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February 29, 2016 Articles

Helpful Class Settlement Guidance from Two Recent Circuit Opinions

A minority of courts have created a "public policy" exception to Article III standing

by J. Trumon Phillips

Two recent opinions issued by panels for the Fourth and Eleventh Circuits approved class settlements and provide helpful guidance on crafting class settlement agreements likely to withstand objection. In Greco v. Ginn Dev. Co., LLC, an Eleventh Circuit panel considered the objections of lone objector Christopher Greco to class settlement with all purchasers of real estate in one of the defendants’ developments. 14-11443, 2015 WL 7755673 (11th Cir. 2015).

Greco challenged the substance of the settlement, class notice, and the scope of the settlement release. In rejecting Greco’s challenges, the court made several useful observations regarding the substance of the release and the objection process. The court first addressed Greco’s fairness considerations, noting that a settlement cannot be approved unless it is found to be “fair, adequate and reasonable and [] not the product of collusion between the parties.” Id. at *3, It went on to identify the factors considered in the Eleventh Circuit in making that determination:

(1) the likelihood of success at trial; (2) the range of possible recovery; (3) the point on or below the range of possible recovery at which a settlement is fair, adequate and reasonable; (4) the complexity, expense and duration of litigation; (5) the substance and amount of opposition to the settlement; and (6) the stage of proceedings at which the settlement was achieved.

Id. The court found the district court to have properly considered the relevant factors, noting among other things, “substantial hurdles that affected the class’s likelihood of succeeding on the merits” as well as difficulty proving “Defendants’ actions were the cause of [] damages in light of the contemporaneous ‘sharp rise and subsequent crash’ of virtually every housing market in United States.” Id. at *4.

Turning to the class notice, the court rejected Greco’s argument that the notice failed to apprise class members of the scope of the release. While the notice need not contain “every material fact,” the panel found that, “in this instance, all material facts were available to class members because a full copy of the settlement agreement, and the release, were available on a website referenced in the Notice.” Id. at *5.

The panel disagreed with Greco’s contention that the 45-day deadline for class members to submit objections was “extremely short,” observing that “Courts have consistently held that 30 to 60 days between the mailing . . . of class notice and the last date to object or opt out, coupled with a few more weeks between the close of objections and the settlement hearing, affords class members an adequate opportunity” to consider and, if desired, take action concerning a proposed settlement. Id.

Finally, the court rejected Greco’s argument that “the requirements for objections were ‘onerous’ and too confusing and complex for pro se litigants.” Id. To object to the proposed settlement, the Notice required, among other things, that objectors identify the lot of real property purchased and provide a “written statement explaining the reasons for . . . objection, together with any legal support.” Id. at *6. The panel took no issue with this requirement, rejecting Greco’s contention that the notice “for all practical purposes require[ed] [objectors] to seek out counsel” and explaining the notice did not require an objector to file legal or documentary support. It further observed that “[t]here is nothing unreasonable about requiring an objector to explain the basis for the objection.” Id.

Likewise, Berry v. Schulman, a Fourth Circuit decision approving a class settlement over objection, provides valuable insight on the analysis applicable to class settlements primarily providing injunctive relief. 807 F.3d 600 (4th Cir. 2015). The plaintiffs alleged that defendants failed to provide Fair Credit Reporting Act protections in connection with sale of personal data reports to debt collectors. Following lengthy and laborious settlement negotiations, the district court certified a settlement class under rule 23(b)(2) and approved a settlement requiring extensive revamping of the defendants’ product offerings that would make defendant “the industry leader among data aggregation companies in the protection of customer information provided to debt collectors.” Id. at 5–6. A group of objectors challenged the settlement as “unfair and inadequate because it releases class members’ statutory damages claims without providing for any monetary relief in exchange.” Id. at 30.

In addressing the objectors' primary complaint, the panel explained that “the fairness of a deal under which class members give up statutory damages claims in exchange for injunctive relief depends critically on an assessment of the Plaintiffs’ case that they are entitled to statutory damages in the first place.” Id. at 8. Noting both that plaintiffs only could recover the statutory damages in question upon a showing that defendant had “adopted an ‘objectively unreasonable’ reading” of the relevant statutory provision, and FTC guidance in line with defendant’s interpretation of the provision, the panel concluded that plaintiffs were not likely recover as it was “hard to see how [defendant] can be said to have acted unreasonably.” Id. at 32–33.

The Berry court further clarified that the applicable analysis considered the likelihood of recovery of monetary damages, and also the “benefit to the (b)(2) class of ‘substantial [injunctive] relief without the risk of litigation.’” Id. at 33. The court noted the district court’s assessment of the injunctive relief as “‘a substantial, nationwide program that addresses the issues raised in the Complaint . . . and will result in a significant shift’ in industry practices” as well as the finding by an information privacy law expert that the injunctive relief “provides customers with benefits so substantial that their monetary value is in the billions of dollars.” Id.

Keywords: litigation, class action, derivative suits, class settlements, class notices

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