Source: https://www.justice.org/what-we-do/enhance-practice-law/publications/trial-magazine/unveiling-new-class-action-rules
Timestamp: 2019-04-25 04:24:19+00:00

Document:
After several years of public debate, deliberation, and refinement, proposed amendments to Federal Rule of Civil Procedure 23 will go into effect next month. Here’s what you need to know about the changes.
Amendments to Federal Rule of Civil Procedure 23, which governs class actions, will take effect Dec.1.1 The amendments focus on four issues: class notice in Rule 23(c)(2) (particularly, electronic notice); uniform standards for obtaining approval of a class action settlement in Rule 23(e); objections in Rule 23(e)(5) (specifically, requirements concerning the content and resolution of objections); and modification of the standards and timing for appeals in Rule 23(f).
For the most part, these amendments reflect current practice and will likely accelerate current trends rather than create any unusual disruptions. With respect to objections, however, the amendments initiate new and unproven procedures intended to deter frivolous claims.
The process of developing the proposed amendments was more noteworthy than the proposed ­amendments themselves because several potentially controversial topics were discussed, involving, among other things, the certification of settlement classes, issue certification, and the use of cy pres to distribute unclaimed settlement funds.2 These issues continue to divide courts and may warrant future modifications of Rule 23, so class action lawyers should continue to pay close attention to the rulemaking process.
Amendments made through the Advisory Committee on Civil Rules also could result in changes that would undermine class actions and make it harder for consumers to access the courts. Fortunately, with the most recent round of amendments, Rule 23 has emerged almost entirely unscathed.
The presumption in favor of direct mail over publication notice dates back to the early days of Rule 23, when the U.S. Supreme Court held that the appropriate means of individual notice was by U.S. mail, especially when the names and addresses of class members are known or are easily ascertainable.7 Decades of experience with direct mail notice generally supports the view that this method generated some of the highest levels of class member response.8 But in recent years the proliferation of “junk” mail, as well as the ever-increasing number of class notices, has forced notice providers to search for alternative ways to reach class members.
The terms “electronic” and “other appropriate means” include the banner ads, email, and even text messaging already used in many notice plans. This broad and unlimited language also can embrace electronic communication methods not yet imagined, allowing notice plans to keep pace with technology. While direct mail is likely to remain a powerful method of reaching class members, email, banner ads, and texts are likely to become more prominent.
The text in bold indicates the rule's new text.
During the course of its information gathering, the Advisory Committee on Civil Rules’ Rule 23 Subcommittee was troubled by the fact that one uniform set of settlement criteria did not exist and that the criteria developed in the circuits often do not include matters “that contemporary experience suggests should matter in assessing settlements,”10 including the anticipated claims rate, the plan for distribution of any unclaimed funds, and the likely range of litigated outcomes.
While largely consistent with existing practice, the Rule 23(e) amendments provide new, express, and uniform instructions on the proper procedures and substantive assessments for courts to implement when considering whether to grant preliminary and final approval of class action settlements.
Under the new rule, courts must assess the adequacy of the relief that the settlement provides by considering the costs, risks, and delay of trial and appeal; the effectiveness of any proposed method of distributing relief to the class, including the method of processing class member claims; the terms of any proposed attorney fees, including timing of payment; and any side agreements required to be identified under Rule 23(e)(3).15 Until recently, courts rarely considered the terms of the attorney fees and the effectiveness of distributing relief in determining the settlement’s adequacy—and even now these factors are not always evaluated. Nonetheless, these factors address courts’ concerns that class action settlements obtain the promised relief for class members and that attorney fees are fair relative to the benefits obtained by the class.
The amended rule essentially requires that the parties detail attorney fees and claims administration methodologies to the court during the preliminary approval stage, which is already happening in many courts. Recent cases demonstrate that courts are “frontloading­” scrutiny of settlements and are increasingly reluctant to defer rendering judgment on the settlement’s merits until final approval.16 Expect courts to closely examine proposed settlements at the preliminary approval stage and to apply uniformly the new Rule 23(e) criteria.
The new rule replaces the bare requirement of court approval for the withdrawal of an objection with a more detailed requirement to disclose any payment or other consideration provided to a withdrawing objector and obtain court approval after a hearing.20 With the new rule, an objector will be free to withdraw an objection without court approval after concluding that an objection is not justified,21 thereby streamlining the settlement approval process.
