Peter G. McCabe, Secretary
Committee on Rules of Practice and Procedure
Thurgood Marshall Federal Judiciary Building
Washington, D.C. 20544
Re: Proposal for Rule Change
Dear Mr. McCabe:
This office has been involved in numerous class actions, sometimes on behalf of the class plaintiffs and other times on behalf of objecting absent class members. I am writing to address a procedural problem affecting objecting class members that should, in our view, be addressed by the Committee on Rules. As discussed below, we believe an amendment to Rule 23(e) of the Civil Rules would be appropriate. However, because our suggestion concerns standing to appeal in certain class actions, a conforming amendment to the Rules of Appellate Procedure may also be appropriate. Therefore, we ask that copies of this letter be sent to the Chairs and Reporters of the Advisory Committees for both the Civil and Appellate Rules.
There is a split in authority over whether an absent class member, who appears before the district court in opposition to a proposed class action settlement, must formally intervene pursuant to Rule 24 (or at least have sought intervention) in order to have "standing" to appeal a judgment approving the settlement under Rule 23(e). Some courts have held that intervention is a prerequisite for appeal, 1 while others have held that intervention is not necessary. 2 Despite the deep split, the Supreme Court has declined to review the issue, including just last year.3
In our view, there are several reasons why intervention should not be required. First, intervention is designed to permit non-parties to be able to litigate the underlying case. Thus, potential intervenors file "complaints in intervention," setting out the claims that they wish to litigate against the defendant which they believe are not being adequately advanced by the named plaintiffs. In the settlement context about which we are concerned, however, the absent class member does not generally want (or have the resources) to litigate the case, and merely seeks to challenge a proposed settlement or some aspect thereof, such as the fees awarded class counsel. Requiring intervention does nothing to protect the interests of the courts or the settling parties. Assuming that absent class members are aware of the intervention requirement, they will file papers explaining the obvious fact that their interests are adverse to the settling parties and that they desire intervention status solely to protect their appellate standing. The district judge will be hard pressed not to grant intervention in such circumstances, since to do otherwise might be tantamount to denying the objectors' rights to appeal. In sum, requiring intervention is more work for both litigants and judges, with no countervailing benefit.
Second, if absent class members are required to intervene, the courts will become enmeshed in questions about whether that intervention gives the absent class members full party status typically accorded to "regular" intervenors. Thus, for instance, are intervenors unilaterally allowed to reject the settlement and litigate the case? Are their discovery rights the same as those of the named parties? These are important questions (for instance, we believe that objecting class members should have significant rights to discovery, but only relating to the settlement), but they should not turn on whether the absent class member is an intervenor. To be sure, the courts could grant "limited" intervention to absent class members to assure that they can appeal if necessary, but, if that is the only purpose, why require intervention in the first place?
Finally, the notion that intervention should be required to give an absent class member standing to appeal is contrary to the spirit of the rules governing civil litigation generally. Absent class members are "parties to the suit."4 Their claims, just like the claims of the named plaintiffs represented by the designated class counsel, must meet the requisite jurisdictional amount in diversity cases. 5 The typicality requirement of Rule 23(a)(3) is meant to assure that the class representatives' claims are similar, in every material respect, to those of the absent class members.
Thus, if absent class members appear in the district court and present arguments and evidence as to why the settlement should not be approved, as the Rules and the Manual for Complex Litigation allow, 6 there is no reason why the absent class members should be required to do anything more to appeal approval of the settlement. Since it is clear that the district court must entertain absent class members' objections without intervention, requiring intervention solely for appellate purposes is at odds with 28 U.S.C. § 1291's appeal as of right in civil cases. In the class action context, where pro se claimants are encouraged to participate in the objections process through the notice provisions of Rules 23(c)(2) and (e), there is all the more reason not to require adherence to formal legal requirements in order to preserve one's appellate rights.
