For the past 50 years, Rule 23 of the Federal Rules of Civil Procedure has required district court judges to scrutinize proposed class settlements. Judges are told their duty to absent class members is akin to a fiduciary duty. We are reminded that district judges must “exercise the highest degree of vigilance in scrutinizing proposed settlements of class actions.” Reynolds v. Beneficial Nat’l Bank, 288 F.3d 277, 279–80 (7th Cir. 2002). In its present form, Rule 23(e) permits approval only when, after a hearing, the court finds the settlement “fair, reasonable, and adequate.”
The judicial gloss on this rule is that there’s lots for the district court to do. In one widely accepted formulation, the district court must weigh the following:
(1) the strength of the plaintiffs’ case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed and the stage of the proceedings; (6) the experience and views of counsel; (7) the presence of a governmental participant; and (8) the reaction of the class members to the proposed settlement.
Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004).
Unfortunately, the dynamics of the Rule 23 settlement process do not favor the judge. While class counsel is generally the movant, plaintiff and defendant share a community of interest in seeing the settlement approved. And in the absence of an objector, the court has no adverse party questioning the settlement. Rather, the burden of ferreting out problems falls wholly on the court.
Yet, too often, the court doesn’t get the information the judge needs. Here is what the district court should know but too often isn’t told.