Opinion ID: 379272
Heading Depth: 1
Heading Rank: 3

Heading: specific procedural issues

Text: 39 Sanchez argues that approvals of the desegregation plan and the class action settlement were done in violation of the objectors' procedural rights. We address his several assignments of error below.
40 Sanchez first objects to the short period of time available to him to prepare for the plan hearing and the settlement hearing.
41 The timing of the plan hearing is one of the more troubling issues raised by Sanchez. He correctly points out that he was allowed very little time to prepare his objections to the plan. The desegregation plan was submitted on July 17, Sanchez requested substitution of counsel on July 27, and the hearing was held August 8 and 9. In addition to objecting to the plan, Sanchez was simultaneously advancing a subclass motion and preparing discovery requests. 42 We have no doubt that Sanchez received sufficient opportunity to be heard to satisfy constitutional due process requirements. See Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950). The closer question is whether the District Court abused its discretion in its scheduling of the remedy hearings, given its awareness that there were objections from within the class. 43 The fact that the action before the Court is a class suit imposes special responsibilities upon the trial judge. As noted above, representative suits carry with them inherent dangers of conflict and compromise of absentee interests. Accordingly, a Court overseeing a class suit must constantly be sensitive to conflicts within the class. See Note, Developments in the Law Class Actions, 89 Harv.L.Rev. 1318, 1490 (1976) (judicial awareness of differences within a class as a protection of absentee interests). The Court must be well informed of the views of objectors, and serve as a guardian of absentee interests. Mandujano v. Basic Vegetable Products, Inc., 541 F.2d 832 (9th Cir. 1976); Greenfield v. Villager Industries, Inc., 483 F.2d 824, 832 (3d Cir. 1973). Cf. Norman v. McKee, 431 F.2d at 774 (context of Rule 23(e)). 44 However, the desegregation plan was not a settlement and was not bound by the more formal Rule 23(e) requirements. Fed.R.Civ.P. 23(e). With respect to the proposed plan, the District Court's responsibility was to assure itself that it had before it all relevant arguments, objections, and considerations concerning the plan. The extent, timing, and even existence of the plan hearing rested largely within the discretion of the trial court. 45 Review of a trial court's discretion must always be done in light of the circumstances of the case. See Anderson v. Air West, Inc., 542 F.2d 522, 524 (9th Cir. 1976). In addition, we are not to substitute our ideas of fairness for those of the trial court in the absence of evidence that it acted arbitrarily, Patterson v. Newspaper & Mail Deliverers' Union, 514 F.2d 767, 771 (2d Cir. 1975), cert. denied, 427 U.S. 911, 96 S.Ct. 3198, 49 L.Ed.2d 1203 (1976), and such evidence must constitute a clear showing of abuse of discretion, Flinn v. FMC Corp., 528 F.2d 1169, 1172 (4th Cir. 1975), cert. denied, 424 U.S. 967, 96 S.Ct. 1462, 47 L.Ed.2d 734 (1976). In re Gypsum Antitrust Cases, 565 F.2d 1123, 1128 (9th Cir. 1977). Unless we find that the exercise of discretion was arbitrary and constituted plain error under the circumstances, we will not reverse. See Bowles v. Quon, 154 F.2d 72, 73 (9th Cir. 1946). 46 It is significant that the settlement and objections have come at the remedy stage of this litigation, and not during pretrial proceedings as do many class action settlements. Here, the District Court was particularly well informed about the action, having been intimately associated with it for over four years. This association included a full trial on the merits, familiarity with a voluminous amount of evidence, and a lengthy and detailed written decision. The Court was able to assess the relative merits and significance of a given argument or objection, and determine the amount of detail needed in the presentations. A further element properly in the Court's consideration was the desire to implement whatever plan was approved at the start of the next school year in September. 47 The District Court could also assess Sanchez's opportunity to prepare his objections to the plan. First, Sanchez had been involved in the case from its commencement as one of the original named plaintiffs in the Mendoza action, placing him in a different position than that of a passive, insulated class member. Second, Sanchez requested substitution of counsel on July 27, meaning that he and his attorney had at the minimum nearly two weeks in which to prepare their objections to the plan. Third, it was clear from the District Court's order establishing the August 8th hearing that it was not a settlement hearing, but rather focused only on the acceptability of the desegregation plan. As discussed above, this was limited to an examination of the adequacy of the District's plan in acceptably correcting the constitutional violations found in the Court's June 5th decision. There was nothing misleading in the Court's order, and Sanchez should have been aware of the narrow focus of the August 8th hearing. Given these considerations, the Court could properly decide that Sanchez could prepare a presentation for the hearing sufficient to inform the Court of potential constitutional problems the plan might contain for those who, due to a conflict of interests within the class, were not adequately represented by class counsel on the issue of school closure. 48 Thus, in light of these circumstances, we cannot say the District Court abused its discretion in not postponing the plan hearing.
