Opinion ID: 374663
Heading Depth: 2
Heading Rank: 1

Heading: Trial Court

Text: 17 In what can be termed ordinary litigation, that is, lawsuits brought by one private party against another private party that will not affect the rights of any other persons, settlement of the dispute is solely in the hands of the parties. If the parties can agree to terms, they are free to settle the litigation at any time, and the court need not and should not get involved. As Judge Wyzanski has described this situation: the traditional view is that the judge merely resolves issues submitted to him by the parties . . . and stands indifferent when the parties, for whatever reason commends itself to them, choose to settle a litigation. Heddendorf v. Goldfine, 167 F.Supp. 915, 926 (D.Mass.1958). 18 Moreover, procedurally it would seem to be impossible for the judge to become involved in overseeing a settlement, because the parties are free at any time to agree to a resolution of the dispute by private contractual agreement, and to dismiss the lawsuit by stipulation. 15 In this situation, then, the trial court plays no role in overseeing or approving any settlement proposals. 19 In contrast, there are certain special situations in which the trial court is required by statute or rule to approve a settlement to which the parties to the litigation have agreed. The three most prevalent examples of this are proposed class action settlements, proposed shareholder derivative suit settlements, and proposed compromises of claims in bankruptcy court. 16 See, e. g., Protective Committee v. Anderson, 390 U.S. 414, 88 S.Ct. 1157, 20 L.Ed.2d 1 (1968); McDonald v. Chicago Milwaukee Corp., 565 F.2d 416 (7th Cir. 1977); United States v. Allegheny-Ludlum Industries, Inc., 517 F.2d 826 (5th Cir. 1975), cert. denied, 425 U.S. 944, 96 S.Ct. 1684, 48 L.Ed.2d 187 (1976); Grunin v. International House of Pancakes, 513 F.2d 114 (8th Cir.), cert. denied, 423 U.S. 864, 96 S.Ct. 124, 46 L.Ed.2d 93 (1975); Young v. Katz, 447 F.2d 431 (5th Cir. 1971); Norman v. McKee, 431 F.2d 769 (9th Cir. 1970); Florida Trailer and Equipment Co. v. Deal, 284 F.2d 567 (5th Cir. 1960); Heddendorf v. Goldfine, 167 F.Supp. 915 (D.Mass.1958). 20 In these three situations, the standard for approval has been stated both positively that the trial court must find that the settlement is fair, adequate, and reasonable, see, e. g., Cotton v. Hinton, 559 F.2d 1326, 1330 (5th Cir. 1977); West Virginia v. Chas. Pfizer & Co., 440 F.2d 1079 (2d Cir.), cert. denied, 404 U.S. 871, 92 S.Ct. 81, 30 L.Ed.2d 115 (1971) (quoting district court judge) and negatively that the trial court may only approve a settlement after determining that its terms are not unlawful, unreasonable, or inequitable, see, e. g., United States v. City of Jackson, 519 F.2d 1147, 1151 (5th Cir. 1975). 21 We have been unable to discern any difference in meaning between these variants on what we perceive to be essentially one standard; nor does the standard vary in application between the three different types of cases. In each of the three situations bankruptcies, class actions, and shareholder derivative suits there are special considerations not present in ordinary litigation which make this standard appropriate. In the bankruptcy situation, the fair and equitable standard was mandated by a statute, 11 U.S.C.A. §§ 574, 621(2) (West 1970) (repealed, P.L. 95-598, 92 Stat. 2549 (1978)); see TMT Trailer Ferry v. Anderson, 390 U.S. 414, 424, 88 S.Ct. 1157, 1163, 20 L.Ed.2d 1 (1968). In the class action and shareholder derivative suit contexts, the Federal Rules of Civil Procedure require that the court approve the settlement before the action is dismissed or compromised, see Fed.R.Civ.P. 23(e) and 23.1, and careful scrutiny is necessary to guard against settlements that may benefit the class representatives or their attorneys at the expense of absent class members or shareholders. The court's role as a fiduciary serving as guardian for the unrepresented class members has been held to stem directly from the language of the relevant rule. See, e. g., Grunin, supra, 513 F.2d at 123; Heddendorf, supra, 167 F.Supp. at 925-26. 22 Because there have been few situations other than the three special situations in which trial courts have been asked to approve a settlement, and the language in some of the cases involving these special situations has been expressed without limiting its application to the type of lawsuit involved, there may have been reason to believe that whenever a trial court is asked to approve a settlement, he must determine that the settlement is abstractly adequate, and that his decision to this effect will be routinely approved by us on review. 17 23 As we have noted, however, an active role for the trial court in approving the adequacy of a settlement is the exceptional situation, not the general rule. Even in the situations requiring court scrutiny, it has been said that, even after the court has inquired into the facts and law of the case, it need not reach any ultimate conclusions concerning how the case would be decided at trial, see Cotton, supra, 559 F.2d at 1330; indeed, trial judges have been told that absent fraud, collusion, or the like they should be hesitant to substitute their judgment for that of experienced counsel, even when those counsel represent private interests. See id. at 1332 nn.2 & 3. 