Class Actions, Federal Practice

Amendments to Federal Class Action Rules May be on the Horizon: Settlement, Issues Classes, and Notice Requirements on the Front Burner

24258913Class action settlements, certification of issues classes, and class notice requirements are among the topics that may be the subject of upcoming proposed amendments to Federal Rule of Civil Procedure 23. On the agenda for the October 30-31, 2014 Advisory Committee on Civil Rules meeting is a report from the Rule 23 Subcommittee, which was formed in 2011 to consider modifying the rule governing class actions for the first time since the 2001-2003 cycle of amendments. Since its formation, the Subcommittee has identified several issues that may necessitate changes to Rule 23 and is now moving forward to seek input from the full Advisory Committee, as well as industry professionals. The Subcommittee reported that it was slated as a “Showcase Program” in the American Bar Association’s 2014 National Class Action Institute held last week in Chicago, which would be the first opportunity to seek input from the industry on what issues need to be addressed in modifying Rule 23. Below, we highlight the main issues identified by the Subcommittee thus far. The Subcommittee plans to solicit additional industry input through mini-conferences or other means, prior to submitting proposed amendments for the Advisory Committee’s consideration. The Subcommittee anticipates that “more focused proposals” will be presented to the Advisory Committee at some point in 2015.

Front Burner Issues for Consideration

Through its several meetings, the Subcommittee has developed a robust list of tentative topics to be addressed by changes to Federal Rule of Civil Procedure 23. The Subcommittee has identified the following “Front Burner” issues:

  1. Settlement Approval Criteria: The 2003 expansion of Rule 23(e) produced criteria for considering approval of settlements based on the “fair, reasonable, and adequate” analyses in case law, but more guidance might be needed due to varying standards that have been developed in the courts and the lack of guidance currently provided to the district judges.
  2. Cy Pres Treatment: Although there is no provision in Rule 23 that addresses cy pres treatment of settlement funds, it is occasionally used and has been criticized. The Subcommittee suggests that a rule change may be a proper approach to setting limits on cy pres, noting Chief Justice Roberts’ observation in the opinion on denial of cert. in Marek v. Lane, 134 S.Ct. 8 (2013) that “[i]n an appropriate case, this Court may need to clarify the limits on the use of such remedies.” The Subcommittee pointed to the ALI Aggregate Litigation provision on cy pres treatment as a potential model.
  3. Settlement Certification: Faced with a class action settlement that had been simultaneously filed with a complaint, answer, and joint motion for class certification, the U.S. Supreme Court held in Amchem Products, Inc., et al., v. Windsor, et al., 117 S.Ct. 2231 (1997) that whether a proposed settlement meets the fair, reasonable, and adequate standard of Rule 23(e) is relevant to a class certification decision but cannot replace the certification analysis required by Rule 26(b)(3). In Amchem, the Supreme Court referenced a pending proposed rule amendment that “would expressly authorize settlement class certification, in conjunction with a motion by the settling parties for Rule 23(b)(3) certification, ‘even though the requirements of subdivision (b)(3) might not be met for purposes of trial.’” The proposed amendment was withdrawn at the time, and the Subcommittee suggests that another attempt to draft a rule to govern settlement only classes may be warranted.
  4. Settlement Objector Misbehavior: In order to prevent “bad” objectors from trying to extract payments in exchange for dropping their objections that could hold up a proposed settlement, the Subcommittee suggests that additional safeguards may need to be built into the requirement that objections cannot be dropped without court approval.
  5. Appropriateness of “Issues” Classes: The Subcommittee noted that “issue certification” has become popular in some courts. The Subcommittee describes as “unnerving” the “blatant division in the circuits” regarding whether Rule 23(c)(4)’s provision for the maintenance of cases as class actions for “particular issues” can be reconciled with Rule 23(b)(3)’s requirements that common questions predominate over individual issues and a class action be the superior method of adjudication. Some means of reconciling the two provisions is suggested.
  6. Notice Issues: In light of advances in potential methods for providing notice, the Subcommittee suggests revisiting the requirement established by the U.S. Supreme Court in 1974 that notice must be served via first class mail. The Subcommittee also suggests that requiring notice for 23(b)(1) classes (potentially inconsistent adjudications) and 23(b)(2) classes (seeking declaratory or injunctive relief) may be more efficient and less costly, given advances in methods of communication.