49 Sanchez also contends that he was not afforded adequate time nor sufficient discovery to prepare for the August 30th settlement hearing. Initially we conclude that Sanchez's opportunity to be heard was not so limited or so nominal that it violated due process requirements. See Mullane, supra. 50 Our second inquiry is whether the District Court abused its discretion in not continuing the settlement hearing further into the future. 6 Fed.R.Civ.P. 23(e) provides: A class action shall not be dismissed or compromised without the approval of the court . . .. It further requires that notice of the settlement 7 be sent to class members, and though not mandatory, generally a hearing on the settlement is held. 8 Patterson v. Stovall, 528 F.2d 108, 114 (7th Cir. 1976). See Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974). Notice and hearing are provided to assure that there are no unrepresented interests which are unfairly treated by the settlement. Absent class members are afforded an opportunity to come forward and make the Court aware of any undisclosed inadequacies. See Norman v. McKee, 431 F.2d at 774; Pettway, 576 F.2d at 1214-16. Particularly at the settlement stage, the Court must be keenly aware of its role as a fiduciary (serving) as a guardian of the rights of absent class members. Grunin, 513 F.2d at 123. 51 The form which the Rule 23(e) procedural protections take is clearly left to the discretion of the trial court. Fed.R.Civ.P. 23(e). The Court must have before it sufficient information to assure itself that there were no procedural defects in the reaching of the settlement, and that the substantive terms of the settlement are fair and reasonable. Marshall v. Holiday Magic, Inc., 550 F.2d 1173, 1178 (9th Cir. 1977); Norman, 431 F.2d at 774; Grunin, 513 F.2d at 123. Although the Court must be particularly sensitive to any sacrifice of minority interests, there will generally have to be some compromise where, as here, the remedy sought is pervasive structural relief necessarily affecting all class members. The trial court must be able to determine if the balance struck is basically fair, looking to the benefits to be achieved by the class as a whole, as well as the distributive effects. 52 The question presented here is not whether the trial judge was correct in his substantive determination of fairness, but whether he abused his discretion in his scheduling of the settlement hearing. Because the purpose of a settlement hearing is to insure the opportunity for all relevant facts and objections to be placed before the Court, we must ask whether the trial court had sufficient facts before it to intelligently evaluate the settlement proposal. Detroit v. Grinnell Corp., 495 F.2d at 462-63; Newman v. Stein, 464 F.2d 689, 692 (2d Cir.), cert. denied, 409 U.S. 1039, 93 S.Ct. 521, 34 L.Ed.2d 488 (1972). And in reviewing this question, we must accord great weight to the trial judge's views. He was close to the litigants and the case, was far more familiar with it than this Court, and in a superior position to perceive what needed to be known. Cf. Ace Heating & Plumbing Co. v. Crane Co., 453 F.2d 30, 34 (3d Cir. 1971). 53 Here, Sanchez had at the minimum nearly a month to prepare for the settlement hearing, and his discovery requests were granted 9 (except as to the issue of school closure which had been rendered moot by the Court's August 11th order). 10 Sanchez had been involved in the case from its inception, and there was a voluminous resource of material already available. As it was, the District Court postponed the settlement hearing for one week on Sanchez's motion over the settling counsel's objection. Further, Sanchez has not demonstrated to this Court any relevant facts or objections which were not placed before the District Court. 11 In light of these circumstances, we believe that the District Court had sufficient information before it from all viewpoints to evaluate the fairness of the settlement. Moreover, it appears that no significant objections were suppressed by the District Court's decision to deny any further continuances of the settlement hearing. We find no abuse of discretion in the scheduling of the settlement hearing. 12
54 Sanchez moved for the certification of a subclass, with himself as class representative, to include those class members who would be directly affected by the school closure provisions of the desegregation plan. 13 The District Court denied this certification motion simultaneously with its approval of the plan, finding, inter alia, that there was no longer any need for a subclass formed to object to school closures because the issue was decided on the merits by the approval of the plan, and, furthermore, the subclass description was vague. We agree with the District Court that after the August 11th order, the need for the subclass disappeared. 55 Subclasses must meet the same requirements as a class. Weathers v. Peters Realty Corp., 499 F.2d 1197, 1200 (6th Cir. 1974). Just as the determination of class certification rests within the sound discretion of the trial court, James v. Ball, 613 F.2d 180, 186 (9th Cir. 1979); Montgomery v. Rumsfeld, 572 F.2d 250, 255 (9th Cir. 1978), so, too, does the determination of the need for a subclass. It is appropriate to invoke subclassification when there are or may be divergent views among class members and when the Court believes that subclasses would materially improve the presentation of all relevant considerations. 