Rule 23 Amendments Awaiting Congressional Review
The final amendments to the Federal Civil Rules of Procedure, including amendments to Rule 23 class actions, are waiting for approval from Congress. The primary changes to Rule 23 affect the class action notice and settlement processes. The amendments acknowledge advancements in technology and the popularity of social media, while formalizing procedural and substantive notice and approval requirements already being employed in some federal courts.
If approved, the amendments will become effective December 1, 2018.
Here’s what employers need to know:
Preliminary Approval: No longer is moving for preliminary approval a perfunctory task. The amendments to Rule 23(e) would place additional substantive requirements on parties moving for preliminary approval, requiring them to demonstrate the proposed settlement will likely be granted and the court will likely certify the class for purposes of settlement. Historically, federal courts had denied preliminary approval motions for failure to provide estimated class size, description of how the settlement funds would be distributed, and a draft notice. By requiring this information at the preliminary approval stage, the amendment makes mandatory what courts were already considering. While this amendment likely will result in more extensive early class discovery, it reduces the risk associated with a notice process that may never be approved.
Form of Notice: The amendments to Rule 23(b)(3) eliminate the requirement that class notice must be sent by first class mail, instead permitting delivery through “electronic means” such as emails and text message, which will likely be more cost effective. In permitting alternate means of notice, counsel remains obligated to consider the class members’ overall accessibility to email and social media. And, because inboxes are flooded with hundreds of daily emails, to maximize the deliverability rate, it is critical for a notice to be drafted and distributed in a manner that will not get filtered out. Employers should consider revising their electronic communication policies to ensure professional email accounts are not being used for non-work related purposes to minimize workplace disruption.
Settlement Approval: The amendments to Rule 23(e)(1) expand upon the idea that a settlement must be “fair, reasonable, and adequate” by setting core factors the parties must demonstrate in seeking approval. To standardize the final approval process, the amendments set the following criteria: 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.”
Class-Member Objections: The amendments to Rule 23(e)(5) clarify what must be included in an objection, requiring the objector to state with specificity the basis for any objection and whether the objection is being made only by the objector, by a subset of the class, or by the entire class. These amendments may deter “serial objectors” with ulterior and personal financial motives from delaying settlement approval and distribution to injured class members.
Appeals: Amended Rule 23(f) would clarify that interlocutory appeals may be sought only after class certification is granted or denied, not from an order to give notice under Rule 23(e)(1). It would also expand the filing time for an interlocutory appeal to 45 days (from 14 days) if any party is the United States, a United States agency, or a United States officer.