More important, the requirement of court approval for the withdrawal of an objection on appeal for payment or other consideration may thwart professional objectors from filing appeals with the hope of leveraging a fee from class counsel but without any real intent of pursuing the objection.22 However, it is also possible that this new mechanism will spur professional objectors, eager to “obtain benefits for themselves,”23 to pursue appeals more earnestly through briefing—even as long shots—thereby further prolonging the ultimate resolution of the case. Consequently, it is difficult to predict whether disclosure of payments to objectors will deter frivolous objections or merely prolong the process. Time will tell whether greater transparency surrounding objections and acceptance of payment to ­withdraw objections will be a deterrent or whether further amendments are necessary to stop this burgeoning practice.
(A) In General. Any class member may object to the proposal if it requires court approval under this subdivision (e); the objection may be withdrawn only with the court’s approval. The objection must state whether it applies only to the objector, to a specific subset of the class, or to the entire class, and also state with specificity the grounds for the objection.
(C) Procedure for Approval After an Appeal. If approval under Rule 23(e)(5)(B) has not been obtained before an appeal is docketed in the court of appeals, the procedure of Rule 62.1 applies while the appeal remains pending.
The last main area that the amendments affect are the standards and timing for appeals.
(f) Appeals. A court of appeals may permit an appeal from an order granting or denying class-action certification under this rule if a petition for permission is filed with the circuit clerk within 14 days after the order is entered., but not from an order under Rule 23(e)(1). A party must file a petition for permission to appeal with the circuit clerk within 14 days after the order is entered, or within 45 days after the order is entered if any party is the United States, a United States agency, or a United States officer or employee sued for an act or omission occurring in connection with duties performed on the United States’ behalf. An appeal does not stay proceedings in the district court unless the district judge or the court of appeals so orders.
The subcommittee also considered issue certification under Rule 23(c)(4) because many practitioners expressed the need for clarification. However, the circuits remain divided about the role of predominance in considering certifying issues—time and again asking whether an issue can predominate only by resolving all elements of a cause of action or whether resolution of an important element of a claim can be sufficient to establish predominance.33 Given the current level of judicial uncertainty, the subcommittee declined to propose any amendments.
These issues surely will resurface when the Advisory Committee looks at Rule 23 again. For now, class action lawyers only need to make small adjustments to adapt to the amendments. The amendments will not impair consumers’ ability to use class actions to seek relief in federal court, and Rule 23 will continue to be a powerful tool for individual consumers to band together against corporate wrongdoing.
Gary E. Mason is a founding partner at Whitfield Bryson & Mason in Washington, D.C., and was the chair of AAJ’s Rule 23 amendments working group. Jennifer S. Goldstein is an attorney at the firm. They can be reached at gmason@wbmllp.com and jgoldstein@wbmllp.com.
See 28 U.S.C. §2074 (West through Pub. L. No. 115-223); John Roberts, Chief Justice of the U.S., Proposed Amendments to the Federal Rules of Civil Procedure (Apr. 26, 2018), www.supremecourt.gov/orders/courtorders/frcv18_5924.pdf.
See generally Report of Apr. 9–10, 2015 Meeting, Wash., D.C., U.S. Courts Advisory Comm. on Civil Rules, www.uscourts.gov/sites/default/files/fr_import/CV2015-04.pdf.
See The Private Securities Litigation Reform Act of 1995, 15 U.S.C. §78u-4 (West through Pub. L. No. 115-223); Class Action Fairness Act of 2005, 28 U.S.C. §§1332(d), 1453, 1711–1715.
Fed. R. Civ. P. 23(c)(2).
Fed. R. Civ. P. 23(c)(2)(B). Rule 23 also allows for certification of classes seeking non-monetary relief. See Fed. R. Civ. P. 23(b)(1)-(2). These types of classes are mandatory (no opt-outs) and generally do not require notice.
Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 173 (1974) (“Individual notice must be sent to all class members whose names and addresses may be ascertained through reasonable effort.”).
Larson v. AT&T Mobility LLC, 687 F.3d 109, 124 (3d Cir. 2012) (notice by publication “had long been recognized as a poor substitute for actual notice”) (citing Eisen, 417 U.S. at 175).
Fed. R. Civ. P. 23(c)(2)(B), as amended.
Report of Apr. 9–10, 2015 Meeting, Wash., D.C., supra note 2, at 246.
