Court Opinion

ID: 7005214
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:49:12.015693+00
Date Added: 2024-06-11T16:10:01.830111
License: Public Domain

MICHAEL, Circuit Judge,
concurring in part and concurring in the judgment:
The only fair rule gives the right of appeal to an unnamed class member who objects to a settlement in district court. This rule, which is steeped in tradition and followed in three of our circuits, does not burden the class action system. I- therefore respectfully disagree with the majority’s decision, stated in part III of its opinion, that an objecting class member who does not intervene lacks standing to appeal a settlement order. Nevertheless, because I otherwise agree with the majority, I concur in the judgment and in parts I, II, and IV of the court’s opinion.
I.
An unnamed class member has the right to object in district court to a proposed class action settlement. See Gould v. Alleco, 883 F.2d 281, 284 (4th Cir.1989); 7B Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1797, at 376 (2d ed.1998). Typically, the unnamed class member may file written objections and appear at the fairness hearing to contest the reasonableness of the proposed settlement. See 2 Herbert Newberg & Alba Conte, N&wberg on Class Actions § 11.56, at 11-139 (3d ed.1992). Although a district court has considerable leeway in controlling the course and scope of fairness proceedings, an objector is generally entitled “to be heard, to examine witnesses and to submit evidence on the fairness of the settlement.” Flinn v. FMC Corp., 528 F.2d 1169, 1173 (4th Cir.1975). The rights of an unnamed class member who objects to a settlement should not be cut off as he walks out the door of the district court. Indeed, better reasoned precedent holds that an un*214named, objecting class member has standing to appeal a district court order approving a class action settlement. See In re Painewebber, Inc. Ltd. P’ships Litig., 94 F.3d 49 (2d Cir.1996); Bell Atl. Corp. v. Bolger, 2 F.3d 1304 (3d Cir.1993); Marshall v. Holiday Magic, Inc., 550 F.2d 1173 (9th Cir.1977); see also 7B Wright et al., supra, § 1797, at 360-61 (“Of course, if the class member appears in response to the notice and puts forth his objections, he can attack the dismissal or compromise [of the class action] on appeal from the entry of the final judgment.”). The rule that allows an unnamed class member to appeal a settlement order is rooted in early American equity jurisprudence. Under the old equity rules, cases could be brought by representative parties: when “parties are exceedingly numerous, and it would be impracticable to join them ... the court will not insist upon their being made parties; but will dispense with them, and proceed to a decree.” Joseph Story, Commentaries on Equity Pleadings § 94 (10th ed. 1892). And, those “who are not directly made parties” have the right to “come in under the decree, and take the benefit of it, or show it to be erroneous, or entitle themselves to a rehearing.” Id. § 96. In other words, if an unnamed party was bound by the decree, he had the right to take an appeal. Today, it is still fair and efficient to allow an unnamed class member to appeal an order approving a class settlement, as long as he has presented his objections in district court.
First, the unnamed class member’s legal rights are affected by the order approving the settlement. This gives the class member standing to object to the settlement in district court. See Petrovic v. Amoco Oil Co., 200 F.3d 1140, 1153 (8th Cir.1999) (holding that an unnamed class member has a due process right to object at the fairness hearing). It is inconsistent with due process to deny the same class member standing to appeal the settlement order after he has exercised his right to object in district court. Cf. Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985) (noting that an unnamed class member has a due process right “to be heard and participate in [class action] litigation” in state court).
Second, the unnamed class member, as a prerequisite for appeal, must state his objections to the settlement in district court. The class representatives and the defendants thus face potential appeals only from those unnamed class members whose objections are denied in district court. In most instances an objector will have little incentive to appeal because the projected expenses will outweigh the potential for convincing the appeals court that the district court abused its discretion in approving a settlement after considering the objector’s concerns.
Third, affording unnamed class member-objectors the right to appeal serves to encourage fair settlements in class action cases. As the Third Circuit has said, class actions present the risk that
[plaintiffs’ attorneys and the defendants may settle in a manner adverse to the interests of the plaintiffs by exchanging a low settlement for high fees.... The effort to obtain court approval entails the suspension, if not termination, of hostilities. In assessing settlements of representative actions, judges no longer have the full benefit of the adversarial process. In seeking court approval of their settlement proposal, plaintiffs’ attorneys’ and the defendants’ interests coalesce and mutual interest may result in mutual indulgence. The parties can be expected to spotlight the proposal’s strengths and slight its defects. In such circumstances, objectors play an impor*215tant role by giving courts access to information on the settlement’s merits.
Bell Atl. v. Bolger, 2 F.3d 1304, 1310 (3d Cir.1993) (footnote and citations omitted). Moreover, when everyone involved' — the class representatives, the defendants, the lawyers, and even the trial judge — knows that an objector has the right to appeal, it stands to reason that a settlement proposal will be designed and scrutinized with more care.
