situation where it's a claims made process that is a

0 9 : 1 2 : 2 5 reversionary fund and unclaimed money goes back to the

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defendants.

Under those circumstances where it's not

reversionary, I think there can be and should be really

important cy pres relief that has to be well thought of and

really provides a indirect benefit to absent class members who

are not able, for whatever reason, whether be it be motivation

or they didn't identify themselves as a class member, they

didn't make a claim.

Additionally, many settlements are distributed simply

by sending a check to the class members. So those are cases

where the class members are known and their damages are known.

So there's also a good bulk of settlements that are like that

and that still sometimes results in money not being fully

distributed. Uncashed checks, addresses that can't be updated

and verified, things of that nature.

So I do know that that is a growing trend. I'm a

plaintiffs attorney so I think it's a dangerous trend because

I think there are remedial measures and deterrents that are

very important and well served by consumer class actions even

where it is very difficult to get the funds directly to the

class members because of the difficulty of encouraging people

who are class members to make claims. And the claims are

frequently, unfortunately, low in cases. All the more reason

to encourage the use of technology to stimulate those claims

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JUDGE BATES: Thank you, Ms. Anderson. We appreciate

very much you coming today and your testimony.

MS. ANDERSON: Thank you very much for the

opportunity.

JUDGE BATES: Our next witness will be Thomas Sobol.

Morning, Mr. Sobol.

MR. SOBOL: Morning. Thank you very much for the

opportunity to speak to the committee.

JUDGE BATES: Thank you for coming.

MR. SOBOL: My name is Tom Sobol. I'm a partner at

the law firm the Hagens Berman Sobol Shapiro. My office is in

Cambridge, Massachusetts. I've practiced complex civil

litigation for almost 35 years. The first half of my career

was at a traditional large Boston law firm, and I represented

primarily corporate and institutional clients. And then for

the second half of my career I've been representing primarily

consumers, health benefit providers, and others in connection

with pharmaceutical pricing matters and other cases that are

intended to assist in making health care more affordable and

effective.

I'd like to address three issues today. Two of them

are quite specific and the third is general. These are my

personal views, not those of my partners or my firm.

So first, the proposed amendments to Rule 23 take an

0 9 : 1 5 : 3 0 important step in expressly addressing, I think for the first

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time in the rule itself, the effectiveness of distribution of

relief to the class members. It is a very good thing that the

rules address this issue specifically.

Historically, responsible class lawyers have made

sure that the most effective means of distribution was used to

get funds into the hands of class members. Most class counsel

continue those efforts long after the settlement has been

signed off on and perhaps even the lawyers been paid.

In many courts, many judges take an active role in

assuring that distribution is made to class members. I'll

give one example. For instance, I had a case in front of

District Judge William Young in Boston and we were trying to

distribute tens of millions of dollars to consumers of a

medication for whom we did not have a roll of those consumers

handy. He wouldn't pay us until we went out and served

subpoenas on large benefit managers and pharmacies and got

together lists and scrubbed them and merged them and made sure

they were all confidential, and we got a list.

We put together a list. It took a long time and lot

of effort, and we put together a list of those folks and got

checks to I think it was about a quarter of a million people

rather than, for instance, the 10,000 people who had responded

to the claims notice.

Now, that is an example of what I consider to be the

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But the state of the art is uncodified. And so the rule

goes -- takes a step in that direction of codifying that there

should be state of the art distribution mechanisms.

PROFESSOR MARCUS: Mr. Sobol, to clarify one thing,

there was an initial notice which prompted around 10,000

claims to be submitted.

MR. SOBOL: It was a parallel. So we -- 

PROFESSOR MARCUS: You did both things

simultaneously?

MR. SOBOL: Both things simultaneously in order to

ensure that constitutional notification had been made to

everybody so that everybody had the opportunity to read about

the settlement and participate in the settlement. We had

constitutionally due notice by publication and that kind of

thing, people could file a claim.

In addition, as a function simply of the claims

process itself, we did this what we call the subpoena project

to generate and create a list of class members to whom we

would send checks directly. We did not require those

consumers to do any more other than the cash the check they

received in the mail.

So as an example, I can't remember exactly what the

number was, but I think it was maybe about 1,000 or 2,000 or

so people in Hawaii who had never heard about this check, but

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$500 each, which for many people is a pretty significant piece

of mail.

In execution, however, the proposal you have before

you I think is flawed in one respect. Currently, the proposal

reads, quote, The effectiveness of the proposed method of

distributing relief to the class including the method of

processing class member claims if required.

That's the consideration. This language is capable

of two quite different interpretations. On the one hand, the

language suggests that there's some absolute standard of

distribution effectiveness, that for all cases there is a

general standard of how effective settlement distribution must

be, and failing that, the court should reject the proposal.

On the other hand, the language might be interpreted

as requiring consideration of comparative effectiveness of

reasonably diligent alternative methods of distributing

relief.

The first interpretation, in my view, is quite

troublesome. The second, not.

The first, the one for -- of an absolute standard,

has no source by which the judiciary might create it, has --

there's little basis to impose one, and it's not in the case

law.

In some situations, particularly consumer classes of

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ascertainable. You can objectively identify who they are, but

very difficult to access them by way of distribution.

Rejecting the proposal because it might not achieve

some absolute standard, and thereby denying relief to those

consumers we can reach, would neither be just nor in the

interests of any of the parties to the settlement. And it

does not appear that that's the intent, I think, of the

advisory committee anyway.

Accordingly, I would respectfully suggest a very

simple addition to your rule, which would add the following

words: After -- well, the rule would read: "The effectiveness

of the proposed method of distributing class -- relief to the

class as compared to other reasonably available methods of

distribution under the circumstances."

Second, the proposed amendments take an important

step in addressing objections to class settlements, both in

proceedings before the district court and when pressing an

appeal. Objections do serve good and not so good purposes.

The proposals seek to achieve the balance needed to protect

legitimate objections and deter self-serving ones.

One proposal requires that the objection to, quote,

state whether the objection 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.

0 9 : 2 1 : 1 3 Now, this -- that change does make some sense in, as

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the committee notes, it is intended to provide sufficient

specifics to enable to the parties to respond to them. But in

my view, it falls short in one very significant way.

Now, let's take a look at something else in the

rules. To gain class certification status, Rule 23 contains

very specific requirements to ensure that the proposed class

representative and the class lawyers will adequately represent

the interests of the class.

Rule 23(a) requires that the claims and defenses of

the representative parties be typical and that the

representative, the class rep, if you will, will fairly and

adequately protect the interest of the class.

Rule 23(g) contains numerous requirements for the

appointment of class counsel, and among them of course also is

a factual showing and a determination by the court that the

class lawyers will fairly and adequately represent the

interests of the class.

Now, these rules ensure that people who affect the

interest of class members, the representatives and the

lawyers, satisfy basic requirements in order to make sure

they're acting on behalf of the class and not their self

interest. We spent a lot of energy in class practice making

sure of that. 

Now, contrast that to the situation of an objector.

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objection is filed, when it is pressed before the district

court and when an objector lodges an appeal, the substantial

rights of all of the class members are immediately affected.

Objections can incur the expenditure of class resources, they

can delay proceedings, and they can stall the issuance of

relief to the class. And they urge changes that are not in

the interest of the class either.

But under the rules, merely by filing an objection,

an objector or his or her counsel can gain de facto status as

class counsel because they're affecting things, and -- period.

So in my view, what there needs to be is added some

requirements to the rule to make sure that there is adequate

representation. That if an objector comes forward, the

objector will make, at the court's suggestion, a factual

showing that the objector is acting in the best interests of

the class, and that if there's objector's counsel, that

objector's counsel has to provide the factual showing that

that objector's counsel qualifies to represent the interests

of the class.

Accordingly, I would respectfully suggest the

following addition to your proposed Rule 23(e)(5)(A), which

would be as follows: 

If an objection applies to a specific subset of the

class or the entire class, the court may require the class

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sufficient to permit the court to find, one, that the class

member is a member of the affected class; two, that the class

member will fairly and adequately represent the interests of

the class; and, three, that the counsel for such class member

is qualified to fairly and adequately represent the interests

of the class.

Absent such a finding, the court may overrule the

objection without considering it further.

My third and final comment is this: The nature of

the proposed rule change is that this body is considering

evinced to me underlying them certain principles that are not

often publicly stated, but which I think are shared on both

sides of the V and are shared regardless whether you are a

blue state or a red state person.

Rule 23 affords the federal judiciary an

administrative tool of enormous power. Our increasingly

complex and consolidated economy brings about legal disputes

with far-reaching consequences. We need jurists to be

empowered to administer and adjudicate these large-scale

disputes fairly and efficiently across large populations. We

lean heavily on the judiciary to provide the forum to enforce

complex environmental, civil rights, racketeering, consumer

and antitrust laws.

Now, as my understanding that proposals not in

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forward and seek to curtail, perhaps significantly, the power

of the federal judiciary to do its job. And what I would

submit to this committee is this: That attacks to constrain

judicial power must be based upon a clear and convincing

showing that there has been a documented abuse of judicial

power. Absent a documented abuse of judicial power, this

committee ought not consider rules changes that are intended

to curtail the ability of the judiciary and judges in the

United States to do their job under Rule 23.

Thank you.

JUDGE BATES: Thank you, Mr. Sobol.

Questions?

JUDGE ERICKSEN: I have a question.

JUDGE BATES: Judge Ericksen.

JUDGE ERICKSEN: What would be the standard by which

a court would make the factual sufficiency finding that would

be required under your proposed amendment to the proposed

amendment of 23(e)(5)(A)?

MR. SOBOL: I think that you would simply bring for

the class -- for the objector, as opposed to the objector's

counsel, for the objector, you would bring in the same

standards that you've applied to class representatives; i.e.,

that the objector has a claim that is typical and that the

objector has made a documented showing that he or she will

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It's the same thing to requirements under Rule 23(a)

for class representatives would be important to the objector.

JUDGE ERICKSEN: It would be for simply a

subcategory; right?

MR. SOBOL: Yes. Yeah. And then for -- obviously

for class counsel, if you go and take a look through the rule

of 23(g), some of those requirements don't translate as

conveniently, if you will, to objector's counsel.

JUDGE ERICKSEN: Right. 

MR. SOBOL: But the overall one does, which is that

the class counsel has made a factual showing not only that

they will act on behalf of the class, but that they are

qualified to do so.

JUDGE CAMPBELL: Following up on that point, it's an

interesting idea, but here's the issue that is rather hazily

in my head. I'm not sure I can articulate it clearly.

When class counsel and class representatives are

approved at the beginning of the case, the judge knows little,

if anything, about the nature of class, the nature of the

claims, how the case is going to proceed. It seems to me at

that point where you're launching a class action, it's

critical that the person representing the class and the lawyer

representing the class are adequate to represent the class.

Usually, when you reach the point of settlement,

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has a much better sense of the class, the judge has a clear

sense of what the proposed settlement is, and has heard from

both sides about why it will benefit the class. It seems to

me that at that point in time the judge is much better

equipped to determine whether an objection is or is not in the

interest of the class.

Why, then, should the judge at that point say, I'm

not going to consider the objection until you prove to me that

you're a lawyer who can adequately represent the class, or

class member who can adequately represent the class? Why

can't the judge look at the objection in the context that is

now much more clear and assess whether or not it is to the

benefit of the class?

MR. SOBOL: Sure. So I'm glad you raised that issue.

The proposal that I put out is a "may," not a "shall," from

the district court's point of view. So if the district court,

if she found herself at a point in the case where there was no

real need to go through additional fact-finding regarding an

objector or objector's counsel, then the court, under my

proposal, wouldn't exercise its discretion to do so.

However, there may be situations where the court at

that point, that far down the road, knowing or being able

to -- or believing there might be some issue regarding the

objector or the objector's counsel, because the rule provides

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bona fides, if you will, of the objector, as a member of the

class or the -- and challenge the bona fides of the objector's

motivations and/or the same thing with counsel. But there are

circumstances where that would be the case, where the court

would wanted to that.

And I think the rule embodying that kind of a "may"

option provides clarity, I think, that -- and brings home, I

think, the reality, right, which is that the objector is

affecting the interest of everybody simply by being there and

raising a claim which they have now, under your proposed rule,

declared themselves as being something that they intend to

affect the class they're a member of.

JUDGE BATES: Parker.

MR. FOLSE: I have a similar concern to

Judge Campbell, but I'll flip it around a little bit.

Are you suggesting that -- one observation I have is

that it would provide your proposal one more ground of

litigation over objections that are filed. Conceivably, could

even lengthen the process even further.

But are you suggesting -- let's take an example where

there is an objection that is lodged. Just looking at it on

its face within the context of the case and the court's

knowledge of it that Judge Campbell alluded to, which should

be superior at that point, it is a decent objection, it is one

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addressed for the best interest of the class.