56 Sanchez's arguments that the District Court erred in denying his motion for subclass certification stem principally from his misunderstanding of the Court's August 11th order. As discussed in section II-B above, the August 11th order finally decided on the merits the question of whether the schools sought to be closed by the School District would in fact be closed. Thereafter, the role that the school closures were to play in the settlement hearing became second order: Their existence could be considered in terms of the overall fairness of the settlement, but the fact of the closures themselves were no longer open to objection. Thus, the substantive question of whether those three schools would or could be closed was not, contrary to Sanchez's argument, present at the settlement hearing. 57 The foreclosure of this issue from the settlement strikes at the heart of the subclassification motion. The need for the subclass was premised upon the desire to prevent the schools from being closed, a desire apparently shared by a significant number of parents whose children attended those schools. However, it is not at all clear where the proposed subclass stood on the overall fairness of the settlement, given as irrevocable the decision to close the schools under the District's plan. Nor is it clear that their views on this question differ from the interests of the class as a whole. Finally, it does not appear that the District Court was deprived of any material viewpoints, objections, or information for want of a subclass at the settlement hearing. 58 For the foregoing reasons, we find no abuse of discretion in the District Court's denial of Sanchez's subclass motion.
59 Sanchez objects to both the form and the content of the settlement notice. 14 He contends that the failure to mail individual notice to class members was a violation of due process. He asserts the same complaint about the tardiness and form of the newspaper notice. With respect to content, Sanchez notes that the notice did not (1) advise that counts 2, 3, 5 and 6 of the Mexican-American complaint would be dismissed with prejudice; (2) name the specific schools to be closed under the approved desegregation plan; or (3) reveal any formula for division of attorneys' fees among the class attorneys. He claims that these omissions rendered the notice defective. 60 Rule 23(e) 15 requires that notice to the class be given of any proposed class action settlement. 16 Although the rule accords a wide discretion to the District Court as to the form and content of the notice, due process requires its presence and constitutional adequacy. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 172-77, 94 S.Ct. 2140, 2150-52, 40 L.Ed.2d 732 (1974); Grunin, 513 F.2d at 121. To meet this standard, the notice given must be reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. Mullane, 339 U.S. at 314, 70 S.Ct. at 657. Further, in applying Rule 23(e), this Court has noted that it reasonably demands that notice be given in a form and manner that does not systematically leave an identifiable group without notice. Mandujano, 541 F.2d at 835.
61 The notice of settlement approved by the District Court was published 13 times in a seven day period in the two major Tucson newspapers, 17 beginning eight days before the August 30th and 31st settlement hearing. The notice was printed in both English and Spanish, and copies were provided to the local broadcast media, and were distributed to numerous locations throughout the minority community which are frequented by large numbers of class members. 18 Further, the trial court observed in its notice order that there was a great amount of local publicity concerning all prior orders and proceedings. All members of the class necessarily lived within Tucson School District No. 1, an area served by the newspapers carrying the notice, and were subject to all of the additional publicity generated by the suit. 62 We believe this form of notice was reasonably calculated to reach the members of the class. A party's capability to provide individual notice does not make such notice mandatory when notice by publication will suffice. In a class action seeking a structural injunction, notice is intended to encourage those with divergent views to come forth, helping the trial court to identify possible inadequacies in the settlement. In general, in such cases seeking a structural remedy, publication notice sufficiently accomplishes this major purpose. See Developments, supra, at 1566. Here, in particular, there was widespread actual notice of the settlement and the hearing as a result of the published notice and other sources, and a number of class members did in fact come forward to object. It being reasonably concluded that this form of notice would be effective, and with the subsequent indications that it did in fact reach large numbers of the class, we find no abuse of discretion or violation of due process in the form of notice provided here.
