October 24, 2016 Articles

Do We Really Need Two Rounds of Largely Duplicative Briefing?

An argument for a streamlined settlement approval process.

By Adam Polk

Rule 23 of the Federal Rules of Civil Procedure turns 50 this year. Courts and practitioners have had five decades to familiarize themselves with class action procedure and the familiar “class action two-step” settlement approval choreography, with a preliminary approval motion followed by a final approval motion and attendant briefing. Although Rule 23 has never mandated a “motion for preliminary approval,” federal rule makers are about to change that. Amendments approved for publication by the Standing Committee in June would expressly provide (for the first time) for a preliminary review of settlements and specify the information the settling parties will be required to provide to the court at the preliminary review stage. Rule makers refer to the delivery of information to the court at the preliminary review stage as “frontloading.”

Even though class actions are no longer the novelty they once were, class action settlements are still being presented to courts in the same way today as they have been for the past 50 years—through two, often repetitive and overlapping rounds of briefing. In light of the proposed “frontloading” rule changes and the civil rules committee’s encouragement of pilot projects to test whether changes in the rules would advance civil practice, the time has come for courts to consider, in appropriate cases, a streamlined approach to the class action settlement approval process. The proposal is for the proponents of the settlement, almost invariably the class plaintiffs, to skip the traditional first round of briefing in support of preliminary approval and to cut to the chase by filing their motion for final approval at the outset. The final approval motion would be supported by all of the evidence on which the class plaintiffs intend to rely for final approval.

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Under the one-brief approach to class action settlement briefing, all parties would be provided with the same information they now receive, only sooner. The purpose of this article is to explain how the proposed streamlined settlement briefing process would work in practice and why it addresses the needs of all relevant stakeholders.

Class Action Settlement Basics
Today, class action settlements are presented to the court through a two-phased settlement briefing process. This process was codified by the Manual for Complex Litigation based on existing practice, but it is not mandated by Rule 23.

Class counsel first prepare a motion for “preliminary approval” of the settlement, in which they describe the settlement terms, the process leading up to the settlement, and why the settlement should be approved as “within the range of reasonableness.” The purpose of the motion for preliminary approval is to secure an order preliminarily approving the settlement, approving the form of notice to the class, and scheduling a final approval hearing. If the settlement was reached before a ruling on the plaintiffs’ motion for class certification, the motion will also seek an order certifying the class, for settlement purposes only, and appointing the class representatives and their counsel to serve in a representative capacity.

If the court grants preliminary approval, notice is given. Class members have a period during which they can object or opt out. Class counsel then submit a “final approval” motion, in which they again describe the settlement and why it should be approved under Rule 23(e). The final approval motion is accompanied by any evidence class counsel wishes to submit in support of final settlement approval. Evidence submitted in support of the settlement may include declarations of class counsel, the named plaintiffs and class members, the mediator, and expert witnesses. Class counsel will also submit evidence that notice was given in accordance with the preliminary approval order and, if applicable, the Class Action Fairness Act. If there are objections to the settlement, class counsel submits a reply responding to the objections.

As a final step, the court holds a fairness hearing to consider the settlement in light of all of the briefing and evidence submitted, including class member objections and opt-out requests. See Manual for Complex Litigation (Fourth) § 21.632 et seq. (2004).

The Proposed Amendments to Rule 23(e) “Frontloading” the Settlement Notice Process
On June 7, 2016, the Standing Committee directed that certain proposals amending Rule 23(e) to “frontload” the settlement approval process be published for public comment. The purpose of the amendments is to ensure that parties “give the court a full picture” of the settlement before notice goes out. The civil rules committee developed these amendments after hearing at length from a range of interested parties. The amendments include

  • a provision that the “parties must provide the court with information sufficient to enable it to determine whether to give notice of the proposal to the class” and

  • specification of the information that should be provided to a district court when it is considering whether to grant preliminary approval, including

  • the nature and extent of settlement benefits,

  • details about the claims process,

  • the likely range of litigated outcomes and the risks of continued litigation,

  • the extent of discovery completed,

  • the breadth of the release, and

  • the proposed attorney fee award.