Are you saying that the court would have the

authority to say, No, I'm not even going to consider this

because I've got some suspicion about the motivation behind

the lawyer or the person making the objection? Why should

their motivation matter, as opposed to the substance of what

they're telling the court as a matter of concern about the

proposed settlement?

MR. SOBOL: I think that in the circumstances where

the face of an objection shows a legitimate consideration that

the court wants to investigate, that that's sufficient in and

of itself to trigger the court's independent obligation on

behalf of the class to exercise its fiduciary duty to

investigate that issue, regardless of the ad hominem from

where it came from.

Again, that's why I think that the proposal I'm

putting forward is instead something where someone is raising

an issue and the court does have legitimate interests,

legitimate concerns about the bona fides of either the

objector or the objector's counsel, in those circumstances,

not in the circumstance where the objection on its face shows

it, it's appropriate to undertake this inquiry.

And the inquiry in many situations does occur

eventually, though it's not occurring under the auspices of a

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counsel is litigated from time to time in cases. This is an

effort to try to memorialize that in some kind of a way in the

rule.

JUDGE BATES: Judge Young. Use the microphone.

JUDGE YOUNG: You think -- if a judge has concern

about the bona fides of the objection, you think that the

judge lacks or requires some sort of structure to exercise

that discretion? Is that what you're trying to do here?

MR. SOBOL: No. I think like many aspects of the

proposed rule changes that are out there, the power is

inherent already in the court.

JUDGE YOUNG: Yeah.

MR. SOBOL: And so then the question ends up being in

a situation where the power is inherent in the court, what

would the purpose be of a rule change to make that more

explicit?

JUDGE YOUNG: If that's what a --

MR. SOBOL: Yeah. Fair enough --

JUDGE YOUNG: -- circumstance where I have the

authority and the concern that I wouldn't exercise my

discretion to inquire into the bona fides --

MR. SOBOL: Right. And I think that in -- much like,

for instance, the rule change that seeks to make explicit an

inherent power of the court with respect to the adequacy of

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embody that now, I think similarly there's a need to embody

explicitly the inherent power of the Article III jurist to

inquire about the bona fides of either the objector or his or

her counsel.

JUDGE YOUNG: But the proposal you make seeks to

frame how that inquiry is made, not to restate the obvious,

you have the power to do so.

MR. SOBOL: I had intended it to be the latter, to be

the -- articulating the power to do so and not to in any way

guide the discretion or to force it -- of the inquiry on the

judge.

JUDGE BATES: Parker.

MR. FOLSE: One more quick question. At the end of

your comments you alluded to other comments that we've

received that you said -- that you characterized as urging a

restriction on the power of the judiciary without documented

evidence of abuse of such power, but you didn't -- I wasn't

clear what you were talking about. Can you give me an example

of what is concerning you and you think ought to concern us?

MR. SOBOL: Sure. So I think that there are comments

to the rules committee and efforts before other branches of

the federal government to limit the scope of federal jurists

with respect to Rule 23. And in particular, to limit the

scope of federal jurists to adjudicate class actions where the

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catastrophe for enforcing the laws and enabling the judiciary

to do its job.

And any kind of a Draconian rules change like that or

legislative action or executive action undermines what I

consider to be fundamental principles that are shared

regardless of whether you are red state or blue state,

regardless what side of the V you're on, because this group --

and lawyers take very seriously how to tailor the use of

Rule 23. And just sweeping it aside as if it's a nuisance is,

in my personal view, anti-American.

JUDGE BATES: Thank you, Mr. Sobol. We appreciate

you coming very much. 

MR. SOBOL: Sure.

MR. BARKETT: Are we going to receive written

comments?

PROFESSOR MARCUS: Mr. Sobol, it would be useful if

you would supply the exact language you mentioned.

MR. SOBOL: Yes. My partner tells me the one typo I

have is in the spelling of my firm's name.

PROFESSOR MARCUS: We'll keep that in mind.

JUDGE BATES: We look forward to your comments as

well.

Next witness will be Jocelyn Larkin.

MS. LARKIN: Good morning. My name is Jocelyn Larkin

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The Impact Fund is a legal nonprofit providing

support for impact litigation to advance economic and social

justice. We've been around for about 24 years. We provide

support in the form of grants, training to lawyers, consulting

help, as well as we litigate some of our own cases, generally

in the areas of employment discrimination and civil rights.

I am also a member of the ABA Federal Practice Task

Force, which will be submitting comments next month, but I'm

here speaking only on behalf of the Impact Fund today.

Before turning to the rule amendments, I wanted to

thank the committee for the outreach that was done in

connection with the Rule 23 changes. The Impact Fund holds an

annual class action conference with about 125 class action

practitioners, both from the nonprofit area and from the

private bar, and many of these are lawyers who are focused on

injunctive relief cases on behalf of the poor, persons with

disabilities, foster children and the like.

And a number of members of the Rule 23 subcommittee

came and spoke with our committee -- our conference attendees

to get their thoughts about changes to Rule 23.

I think it's really important that the committee does

hear from a wide range of constituencies, and I very much

appreciate that outreach effort that was made.

I also want to say in general we're extremely

0 9 : 3 9 : 4 3 enthusiastic about the proposed changes, and my comments are

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just some suggestions that I think might improve them, but

generally we think they are very good.

Focusing first on notice, we very much favor the

change that expands the range of methods that can constitute

best practicable notice. We particularly appreciate that the

comments recognize that some segments of the population do not

have access to electronic methods of communication, hopefully

yet, and that that needs to be taken into account, so that the

notice obviously needs to be tailored to the actual class

members.

Earlier in my comments I raised a concern -- in

comments I submitted to the committee in 2015, I raised

concerns generally about the readability of notices.

Currently the rule requires that notices be clearly and --

that notices clearly and concisely state in plain, easily

understood language the requirements for notice. It's fair to

say that that, despite the very explicit requirement in the

rule, it has been a failure. Ordinary people cannot read or

understand class notices.

We have conducted focus groups, and generally there's

a high level of cynicism about class actions in part because

when people receive the notices, they don't understand them.

The new proposed comments add what I would call some

sort of tepid commentary or direction to the courts about

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and differentiate between notices that go to sophisticated

class members, such as in securities class actions, as opposed

to less sophisticated class members. I've read many of those

securities class action notices, and no one, no matter how

sophisticated they are, should have to read anything like

those.

This is a missed opportunity. And I think it

suggests that the status quo is acceptable. And I have to say

class notices are just unreadable by anyone who is not a

lawyer.

My suggestions for perhaps augmenting the comments

would be that judges should be presented with notices typed

exactly as they will appear so that the formatting is not done

in extremely small typeface with little margins.

I would suggest that counsel should actually make an

affirmative showing that notice is, in fact, readable at the

level of a typical class member. I also think that the

comments could encourage the use of good design and graphics.

I would like to make another suggestion, which is

that the Federal Judicial Center go back and update its model

class notices, which I think were an excellent start. The

thing about having that model notice is that there can often

be a lot of controversy between the parties about what a

notice should say. But when you have a model notice, that

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that. So for us it is very helpful to have those model

notices.

I think they could be updated significantly from

where they were done a number of years ago simply because we

know a lot more and we have the capacity, for example, to

include design, graphics, hyperlinks to glossaries, things

that would be helpful. I think also those model notices --

PROFESSOR MARCUS: Can I ask a question about that?

MS. LARKIN: Yes.

PROFESSOR MARCUS: Would the sorts of improvements

you're talking about be likely to work with first-class mail

paper notice?

MS. LARKIN: So hyperlinks definitely would not.

Obviously the notices could include links that people could go

to if they did have access to additional information that's

online, but there's no reason that a first-class notice

couldn't include a graph or different sorts of charts with --

or means of conveying information that would make it easier

for people to understand.

PROFESSOR MARCUS: All I'm getting at is the concerns

you're raising aren't particularly linked to the manner or

mode of giving notice.

MS. LARKIN: They are not. My point is the

committee's looking at Rule 23 at the moment, and this is a

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given what the notices now look like.

MR. BARKETT: May I interrupt also, since Rick

started? 

MS. LARKIN: Yeah.

MR. BARKETT: So, Jocelyn, I'm curious. You have,

obviously, samples. Why don't you and your colleagues get

together and put together forms of model notices that are

effective, because the AO has a website, the Federal Judicial

Center has this model notice. I don't understand why you

wouldn't be feeding this information directly so that these

things could go on the website and judges can see this is what

works, this is what doesn't work.

What's going through my mind is what can we do by

rule versus what can we do by example that judges can draw on.

And if you've got four or five sample notice forms that have

really reached the people that you have described as not being

able to read these notices or understand these notices, what

are we waiting for? We don't need to wait on a rule to get

that onto a website for judges to look at to compare what is

being presented to them.

MS. LARKIN: That's a perfectly good point, and I

actually -- as I was putting these together, I was thinking

about that.

I think -- there's a couple of things. First of all,

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notices and there are different, I think, areas that would

need to be addressed. I also think it is important, though,

for judges to see something that comes from the Federal

Judicial Center. So I think we certainly could help, and I'd

be happy to assist in terms of developing those model notices

in a number of areas.

So let me turn now actually to the new factors in

connection with the decision to approve a settlement notice.

One of the factors -- the new factors that's articulated to be

considered is whether the -- or not a particular settlement

provides equitable treatment of class members. So

23(e)(2)(D). And I think the inclusion of that factor is

really important, and I compliment the committee on including

it.

In terms of the calls I get from practitioners, I

would say this is the number one question that I'm asked when

people are negotiating settlements is, is it okay if different

segments of the class are treated differently, and how do I go

about, as a lawyer, valuing how -- you know, what one group of

claimants claims are worth rather than others. So I favor its

inclusion.

I think the comments are very useful in clarifying

the -- what that -- what those considerations should be and

how those differences should be taken into account in terms of

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I think the rule language is a bit awkward, though.

And when I first read it, I was a little troubled by it. It

says, "Class members are treated equitably relative to each

other." And -- in passive voice, and it is not clear, sort of

equitably treated by whom? 

And so my suggestion, which is really just a

reformulation, not changing it in any way, would be that the

proposal treats class members equitably relative to the value

of their claims.

And I will submit written comments with that language

in it to make it easier for you.

So finally, I just wanted to bring to you, last month

I was invited to speak to about 200 lawyers for the Northern

California Federal Bar Association about the Rule 23 rule

changes. And there were two questions that came up in the

course of my presentation which don't necessarily affect the

Impact Fund, but I thought it was worth bringing them to you

because they were interesting.

One of them had to do with the disclosure early on of

side agreements. So in connection with what was formerly

known as preliminary approval, now the decision to provide

notice. There's one particular kind of side agreement, one

that is in agreement between the parties about the number of

opt-outs that might occur and whether that would give the

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if there were essentially too many opt-outs. I think it's

colloquially known as the "blow up" provision. Often, those

are filed under seal to avoid anyone who might be

opportunistic about opting out a number of class members.

The comments seem to suggest that all of the

information that is provided to the court in connection with

the decision to give notice should be made available to class

members. So someone raised the question with me, Well, does

that mean we can no longer put those agreements under seal? 

I don't see any reason why they couldn't still be

under seal.

So the language in the comment that raises the point,

it says: At the time they seek notice to the class, the

proponents of the settlement should ordinarily provide the

court with all available materials they intend to submit in

support of approval. This would give the court a full picture

and, quote, make this information available to members of the

class.

So that was the point that was raised.

The second point that came up was the question about

what exactly would be the grounds for approving payments to

objectors. So I went back and looked at the comments. And it

does mention one circumstance, which is the circumstance where

an objector's comments had provided some useful information to

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settlement.

But I think the question was that was raised are, are

there any other grounds, and how would a judge decide that? I

don't particularly have an answer to that question. But it

did seem to make people queasy trying to figure out what might

be -- what kind of payment might be approved.

I obviously have no interest in having serial

objectors come in and be given payments at all, but the

question was what might be the circumstances or the standard

that the judge would use to decide whether a payment should be

approved.

JUDGE BATES: Ms. Larkin, let me take this

opportunity to extend the committee's reciprocal thanks to you

and your organization, and to the others and their

organizations, for your participation in the entire process of

the rule amendments conferences and other things that have

been invaluable to us in considering and developing those

rules.

Any questions for Ms. Larkin?

PROFESSOR MARCUS: I sense that the cases in which --

that the Impact Fund has brought and those on which it

consults may be of a different sort from many of the others

that we hear about here. I wonder if in the cases that you're

familiar with you've encountered a serious problem of what

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MS. LARKIN: No. No. I mean, in injunctive relief

cases, there's simply -- the money is not an issue, and often

the attorneys' fees are based on a statutory fee rather than a

common fund. So typically no.