Fed. R. Civ. P. 23(e)(1)(B), as amended.
Report of Apr. 14–15, 2016 Meeting in Palm Beach, Fla., U.S. Courts Advisory Comm. on Civil Rules 105:319–322, www.uscourts.gov/sites/default/files/2016-04-civil-agenda_book_0.pdf (incorporating the committee notes to Fed. R. Civ. P. 23(e)(1), as amended (“The decision to give notice of a proposed settlement to the class is an important event. It should be based on a solid record supporting the conclusion that the proposed settlement will likely earn final approval after notice and an opportunity to object.”)).
Fed. R. Civ. P. 23(e)(2), as amended.
Fed. R. Civ. P. 23(e)(2)(A)-(D), as amended.
Fed. R. Civ. P. 23(e)(2)(C)(i-iv), as amended.
See, e.g., Order to Show Cause, In re Myford Touch Consumer Litig., No. 13-cv-03072-EMC, Doc. No. 449, at *5 (N.D. Cal. June 14, 2018) (conditionally denying motion to preliminarily certify class).
Fed. R. Civ. P. 23(e)(5)(A), as amended.
Fed. R. Civ. P. 23(e)(5).
If done prior to appeal, the agreement to withdraw would be reviewable by the district court pursuant to Rule 23(e)(5).
Fed. R. Civ. P. 23(e)(5)(A), (B), as amended.
Report of Apr. 14–15, 2016 Meeting in Palm Beach, Fla., supra note 12, at 105:319–322, (incorporating the Rule 23 Subcommittee report).
Fed. R. Civ. P. 23(e)(5)(B)(ii), as amended.
Rebecca Womeldorf, Rules Comm. Chief Counsel, Transmittal of Proposed Amendments to the Federal Rules to the Supreme Court, Admin. Office of the U.S. Courts 319 (Oct. 4, 2017), https://www.fjc.gov/sites/default/files/2017/Rules-Amendments-2018-Supreme-Court-Transmittal.pdf.
Fed. R. Civ. P. 23(f), as amended.
Report of Nov. 3–4, 2016 Meeting in Wash., D.C., Advisory Comm. on Civil Rules 70:666–667, www.uscourts.gov/sites/default/files/2016-11-civil-agenda_book_0.pdf (incorporating the draft minutes of Apr. 14, 2016 meeting in Palm Beach, Fla.).
Report of Apr. 14–15, 2016 Meeting in Palm Beach, Fla., supra note 12, at 107:399–401 (incorporating committee note to Fed. R. Civ. P. 23(f), as amended).
Report of Apr. 14–15, 2016 Meeting in Palm Beach, Fla., supra note 12, at 107:414–421 (incorporating committee notes to Fed. R. Civ. P. 23(f), as amended).
Report of Apr. 9–10, 2015 Meeting, Wash., D.C., supra note 2, at 257–62.
Grandalski v. Quest Diagnostics Inc., 767 F.3d 175, 184 (3d Cir. 2014).
See In re Hyundai & Kia Fuel Econ. Litig., 881 F.3d 679, 701–03 (9th Cir. 2018), vacated and reh’g en banc granted, 897 F.3d 1003 (9th Cir. 2018).
Compare, e.g., Castano v. Am. Tobacco Co., 84 F.3d 734, 744–45 (5th Cir. 1996) (rejecting the use of the Fed. R. Civ. P. 23(c)(4) device on predominance grounds) and Blain v. Smithkline Beecham Corp., 240 F.R.D. 179, 189–91 (E.D. Pa. 2007) (entirety of a cause of action must satisfy predominance before issues can be certified) with In re Nassau Cnty. Strip Search Cases, 461 F.3d 219, 226 (2d Cir. 2006) (a court may certify a class under Rule 23(c)(4) regardless of whether the entire claim satisfies predominance).
Report of Apr. 9–10, 2015 Meeting, Wash., D.C., supra note 2, at 263–64; Report of Apr. 14–15, 2016 Meeting in Palm Beach, Fla., supra note 12, at 36.
Frank v. Gaos, 138 S. Ct. 1697 (2018), granting cert., 869 F.3d 737 (9th Cir. 2017). AAJ filed an amicus brief in this case, and oral argument was scheduled for Oct. 31, 2018.
Report of Apr. 9–10, 2015 Meeting, Wash., D.C., supra note 2, at 36.

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