Details about the proposed frontloading amendments are reflected in the agenda book for the June 6–7, 2016, meeting of the Committee on Rules of Practice and Procedure (see pages 252–53 and 255–56).

Here’s where practitioners can expect some significant changes: The standard for preliminary approval has traditionally been undemanding—to secure an order granting preliminary approval, the court was required to find only that the settlement was free from collusion and fell within the range of possible approval, sometimes described as a “ballpark” test. E.g., In re AT&T Mobility Wireless Data Servs. Sales Litig., 270 F.R.D. 330 (N.D. Ill. 2010) (In considering preliminary approval, courts should “insist that the parties present evidence that would enable possible outcomes to be estimated, so that the court can at least come up with a ballpark evaluation.”) (quotation omitted). The preliminary approval brief was used to familiarize the court with the terms of the settlement and put the approval process in motion.

The frontloading amendments will require class counsel to increase their level of proof when submitting settlements for preliminary review. The parties will be required to make a concrete showing in response to the specific requirements of Rule 23(e). The “preliminary review” brief will need to be more comprehensive, and “the parties must provide the court with information sufficient to enable it to decide whether notice should be sent.” See Agenda Book at 252.

In light of the impending changes to Rule 23(e), the following question needs to be asked: Do we still need a preliminary and a final approval brief in every case? Or could class counsel simply file their motion for final approval at the outset, including all of the elements of the showing required for “preliminary review” and any evidence relied on in support of final approval, in response to which the court would issue a notice order and schedule a fairness hearing.

Origin of Two-Tiered Settlement Briefing
Nothing in Rule 23 requires two rounds of briefing in support of settlement. Rule 23 simply provides that the court “may approve [the settlement] only after a hearing and on finding that it is fair, reasonable, and adequate.” Fed. R. Civ. P. 23(e)(2). The two-tiered briefing convention originated in the first cases to take up the issue of class action settlement approval, and it was then memorialized in the Manual for Complex Litigation. See Alaniz v. Cal. Processors, Inc., 73 F.R.D. 269, 273 (N.D. Cal. 1976); Manual for Complex Litigation (Fourth) § 21.632 et seq. (2004). The staggered process exists because of (1) the need to avoid fraud, collusion, or unfairness to the class; and (2) perceived complexities in class action litigation under Rule 23.

Alternative Approach: A Single “Motion for Approval of Class Action Settlement”
Courts now have half a century’s experience reviewing class action settlements and considering the attendant issues—such as class notice, conditional class certification, the amount of attorney fees, and settlement administration. While these issues may have raised “complexities” sufficient to necessitate two layers of briefing in the past, that is not always the case anymore.

The alternative single-tiered process would operate as follows:

Step 1. Once the parties reach agreement on a settlement, plaintiffs file their motion for final approval at the outset, with all supporting materials, in a single motion for approval of class action settlement and an award of attorney fees. The motion would include any evidence the moving party intends to rely on in support of final approval of the settlement and the requested fees, along with a proposed form of notice and details about settlement administration, attorney fees, and all other factors necessary to allow the court to make a determination as to whether the proposed settlement is fair, reasonable, and adequate under Rule 23(e)(2). The motion would attach two proposed orders and a proposed form of judgment:

Proposed order finding the proposed settlement is reasonable. First, the motion would include a proposed order finding that the proposed settlement is reasonable, conditionally certifying a class if no class has been certified, and directing that notice be issued.

Proposed order granting final approval. Second, the motion would include a proposed order finally approving the proposed settlement, certifying the class, appointing class counsel, awarding fees, and ordering that judgment be entered.

Proposed form of judgment. Third, as is the current practice, the motion would also include an agreed-upon proposed form of judgment for the court to enter upon approving the settlement.