JUDGE BATES: Other questions?

Ms. Larkin, thank you very much. We appreciate it.

Our next witness will be Michael Nelson.

Good morning, Mr. Nelson.

MR. NELSON: Good morning. My name is Michael

Nelson. I'm a partner in the law firm of Sutherland Asbill &

Brennan, and I chair the firm's class action group. I've

testified in front of committees like this on several

occasions. In fact, I date myself a bit by recalling

testifying on the class action reform initiatives that

ultimately became part CAFA some twenty-some years ago.

I applaud the committee for its work on these kinds

of initiatives. It's wonderful to look back after you've seen

progress in the rules and think that these processes help

bring those kinds of changes.

I'm associated with the Lawyers for Civil Justice,

although I'm not speaking on LCJ's behalf. I absolutely

support the position that they've taken in their White Paper

of October 3rd.

I would like to focus at this point not so much on

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rule changes should be. Specifically Rule 23(f) as a

mandatory appeal.

I think the time has come for us to embrace the idea

that 23(f) as it's currently constructed is not working. Very

few interlocutory appeals are granted on this issue. Or

petitions to take interlocutory appeal. And some circuits

have never, not once, allowed a petition to go forward.

There's something wrong when one circuit's never done it.

If we think about what happens in a class action

scenario now, the court, after conducting rigorous analysis,

has decided the class is certifiable or not, and then absent

Rule 23(f), the case proceeds through the notice process,

which we just heard about, is getting more and more

complicated all the time.

As a practitioner standing in front of the court

trying to argue what the notice should say, who the notice

should go out to, the means the notice should go to, meaning

how it's going to go to those parties, the administration

process, who's going to pay for it, then moving past that,

what that trial's going to look like, and then what the appeal

of the trial as merits of the trial looks like, in addition to

the appeal of the class certification that the defendants

would argue should have never happened in the first place.

It's an inefficient process to put review of the class

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A lot of courts need training on how these elements

fit together. Where would we be without In Re Hydrogen

Peroxide where Judge Sirica in the Third Circuit explained

what rigorous analysis was and how to deal with experts and

the extent you look at pleadings as you consider class

certification issues. And that was done through the

Rule 23(f) procedure.

That would have been a very complicated antitrust

case to try absent that Rule 23(f) presentation and the

decision that came down. And then it would have been a much

more complicated appeal because we would have been litigating

class certification issues at the same point we would have

been litigating merits issues.

So I do think that the rule should be changed so that

the rule says "must" or "shall" or "should." I think back to

some of the discussions we've had on motions for summary

judgment when we got tied up in knots on those words. But

mandatory as opposed to completely discretionary.

And as far as the discretionary action expect of

this, the court is allowed discretion that is really

unfettered and boundless. The appellate court. There's

really no guidance to them, either in the rule or in the

comments, as to what they should consider.

Some courts have carved out some rules where things

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you as a party that is routinely drafting these type of

petitions, trying to explain what a death knell looks like

when you're trying not to prejudice your position in

litigation to a court is nearly impossible.

And then generally when you do get a written opinion

denying the petition, the court says, Well, we're not

convinced it's death knell. That's a big company, they can

weather the storm. When really, we should be looking at

whether or not, not just the corporation, but the absent class

members who are going to be getting notice and are getting

wrapped up into this process, are being served justice by

being brought through the legal system when class

certification wasn't done properly because either the

appellate court didn't want to take it, never takes them, or

didn't see it as a death knell.

The time to address this most important part of class

certification is when it gets certified. The judge did a

great job, fantastic. The court simply says, See that you

followed all the rules, did the rigorous analysis, the

plaintiffs demonstrated how this was manageable. We're

satisfied.

If the court's already looking at a petition, how

much more is it a draw on judicial resources to have them

actually review the certification process? And it's

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request for certification is denied, I'm sure they'd like to

have their day in court on that issue sooner rather than

later.

So I do think the time is right to address that now.

I realize that is not in the proposed rule changes. I do

believe you have the authority to make these changes now

without having to go back and start the process over again.

Those are the comments I have today. I will be

following up with separate comments on these points following

this testimony, and I thank you very much for your time.

JUDGE BATES: Thank you, Mr. Nelson.

I have one question. Are there statistics -- I know

this doesn't cover the universe, but are there statistics on

the number of cases in which an appellate court has declined

to consider an appeal, interlocutory appeal on class

certification, but has later decided that the class was

improperly certified on an ultimate appeal? Are there any

statistics on that?

MR. NELSON: I haven't seen a study that talks about

it from that perspective. I see it from the standpoint of how

many petitions have been allowed.

JUDGE BATES: Are you aware of cases in which that

has happened?

MR. NELSON: No, I'm not. Because, again, most of

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settle.

JUDGE BATES: I know that, and that's why I say it

doesn't cover the universe of cases, but I'm just curious if

there are any such cases that you're aware of.

MR. NELSON: As a practitioner, I can tell you within

a couple days of receiving certification I'm getting a phone

call from plaintiff saying, Okay, how about settlement now?

Cases with billion dollar exposures.

JUDGE BATES: Other questions?

MR. BARKETT: So is your proposal in 23(f) where it

reads the Court of Appeals may permit an appeal from an order,

you're suggesting it should read Court of Appeals must permit?

MR. NELSON: "Must," "shall," "should." Again, that

gymnastics of the words has been difficult when it concerns

summary judgment, but it should be not something that is at

discretion of the circuit court.

MR. BARKETT: And why do you believe we can make this

change now under this package without having to go back to

republish it? It strikes me that that's a rather significant

change.

MR. NELSON: That is a significant change.

MR. BARKETT: The appellate rules committee may also

be interested in this as well.

MR. NELSON: I imagine they would, and certainly they

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but from the standpoint of the authority, I think the courts

have been given the authority by Congress under Class Action

Fairness Act to make these sort of changes now without it

going through a rule-making process.

MR. BARKETT: I'm sorry, the courts have been given

authority?

MR. NELSON: Yes, I think there's statutory allowance

for these kinds of changes to Rule 23 now.

PROFESSOR MARCUS: As I recall, not long after 23(f)

came into effect, the Seventh Circuit, in a case called Blair

v. Equifax, articulated an approach to whether or not to grant

a petition that many other courts found useful. Are you

urging that this committee should articulate what standards

the courts use? "Must," it seems to me, doesn't require

standards. "Should" -- we're not allowed to use "shall"

anymore. The other words probably do. And that strikes me as

something of a challenge. There's a widely accepted standard

already out there. Do you think the standard out there is

wrong?

MR. NELSON: Well, the standard fundamentally starts

off with the fact that the court has discretion. If you

remove that discretion, you make it a mandatory appeal --

PROFESSOR MARCUS: "Must" doesn't need a standard.

MR. NELSON: "Must" doesn't need a standard. If

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think at the very least commentary about what appropriate

standards should be considered would be helpful.

And with all due respect to the death knell approach,

I can tell you that I think that's just a crazy exercise. And

as a practitioner trying to describe why something is a death

knell to a corporation or to the litigation, it's nearly

impossible to do that. And it also becomes something where

somebody on the other end with absolute discretion can say,

I'm just not satisfied. When it really should be about

whether or not the class was appropriately certified.

MR. BARKETT: Will you being submitting comments?

MR. NELSON: Yes.

MR. BARKETT: So when you do, just -- I'd be

interested in just seeing the explanation as to why we have

the authority, because even if I agree with you, I'd want to

make sure that I was comfortable that we have the authority to

act without republishing and without running this by the rules

committee, the appellate rules committee.

MR. NELSON: Thank you.

JUDGE BATES: Thank you, Mr. Nelson, we appreciate it

very much.

Our next witness is Annika Martin.

Good morning, Ms. Martin.

MS. MARTIN: Good morning. And thank you for the

1 0 : 0 4 : 2 9 opportunity to testify today. My name is Annika Martin. I'm

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a partner at Lieff Cabraser Heimann & Bernstein in the

New York office. My practice focuses on representing

plaintiffs in consumer fraud, environmental and product

liability class actions and mass torts.

And I would like to first join the others who have

thanked the committee for their efforts in considering these

rule changes and putting together this package and reaching

out to all of the stakeholders and various groups in the bar

and embarking on a listening tour, as it was called. And I

was present for a couple of those, and I think they were

really great opportunities for us to feel heard. And I'm sure

that many others feel that way as well. So thank you for

involving us in this process so fully.

And I think the result is a great package of

amendments that really has a lot of consensus, and I think

many had expressed enthusiasm for many of the changes in the

package.

So I just have two areas that I was going to focus on

today. One is changes related to 23(e)(5) regarding

objectors, and they're just little tweaks. It's not a lot of

big stuff. And then notice --

MR. BARKETT: Could you speak up.

MS. MARTIN: Sure. Yeah.

So as far as the objector section, there were just a

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So in 23(e)(5)(A), I thought one way that judges could have

some more information in order to determine -- I don't want to

say good objectors and bad objectors, but learn a little bit

more about the party that is objecting, would be in that

section to also require disclosure of prior instances in which

that party has objected, if any, and what the outcome of that

was. It's not particularly burdensome to make such a

disclosure. Already there's discretion to allow discovery

into objectors. So I think adding that into 23(e)(5)(A) could

provide some useful information to judges when considering

objectors and the bases for their objections and their

motivation.

PROFESSOR MARCUS: Do you sometimes pursue discovery

regarding who is making objections, the people who are making

objections?

MS. MARTIN: Yes. Absolutely.

PROFESSOR MARCUS: And would this addition facilitate

additional discovery efforts of that sort?

MS. MARTIN: I think so. I mean, I think making a

disclosure at the outset would educate the parties and the

court from the outset as to what prior objection activity that

party and/or their counsel has engaged in. And legitimate

objectors that may have objected more than once, I don't think

that that's particularly burdensome, and I think that you will

1 0 : 0 7 : 5 6 see that they have added value to various cases. Even if they

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are a repeat objector, that doesn't mean they're not

repeatedly adding value when they're objecting. So I think it

would be a useful mechanism to educate parties and the court.

JUDGE CAMPBELL: Can I ask a question on what you

just said. You just said "and/or their counsel." So are you

suggesting this should require disclosures not only for the

class member who is objecting, but also for the attorney

representing the class member?

MS. MARTIN: The language as it says now, I believe,

restricts it only to the objector. I would certainly like to

have information on the counsel as well. But, you know, if

the limitation was just the objector, that would also add

value.

MR. BARKETT: I'm sorry, can I just follow up on

that? 

MS. MARTIN: Sure.

MR. BARKETT: You said "party." The rule reads any

class member may object to the proposal, the objection stated,

et cetera.

So when you say "party," you're referring to the

class member, referring back to the word "class member" in 23

and 5(a)?

MS. MARTIN: When I said "parties," I meant the

parties to the class action that would be educated.

1 0 : 0 9 : 1 4 MR. BARKETT: That's objecting.

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MS. MARTIN: Yeah.

PROFESSOR MARCUS: Do you think Mr. Sobol's

suggestion about a required or suggested screening of counsel

for objector at that point is productive?

MS. MARTIN: I think it could be productive and -- 

PROFESSOR MARCUS: Could that also be the beginning

point of additional discovery?

MS. MARTIN: I think so.

As for 23(e)(5)(B), I have one small suggestion on

the language of this proposed change, just to close what I

think may be a loophole in it. So right now it refers to

payment to an objector or objector's counsel. And I just

think that by changing the language -- because right now there

are some groups, nonprofit groups, that are related to

objectors or serial objectors or those who represent

objectors, and I don't think that they would be covered by the

current language, and I think that they should be.

So I think that one way you could change the language

easily would just be to say, instead of saying "court approval

required for payment to an objector or objector's counsel," it

could just say "for payment related to withdrawing an

objection," or something similar. That doesn't limit it to

the objector and objector's counsel, but instead allows it to

just be payment related to the withdrawal of the objection.

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PROFESSOR MARCUS: So what you're suggesting, then,

is to delete the words "to an objector or objector's counsel"?

MS. MARTIN: Yeah, and replace it with something like

"related to an objection," or something similar.

PROFESSOR MARCUS: Well, do you even need those words

to achieve your goal?

MS. MARTIN: No, you could just delete it, if you'd

like. Sure.

PROFESSOR MARCUS: Well, I'm just trying to get a

feel for what you're -- 

MS. MARTIN: No, no. My goal is to not limit it to

objector and objector's counsel.

So, for example, later in the body of the rule, of

the proposed rule, where it says "other consideration may be

provided to an objector or objector's counsel in connection

with," there, I think, you can just delete "to an objector and

objector's counsel."

But in the first line of the rule of (B), I think you

may need something there, otherwise it just says "court

approval required for payment." So that was my thought

process in adding "related to withdrawal of an objection" or

"related to an objection."

