Court Opinion

ID: 4712142
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:37:53.107009+00
Date Added: 2024-06-11T08:07:12.316346
License: Public Domain

Sanders, J.
(dissenting) — The overarching issue is whether the trial court abused its discretion by approving a *202class action settlement in light of its earlier decision to deny certification of the same class for litigation purposes. The court’s approval of the settlement as fair, adequate, and reasonable is premised on a discounted settlement value due to denial of class certification. This, however, is legally erroneous since class certification for settlement purposes must satisfy a stricter standard than class certification for the purpose of litigation.
There can be little doubt the trial court approved this meager settlement because of its prior decision denying class certification for trial:
[C]ertainly the legal posture that this case is in I think is instructive on what is or is not a fair and a reasonable and adequate settlement, and you know once the Court denied certification it makes it very difficult to litigate whatever individual interests that each of the individuals may have.
So I think that from the standpoint of where the case is that it is a remarkable settlement....
Verbatim Report of Proceedings (Sept. 28, 1998) at 107-08. However, in its final court order approving the settlement the trial court found class certification for settlement purposes to be appropriate:
This Court on September 22, 1997 found that class certification for trial purposes was inappropriate with respect to causation and damages. However, in the context of deciding whether the Settlement is fair, adequate and reasonable, common questions of law and fact exist and predominate over questions affecting only individual Class members. Therefore, the Class is sufficiently cohesive to warrant adjudication through settlement by representation; ....
Clerk’s Papers (CP) at 289.
The record demonstrates the trial court’s denial of certification for trial was the moving force that motivated the named plaintiffs to enter into settlement negotiations with Holland.
*203In light of the denial of plaintiffs’ request for discretionary review of the trial court’s class certification denial, it appeared that few cruise passengers could establish a [Consumer Protection Act, chapter 19.86 RCW] claim against [Holland] for its deceptive conduct. Thus, plaintiffs had good reasons under the circumstances for entering into the settlement with [Holland]. Although plaintiffs supported the fairness and adequacy of the settlement at the appellate court, they did so only because the trial court’s class certification ruling, coupled with the denial of discretionary review, left them no other real choice.
Suppl. Br. of Pls./Resp’ts at 18 n.17 (emphasis added).
In other words, denial of certification for litigation purposes coupled with the Court of Appeals’ refusal to review that denial sounded the death knell to the class members’ ability to prosecute their claims against Holland in a practical and economic manner. The fact that the named plaintiffs now come before this court opposing the very settlement they previously negotiated, and defended below, further evinces their decision to settle was based on the denial of class certification for trial.
Class member Leonard Bebchick here objects to the proposed settlement, and reasonably so. The settlement would offer discount coupons having virtually no practical value to class members. Although Holland claimed the 1.5 million coupons offered had an aggregate face value of $20 million, the conditions placed on redeeming these coupons, coupled with the nature of Holland’s price schedule, ensured only a miniscule portion of these coupons would ever be used, and even then only if a class member paid Holland thousands of dollars for future trips. The coupons ranged in value from $10 to $50 and were subject to a so-called “capacity control” restriction, meaning they could be used only on travels booked less than 45 days from departure. However Holland frequently sells its cruises on an early-purchase, reduced-fare basis. Savings under this early-purchase scheme range as high as 20-25 percent of the ticket price, which sometimes goes as high as $5,000. Naturally, reasonable travelers will not forgo such large *204savings to receive a coupon credit of only $10 because early-purchase discounts would more than offset whatever illusory benefit might be achieved from the settlement.
Such a settlement makes sense only if there is no alternative. That was the case here because the trial court’s denial of class certification for trial, and denial of discretionary appellate review, defeated the only viable alternative available to the class.
Other courts have recognized denial of certification for trial may render the representative plaintiff’s individual claim insufficient to warrant the expense of continued litigation. See, e.g., Blair v. Equifax Check Servs., Inc., 181 F.3d 832, 834 (7th Cir. 1999); Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 293 (1st Cir. 2000). This realization led to the recent amendment of Fed. R. Civ. R 23(f) to provide a mechanism whereby appellate courts “can restore equilibrium when a doubtful class certification ruling would virtually compel a party to abandon a potentially meritorious claim or defense before trial.” Waste Mgmt. Holdings, 208 F.3d at 293.
Only by relying on its own erroneous prior decision denying class certification for litigation purposes could the trial court justify approving a settlement which provided little practical benefit to class members. Consequently, if the trial court’s original denial of certification for trial was improper, the foundation for its approval of the settlement was similarly flawed, as is our majority’s decision to affirm it. The Court of Appeals recognized this, as do I.