Step 2. If the court issues an order finding that the proposed settlement appears reasonable and ordering notice, the parties proceed in the customary fashion and disseminate notice in accordance with the court’s order. If the court does not find that the proposed settlement is likely to receive final approval, the parties return to the drawing board.

Step 3. The court sets a single fairness hearing at a date sufficient to allow absent class members a reasonable opportunity to assess and act on their rights to object or opt out.

Step 4. Interested parties will submit objections to the settlement or requests to be excluded from the settlement. Plaintiffs will then address any objections in a reply in support of their motion for approval—a commonsense approach that mirrors typical motion practice.

Step 5. Following the fairness hearing, assessment of any settlement briefing, and analysis of any objections, the court decides whether to grant final approval.

The single-tiered settlement briefing solution might not work in every case. Cases that raise more complex or controversial issues might require two rounds of briefing. The single-brief alternative should therefore be adopted only in appropriate cases and upon court approval. Such a case-by-case approach to the single-brief alternative would be consistent with the advisory committee’s recent encouragement of the use of pilot projects as tools to “advance improvements in civil litigation by testing proposals that, without successful implementation in actual practice, seem too adventuresome to adopt all at once in the national rules.” Agenda Book at 506.

Impact of Single-Tiered Settlement Briefing on Stakeholders
Class action settlements implicate the interests of several constituencies: (1) the named plaintiffs, who led litigation of the case on behalf of the class and presumably favor the relief afforded by the settlement; (2) absent class members, who may take issue with the relief provided by the settlement and object or opt out accordingly; (3) the defendant, which, in agreeing to the settlement, normally has an interest in obtaining a release and achieving finality; (4) the court, which must ensure that the settlement is “fair, reasonable, and adequate” in accordance with Rule 23(e)(2); and (5) plaintiffs’ lawyers, who have invested in the case, assumed the contingent risk of nonpayment, litigated the case to resolution, and desire to be paid for their work.

The single-tiered approach to settlement briefing has practical benefits for each of these stakeholders that are superior to the two-tiered system that currently prevails. There are two central considerations for the stakeholders to a class action settlement—preservation of resources and ensuring adequate notice to the class. Assuming an ordinary class action case that the parties agree—and the court confirms—should be presented through a single settlement brief, both considerations weigh in favor of one settlement approval brief, instead of two.

Preservation of resources. Submitting two overlapping briefs, both advocating the same settlement for the same or similar reasons, may lead to inefficiencies and waste resources. Under the current system, plaintiffs’ lawyers need to research and prepare two substantially similar briefs, and they necessarily incur additional attorney fees in the process. Those fees ultimately come out of the settlement fund and would otherwise go to the class. The court similarly is asked to analyze two sets of settlement papers, which further taxes its resources.

Adequate notice. A single-tiered settlement approval process will work only if robust notice goes out to the class members with sufficient time to analyze and respond to the proposed settlement. Under the single-brief alternative, the court receives everything it needs to consider a proposed settlement up front, in a single brief, along with a proposed order finding that the settlement is reasonable, approving notice, and conditionally certifying the class if necessary. Once the court issues its preliminary order, the right of absent class members to respond to the proposed settlement can be preserved by setting the fairness hearing on a date that allows for a sufficient period of time after the deadlines to opt out and object. Class counsel can respond to any objections or comments from class members in reply.

Concluding Observations
As Rule 23 has aged, all actors in the world of class actions have become more experienced with the various issues implicated by class action settlements. In light of the forthcoming frontloading amendments to Rule 23, which will ensure a comprehensive notice program, it is our view that in certain cases—subject to court approval—a streamlined settlement briefing process involving a single motion would advance the interests of all relevant stakeholders while preserving procedural fairness and advancing the central purposes of the class action: efficiency, compensation, and finality.

Keywords: litigation, class actions, settlement, Rule 23 amendment, preliminary approval, frontloading

Adam Polk – October 24, 2016