Since 2011, a Subcommittee of the Federal Rules Advisory Committee has been mulling changes to Rule 23 of the Federal Rules of Civil Procedure. On April 14, 2016, the Advisory Committee forwarded proposed changes to the Standing Committee on Rules of Practice and Procedure, recommending that they be published for public comment. On August 12, the Standing Committee published a draft. Any approved changes will be made effective December 1, 2018.
The most significant changes involve measures to deter “bad faith” objectors. Under the new Rule 23(e)(5)(B), the Court must approve any side payment to an objector or objector’s counsel associated with withdrawing an objection or abandoning an appeal from a judgment approving a settlement.
Also significant are changes involving the criteria Courts must use to approve a class settlement. The committee notes that different Courts have developed their “own vocabulary” to describe how to ensure that settlements are fair, reasonable, and adequate, and that the amendment was not meant to “displace” any one Court’s conception of these factors, but to “focus the court and the lawyers on the core concerns of procedure and substance that should guide the decision whether to approve the proposal.” Thus, under the proposed Rule 23(e)(2), in order to approve a binding class settlement, the Court must consider whether, (A) the class representative and class counsel adequately represented the class, (B) the settlement proposal was negotiated at arm’s length, (C) the relief is adequate, and (D) class members are treated equitably relative to one another.
Additionally, the Committee clarified that the Rule 23(e) requirements for settlement, voluntary dismissal, or compromise apply to putative settlement classes as well as certified classes, and the proposed rules now allow for e-mail notice for certified and putative 23(b)(3) classes.
The Committee also broadened the wording regarding notice to recognize that electronic notice, rather than mail notice, may be the appropriate method, depending upon the particulars of the case.
The Committee did not address more controversial proposals which (among other things) sought to address (1) the Circuit Split over when classes may be certified for particular issues, (2) the contours of the implicit “ascertainability” requirement, and (3) the propriety of “no injury” class actions.
Public hearings regarding the new rule will be held in Washington D.C. on November 3,2016, Phoenix, Arizona on January 4, 2017, and Dallas, Texas on February 16, 2017. Public comments are due February 15, 2017.