MR. BARKETT: You could say the same thing, "court

approval related to withdrawal of an objection."

1 0 : 1 2 : 1 3 MS. MARTIN: Sure. My goal is just to avoid limiting

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to objector and objector's counsel so that we can also include

other organizations that may be benefiting serial objectors.

So those were the two tweaks I had for the section on

objectors.

With regards to the notice change, 23(c)(2)(B), for

what the rule is right now, it appears to me that the

committee's goal was to formally allow in the rule what some

judges are already doing in practice, which is to allow notice

by electronic means when it's appropriate for the

circumstances of the case, when it meets the standard of best

notice practicable, and including individual notice where

possible.

I think that in the comments, you have put in a lot

of language that confirms the court's discretion to consider

various types of technology, but still to be considering it on

the basis of what is best for this particular case and

circumstances and the population that you're trying to reach,

and I think that the language there is good.

I think that the changes that have been proposed deal

solely with the means, and I think some of the comments deal

with more content related aspects of notice.

And I do agree that there could be additions to the

language and the commentary that would address content and

substance of the notice, but as for what is here just

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electronic means, I think the language that the committee has

put in here is good.

And if the committee chooses to expand into

commentary about substance, I would support that. But in

terms of expanding means of notice and formally codifying that

electronic means can be used, I think the language the

committee has chosen is good.

JUDGE BATES: Thank you, Ms. Martin.

Do we have any questions -- or further questions for

Ms. Martin? 

Mr. Marcus.

PROFESSOR MARCUS: I'll ask you something I asked

earlier. Are you familiar with use of banner ads --

MS. MARTIN: I am.

PROFESSOR MARCUS: -- in conjunction with other means

of giving notice or as a sole manner of giving the notice?

MS. MARTIN: I have not used it personally, but I

have -- I'm aware of cases where it has been used. I don't

know of any cases off the top of my head where is was the sole

means of notice.

I think that certainly there are concerns and, you

know, there's developing area here about what kind of actual

clicks banner ads may have.

I do think that it may not be the role of the rule

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policing or making a judgment as to specific types of

technology. I think that may be why the committee drafted it

in a broader way to allow for types of technology that we

don't yet know about or -- you know, there are other

electronic means that are not banner ads. 

You know, your car can be sent a message from the

dealer that it needs to come in for a recall. That could be

considered individual notice by electronic means. If you have

an app on your phone that can give you notification that you

should collect your $2 that they overcharged you, that could

be individual notice by electronic means. It doesn't need to

just be e-mail.

And I think the committee was wise in drafting

broadly, too, so it's not out of date tomorrow, as technology

changes.

I do think that by allowing the courts discretion and

confirming that their authority is to carefully look at what

the notice is and how it fits with the case and what is best

practicable and to include the individual notice if that's

possible, I think all of those elements are still in there and

confirmed in what the committee has here.

So I don't think that getting into the weeds on

particular types of technology is necessarily productive, and

I think the courts can handle that.

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questions, thank you very much, Ms. Martin. We appreciate

your testimony.

MS. MARTIN: Thank you.

JUDGE BATES: And we're halfway through the

anticipated witnesses, so maybe it makes the most sense to

take our break for the morning at this point. Why don't we

resume at 10:30, which is in approximately 12 minutes. Thank

you.

(Recess taken from 10:17 to 10:29.)

JUDGE BATES: Welcome back, everyone. We are ready

to resume, and we will now hear from Todd Hilsee.

Good morning, Mr. Hilsee.

MR. HILSEE: Good morning, Your Honor. My name --

morning, all of Your Honors. Thank you for the opportunity.

My name is Todd Hilsee, and I will be playing the role of the

monkey wrench on the notice question this morning.

I am a class action notice expert. I appeared before

this committee in 2002 in support of plain language amendment

to Rule 23(c)(2), and upon the request of the committee, I

assisted the Federal Judicial Center pro bono to develop model

notices that have been adopted in hundreds of class actions.

In 2010, I again served the FJC pro bono to develop a

judge's checklist of best practices in class action notice and

claims processes, which has been increasingly cited and relied

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I'm here because I care. 

For the reasons detailed in my written comments, I'm

respectfully opposed to the proposed new sentence in

Rule 23(c)(2)(B) that states, quote, the notice may be by

United States mail, electronic means, or other appropriate

means.

And I'm opposed to the committee notes that accompany

that sentence, specifically those that suggest electronic

means may be, quote, more reliable than postal mail.

That idea is not supported by research or data. In

fact, first-class mail notices are more likely to be opened,

read, and responded to than electronic notices.

The most basic point I want to make is this: The

rule need not change. It requires individual notice when

class members are reasonably identifiable, as it should. It

does not specify any means of doing so. It is already

flexible.

But the rule should not change. If one of the

committee notes is correct, the one stating, quote, Many

courts have read the rule to require notice by first-class

mail in every case, then the only reason for the proposed rule

change is to encourage means other than first-class mail.

This would be encouraging means that are far less

effective and less reliable than properly designed first-class

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In addition to the consistent research and data that

I have cited in my written comments, I have now, at my own

expense, commissioned a nationwide study so that class members

themselves could inform the rule. A statistically significant

study among 3,187 respondents, men and women of all ages from

all over the United States indicates to a 95 percent

confidence interval, and only a 1.8 percent margin of error

that most adults, even millennials, find first-class mail more

reliable, more reliable, than electronic means for class

action notice, and overwhelming percentages expect to receive

a class action notice by first-class mail when their address

is identifiable.

Notably, the respondents were all online adults.

Online adults who all use e-mail.

I have boards that I will show at the conclusion of

my comments to pass around, and a link to the entire study is

included in my written comments. I will be providing

additional comments before the deadline of the entire study

for the record.

Your Honors, the current rule already allows e-mail

in appropriate circumstances. I've been practicing for more

than 25 years, and, in fact, the courts regularly approve many

different forms of notice under the current rule when mail is

not reasonable. But the rule change would promote e-mail in

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and even though e-mail is not better.

Just because we use e-mail with family and friends

and colleagues does not mean we open e-mails sent in bulk from

unknown vendors that send mass e-mailings on behalf of claims

administrators. If those e-mails even get past spam filters

that divert them to trash. There is hardly a comparison of

reliability.

Data shows that as low as only 7 percent of such bulk

e-mails are opened as compared to U.S. Postal Service studies

indicating 78 percent of even the mail we perceive to be

advertising is read or at least scanned.

All mail must be delivered to us by law, and there is

no spam filter on our postal mailbox. People do not grab all

of the mail from their mailbox and drop it in the trash

without a glance. Not when checks, summonses, jury notices,

citations, IRS letters, and other important communications

which consumers expect to receive by mail may be in there.

This rule change would also inappropriately

legitimize other electronic notice in lieu of available postal

mail. Notices that can be targeted to individuals, computers,

and mobile devices. Notices called banner ads. These are the

small ads, ads with 15 to 20 words that pop up on the internet

cites we visit. These are the ads we generally ignore and

that almost nobody clicks on.

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impressions that are counted towards reaching people are ever

clicked. Thus, only those who do click can ever be said to

have received a Rule 23 compliant notice. This would be a

massive downgrade in class action due process. But the mere

possibility of this rule change has already legitimized such

means among vendors seeking to submit a low bid to win notice

contracts, and the rule changes make this much worse.

PROFESSOR MARCUS: Just to clarify on that, you're

aware of instances in which our preliminary draft has affected

judicial decisions on what form of notice to approve?

MR. HILSEE: I'm aware of affidavits sworn to by

affiants in court cases advocating for internet banner notices

because of the pending rule change.

JUDGE BATES: Are you aware of any case in which a

judge has adopted internet banner notices as a primary form

of --

MR. HILSEE: I'd like to show one, Your Honor. 

JUDGE BATES: Okay. 

MR. HILSEE: It's like show and tell. It helps,

especially when there's a lot of questions about this. 

Would be all right if I approach?

JUDGE BATES: Sure.

MR. HILSEE: I'm going to show you a banner ad down

here in the bottom right corner. I'm going to show you the

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you the blowup of an internet page. Now I'm showing it to you

very quickly. There's a reason I'm doing that.

JUDGE BATES: I hope the reason is not to quiz us on

it later.

JUDGE ERICKSEN: Judges are prohibited from clicking.

MR. HILSEE: I'm showing all the pixels of this

banner ad. You are deemed -- by media standards, you are

deemed to have been reached if you see half of the pixels of a

banner ad for one second. That is the standard for a viewable

banner that will count you as being reached.

You also will be reached, by the way, if this page

loads on your computer but you click away from it as you're

searching for the information you're seeking, which happens

quite regularly. The fact is --

MS. CABRASER: That's the -- that's the Remington

Firearms banner ad; correct?

MR. HILSEE: Yes, it was, Elizabeth.

That notice was advocated, was counted on, sworn to

by a vendor in the case Ms. Cabraser just mentioned in lieu of

mailings to more than a million contact records, in lieu of

seeking and searching available lists for millions of others.

Hardly anybody filed a claim. As a result, seven and a half

million of these products are out there today, could be picked

up by a class member and, according to the plaintiff's

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defendant's documents, could injure and kill family members,

the general public.

JUDGE ERICKSEN: With respect to banner ads, would

that -- couldn't the argument be made that that just doesn't

qualify as other appropriate means? 

MR. HILSEE: It's being advocated as such.

JUDGE BATES: When did this happen?

MR. HILSEE: When?

JUDGE BATES: Yes.

MR. HILSEE: In the particular case I just mentioned?

JUDGE BATES: Yes.

MR. HILSEE: In 2015. And it is happening regularly,

Your Honor, in other cases.

JUDGE BATES: But not based on the proposed rule

change. Under the existing language of the rules.

MR. HILSEE: Under the existing language of the

rules. Of course. The new rule is not in effect.

MR. BARKETT: If I can interrupt, I think we

certainly take your point on first-class mail versus e-mail

and the reliability sentence that's in the notes, and I take

your point, but it seems -- I read all of your submissions and

they're all quite interesting and informative. It seems like

you're describing a problem that currently exists, and maybe

it's just in the consumer class action area. I couldn't quite

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But is there anything that you see right now in the

notice area landscape that we can fix by rule? Is there

something you think we ought to be doing that isn't in this

package, or are there things in this package that we can

modify to solve a problem that you're seeing in this notice

arena?

MR. HILSEE: I don't think in this package,

Your Honor, but --

MR. BARKETT: You're kind. I'm not a judge.

MR. HILSEE: Okay. I don't think in this package

now. I don't think this rule helps, I don't think it is

needed, and I think it could harm and hurt because of systemic

disincentives that are tilting us. We have to face up. We

have a reverse auction notice bidding process. We have

vendors who are tripping over each other to propose the lowest

cost notice because they want to get selected. That's why

these types of programs that I just showed are being presented

and approved.

MR. BARKETT: But what you're really saying is the

judges just aren't paying attention.

MR. HILSEE: There isn't any critique. It's not

acceptable to critique. None of the vendors -- none of the

claims administrators who have all the data are here because

they're afraid to be. They're afraid they are going to get

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They know that first-class mail works the best.

I think we have some systemic problems that need

more -- that are not -- can't just be slipped into this

package. But I think we really need to work on that.

MR. BARKETT: Well, I read your comments as

effectively suggesting that, at least in the consumer class

area, what this rule, Rule 23, has created is an economic

incentive for lawyers to bring these claims, minimize the

effective notice. Lawyers walk away with collecting whatever

fee they collect, and then the class members just don't get

very much because you want to reduce the cost of notice to the

point that it's really not very effective.

It struck me as though, anyway, it was a criticism of

the system that we've created this economic enterprise for

certain law firms to collect fees.

MR. HILSEE: Not really certain law firms, no. I

think it's throughout. I mean, I think the claims made

settlement accentuates it. I mean, defense counsel want the

settlement with the lowest payout. Class counsel want the

settlement.

There is an understanding that, at least in many

circumstances, class counsel can be paid based on what some of

the testimony you heard this morning, based on the

opportunity, the argument is, Hey, we tried. And they have a

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the lowest cost estimate in order to be selected. And that's

a big problem, because judges are not truly getting the best

practicable proposals put before them, and then there's nobody

else there to say, Hey, that might not be the best. That's

truly a problem.

MR. BARKETT: So what's the solution? What's the

solution?

MR. HILSEE: I think notice should not be -- I mean,

Jocelyn made an excellent point this morning, we have

excellent model notices. That was a sea change when we

developed with the Federal Judicial Center these model

notices. It was a sea change from fine-print legalese.

But why are we seeing -- and I'll just pull out

another one -- why are we seeing tiny, fine-print notices

today? These are not FJC models. How are these --

This is a case where women have $20,000 claims. We

have their addresses for some of them. Why didn't they get a

claim form? It would be in their best interest to get a claim

form sent to them if they have potentially a $20,000 claim.