24 Here, we are faced with a situation somewhat different from that posed by ordinary litigation, for the interests of individuals and organizations other than those approving the settlement may be implicated. The presence of these other interests prevents us, or the trial court, from taking a totally hands-off attitude toward the settlement reached. In fact, if this were merely a suit between private parties in which interests of non-parties were implicated, we might be inclined to endorse a fairly active role for the trial court in determining the fairness of the settlement. However, several factors convince us that the trial court properly took an intermediate stance. 25 First is the extremely high premium put by Congress on voluntary settlement of Title VII suits. There have been repeated asseverations of this principle. In Alexander v. Gardner-Denver Co., 415 U.S. 36, 44, 94 S.Ct. 1011, 1017, 39 L.Ed.2d 147 (1974), the Supreme Court said: Cooperation and voluntary compliance were selected (by Congress) as the preferred means for achieving (the goal of elimination of unlawful employment discrimination). This Court has wholeheartedly endorsed that conclusion. See, e. g., Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir. 1977); United States v. Allegheny-Ludlum Industries, Inc., 517 F.2d 826, 846 (5th Cir. 1975), cert. denied, 425 U.S. 944, 96 S.Ct. 1684, 48 L.Ed.2d 187 (1976) (it cannot be gain-said that conciliation and voluntary settlement are the preferred means for resolving employment discrimination disputes) (Thornberry, J.); Hutchings v. United States Industries, Inc., 428 F.2d 303, 309 (5th Cir. 1970) (it is clear that Congress placed great emphasis upon private settlement and the elimination of unfair practices without litigation on the ground that voluntary compliance is preferable to court action (citation omitted) (Ainsworth, J.), Culpepper v. Reynolds Metals Co., 421 F.2d 888, 891 (5th Cir. 1970) (the central theme of Title VII is 'private settlement' as an effective end to employment discrimination) (Tuttle, J.); Dent v. St. Louis-San Francisco Ry. Co., 406 F.2d 399, 402 (5th Cir. 1969) (the basic philosophy of (Title VII) is that voluntary compliance is preferable to court action and that efforts should be made to resolve these employment rights by conciliation both before and after court action) (Coleman, J.); Oatis v. Crown Zellerbach Corp, 398 F.2d 496, 498 (5th Cir. 1968) (it is thus clear that there is great emphasis in Title VII on private settlement and the elimination of unfair practices without litigation) (Bell, J.). To insist on a detailed inquiry by the trial court into every proposed settlement of a Title VII action would severely interfere with this policy by delaying approval of settlements and increasing their cost to litigants. 26 Second is the fact that the plaintiff here is a department of the United States government. Unlike the situations in which we fear that a party may be attempting the profit at the expense of unrepresented individuals, e. g., class actions and shareholder derivative suits, we here have as plaintiff the government department charged with seeing that the laws are enforced. We therefore need not fear that the pecuniary interests of the plaintiff and defendant will tempt them to agree to a settlement unfair to unrepresented persons, 18 but can safely assume that the interests of all affected have been considered. 19 27 Moreover, a careful calibration by the trial court to ensure that the relief granted goes exactly as far, but no further, than is required by the extent of the past illegal discrimination is impossible. 20 Before trial, there is no way of knowing which particular practices of the defendants may have contributed to the gross statistical disparities presented in their workforces. 21 However, there are parties present before the court who have spent long hours negotiating over the situation and who are intimately familiar with the practices of the defendants the defendants themselves and the Justice Department officials responsible for the lawsuit. The Justice Department and the defendants are in an adversary posture. The defendants do not want to give up more control over their personnel decisions than is absolutely necessary. The Justice Department officials are charged with seeing that violations of our employment discrimination laws are remedied. 28 There are other reasons for a deferential attitude towards agreements reached by consent in Title VII suits. As this court has previously noted, when agreement is reached by consent voluntary compliance is rendered more likely, and the government may have expeditious access to the court for appropriate sanctions if compliance is not forthcoming. See City of Jackson, supra, 519 F.2d at 1152 n.9. Moreover, failure to enter the decree would result in the loss of the nation's investment in the resources consumed by the federal agencies in negotiating these decrees, as well as the chance justly to finalize a matter that otherwise would burden agencies and courts. Allegheny-Ludlum, supra, 517 F.2d at 851. 