Fourth, we have not been presented with any evidence that objector appeals have gummed up the works in the circuits (the Second, Third, and Ninth) where they are expressly allowed. Class action litigation is plenteous in the district courts in these circuits, and there is no indication that the circuit courts have been faced with an unmanageable avalanche of appeals by objectors to class action settlements. Nor is there any indication that plaintiffs are reluctant to become class representatives or that plaintiffs’ lawyers are reluctant to file class actions because unnamed, objecting class members have the right to appeal. In short, the objector appeal right does not appear to be causing the class management and fragmentation problems that worry the majority.
Fifth, the rule authorizing objector appeals actually promotes efficiency in the class action system. For example, the unnamed. Rule 23(b)(3) class member who knows he has the right to appeal is less likely to opt out of the class because he will have the opportunity, after objecting, to appeal any settlement order he regards as unfair. In addition, the availability of appellate review of the denial of a class member’s objections will lessen the possibility of collateral attacks on settlement orders. See, e.g., Walker v. City of Mesquite, 858 F.2d 1071, 1075 (5th Cir.1988) (recognizing that unnamed class members may “challenge the adequacy of class representation ... by filing a separate lawsuit for that purpose”). With the right to appeal in place, a disgruntled class member will have more incentive to pursue his objections in the core action instead of waiting to launch a collateral attack on the judgment in separate litigation.
Finally, the majority’s approach — requiring an unnamed class member to formally intervene before he can appeal — is unduly burdensome to class members and creates its own inefficiencies. As the majority notes, an intervention application must be timely. See Fed.R.Civ.P. 24(a). Yet the majority fails to recognize that most unnamed class members receive very little information about their case as it goes along. See Jonathan R. Macey & Geoffrey P. Miller, The Plaintiffs’ Attorney’s Role in Class Action and Derivative Litigation: Economic Analysis and Recommendations for Preform, 58 U. Chi. L.Rev. 1, 20 (1991). Indeed, most unnamed class members do not realize that they might have an objection until they receive notice of the fairness hearing at the end of the litigation. This lack of information makes it difficult for unnamed class members to make timely decisions to seek intervention in an effort to protect their interests. The intervention requirement also has the potential to waste judicial resources, and it will not lead to quicker resolution of cases. The intervention requirement will place more work on the district courts who will have to deal with motions to intervene in addition to the fairness proceedings. Of course, if intervention motions are denied, the unnamed class members will be able to appeal the denials. The intervention alternative adopted by the majority therefore does nothing to take cax-e of its concern about “delay[ing] class settlement on appeal.” Ante at 208. At bottom, the majority’s approach forces costly intervention mo*216tions, creates more work for the district courts, produces about the same amount of work for the court of appeals, and delays final resolution without providing any meaningful benefit. On the other hand, a rule that allows objecting, unnamed class members to appeal keeps the focus strictly on the merits, that is, whether the settlement is fair and reasonable.
I firmly but respectfully disagree with the majority’s intervention requirement that denies appeal rights to unnamed class members. Giving unnamed, objecting class members the right to appellate review is much better insurance against unfair class action settlements. The latter approach appears to be working in three of our busiest circuits, and it will work here, too.
II.
I now turn to how I would deal with Robert Devlin’s appeal, which is before us. The district court denied his motion to intervene as untimely, and I (like the majority) would affirm that ruling. I, of course, disagree with the majority’s decision that Devlin lacks standing to appeal the order approving the settlement agreement. Because Devlin filed objections to the proposed settlement in the fairness proceedings, I would hold that he has standing to appeal. Nevertheless, after considering the merits, I would affirm the district court’s order approving the settlement. As the majority points out, the “district court thoroughly considered the fairness and adequacy of the settlement,” ante at 204 n. 10, giving careful consideration to Devlin’s objections. Devlin objected to the settlement because it nullified the 1991 COLA amendment. The COLA amendment had the effect of substantially increasing benefits to participants who retired before January 1, 1991. Because the removal of the COLA reduced the retirement benefits of pre-1991 retirees, Devlin argued that the settlement was unfair in that it adversely affected the pre-1991 retiree subclass. The district court found, however, that restoration of the COLA would jeopardize the viability of the retirement plan and would compromise the interests of the pre-1991 retiree subclass and the active subclass. The court concluded that Devlin’s position “was absolutely destructive of everybody’s rights and interests” and would “steer the ship onto the rocks.” A review of the record of the fairness proceedings reveals that the district court fully analyzed the proposed settlement for fairness and adequacy in accordance with the Jiffy Lube factors. See In re Jiffy Lube Sec. Litig., 927 F.2d 155, 159 (4th Cir.1991). The district court’s decision to approve the settlement was well within its discretion.