Notices should not be negotiated by parties.

I believe courts should exercise their discretion to

take over the procedural aspects of settlement processing,

including the notice.

I think under our present system, it's unlikely -- we

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parties are negotiating the notice.

JUDGE BATES: To return for a second to the

electronic means issue, in your view, is there a role for

electronic means notice in conjunction with first-class mail?

MR. HILSEE: Of course. It hardly costs anything.

Do it all. Do it both. But if you can, have or can get

addresses reasonably identifiable, we should not be advocating

to the courts that it is okay to not do the mailings, because

that's what will happen because of economics. Because it

costs so much less. And I was just getting to that, if I --

JUDGE BATES: Well, just to follow up, is there any

situation in which you are aware or can imagine that e-mail

notice would be preferable to first-class mail?

MR. HILSEE: E-mail notice is preferable -- if there

is -- if there's a direct mail envelope -- direct mail address

available and an e-mail address, do both.

JUDGE BATES: I understand that. Here's my --

MR. HILSEE: If you're saying --

JUDGE BATES: Here's my example: A professional

organization -- this is a real life example. A professional

organization where the class is the members or former members

of that organization, all of whom have been used to

communicating with that professional organization through an

e-mail process. Is e-mail not at least equal to first-class

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MR. HILSEE: But here's where the rubber meets the

road on that. The devil's in the details. Where is that

e-mail going to come from? It's going to come from a bulk

center, from a claims administrator on behalf of that

defendant, and not an individual person that that person is

used to getting an e-mail about. It's a less-intrusive form

of communication. Data shows it.

Realize this: Claims administrators, when they send

an e-mail, they know exactly how many e-mails were not opened.

Courts are not asking right now, because they don't understand

that they can ask, Hey, tell me -- when you're standing here

at final approval, Hey, by the way, Your Honor, we just want

you to know that only 7 percent of the e-mails that we sent

were opened.

We will know that information. And it is very

unlikely, based on data and studies, that that number is going

to be a high number. So we need to do both.

JUDGE BATES: Judge Young had a question before I let

you -- 

JUDGE YOUNG: Let him finish. My question -- finish

your comments.

MR. HILSEE: I just have a few more comments, then

I'm happy to take any additional questions. 

So my point is if the rule changes, these means would

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means, even though far less effective, would be proposed to

courts, even when a dangerous safety defect is involved. Why?

Because of these systemic disincentives I've detailed in my

written comments.

These disincentives, reverse auction notice bidding,

untrained vendor swearing to inflated audience statistics,

blackballing of critics should be the focus of rule-making

attention.

We are fortunate to have the opt-out class action. I

believe it is a valuable social justice tool and an important

way for companies to resolve claims. But it is backwards

intuitive for class members. Average people cannot imagine

that not clicking a banner or not opening a bulk e-mail could

cost them constitutional rights. 

In opt-out class actions, inaction represents

consent. Notice that is a mere gesture, a fleeting banner ad

that is not clicked, cannot be deemed informed consent to

being bound by without compensation. That would weaken the

legitimacy of class actions already reeling from low response

rates. Low response rates that have led to studies cited in

legislation seeking to gut them.

Claims administrators have reams of data on response

rates to class action notices. I've worked with the leading

administrators on hundreds of cases. That data would show

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works best. And I did provide some of that in my written

comments. Data that the oldest claims administrator had

provided to the Federal Trade Commission showing direct

mailing typically exponentially greater response. 

On that point, in November, I believe, I hope this

news has made it out, the Federal Trade Commission did issue

orders under Section 6(b) of the FTC Act compelling the

production of claims administrator data.

If not for any of the other reasons I've cited, the

committee should not change Rule 23(c)(2)(B), or at least

defer doing so during this cycle, because the outcome of the

FTC study will not be known.

Your Honors, it is expensive to reach mass audiences

by proper means. But constitutional rights and the integrity

of our courts are worth that expense. Fleeting internet ads

are no match for legal notice. E-mails are too easily ignored

compared to physical mail.

So I respectfully advise the committee to firmly hold

onto the current strength of the individual notice

requirement, the bulwark of the opt-out class action. The

proposed change to 23(c)(2)(B) and the notes accompanying that

proposed change should not be adopted. Current rule does not

limit a court's ability to utilize the best notice that is

practicable for a given class action case. In my opinion, the

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courts in the wrong direction.

JUDGE BATES: Thank you, Mr. Hilsee. We look forward

to your further written comments.

Judge Young.

JUDGE YOUNG: It strikes me that your criticism goes

to either the fecklessness or the ignorance of trial judges to

the facts, the data that you're providing, that the certain

forms of electronic communications aren't very effective at

all.

Isn't your -- isn't that more readily addressed by

judicial education or publishing the data you've collected? 

There's inherent power of a sitting trial judge to

make all the inquiries to put the parties to the task of

showing what their proposed means of communication, how

efficacious they are.

So I'm not sure why broadening the range of ways of

communicating necessarily is a bad thing if judges are engaged

and understand what the facts are.

MR. HILSEE: Well, I think my point, Your Honor, is

the rule doesn't broaden the range of what they're able to do.

The current rule has the broadest possible range. There are

education materials. The Federal Judicial Center has been a

big advocate of educating judges. I've been proud to be part

of that. We've provided a detailed checklist that judges

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The problem is there's not a lot of adversarial

process during settlement. Most settlement -- most notice

occurs during settlement. I think the number when we worked

on our checklist was we came up with about 88 percent of the

notice campaigns are during settlement. There is not a lot of

adversarial activity. The parties come in lockstep together,

This is what we think we should do, Your Honor. There's not a

lot of opposition because no notice has gone out yet.

And then, if a weak notice does go out, that

self-perpetuates a lack of objections. And then if there is

an objection, objectors call around and say, Hey, we need an

expert to come in and study what the parties have done in

their case. No expert will take the case.

I mean, it's falling to me. I've stepped away, years

ago, from executing notice campaigns. I'm an expert. That's

it. So they all end up calling me saying, Hey, nobody wants

to take this case, it is critique assignment.

So judges are not getting critical analysis.

JUDGE BATES: Judge Ericksen.

JUDGE ERICKSEN: Thank you for all your work for the

judicial center and in the work you did here.

As I understand it, what you're saying -- I just want

to make sure I understand your point. If there were to be no

change to 2(b) -- to the notice language, courts would still

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out to be the most appropriate, and so there's no need for a

rule change in order to make that possible. But by putting

the language in about electronic means or other appropriate

means, the trial judge will be given the impression that the

rules committee has done extensive work and is now blessing

these other means such that the court might be disinclined to

do the rigorous inquiries that it might otherwise do if

there's no rule change because -- 

MR. HILSEE: I believe that's correct.

JUDGE ERICKSEN: -- it says right here in the rule

that these are equal. You're saying, look, they're not equal,

don't make a rule that makes it look like they are all equal.

MR. HILSEE: I believe that is correct. And I

believe the notes are problematic in that respect because they

talk about these other means being more reliable.

I'm going to -- this will be in my written comments.

I'm happy to look through -- there's a detailed survey,

nationwide study. We did notice by first-class mail.

Reliable? Definitely. I believe so. Would an e-mail be more

reliable? I don't think so.

JUDGE ERICKSEN: My question isn't really on that.

That's the actual facts. And what you're point is about the

rule is that if this rule is adopted in its current proposed

state, that the public will have the misimpression that

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those methods are equally valid and, in fact, that rigorous

research has not been done, or maybe it's been done by you,

and shows the opposite.

MR. HILSEE: That's the case.

JUDGE ERICKSEN: And so in terms of just an

interpretation of how this is going to work in trying to

make -- well, okay. So it would be an unintended consequence.

MR. HILSEE: Yes, Your Honor.

JUDGE BATES: Just to follow up Judge Ericksen, if we

were to address your concerns with respect to the note, the

comment, about more reliable, and you've raised some very

important considerations for us, if that were addressed, what

would be the problem -- in our effort to have a rule that is

sufficiently flexible to keep up with the advances in

technology, what would be the problem of referring along with

first-class mail to electronic means in the rule itself if we

address the concern that you have with respect to the note and

some impression that electronic means is better than

first-class mail?

MR. HILSEE: I think even without the note, the rule

specifying it will be interpreted as there's a reason they're

pointing it out.

JUDGE BATES: Well, if we said in the note it

shouldn't be interpreted that way, maybe it wouldn't be as

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MR. HILSEE: Well, I believe my takeaway would be why

would we be changing the rule? The rule doesn't mention

first-class mail. The rule doesn't say you should do

first-class mail. So why? Why would we make a rule that --

still, the purpose of that change would be to encourage

something beyond first-class mail, because that is what --

that is -- I agree that is a perception that courts have, is

that that's what they should do.

Just like Mr. Sobol mentioned, when Judge -- in the

Relafen case. I believe you're referring to the Relafen case.

I mean, look at the response. That was the expectation. And

that is. That's like -- there was a case in California going

to the California Court of Appeals just this July where they

had hundreds of thousands of mailing addresses, and they sent

e-mails instead. They got 800 claims.

You know, I mean, we shouldn't be encouraging, we

shouldn't be pointing out other means of notice. We should

leave the sort of the mind-set that if you can do mailings,

you should try hard to do them.

JUDGE BATES: Parker.

MR. FOLSE: You asked a question what about would be

the purpose of the sentence that's proposed to be added, other

than to encourage courts to use electronic means. You

answered an earlier question by Judge Bates by saying, of

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addition to first-class mail, you should do it.

There are obviously going to be some people who

probably would open the e-mail, but wouldn't get the

first-class mail, maybe because there's a bad address.

So if the comments -- and I think as the comments are

already written, they, I think, take great pains to point out

the obligation of the court to determine the best means of

communication practicable.

There is a sentence, I think, that you focused on

that we may need to look at. We may need to look at some

other language as well. But it -- I guess I have the same

question that Judge Bates has, what is the problem with the

sentence that is being added? Because it doesn't say

electronic in lieu of. It doesn't -- there's nothing in that

sentence that says it is preferred. But it acknowledges that

there are these methods and the courts can select among them

or maybe all of them.

I guess I'm kind of coming out in a similar place,

which is if the comments, let's just say hypothetically,

embrace part of what you've told us, the comments themselves

say there -- it's unclear that electronic means are always

going to be more effective means of communication. And the

court should consider in the context of each case what the

facts indicate about the best means of communicating with the

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means doesn't mean the best means.

If we did things like that, what again is the problem

that you have with the sentence in the rule, especially given

the examples you've shown us where, with or without that

sentence, people are going to propose electronic notice to

courts, vendors are going to provide affidavits? Everything

that you're talking about has already happened and will

continue to happen with or without that change.

MR. HILSEE: Thank you.

I don't believe there is -- there is no problem right

now with -- with courts choosing not to send an e-mail in

addition to a mail. There's nobody -- that's not a problem

that's looking for a solution.

There is no -- the problem is that e-mail would be

used. Electronic means. If there was a sentence in the

notice that says "electronic means should not be used in lieu

of more reliable first-class mail," that would help. But I

don't think that's what you're proposing or suggesting or

where it's reasonable to end up, perhaps. But that would be

what would be required, in my opinion. I mean, making it an

affirmative. Hey, because all of the data says mail is more

reliable and more effective than electronic means.

JUDGE BATES: I think the last question. Elizabeth.

MS. CABRASER: Mr. Hilsee, are you stating a

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your message.

MR. HILSEE: When it's available. When it's

reasonably identifiable, we shouldn't walk away from it, we

should try hard to do that. As we've always done.

MS. CABRASER: Shouldn't courts be interrogating that

methodology just like all of these other methodologies? What

about a stale mailing list versus a current e-mail list? It

would seem to me in that case the mailing list would not be

the most -- the best practicable means of notice.

MR. HILSEE: Actually, in most circumstances, it is

more likely that an e-mail list is more stale and unupdateable

than a mailing address. There's more data -- when someone

changes e-mail addresses, there's no repository to go and find

out whether they're still using that e-mail in that up -- in

that defendant's former customer list. There is public data

that we search for that best practices have for years, and

still, it's still the best means of updating a mailing list.

MS. CABRASER: Do you know what the current cost of

sending, let's say, a long-form class notice in a first-class

envelope is, all-inclusive?

MR. HILSEE: Well, in fact, just in the Remington

case that you mentioned, I've cited --

MS. CABRASER: I only mentioned it because you

flashed the banner ad and I read the banner ad. I'm not

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MR. HILSEE: Sure. Okay. Yeah. 

It's -- we can comply with what -- in fact, several

claims administrators publish literature to their own clients.