Although the majority correctly states “CR 23 is identical to its federal counterpart, Fed. R. Civ. P. 23, and thus, federal cases interpreting the analogous federal provision are highly persuasive,” majority at 188, my colleagues miss the seminal case on class settlements: Amchem Products, Inc. v. Windsor, 521 U.S. 591, 117 S. Ct. 2231, 138 L. Ed. 2d 689 (1997). There the Court delineated the three-step approach Fed. R. Civ. P. 23 mandates to certify a class for settlement purposes. CR 23 is identical to Fed. R. Civ. P. 23, and I agree there is no reason a different approach should *205be taken here. See Am. Disc. Corp. v. Saratoga W., Inc., 81 Wn.2d 34, 37, 499 P.2d 869 (1972); Brown v. Brown, 6 Wn. App. 249, 252, 492 P.2d 581 (1971).
Amchem involved a massive class action for asbestos-related injuries during the heyday of asbestos litigation. Amchem, 521 U.S. at 597. The proposed class covered several hundred thousand persons exposed to asbestos. Id. The Supreme Court’s reasoning, analysis, and holdings on class settlements under Rule 23 are instructive. The parties in Amchem proposed a settlement that, much like the settlement at bar, not only settled the claims of the named plaintiffs, but also necessarily precluded every class member who had not opted out from individually pursuing their claims following settlement approval. Id. at 597, 603. Like here, the district court only certified the class for “settlement purposes” under Rule 23(b)(3), and then approved the proposed settlement as fair and adequate. Amchem, 521 U.S. at 597, 605.
However the Court of Appeals for the Third Circuit reversed because the class could not satisfy the certification requirements of Rule 23(a) and (b). Georgine v. Amchem Prods., Inc., 83 F.3d 610, 634 (3d Cir. 1996), aff’d sub nom. Amchem Prods., Inc. v. Windsor, 521 U.S. 591. In addition to decertifying the class, the Court of Appeals also vacated the injunction prohibiting class members from individually pursuing claims. Georgine, 83 F.3d at 635. The court held even though the class action settled, the same certification requirements of Rule 23(a) and (b) must be satisfied as would be the case if it were going to trial. Georgine, 83 F.3d at 625.
With slight modification, the Supreme Court affirmed the Court of Appeals decision and adopted much of its reasoning. Amchem, 521 U.S. at 619-20. The Court held, as had the Court of Appeals, the certification requirements of Rule 23(a) and (b) must be satisfied before a court asked to approve a class settlement can determine the fairness thereof under Rule 23(e). See Amchem, 521 U.S. at 613-22.
Under Amchem, approval of a proposed class settlement requires a three-step approach. All class actions, whether *206settled or litigated, must first meet the prerequisites in CR 23(a) of numerosity, commonality, typicality, and adequacy of representation. See Amchem, 521 U.S. at 613. Second, if all four requirements of CR 23(a) have been met, proponents of a class settlement “must show that the action is maintainable under Rule 23(b)(1), (2), or (3).” Amchem, 521 U.S. at 614. Third, if, and only if, the certification requirements of both Rule 23(a) and (b) have been satisfied may a court analyze a proposed class settlement for fairness, adequacy, and reasonableness under CR 23(e). See Amchem, 521 U.S. at 620-22; Hanlon v. Chrysler Corp., 150 F.3d 1011, 1025 (9th Cir. 1998).
It is important to note the requirements in CR 23(a) and (b) are not for the benefit of the named plaintiffs or the defendants, but for the protection of the absent class members. Although absent class members will never see the inside of the courtroom, or in this case sit at the negotiating table, their legal rights are determined by the outcome.
Neither the trial court, the Court of Appeals, nor today’s majority follows the three-step analysis required by CR 23. The majority’s opinion is focused entirely on CR 23(e), and does not even consider whether the absent class members received the protection they were due under CR 23(a) and (b). Further, the majority’s fairness determination under CR 23(e) is premised on the same erroneous trial court decision to deny class certification for litigation purposes as was the trial court’s approval of the settlement.