63 Nor do we find any infirmity in the content of the notice provided. Notice in a class suit may consist of a very general description of the proposed settlement. Grunin, 513 F.2d at 122. It must present a fair recital of the subject matter and proposed terms. Holiday Magic, Inc., 550 F.2d at 1177. Here, the specific omissions which Sanchez notes are not fatal to the document. 64 The content of this notice provides a fair and general summary of the settlement. It first identified the members of the class to whom it was directed, briefly mentioned the background of the case, described the Court's June 5th desegregation order, and identified the nine schools requiring desegregation. The notice then went on to describe the proposed settlement. It cited the options under which the nine schools would be operated; identified the additional three schools which would have assignment patterns altered; identified additional schools whose assignments would be studied; mentioned additional procedural points of the settlement; and disclosed that a $500,000 attorneys' fee (including costs) had been agreed upon and incorporated. The notice also informed the reader where a copy of the stipulation of settlement and the desegregation plan could be obtained, announced the time and place of the settlement hearing, and concluded by inviting any class member to file written objections or to appear and be heard by the Court. 65 Sanchez relies on In re General Motors Corp. Engine Interchange Litigation, 594 F.2d 1106, in arguing that the failure to disclose the division of the agreed-upon attorneys' fees rendered notice defective. We do not find this case factually analogous to General Motors. The General Motors case was procedurally complex many class actions had been consolidated, the Attorneys General of most states were participating as well as private attorneys, and only a small committee conducted the settlement negotiations, perhaps without authority to do so. We do not believe that the same potential for abuse and undue influence existed here. Moreover, the total amount of fees to be paid here was disclosed, and only two sets of attorneys were to participate in its division. While disclosure as to apportionment of the negotiated attorneys' fees may have been desirable, we cannot say it was an abuse of discretion to approve the settlement notice without such a provision. 66 Sanchez further objects to the notice because it does not specify that three schools will be closed under the desegregation plan. The notice merely states that these schools will be operated . . . in accordance with (certain options) of the plans submitted to the court on July 17, 1978. Again, this argument loses force when the school closure question is viewed in proper perspective. If the merits of school closure were subject to debate at the settlement hearings, this omission might well be fatal. However, because the school closures only assumed a subordinate role at this hearing, they could be described in the same general terms applicable to other portions of the settlement notice. The notice generally describes the terms of the settlement in sufficient detail to alert those with adverse viewpoints to investigate and to come forward and be heard. We find the content of the settlement notice to be adequate.
67 Finally, Sanchez complains that the simultaneous negotiation of attorneys' fees and substantive issues in the settlement discussions was improper. He describes possible trade-offs between additional benefits to the class and attorneys' fees, and argues that these are improprieties which should weigh toward reversal. 68 Although we find the scenarios offered by Sanchez to be no more than suggestive of mere potential conflicts, we cannot endorse the procedure used here to reach agreement on attorneys' fees. Negotiation is necessarily a give and take process, and all active elements are weighted in the balance. We cannot indiscriminately assume, without more, that the amount of fees have no influence on the ultimate settlement obtained for the class when, along with the substantive remedy issues, it is an active element of negotiation. See Prandini v. National Tea Co., 557 F.2d 1015, 1021 (3d Cir. 1977). Nor do we believe that this potential conflict disappears simply because there is no fund or money damages being negotiated. Financial consequences of injunctive relief are a significant consideration to the institution negotiating a remedy, and the potential conflict 19 between class counsel and the members of the class remains. 20 69 Whether the existence of this potential conflict requires a trial court to reject a settlement proposal depends upon the circumstances of each case. The presence of simultaneously negotiated attorneys' fees should cause the court to examine with special scrutiny the benefits negotiated for the class. It would rarely be an abuse of discretion for a trial court to reject a settlement proposal where such combined negotiation took place. But rejection of a settlement is not automatically required in such cases there may be circumstances present which appear to neutralize the potential for impropriety. Such a judgment is appropriately within the sound discretion of the trial judge who can be sensitive to the dynamics of the situation. Thus, while we strongly discourage the simultaneous negotiation of attorneys' fees and substantive issues in class action settlement negotiations, accord, Prandini, 557 F.2d at 1021, we do not believe rejection of a resulting settlement in every case is appropriate. 70 This case, while presenting the evil of simultaneously negotiated attorney fees, also contains such neutralizing elements. The United States Department of Justice has been an active participant in this case on the side of the plaintiff class since before the trial on the merits. It participated in the negotiations leading to settlement, and placed its imprimatur on the ultimate proposal. The participation of a government agency in such proceedings serves to protect the interests of the class against possible improper dealings. Its concurrence in the approval of a settlement is properly an element for the Court to consider. Holiday Magic, Inc., 550 F.2d at 1178. See Developments, supra, at 1563. We believe this participation to be a significant factor in quieting the potential for unfair treatment of minority interests within the plaintiffs' class. While the Justice Department's involvement is not determinative of any issue, it weighs favorably in issues focusing on potential unfairness to absentee interests. Further, we believe it to be of some mitigating value that there was statutory authorization for an award of attorneys' fees to plaintiffs. See 20 U.S.C. § 3204 (formerly 20 U.S.C. § 1617). Again, while this is not determinative, and not a justification for class action parties to engage in simultaneous negotiation in the future, we believe it is a mitigating factor properly considered in this case. Under these circumstances, we do not believe that the trial judge abused his discretion in approving the settlement.