Duane Morris Class Action Review - 2023 - Report - Page 320
The parties agreed to a class-wide settlement, but the Allen Trust objected to the
settlement on multiple grounds, including that the plaintiffs did not give sufficient weight
to the Allen Trust’s claim when negotiating the settlement. The district court heard the
objection at a fairness hearing and continued the hearing to permit the Allen Trust to
conduct additional discovery. At the conclusion of the second fairness hearing, the
district court overruled the objection and approved the class-wide settlement. On the
Allen Trust’s appeal, the Fourth Circuit analyzed the burden of proof of an objector. It
opined that an objector must state the basis for its objection with enough specificity to
allow the parties to respond and for the district court to evaluate the issues at hand.
Furthermore, the parties must show that the objection does not demonstrate that the
proposed settlement fails one of Rule 23’s requirements. The Fourth Circuit determined
that as a “fiduciary of the class,” the district court “must protect the class’s interests from
parties and counsel overeager to settle (who may deny absent class members relief
they would otherwise receive) and frivolous objectors (who may impede or delay
valuable compensation to others)” and “may, in its discretion, grant an objector
discovery to assist the court in determining an objection’s merit.” Id. at 521. On the
record before it, the Fourth Circuit found the district court did not do “anything different
than what we have just outlined” and rejected the Allen Trust’s argument that the district
court “improperly placed upon it the burden of overcoming the settlement.” Id.
C.
Rulings On Class Notice Issues In Class-Wide Settlements
Part of the approval process also focuses on the parties’ notice plan to communicate
the class-wide settlement to class members. This process is rife with possibilities for
objections, as notice plans for a class-wide settlement must ensure that a high
percentage of class members will receive actual notice of the settlement.
In McAdams, et al. v. Robinson, 26 F.4th 149 (4th Cir. 2022), the Fourth Circuit
examined the standard for appellate review of class notice. In McAdams, a putative
class of borrowers alleged that a mortgage company violated federal and state
consumer protection laws in servicing their mortgage loans. The parties agreed to a
class-wide settlement and filed a joint motion to proceed before the magistrate judge
(who had mediated the settlement). McAdams objected to the settlement on the basis
that the class notice was insufficient; the settlement was unfair, unreasonable, and
inadequate; the release was unconstitutionally overbroad; and the attorneys’ fee award
was improper. The magistrate judge overruled the objection and approved the
settlement. The objector thereafter appealed to the Fourth Circuit. On appeal, the
objector challenged the magistrate judge’s jurisdiction to approve the class-wide
settlement because she did not consent to proceeding before the magistrate judge.
Under 28 U.S.C. § 636(c), the magistrate judge may consider approval of the settlement
by consent of the parties, and the objector argued that “parties” under the statute
included absent class members like her. The Fourth Circuit recognized this was a
question of first impression, but it decided to follow “every other circuit to address the
issue” in determining that absent class members are not parties. Id. at 155. It opined
that Congress did not intend absent class members to be parties, and that the practical
effect of the objector’s interpretation would mean that the district court would have to
seek the consent of the almost 350,000 absent class members, which was impractical.
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Duane Morris Class Action Review – 2023