Quixotically, although the trial court initially declined to certify the proposed class for litigation purposes under CR 23(b)(3), finding individual questions of law and fact to predominate over common questions, it later decided to certify the class for settlement purposes, finding:
(a) The Class is so numerous that joinder of all members is impracticable;
(b) There are certain questions of law or fact common to the above-described Class;
*207(c) For purposes of settlement, the claims of plaintiffs are typical of the claims of the above-described Class;
(d) The plaintiffs . . . will fairly and adequately protect the interests of the above-described Class in connection with the Settlement;
(e) This Court on September 22, 1997 found that class certification for trial purposes was inappropriate with respect to causation and damages. However, in the context of deciding whether the Settlement is fair, adequate and reasonable, common questions of law and fact exist and predominate over questions affecting only individual Class members. Therefore, the Class is sufficiently cohesive to warrant adjudication through settlement by representation; and
(f) For purposes of Settlement, certification of the above-described Plaintiff Settlement Class is superior to other available methods for the fair and efficient settlement of the claims of the Class. For purposes of Settlement, certification of the above-described Plaintiff Settlement Class is superior to other available methods for the fair and efficient settlement of the claims of the Class.
CP at 289-90. Cf. CP at 66; majority at 185. Findings (a) through (d) satisfy the prerequisite numerosity, commonality, typicality, and adequacy of representation requirements of CR 23(a). Findings (e) and (f) satisfy the predominance and superiority findings required by CR 23(b)(3).
This settlement approval is fatally wounded because the trial court found the settlement reasonable because of its prior decision to deny the same class certification for litigation purposes. However, the procedural protections in CR 23
demand undiluted, even heightened, attention in the settlement context. Such attention is of vital importance, for a court asked to certify a settlement class will lack the opportunity, present when a case is litigated, to adjust the class, informed by the proceedings as they unfold.
Amchem, 521 U.S. at 620 (emphasis added); Ortiz v. Fibreboard, Corp., 527 U.S. 815, 846, 119 S. Ct. 2295, 144 L. *208Ed. 2d 715 (1999). In the settlement context, as well as in a litigation setting, it is of utmost importance that CR 23(a) and (b) be applied to protect the interests of absent class members. Amchem, 521 U.S. at 620. We must recognize CR 23(e) operates in addition to, not instead of, the certification requirements of CR 23(a) and (b).
Subdivisions (a) and (b) focus court attention on whether a proposed class has sufficient unity so that absent members can fairly be bound by decisions of class representatives. That dominant concern persists when settlement, rather than trial, is proposed.
The safeguards provided by the Rule 23(a) and (b) class-qualifying criteria, we emphasize, are not impractical impediments—checks shorn of utility—in the settlement-class context. First, the standards set for the protection of absent class members serve to inhibit appraisals of the chancellor’s foot kind—class certifications dependent upon the court’s gestalt judgment or overarching impression of the settlement’s fairness.
Second, if a fairness inquiry under Rule 23(e) controlled certification, eclipsing Rule 23(a) and (b), and permitting class designation despite the impossibility of litigation, both class counsel and court would be disarmed. Class counsel confined to settlement negotiations could not use the threat of litigation to press for a better offer ....
Amchem, 521 U.S. at 621. In other words, a fairness hearing under CR 23(e) “is no substitute for rigorous adherence to those provisions of the Rule ‘designed to protect absentees.’ ” Ortiz, 527 U.S. at 849 (quoting Amchem, 521 U.S. at 620).
We must also recognize certification of a class for settlement purposes in an action for money damages implicates the Seventh Amendment rights of the absent class members to a trial by jury. Ortiz, 527 U.S. at 846. Class actions are representative suits that, when settled, impose a preclusive agreement by the named plaintiffs on themselves as well as absent class members. This necessarily precludes *209absent class members who possess valid legal claims from independently exercising their right to their day in court. Id.
Juxtaposing the trial court’s findings to support denial of class certification for trial with those made when it approved the settlement, the contradiction makes evident that the trial court misapplied CR 23. Whether a class action is headed for trial or for settlement, CR 23 imposes the same requirements. And here, the class proposed for trial was the same as the class proposed for settlement. Compare CP at 32 (setting out the proposed class for trial) with CP at 289 (setting out the approved class for settlement purposes). If the rule is the same and the class is the same, the two decisions by the trial court on the certification issue must be the same. But here they were not; they were 180 degrees apart. This is plain and palpable error.
As a result of the divergent findings the trial court improperly devalued the merits of the case by factoring in its erroneous decision to deny certification for trial. The trial court’s decision to certify the class for settlement demonstrates its decision to deny certification for trial was error. Thus, to discount the value of the plaintiffs’ case on this ground was untenable. The trial court abused its discretion. I would set aside the settlement and remand for further appropriate proceedings.
Chambers, J., concurs with Sanders, J.
Reconsideration denied February 20, 2002.