But sometimes, often lately, they don't include that in their

statements to courts. Unfortunately. They publish to their

clients that the best form, the most responsive form of notice

is a double postcard with a claim form with return postage

applied. And I think I've cited that that can be done for 30

cents.

MS. CABRASER: What does the type size look like on

something like that?

MR. HILSEE: Depends on what the words are. If you

concisely construct the language, can be and should be much

better than the postcards that I pointed out to you.

JUDGE BATES: All right. 

Judge Dow, did you have a question?

JUDGE DOW: Parker covered exactly the questions I

had.

JUDGE BATES: Mr. Hilsee, thank you very much for

your submissions and your testimony here today. We look

forward to a further submission.

And we will now move to the next witness. That will

be Paul Bland.

MR. BLAND: My name is Paul Bland. I'm executive

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litigation and class actions principally from the plaintiff --

entirely from the plaintiff side for about 25 years, and then

sometimes we represented objectors to settlements that we

thought were really poor settlements. And most of class

actions I handle are poverty cases, cases against payday

lenders, predatory lenders, debt collectors, things of that

sort. So we handle some other things, but that is our

principal wheelhouse of my experience.

First, I want to echo some of the comments several

people have made that I'm just incredibly grateful at the way

the committee has gone about the process this time. I've been

involved in these rules processes going back to 1997, when we

worked on discovery rule proposals. The listening tour, the

outreach this committee did, the people came -- people from

this committee -- a number of people came to the National

Consumer Law Center to the Impact Fund, the ABA, to a whole

bunch of different settings, and really -- and asked a lot of

questions, people stayed for hours. Professor Marcus in

particular questioned tons of people. The amount of effort

that's gone into drawing in and being inclusive here is really

wonderful, and it is a change and we're very grateful for it.

And I think it means a great deal.

And I think that the fact the proposals are ones for

which there is by and large a consensus on both sides of the V

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pretty much in favor of the proposals. Some of tweaks that

have been suggested by Tom Sobol and Annika Martin are ones

that we agree with. But in general, I think this is a

terrific set of proposals.

I do want to apologize, I haven't gotten written

comments to you. We will follow up and get those to you

fairly shortly.

I want to respond to briefly Mr. Nelson's suggestion

that Rule 23(f) be made mandatory. That will inject an

enormous delay into every single class action.

Most of the cases we handle -- we're brought into

cases that tend to have some sort of difficult issues, federal

preemption issue, a mandatory arbitration issue where there's

something -- some flaws or clause or something. But my

typical class case tends to takes five to seven years, and

I've had some that have taken nine, some have taken 13 years.

If you had in an extra appeal to every single case out there,

no matter how large the size of the case, you're going to be

extending all class actions by two to three years.

Every single class action, because he feels that

there are some federal court of appeals that are not taking

cases that they should have heard, I think that that is an

enormous increase in cost and delay, and is really harmful to

people who do cases involving poor people. Because our

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like, oh, well, the plaintiff's lawyers just want to get paid,

they don't care whether their clients get money, I care if our

clients get money. But if we represent really low-income

people, about 16 percent of them move every year. And the

ability to trace them and find them -- if the defendant's able

to stretch a case out to seven years instead of it being a

two-year case, then the number of people that we find is going

to drop way down. And so that the amount that we're going to

end up is going to be a cy pres or legal aid, which is still

something that's valuable to the class, I think, implic- -- in

part, but the number of class members we're going to find

drops down.

Similarly, in the consumer setting, the lot of the

cases, the biggest relief we're looking for is to get rid of

legal debts and to clear people's credit records. That's --

that's -- it tends to be the biggest relief in most consumer

class actions.

Your -- the discussion of claims processes and is the

relief really -- are enough people making claims and that

heavy focus, in most consumer cases that's actually sort of

missing the principal relief of actually getting rid of debts

and clearing people's credit records.

If you drag everything out by years, then by the time

you clear someone's credit record, they've already suffered a

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different settings.

So for someone to just pop up and say, oh, well, why

don't we just extend every class action for an extra couple of

years to have an appeal, every defendant is going to take an

appeal and the cases are not going to get resolved for several

more years. That is a problem.

I want to respond to something that has been in a

number of written comments, and it also was raised several

times in your Washington hearing, which is there have been a

number of people who have come before this committee and said,

oh, well, you should do something about what they phrase as

"no injury class actions," which is a -- I think it's a

pejorative phrase. I think the phrase is wildly inaccurate. 

And basically they're sort of gumming together two

different things. One is the statutory damages cases or cases

involving, for example, privacy statutes of the Fair Credit

Reporting Act. And they're saying, Well, no one is bleeding,

there's no money loss, so the fact that they lost some privacy

or the Fair Credit Reporting Act has been violated, that is

not an injury.

Or also, other people are talking about product cases

where the defect of the product hasn't manifested itself yet.

It's like in Remington case, for example. The gun hasn't

actually shot someone yet; it's just prone to do that at some

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can bring claims under warranty and say, Well, if you had

known that the gun was prone to shoot, that the value of it is

less, you would have paid less. And that is sort of the

nature of those product cases.

This committee, with all respect, has no business

getting involved in the issues of whether or not the Fair

Credit Reporting Act is a lousy statute, whether warranty law

in America should be rescinded, and -- you know, basically all

of those arguments that are being made to you are arguments

that go to the substance of the law in those areas.

And the Rules Enabling Act says this is a procedural

system in which you're allowed to make procedural changes.

All this stuff about no injury class actions, I think, is

completely out of bounds, and I urge this committee to just

sort of tune all of that out and think back to, you know,

whatever interesting other things have crossed your mind. But

please do not try and suddenly inject something in here, we're

going to try and abolish no injury class actions as an idea of

rewriting a bunch of our statutes in America.

I want to touch upon the notice issue. We actually

support the notice proposal. You know, the thing I really

like about the way this committee's come at the notice issue

is that you come at this with an enormous amount of humility,

it seems to me. You have not attempted to say that this

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case for every class for every type of setting. You've left

that to district courts to consider based upon the evidence

and the facts in the case.

You know this Remington case, one thing is that the

judge is still trying to decide what's going to happen in that

case, and the judge has said very directly, you know, that he

has have grave concerns that the number of people who have

made claims is very low, he's not sure at all he's going to

approve it. He wanted to hear a bunch of additional evidence.

You know, so Todd came in with his big set of facts,

has like a 40-page affidavit saying that the plaintiffs and

its experts have done a terrible job and is negligent and

don't know what they're doing.

The plaintiffs actually come back with their own

notice experts who did a series of affidavits saying that Todd

got a whole bunch of facts wrong, that there's a bunch of

things that are false in his testimony, he didn't understand

how the internet works in various ways, he doesn't understand

how the NRA works, and so forth.

I have no idea who is right. I actually am not

involved in the case. Our role in the Remington case was that

they're originally keeping the documents that show that the

guns were dangerous secret, and we came in and broke up the

secrecy, and all the documents are on the website now. And

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can find all the documents. I think the secrecy aspect of

that case worked perfectly.

Who is right about the settlement? You know who

would be a really great person to decide that? It would be

the judge in that case. Right? Because this committee has

now heard, you know, sort of a partisan view that, you know,

here's how that case should come out.

There's another view in that case. If Todd's

argument is right, I have every confidence that judge has been

extremely diligent, had a bunch of hearings, asked a bunch of

hard questions, has been climbing all over both sides in it.

You know, that would be a good way to figure that out.

There are going to be settings in which electronic

notice is going to be better. I really liked one of the

examples that Annika Martin gave where she talked about so,

for example, there are some apps sometimes that fail, and all

of the consumers' interactions with the company are going to

be through the app. If something just shows up on your phone

and says, you know, We designed this in the way that didn't

work, you are eligible for, you know, a refund of this amount

or you're eligible to have your warranty extended, or

something like, reaching that person electronically might be

better.

I've actually seen in some settings where this phrase

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ever. I saw a class-action settlement involving a cable case,

where I was talking to a guy who had a case involving a cable

company where they had been allegedly overcharging people.

And they had -- they required people, if you wanted to change

your package in various ways, you went online through your

phone or through your computer, and so there was a ton of

interaction between the consumers in that class.

And so what they started, what they made the company

do was put this running crawl across their Web page that says,

you know, We've been alleged to have overcharged you, you may

be eligible for a refund in this amount. If you're

interested, click here.

And plaintiffs' lawyer in the case said they actually

got more responses from that than they got from people who

sent out a piece of mail. It's interesting.

One of the things I think we have to think about, you

know -- so you're trying to write a rule that's not going be

to be for this year and next year; right? We're not sitting

here in January of 2017 saying, hey, why don't we have the

best rule between January and June of 2017. 

You want this rule to be around for ten years. I

mean, do we know for a certainty the U.S. Postal Service will

be here in ten years?

I don't ask that in sarcastic way. I think that's a

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Communications are changing at light speed in

America. And this is a totally serious point. Go back ten

years. Twitter did not exist ten years ago.

It used to be in America that a really good way to

win a presidential election would be to have $100 million.

Okay? It turns out now that something that didn't exist ten

years ago was an incredibly better way of reaching to tens and

tens of millions of people and repeat messages to them to get

them shared and multiplied many times than $100 million of TV

advertising worked out; right? 

The idea you would sit here today and say, wow, with

our crystal ball, we can see where technology's going, and I

can tell you right now how people are going to be

communicating most effectively with each other in 20 years

from now involving cases involving different types of

populations and different types of claims, you know, then

you're -- you guys are way smarter than me and way smarter

than the entire nation's pundit court. Okay? 

The idea that this committee would try to say for all

time we know that first-class mail is going to be the best

way, and that electronic communications are, you know, for

boneheads and is a terrible way of going about things, I think

would be an extremely presumptuous act. So I just think that

the world is changing in a way that it makes it extremely hard

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I did want to say something about the -- I agree very

strongly with Tom Sobol's suggestions with respect to the part

of the Rule 23(e)(2)(C)(ii). And the reason -- I think that

first of all, there is a misunderstanding, I think, that's

suggested potentially by that, that most class actions, for

example, involves claims processes.

The Consumer Financial Protection Bureau, in looking

at the -- in comparing the use of forced arbitration clauses

by lenders and class actions looked at 400 class actions, and

in more than 100 of the cases, people had received direct

reimbursements, had received checks, had received credits to

their account, that sort of thing.

We had also provided to the CFPB a ton of examples of

cases in which people had had debts completely eliminated for

them, and where they had gotten relief to their credit

records.

So the idea that every class action is something that

involves a claims process just simply isn't even true. But

also, the idea --

PROFESSOR MARCUS: Can I -- I'm just -- a specific

question about that part of (e)(2)(C). It says, "The

effectiveness of the proposed method of distributing relief to

the class, including the method of processing class-member

claims, if required."

1 1 : 1 4 : 4 2 Am I understanding you correctly to say, well, that

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really means there has to be a claims submission process?

MR. BLAND: No. But I think --

PROFESSOR MARCUS: I don't think it says that.

MR. BLAND: No, I didn't mean to suggest that. I'm

sorry. I liked what -- what his suggestion was, was to add

language that said "as compared to other reasonably available

methods of delivering relief."

I think in the comment you do a nice job of saying

there are a variety of different ways in which relief gets out

to class members, and then at end of that sentence you

reference the ALI report, which I think is sort of code

language for there are going to be a lot of cases in which it

is going to be impossible to actually find people, but if you

have an appropriate cy pres remedy, so for example we have a

class of people who suffer from -- who have been overcharged

in mortgages and who are treated badly and the money's going

to go to a legal aid which is principally focusing on

foreclosure relief, that that is a perfectly acceptable method

of relief that should be accepted. 

I think the comment -- we're going to suggest some

language that -- we'd urge you to bolster that comment

language a little bit. I think that -- what I'm concerned

about -- so we've talked some about -- I don't think that the

language of the rule per se is problematic, but I think it

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certain type of relief that is a little misleading.

I think a lot of the significant relief that comes

out of class actions is not in that form, and you make that

point to some extent in your comment, but your comment is

really brief and cryptic.

And so I felt like I knew what it was talking about,

but I had to think about it some. And I think if you -- we're

going to suggest some language that'll have you put a few

steroids into that comment so it becomes clearer.

I see I've exceeded my time.

JUDGE BATES: Questions? 

Parker.

MR. FOLSE: Do you have a reaction to one of the

arguments that Mr. Hilsee made that, in effect, the current

system for approving class-action notice creates an economic

incentive for choosing what might be in many cases the least

effective but also the least expensive means of communication?

I took him to be saying that in claims made

settlements, it's actually to the defendant's advantage to

have as few claims made as possible. So no defendant in a

case like that is going to be telling a judge, this is a poor

means of trying to reach the class members in this case.