29 We also note that if the government agency negotiating with the defendants to remedy discrimination had been the Equal Employment Opportunity Commission rather than the Department of Justice, and if a conciliation agreement with exactly the same terms as the proposed consent decree had been reached between the E.E.O.C. and the defendants, the district court's scrutiny of the terms of the agreement would be minimal. In Equal Employment Opportunity Commission v. Contour Chair Lounge Co., 596 F.2d 809 (8th Cir. 1979), the Eighth Circuit upheld the district court's determination, 457 F.Supp. 393 (E.D.Mo.1978), that conciliation agreements between the E.E.O.C. and employers are specifically enforceable. Neither the trial court nor the appellate court conducted a detailed inquiry into the reasonableness of the agreement; rather, each independently satisfied itself that the agreement contained no illegal terms, and specific performance was ordered without further inquiry. We are unaware of any difference between the roles that the Department of Justice and the E.E.O.C. play in enforcing the antidiscrimination provisions of Title VII that requires courts to order specific performance of voluntary settlement agreements with the E.E.O.C. after a minimal inquiry into their legality, but enables a court to freely overrule agreements reached by the Department of Justice merely because the court would have reached a different result. 30 For these reasons, we hold that in this situation the trial court need only determine that the proposed settlement is not unconstitutional, unlawful, cf. Kelly v. Kosuga, 358 U.S. 516, 520, 79 S.Ct. 429, 431, 3 L.Ed.2d 475 (1959) (court will not enforce contract which violates the law), contrary to public policy, or unreasonable before approval is granted. Moreover, for these same reasons, we believe that the decree proposed in these circumstances should be entitled to a presumption of validity. 31 This presumption of validity means that a district court judge must have a principled reason for refusing to sign a consent decree in this context. A refusal to sign a consent decree based on generalized notions of unfairness is unacceptable. Rather, the district court judge must state specific reasons why a proposed consent decree unduly burdens one class or another. 32 If the judge feels unable to make this determination without additional information, he may, in his discretion, hold whatever hearings he deems necessary to garner that information. But, the judge must inform the parties who have proposed the decree of his precise concerns, and lend every possible assistance to reach a reasonable accommodation. Only if it clearly appears that the proposed settlement cannot be modified to meet the standard set out above should he refuse to grant his approval, and then he must clearly articulate for our review his reasons for disapproval. 33 When the remedy that is jointly proposed by these parties is within reasonable bounds and is not illegal, unconstitutional, or against public policy, the courts should give it a chance to work. The trial court retains the power to modify or vacate the decree if it later appears to have been unwise. 22 At a later point, experience operating under the decree may prove that it did unjustly burden one group or another. However, if the trial court can simply say that, without a full-blown trial of the facts, he cannot make a positive determination that the proposed decree is fair and equitable, and can therefore refuse to sign it, the goal of a society with equal opportunity for all will be needlessly delayed. The expense to all sides of a full blown trial can be enormous. If the resources of government agencies charged with enforcing anti-discrimination laws must be expended in the trial of complex factual issues in every case, the progress of remedying illegal discrimination is likely to slow to a snail's pace. 23 This result would be entirely contrary to the goals of Title VII. 24 34 The trial court may only rely on whatever record he has before him when the settlement is proposed; if nothing appears to make him believe the settlement is unreasonable, illegal, unconstitutional, or against public policy, he should grant his approval. If he cannot approve the settlement, he should explain his objections to the parties to give them a chance to meet them. When objections to the settlement are presented, they should be carefully considered. See E.E.O.C. v. American Telephone & Telegraph Co., 556 F.2d 167, 178 (3d Cir. 1977), cert. denied, 438 U.S. 915, 98 S.Ct. 3145, 57 L.Ed.2d 1161 (1978). However, the burden must be on the objectant to convince the court to disapprove the proposed settlement, and the trial court's reasoned approval of the settlement will be entitled to much difference. Otherwise, the policy of voluntary compliance with Title VII could be severely thwarted by the interposition of objections to the settlement.