Testimony to the Federal Civil Rules Advisory Committee on Proposed Amendments to Rule 23 of the Federal Rules of Civil Procedure

Abstract

On November 3, 2016 in Washington, D.C., the federal Civil Rules Advisory Committee heard testimony on its proposed amendments to Federal Rule of Civil Procedure 23. Included in the Committee’s proposals is a new Rule 23(e)(5)(B), which would require that payments to class-action settlement objectors and their lawyers be submitted to the district court for approval – that is, the settling parties would not be permitted to pay off objectors or their lawyers on their own. In 1993, the Rules were amended to require that objections to class-action settlements could be withdrawn only with the district court’s approval. See Fed. R. Civ. P. 23(e)(5). But, importantly, that Rule does not apply while a district court’s approval of a class-action settlement is pending on appeal – meaning that objectors and their lawyers may extract payments from the settling parties using a pending appeal as leverage. Among other improvements, the proposed Rule would apply during appeal. (In 1999, I proposed to the Committee that objector settlements be subject to court approval, including while challenges to class-action settlements are pending on appeal.)

The document accompanying this abstract contains two items. First, it includes my written testimony addressing proposed Rule 23(e)(5)(B) submitted to the federal Civil Rules Advisory Committee in advance of its November 3, 2016. In that testimony, I propose that the new Rule include a strict standard for district-court approval of side-deals with objectors and their lawyers. This standard would make it difficult for settlement objectors and their lawyers to extract deals that would provide them benefits different from the class-wide settlement approved by the court. If we want to combat extortion in the class-action settlement process, disparate treatment for objectors and their lawyers should be a rare exception. My written testimony includes as an attachment my 1999 proposal on the subject.

Second, the document accompanying this abstract also includes my written notes on the oral testimony that I gave to the Advisory Committee on November 3. My oral testimony covers not only my thoughts on proposed new Rule 23(e)(5)(B), but ideas about reforms to Rule 23’s notice requirements. Committee members questioned me about the notice issues, but the Committee’s questions and my responses are not available here.

Keywords: Rule 23, civil procedure, class actions, objectors, notice, attorney, fees, settlement