Likewise, the plaintiffs' lawyers have no economic

incentive to do that either. That the ultimate outcome of how

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counsel, and therefore the judge is left with -- in a -- what

is typically an adversarial process, both sides telling him or

her the same thing, and no resources and no particular alert

going off in his or her head that there might be something

wrong with this.

Do you have a comment on that?

MR. BLAND: Yeah. Yeah. So if I can take both parts

of that. So first with respect to the defendants, it's pretty

rare now to see a class-action settlement that has a claims

process and a reversion to the defendant. I think that the

vast majority of district courts, in my experience, see that

as a fundamentally flawed process.

Where that exists, I do worry about that enormously.

I think if you have a claims made settlement and you have a

reversion to the defendant, I think the incentives of the

defendant to try to suppress claims become very, very high,

and is really problematic. I also think it rewards -- you

know, a company that's done something really bad can

frequently get away about it if it's hard to find the class

members.

But most judges won't let do you that, and reversion

is disfavored in a lot of courts. And I -- it is interesting,

you see this in mediations in particular. So it used to be --

there's a particularly famous mediator in San Francisco, who's

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I was in front of him and he said, Well, we're going to have

claims process and reverter, and I said, No, actually we'll

pass, we'll walk out. We will pack our bag and walk out. And

he was yelling at me, screaming at me at the top of his lungs,

I've done this settlement again and again and again. Which at

that time was true.

And then, objections to these sorts of settlements

started succeeding, and a bunch courts started throwing them

out.

And I was in there the other day, and he came in, the

same judge, the same former judge, and he said, Well, you

know, first of all, it's clear that we're going to have claims

settlement, we can never have reverter. So I thought that

was -- I enjoyed the feeling of over ten years of seeing some

justice sort of move into the settlement process around that.

With respect to the plaintiffs' counsels' incentives,

first of all, I can't remember which earlier speaker, but

there had been a question that asked are more and more judges

looking at the percentage of people who are making claims --

or -- or looking at the relief the class is getting. And I

think that is something you hear from district judges quite

often. And I think there are many district judges who, if

they have a sense that you could have done better, that there

was a way to reach people and you did not do a very good job,

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that.

Now, I think that where there is a cy pres that is

really clearly linked and there's a strong nexus to the

purpose of the case, I think that somewhat mitigates the

feelings of courts, but I think there are judges who are going

to slash plaintiffs' fees, and that you simply see that. It

happens a lot. I think it's -- I -- there's been a case

referred to today where I wouldn't be at all surprised if the

plaintiffs' counsel ended up getting whacked significantly if

the claims rate turned out to be really low.

And so I think the idea the plaintiffs' lawyers have

no incentives in where -- so first of all, let me back up and

say, I think that the plaintiffs' lawyers are ethical --

operating on an ethical basis. They're trying to get money to

their clients. I mean, I am much more interested in getting

money to my actual clients than having a cy pres or giving

money to the attorney general or whatever, something like

that. I mean, I think that that's my job. That's who I

represent. That's sort of my ethical North Star in the case,

is to try and actually get money to our clients.

But even if I'm just, you know, mercenary in it,

trying to get paid, then it's still a pretty big mistake to

have a -- to agree to something where your clients aren't

going to get paid because I think -- or where very few of your

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judges are looking at that now. That question comes up again

and again.

JUDGE BATES: Other questions?

Thank you, Mr. Bland. We appreciate your coming and

your comments.

That brings us to James Weatherholtz.

MR. WEATHERHOLTZ: Thank you for the opportunity to

be heard. I have enjoyed over the last few weeks getting to

learn a little bit more about this process, and I'm honored to

play a small part in it by testifying here today.

I'm here on behalf of DRI, the Voice of the Defense

Bar. DRI is a national organization of defense lawyers who

essentially represent companies in civil litigation.

My practice is out of South Carolina. I've litigated

class action in state court and federal court, both inside and

outside of South Carolina, and my primary experience is in

building products class actions.

I want to make three points here today, and all of

them will be focused on the committee notes to the proposed

rule changes. I have some suggestions for edits to the

language that I think are tied to current practice, and in

some cases I think that some of the language is unnecessary

and probably takes change a little bit too far, and so I want

to talk about those three things.

1 1 : 2 2 : 0 8 The first is 23(e)(1). On paragraph 222 of the

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proposed amendments, there is a committee note that basically

says when a judge is presented with a proposed settlement, he

goes through -- he or she goes through this process. And

there's a sentence in there that says the judge cannot certify

the settlement class until the settlement reaches final

approval.

I feel like that statement takes it a little bit too

far.

There are some situations where a certification of a

settlement class at that stage in the process, what we used to

call preliminary approval, has some utility. One example

would be anti-suit injunctions to preserve the status quo. It

may make a difference in a (b)(1) limited fund class or a

(b)(2) declaratory judgment class.

I think this is a situation where the rules would

probably do better to allow the judge the discretion in

certain circumstances to approve or to certify the class at

that earlier stage, and then, if on final approval at that

hearing, if after notice and after the objection period has

occurred, the judge is satisfied that that was the right

decision, then he or she can continue with it. But that's the

backstop.

If the judge at that point decides that certification

of a settlement class at that earlier hearing was improper,

1 1 : 2 3 : 3 9 they can always undo it at that stage of the process. So -- 

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PROFESSOR MARCUS: Just so I'm clear, you're

referring to the sentence, quote, The decision to certify the

class for purposes of settlement cannot be made until the

hearing on final approval of the proposed settlement. Is that

correct?

MR. WEATHERHOLTZ: Exactly, Professor. That is the

sentence in my recommendation.

PROFESSOR MARCUS: What you're saying is that that is

wrong?

MR. WEATHERHOLTZ: What I'm saying is that I would

like to see the committee note strike that sentence and be

silent on the issue so that a district court judge would be

left with the discretion to certify a settlement class at the

earlier hearing, where the settlement proposal was presented

to the judge, and --

PROFESSOR MARCUS: And that, under Rule 23(f), would

lead to what, possibility of an immediate petition for

appellate review?

MR. WEATHERHOLTZ: Well, to be honest, I haven't

really considered it in the context of how it would play with

Rule 23(f). My only point is that during the pendency of the

review of that proposed settlement, while the plaintiff and

the defendant are getting together, while they're sending out

notice, while they're inviting objectors to come and voice

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class in place so that that district court judge could issue

injunctions where necessary in limited circumstances.

But I feel like that would give the judge the

discretion, the ability to do certain things in the class that

he or she wouldn't otherwise be able to do if we leave that

note in there. And it doesn't otherwise undermine what the

committee is trying to do with this rule change overall.

So that's my point about 23(e)(1).

I want to move to 23(e)(2). There are a number of

comments under both (e)(1) and (e)(2) in the committee notes

that suggest that the claim and rate should be considered as

part of the judge's decision whether or not to approve the

settlement. And ultimately the judge is going to have to

answer the question, is this proposed settlement fair,

reasonable, and adequate?

We've hard a lot of testimony here today about notice

programs, the effectiveness of notice programs. My point

would be that the judge shouldn't be looking at the claim rate

in determining whether or not the proposed settlement is fair,

reasonable, and adequate. Those two things are separate and

independent, and they're not always necessarily related.

There are situations, I think, where the relief

offered to the class members is good. It's generous. It's

enough money it satisfy their claim and to make them whole.

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I came prepared today to talk about certain examples,

but I'm leaving here with more examples than I started with,

just hearing people talk today about what is effective and

what works and what doesn't.

If someone receives a class action notice in the mail

and they may disregard it. They may be distracted by other

things. They may be theoretically opposed to class actions

altogether. They may be satisfied with their product.

And in certain claim in class action situations, a

claimant has to actually have a product that manifests a

defect for them to qualify for the relief that's set forth in

the settlement agreement. They may not qualify. Someone may

have a product that simply doesn't have the defect and it will

perform its intended function.

My point is that if we're asking judges to look at

the claim rate in determining whether or not the settlement

itself, the relief offered, is fair, reasonable, and adequate,

then we're really undermining the adequacy of the settlement,

right, the reasonableness of the relief that's being offered

based on a factor that is not necessarily tied to that.

There are all sorts of reasons someone may not

respond to notice. There are number of reasons why the claim

rate might be low. And my suggestion would be that the

committee notes make clear that the rate of claims in a claim

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determining whether or not the proposal qualifies.

PROFESSOR MARCUS: Well, can I ask you to address the

Remington example that's come up already today where it sounds

like there's perhaps only potential but serious risk with

these products, and responding through the claims process

would apparently provide something that sounds like it's

valuable, but there was very low response.

Now, if I understand it, the judge in that case,

after hearing partly from Mr. Hilsee, has said, whoa, we

better look into this and try something different.

Am I understanding you to say, no, the judge

shouldn't do that?

MR. WEATHERHOLTZ: No, Professor, that's not my

point. I'm not as familiar with the Remington case, but I

think I can talk about it in terms of what I've picked up

during the discussions here today.

I think the adequacy of the notice program and

whether or not the word is actually getting to potential class

members is a different question than whether or not the

proposed relief is fair, reasonable, and adequate.

I think judges should be encouraged to rigorously

analyze whether or not the notice program is adequate.

Whether or not class members are receiving the notice of their

potential claims and what the relief offered is.

1 1 : 2 9 : 3 1 What I'm saying is, I don't think that a low claim

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rate should be a reflection of whether or not the relief

offered to the class member is fair, reasonable, and adequate.

Because the two things aren't tied together. You might have a

class that has generous relief, but for a number of reasons,

some of which I've mentioned and others that we've heard about

here today, people simply don't make claims.

My third point is the cy pres. This issue has come

up in the prior hearing in Washington, D.C. And setting aside

for now any arguments about whether the cy pres mechanism

actually has any applicability here, my point would be

focusing again on the committee notes and specific comments in

the committee notes.

On page 223 of the propose amendments, there is a

sentence that says, "Many courts have found guidance on this

subject in Section 3.07 of the American Law Institute

Principles of Aggregate Litigation."

And in my reading of the committee notes, that's a

tacit endorsement of the cy pres doctrine. And my point would

be if this committee has made a decision to remain neutral on

whether or not the cy pres is appropriate for class actions

and whether or not to address that directly in the text of

these rule changes, if this committee has made a decision to

stay out of that, then the committee note is really a

departure from that because it's a tacit endorsement of the

1 1 : 3 1 : 1 2 cy pres doctrine, and I think it's calling on judges to look

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to that, and it's in many ways an endorsement of it. Or it

could be read that way. And if that wasn't the committee's

intention, I would like to see that removed.

PROFESSOR MARCUS: Can I ask you to look at the

sentence before that sentence, which says, "and because some

funds are frequently left unclaimed, it is often important for

the settlement agreement to address the use of those funds."

Do you disagree with that? 

MR. WEATHERHOLTZ: No, sir. I don't disagree with

that. I think that's a better way to handle it. I think for

the parties to get together on the front end and by agreement

decide what is going to happen to the money that doesn't get

claimed. We don't know how much it's going to be, we don't

know how much is going to be left over, but it's a limited

fund and there's some money left over, let's decide now

between the two of us how that is going to be paid out or

where it's going to go.

PROFESSOR MARCUS: So the problem you have is with

what Section 3.07 of the ALI project urges as an attitude

towards those arrangements, and there simply should be open

season for whatever the arrangements are?

MR. WEATHERHOLTZ: My problem is that that sentence,

the reference to the ALI Section 3.07, is a blessing of the

use of cy pres in leftover money in class actions that is not

1 1 : 3 2 : 3 8 claimed. And if the committee has made a decision to not

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oppose or endorse the use of cy pres through the changes in

the actual rules, then it shouldn't tacitly endorse that

mechanism through the committee notes.

MR. BARKETT: I'm sorry, I'm puzzled. Because funds

are frequently left unclaimed, as Professor Marcus has

explained, it is important for the settlement agreement to

address the use of the funds.

Are you suggesting any guidance to courts as to what

to do? Are you saying there should be no guidance to courts

at all?

MR. WEATHERHOLTZ: I'm saying that that should be

left to the parties by agreement what should happen to those

funds. And if they can't agree that the money either reverts

back to the company or, perhaps, gets paid to a charitable

organization, then there is no settlement.

And that -- and my overall point is that if this

committee has decided not to adopt or reject the doctrine --

MR. BARKETT: Forget that point.

MR. WEATHERHOLTZ: Okay. 

MR. BARKETT: There's money available. We've heard

from many people that no matter what you do, there's going to

be some money available and wonderfully negotiated

settlements.

Is the court to decide up front what's supposed to

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advised that there's money left over? Do the parties simply

tell the court, This is what we'll do and, Judge, you should

accept it?

I'm puzzled because this is not an endorsement. It's

simply saying if you're looking for some guidance, this is an

area you might want to look at --

MR. WEATHERHOLTZ: I think --

MR. BARKETT: -- knowing there are funds that are now

available.

