Opinion ID: 398608
Heading Depth: 2
Heading Rank: 1

Heading: Fairness and Adequacy of the Settlement

Text: 14 Rule 23(e) requires court approval of compromise settlements of class actions, but it is silent as to the standard to be applied. Nonetheless, the rubric is now well established that the court will not approve a settlement unless it is found to be fair, adequate, and reasonable. In re Corrugated Container Antitrust Litigation, 643 F.2d 195 (5th Cir. 1981); Cotton v. Hinton, 559 F.2d 1326 (5th Cir. 1977). In determining the adequacy and reasonableness of the proposed settlement, the court does not adjudicate the dispute, for as we noted in Young v. Katz, 447 F.2d 431, 433 (5th Cir. 1971): (i)n examining a proposed compromise ... the court does not try the case. The very purpose of the compromise is to avoid the delay and expense of such a trial. In evaluating settlement proposals, six factors should be considered: (1) whether the settlement was a product of fraud or collusion; (2) the complexity, expense, and likely duration of the litigation; (3) the stage of the proceedings and the amount of discovery completed; (4) the factual and legal obstacles prevailing on the merits; (5) the possible range of recovery and the certainty of damages; and (6) the respective opinions of the participants, including class counsel, class representative, and the absent class members. See Pettway v. American Cast Iron Pipe Co., 576 F.2d 1157 (5th Cir. 1978), cert. denied, 439 U.S. 1115, 99 S.Ct. 1020, 59 L.Ed.2d 74 (1979). 15 Our appellate review of the district court's approval of a settlement is limited; an approved settlement will not be upset unless the court clearly abused its discretion. 5 Young v. Katz, 447 F.2d 431, 432 (5th Cir. 1971). Similar to the function of the trial court, our limited review rule is a product of the strong judicial policy favoring the resolution of disputes through settlement. United States v. City of Miami, 614 F.2d 1322 (5th Cir. 1980). 16 In deciding whether a clear abuse of discretion has occurred, we share the view of our colleagues of the Second, Fourth and Eighth Circuits that, absent fraud or collusion, the most important factor is the probability of the plaintiffs' success on the merits. See, e.g., Flinn v. FMC Corp., 528 F.2d 1169 (4th Cir. 1975), cert. denied, 424 U.S. 967, 96 S.Ct. 1462, 47 L.Ed.2d 734 (1976); Grunin v. International House of Pancakes, 513 F.2d 114 (8th Cir. 1975); City of Detroit v. Grinnell Corp., 495 F.2d 448, 455 (2d Cir. 1974) (If the settlement offer was grossly inadequate ... it can be inadequate only in light of the strength of the case presented by the plaintiffs.). 17 In the case at bar, the court approved a settlement which provided, because of the accrued interest, a cash recovery exceeding $1,440,000 and 15 specifications of employment enhancement which the court concluded would cost Bell approximately $1,000,000 to implement and maintain. The district court's detailed findings and conclusions, which include a thorough history and analysis of the litigation, reflect a careful evaluation of the settlement in light of the six factors set forth above. 18 After reviewing the entire settlement and pretrial record, the court concluded that the plaintiffs had only a marginal chance of recovery in the five million dollar range, and that even if they were successful in recovering a judgment in the more realistic range of three to five million dollars an appeal raising serious issues was likely. Review and analysis of the plaintiffs' affidavits, testimony, and the opinion of their expert statistician, impressed the district court that substantial weaknesses existed in their case. The trial judge noted a significant risk of failure to show liability on the major backpay issues, and that the issues concerning the validity of Bell's education and experience requirements for hundreds of different jobs would be disputed hotly at trial, with sharply conflicting testimony about the statistical evidence, presenting an all-or-nothing confrontation of unpredictable outcome. The judge also saw difficulties with the issue of certifying a class that included unhired applicants and Bell's facility at Amarillo. Problems were presented by the question of showing discriminatory intent for Title VII claims not based on adverse impact, and the validity of the causes of action based on affirmative action plans. Weighed against this background, the court concluded that the monetary award and the provisions for affirmative relief constituted a fair, reasonable, and adequate settlement. 6 19 We are not persuaded that the trial court erred either in its assessment of the probabilities of success or the range of recovery. Objectors offered no evidence at the settlement hearing concerning these issues. They were represented then by able and experienced counsel who had been empowered to conduct all necessary discovery and allowed adequate time to do so. 7 We find no basis in this record for the contention that the trial court abused its discretion in finding this settlement fair and reasonable. 8