Important Issues for Consideration

The Subcommittee identified several additional important issues for consideration, although not considered to be critical enough to rise to the level of a “front burner” issue: (1) consideration of merits issues during class certification; (2) defendants “picking off” potential class actions by satisfying the individual named plaintiff’s claims via Rule 68 offers; and (3) parameters for determining ascertainability of the class and adequacy of the class definition during certification. In presenting these issues for the Advisory Committee’s consideration, the Subcommittee did note that it may be difficult to address them via rule changes and in some cases might not be worth expending the resources to do so.

More Details

The Subcommittee reported that moving forward it will consider two submissions about Rule 23 that it received from the Lawyers for Civil Justice and the suggestion it received from a University of South Carolina professor to fashion amendments to address class action settlement issues identified in his scholarly article. Additional details regarding the issues summarized above and the submissions the Subcommittee received can be found in the Advisory Committee Meeting Agenda Book. The Agenda Book also contains details regarding issues that were considered during the process of identifying the key front burner and important issues presented in its report to the Advisory Committee. The Subcommittee expressed that it is open to considering all issues, not only those that it has identified in its report, and will narrow down the issues for proposed amendments in the future. We will keep you posted on developments.

Tony Lathrop

About Tony Lathrop

Tony Lathrop brings experience and a high level of analytical ability, professional credibility and creativity to handling litigation matters. He rigorously represents his clients' interests in a diverse range of claims and actions. A certified mediator, Mr. Lathrop has extensive experience representing business clients in mediation. His service to the legal profession in North Carolina has allowed him to develop relationships across the state that benefit the firm's clients.

Leave a comment

Your email address will not be published. Required fields are marked *

Spam Protection by WP-SpamFree

Welcome to the MVA Litigation Blog!

In an increasingly globalized and regulated business environment, companies are faced with ever-changing and complicated litigation and regulatory challenges. The Moore & Van Allen Litigation Blog provides cutting-edge information regarding developments in federal, North Carolina State, and international litigation, as well as in arbitration, regulatory enforcement, and related business practices.

Connect to Recent Authors

  • Tony Lathrop:  View Tony Lathrop's Bio View Tony Lathrop's LinkedIn profileFollow @TonyLathropLaw on Twitter
  • Subscribe to Blog Via Email

    Follow MVA


    Blog Topics


    Our Litigation Practice

    Headquartered in the banking and energy hub of Charlotte, North Carolina, Moore & Van Allen has assembled a team of litigators with the intellectual acuity, knowledge of complex commercial transactions, and breadth of experience necessary to successfully serve our clients in all aspects of sophisticated business litigation and white collar criminal defense.

    Guided by trial lawyers with years of substantial state, federal, and international experience, our team addresses the diverse challenges facing our clients, ranging from general commercial litigation and matters involving employment, antitrust, trust & estate, securities or corporate governance issues, to class actions, regulatory enforcement proceedings, and government & internal investigations.

    We represent large Fortune 500® corporations, as well as start-ups, in banking, securities, healthcare, manufacturing, construction, energy, and other industries. We work closely with our clients to develop strategies to meet their business needs, whether that includes taking a case to trial or appeal, arbitrating a case or finding an alternative means of resolution. Read More About Our Practice and Meet the MVA Litigation Team.


    No Attorney-Client Relationship Created by Use of this Website: Neither your receipt of information from this website, nor your use of this website to contact Moore & Van Allen or one of its attorneys creates an attorney-client relationship between you and Moore & Van Allen. As a matter of policy, Moore & Van Allen does not accept a new client without first investigating for possible conflicts of interests and obtaining a signed engagement letter. (Moore & Van Allen may, for example, already represent another party involved in your matter.) Accordingly, you should not use this website to provide confidential information about a legal matter of yours to Moore & Van Allen.

    No Legal Advice Intended: This website includes information about legal issues and legal developments. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You should contact an attorney for advice on specific legal problems. (Read All)