MR. WEATHERHOLTZ: I think -- my position would be

that the parties should be encouraged to work that out by

agreement, and that the judge should work with the parties to

figure out what happens to that money on the back end, and

that proposal should be made to the judge and the judge should

accept or reject it.

MR. BARKETT: Okay.

MR. WEATHERHOLTZ: If there aren't any further

questions, those are --

JUDGE BATES: Oh, okay. You're done.

So are we done? Are there any other further

additional questions for Mr. Weatherholtz? 

Thank you for coming. We appreciate your testimony.

Oh, Professor Marcus.

PROFESSOR MARCUS: You've heard testimony here about

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you, from your experience, have a view on whether the changes

and process we have proposed will have good effects or any

effect? That is, court approval of consideration to class

members who object, objector counsel, or perhaps, as mentioned

earlier today, something broader that would include nonprofit

organizations somehow perhaps on the receiving end.

MR. WEATHERHOLTZ: Honestly, I just personally do not

have that much experience with the objector process. I have

enough to have an opinion that this court is moving in the

right direction with those changes, but I just haven't

personally haven't had to work through the objection process

and how that plays out to be able to give any response.

PROFESSOR MARCUS: Okay. Thank you.

MR. BARKETT: May I also ask what particular sentence

were you saying we should modify with respect to claims or

claim in or claims experience and how they're -- adequacy

of -- of the fair and adequate language is not related to

relief? Is there a particular sentence you want to point us

to?

MR. WEATHERHOLTZ: Yes, sir. The first one comes up

on page 222 in the second paragraph at the bottom of the page.

About halfway down in that paragraph, it says, "If the notice

of the class calls for submission of claims before the court

decides whether to approve the proposal under 23(e)(2), it may

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the court on the actual claims experience."

That is one place where that comes up.

Another is page 226, the paragraph with the heading

Paragraphs C and D in bold. There is some discussion in the

middle of that paragraph about how the claims rate should be

used in the process of approving the proposed settlement.

And then on page 227, there's some additional

language that talks about claims rate and how that may be tied

to the attorney fee, but that's an issue I didn't intend to

address in my comments. 

JUDGE BATES: All right. Thank you very much again,

Mr. Weatherholtz.

MR. WEATHERHOLTZ: Thank you for your time.

JUDGE BATES: And our last witness will be Scott

Burnett Smith.

MR. SMITH: Thank you.

JUDGE BATES: Morning, Mr. Smith.

MR. SMITH: Good morning.

I'm a defense lawyer from Alabama. I'm delighted to

be here. A little less so after I talked to Judge Hull during

the break. She told me that what I'm here to talk about in

part is a nonstarter. So why don't I start and we'll quickly

finish there, Judge Hull.

The idea is to make a class certification ruling pro

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as of right as a final judgment. Judge Hull is an appellate

lawyer -- I mean is an appellate judge, and she would be on

the receiving end of that, and I think she has some problems

with that.

Mr. Barkett, you asked earlier what would be the

authority for that, and Judge Hull, in our conversation at the

break, said would that take an act of Congress.

The answer to that is yes, and the act has already

been passed. That is 28 U.S.C. 2072(c), and that's the act of

Congress that says that the rules committee has the authority

to determine what is and define what is a final judgment for

purposes of appeal.

MR. BARKETT: I understand that, but that is a

different question from whether or not we have to republish

and consult the appellate rules committee.

MR. SMITH: Right.

MR. BARKETT: The authority is a different point

because -- this committee some years ago put the language in

23(f) it had put in there. But it struck me as a fairly

significant change.

MR. SMITH: Right. But the difference between 23(f)

as currently written and what I'm proposing is a difference

that matters. I mean, defining something as a final judgment

is not necessarily giving permission for permissive or

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so --

MR. BARKETT: But you're sill suggesting a change to

a rule that we define a class certification decision as a

final judgment, which, again, seems to me to be something that

would have to go through the advisor committee process,

republication and the like.

MR. SMITH: Right. 

MR. BARKETT: It just seems to me. Maybe -- maybe

it's fairly minor. It sounds fairly major.

MR. SMITH: That's up to you all. I mean, I'm

assuming that the appellate rules committee may have something

to provide there.

The other thing that it would solve is this issue

about 45 days for the government. If you defined it as a

final judgment under 28 U.S.C. 2107, the government would have

60 days to file appeal, whereas private parties would have 30.

MR. BARKETT: So why didn't you raise this two years

ago? I mean, this is a process that we've been through,

you've heard about all the outreach and -- and bringing it up

at this point when we're dealing with this package, it just

strikes me -- and again, I'm not the expert on whether we have

to republish or not, but it seems to me this is a fairly

significant change.

MR. SMITH: Yes. If that is where the committee ends

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for private parties when you're extending the time for the

federal government. Oftentimes 23(f) appeals are very complex

and you've got to go through not only discussions with your

client, but also some significant writing and research that

might be necessary to write your 23(f), so I would ask the

committee to consider adding 28 days instead of 14 for private

parties while you're adding time for the government.

PROFESSOR MARCUS: Excuse me. One of the earlier

speakers said, Well, if you were to make that change to

Rule 23(f), then the defendants would appeal in every case.

I gather what you're saying -- if I'm right to think

you would more likely be on the defense side -- is that is not

so, and it wouldn't happen in every case in which the

defendants could appeal.

Is that what you're saying?

MR. SMITH: Yes, Your Honor -- I mean, yes,

Professor. I mean, I'm an appellate lawyer, so I file appeals

and party -- as an appellee to appeal. Just because someone

has a right to appeal doesn't mean an appeal is always filed

whenever there is an adverse ruling.

I mean, there are many reasons why you wouldn't take

an appeal, and I think if you created a right of an appeal, it

would develop precedent on Rule 23 that is absent right now,

and a lot of parties who, in a current case think there's an

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decisions that were in place in that circuit. I think is a

non-partisan issue. I think the statistics on 23(f) show that

plaintiffs and defendants use 23(f) right now.

But my point, my bigger point, is that this is really

the only final judgment you have in a class action. As a

practical matter, it's the only time you have the right to

take an appeal.

JUDGE BATES: Judge Campbell.

JUDGE CAMPBELL: If the method for making this

immediately appealable is to declare final judgment, then the

defendant has to appeal at that point, don't they? If they

wait, they lose to the right to appeal.

MR. SMITH: To deal with the class certification

issues, yes.

JUDGE CAMPBELL: Yeah. So if they ever want to

challenge the class certification on appeal, they have to

appeal then, and this notion that they may wait, we've taken

away from them by declaring it a final judgment.

MR. SMITH: Right. But the idea you're waiting for a

final judgment in a class action as a practical matter just

rarely happens.

MR. BARKETT: What's the judgment? What's the

judgment? I'm having trouble understanding how we could --

Do we have the time for this? It's really off topic.

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judgment is that a class has been certified. That's not a

judgment. It isn't relief awarded. It's just that a class

has been certified.

And so you are saying under 28 U.S.C. 2072, we have

the ability to all of a sudden define class certification as a

final judgment.

MR. SMITH: Yes. 

MR. BARKETT: Final judgment has meaning. It ends

the matter, brings it to a close.

MR. SMITH: Same as the denial of qualified immunity.

That's the denial of a defense. It has nothing to do with

liability, but it's still appealable.

MR. BARKETT: And that is described as a final

judgment under the statute?

MR. SMITH: Not under this statute. In circuit

precedent it's determined and -- 

MS. CABRASER: But that is not a purely procedural

determination, is it?

MR. SMITH: The denial of qualified immunity?

MS. CABRASER: Yes.

MR. SMITH: It is not, Ms. Cabraser.

MS. CABRASER: Right. And a class certification

decision is a purely procedural --

MR. SMITH: Purely procedural, yes.

1 1 : 4 4 : 4 1 The other point I wanted to make today has to do with

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the Shady Grove decision from the U.S. Supreme Court, which is

a plurality opinion in which the U.S. Supreme Court held that

Rule 23 of the federal rules governs class certification even

when the state substantive law at issue in a diversity case

says that you cannot have a class action.

I would urge the committee to consider, again,

Mr. Barkett, that's something that's not in the packet, and I

apologize for that, but adding to 23(a) a point that a class

is only certifiable if the substantive law issue does not

prohibit a class action.

The best analogy I can give the committee is there

are state statutes in place that limit punitive damages. And

Justice Ginsburg, in the Gasperini case, said that those state

substantive limits on punitive damages apply in federal courts

in diversity.

The same reasoning applies here when you have a

state --

PROFESSOR MARCUS: She did dissent in Shady Grove,

didn't she?

MR. SMITH: On this same basis, yes,

Professor Marcus.

So her point in her dissent in Shady Grove is the

rule here should be exactly the same. You're modifying state

substantive rights for the federal rule, you're violating the

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provision that said it is appropriate to have a certified

class so long as class is not prohibited by the substantive

law at issue, I think it would solve the Shady Grove problem

that we have now.

PROFESSOR MARCUS: Would the same sort of thing which

is not before us, not in our packets, would the same sort of

thing be true if under state law a class action must be

certified in circumstances where Rule 23 does not authorize

certification?

MR. SMITH: You mean --

PROFESSOR MARCUS: I'm turning it around, in a sense.

If state law is more beneficial to the plaintiff side, should

that also be mandatory in federal court?

MR. SMITH: Can you give me an example of that?

PROFESSOR MARCUS: I'm not sure I have one. I don't

know that there is one. But my sense of things is that the

California state courts probably are said to certify class

actions in circumstances where, after Wal-Mart, for example,

the federal courts might likely not do so, would you then be

introducing an argument that the federal courts in California

dealing with state law claims must follow California law

rather than Rule 23 in making certification decisions?

MR. SMITH: Well, I hadn't thought of that

possibility. It sounds like you're talking not about a

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common law? On a consumer fraud statute --

PROFESSOR MARCUS: Well, gee, I thought Erie told us

those two -- the rules of decision --

MR. SMITH: I was just trying to make sure that I was

understanding your question.

PROFESSOR MARCUS: Well, I don't know --

MR. SMITH: I think Erie solves what you were asking

me as long, as I understood the question. That's why I was

asking for the premise.

I think Erie solves it. But I think Shady Grove

undermines the whole purpose of Erie when you have a

legislative determination that a specific state statute should

not be certifiable as a class.

JUDGE BATES: Professor Cooper.

PROFESSOR COOPER: Do you have any information on how

many times federal courts confront class actions to enforce

state created rights when the state law prohibits class

enforcement?

MR. SMITH: I mean, in my practice, the Shady Grove

issue has come up a lot since the U.S. Supreme Court has

decided it. But I don't know of any statistical studies of

how often it comes up.

I mean, there are a number of states that have

legislative acts that prohibit certification of a class, and

1 1 : 4 8 : 5 3 it seems to me an easy fix under 23(a).

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MR. BARKETT: Have you identified those -- and I've

read your comments, prior comments. Maybe it would be

worthwhile, not for this package obviously, but if it's

something that you have information on, to collect it and

submit it to the committee.

MR. SMITH: We'll be happy to add that. We'll be

turning in some thoughts on these lines by February's

deadline.

MR. BARKETT: It's not going to really matter for

this package on this point, but if you've collected

information on states where class actions can't be brought,

they're brought in federal court because of Shady Grove, and

you think that is significant for the committee to consider, I

encourage you to compile the information and submit it. I

don't think you have to worry about the February deadline

because it's not going to affect this package.

MR. SMITH: Okay. Great.

Any other questions, Judge Bates?

JUDGE BATES: Are there other questions for

Mr. Smith?

Thank you very much.

MR. SMITH: Thank you for the opportunity.

JUDGE BATES: Appreciate you coming and your

comments.

1 1 : 4 9 : 4 7 And for all of you, thank you very much for coming

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today and for submitting comments in the past, which we've

found to be very, very valuable. And we look forward to any

further comments any of you are going to submit relating to

this package by the February deadline.

And with that, I think we conclude this public

hearing, except that I want to thank not only Judge Campbell,

but all those who have been here in the courthouse on the

staff helping with the facilities and the presentation. We

appreciate it greatly. And thank you all again.

(End of transcript.)

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C E R T I F I C A T E

I, PATRICIA LYONS, do hereby certify that I am duly

appointed and qualified to act as Official Court Reporter for

the United States District Court for the District of Arizona.

I FURTHER CERTIFY that the foregoing pages constitute

a full, true, and accurate transcript of all of that portion

of the proceedings contained herein, had in the above-entitled

cause on the date specified therein, and that said transcript

was prepared under my direction and control, and to the best

of my ability.

DATED at Phoenix, Arizona, this 17th day of January,

2017.

 s/ Patricia Lyons, RMR, CRR

Official Court Reporter 

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