Hunton Employment & Labor Perspectives

The Supreme Court recently approved substantial changes to the Federal Rules of Civil Procedure, including amendments to Rule 23, which covers federal class actions.  The amendments to Rule 23 seek to modernize and standardize the notice, settlement, objection, and appeal procedures.  If Congress approves the amendments, they will become effective December 1, 2018.     

 Under the amended Rule 23, parties seeking preliminary approval  must meet an arguably higher burden than is currently in place.  Among other things, the parties must “ establish that the court “will likely be able to approve the proposal” and “certify the class for purposes of judgment on the proposal.”   In order to meet this burden, the parties seeking preliminary approval of the settlement may need to engage in more extensive class discovery than was the case under the current preliminary approval standard that tends to focus on class size, the contents of the draft notice, and distribution of the funds.

The amendments also establish new criteria that courts must consider in determining whether a settlement proposal is “fair, reasonable, and adequate” under Rule 23(e)(2).  Specifically, courts must consider whether “class representatives and class counsel have adequately represented the class”; whether the settlement was “negotiated at arm’s length”; whether the relief provided for the class is adequate (taking into account such factors as costs, risks, and effectiveness of the proposed method of distributing relief to the class, among others); and whether “class members are treated equitably relative to each other.”  Many federal courts already analyze many of these factors, but the amendments would make these factors mandatory.

The amendments seek to modernize class notice by allowing notice by “electronic means, or other appropriate means” for any class certified under Rule 23(b)(3), as well as any settlement class preliminarily approved by the court under Rule 23 (e)(3).  This may do away with the requirement, in most cases, that class members receive notice by mail.

The proposed amendment would also modify Rule 23(e)(5) to clarify what must be included in an objection to a proposed settlement.  Under the amended rule, any objection must state whether it applies “only to the  objector, to a specific subset of the class, or to the entire class,” and also must state “with specificity” the grounds for the objection.

Finally, regarding the appellate process, the proposed amendment to Rule 23(f) would allow interlocutory appeals only after class certification has been decided, and would not allow an appeal from an order to give notice under Rule 23(e)(1).