A few examples of intervention problems in recent class action settlements should suffice to demonstrate that a rule change is necessary. In Bowling v. Pfizer 7 -- a case arising in the Southern District of Ohio -- absent class members filed objections to a proposed worldwide settlement concerning present and future relief for 50,000 individuals implanted with a defective heart valve. The class notice never apprised class members that intervention would be necessary to preserve their appellate rights, and none of the many objectors sought intervention. Indeed, at the time the case was filed, at least one of the leading commentators and other courts were of the belief that the Sixth Circuit was among the circuits where intervention was not a prerequisite to appeal. 8
After the settlement was approved, one group of objectors that had fully participated in the district court filed a notice of appeal. Shortly thereafter, counsel for these objectors was informed that case law in other circuits required intervention. Counsel sought to intervene. The district court declined to rule on the motion on the ground that the appeal had divested it of jurisdiction. On appeal, the Sixth Circuit affirmed the district court's decision not to rule on the intervention request, and dismissed the merits appeal in an unreported order, holding that non-intervening absent class members had no standing to appeal a class settlement approval. Thus, the result was that one of the most widely-reported, significant class action settlements in recent years underwent no appellate review whatsoever, despite vigorous opposition and preservation of numerous issues for appeal.
In the recent airline antitrust settlement, 9 clients of ours moved for intervention solely to preserve their appellate rights. In it order approving the settlement, the district court considered our motion for intervention as if it were a request for full party status under Rule 24, and denied intervention on the ground that "[t]he goals of Rule 23 would be defeated if the Court permitted every individual or entity that objected to discrete aspects of the settlement to intervene."10 The problem is that we only wanted an opportunity to appeal any settlement approval, not to participate in the actual litigation of the case. If we had sought appellate review, we would have had to appeal both the denial of intervention and the settlement approval, and, presumably, we would have had to prevail on the first question in order to have "standing" to raise the merits before the Eleventh Circuit.11
Finally, this office sought intervention in In re Ford Motor Co. Bronco II Products Liab. Litig.12 on behalf of absent class members who opposed a settlement. The motion for intervention, which was filed along with our clients' timely filed objections, made clear that we were seeking to preserve appellate rights in light of Fifth Circuit case law requiring intervention.13 The district court, in a lengthy order devoted solely to the intervention question, addressed the particular requirements of Rule 24, the question whether the request for intervention was timely, and other issues that would be relevant to a typical request for intervention in a litigated case, but which had very little to do with our clients' needs for intervention. The court granted intervention.14 However, most of the objectors -- represented by lawyers unfamiliar with class action practice and the Fifth Circuit rule on intervention -- did not seek intervention and, presumably, would have been unable to appeal had the court not rejected the settlement.15 Once again, the notice advised class members that they could object to the settlement by a certain date, but did not tell them of the consequences if they did not seek to intervene.
For these reasons, we believe that the Rule 23(e) should be amended to make clear that intervention is not essential to appeal the approval of a class action settlement. If necessary, the Appellate Rules should be amended to conform to the Rule 23(e) change. If, however, the Committee disagrees with our views, and believes that intervention is necessary, the Civil Rules should expressly require intervention in order to preserve appellate rights. While we think that such a requirement would be unnecessary and unfair, especially to pro se objectors, at least objectors could read the rule and know what to do. We assume that, if such a rule were adopted, the Manual for Complex Litigation would be revised to state that all class settlement notices under Rule 23(e) should explain the intervention requirement. At present, the combined Rule 23(c)(2) and (e) notice contained in the Manual states only that intervention may be sought, and does not state that intervention is necessary to preserve appellate rights. Indeed, in the section of the model notice explaining the manner in which class members may make objections and preserve their rights to appear at the fairness hearing, there is no mention of intervention at all.16
In summary, we believe that the current requirement in some circuits that objectors to class settlements be intervenors in order to have standing to appeal is unfair, unworkable, and unnecessary. I hope the suggestions in this letter are of some use to you. I look forward to hearing your response, as this office stands ready to assist you in making any necessary changes.
1. See, e.g., Gottlieb v. Wiles, 11 F.3d 1004, 1007-12 (10th Cir. 1993); Croyden Assocs. v. Alleco, Inc., 969 F.2d 675, 679 (8th Cir. 1992); Walker v. City of Mesquite, 858 F.2d 1071, 1074 (5th Cir. 1988).
2. See, e.g., Carlough v. Amchem, 5 F.3d 707, 713-14 (3d Cir. 1993)(reaffirming ruling in Ace Heating & Plumbing Co., Inc. v. Crane Co., 453 F.2d 30, 33 (1971)); Armstrong v. Bd. of School Directors, 616 F.2d 305, 327-28 (7th Cir. 1980); see In re Cement Antitrust Litig., 688 F.2d 1297, 1309 (9th Cir. 1982), aff'd, 459 U.S. 1191 (1993); Marshall v. Holiday Magic, Inc., 550 F.2d 1173, 1176 (9th CIr. 1977).
3. Bowling v. Pfizer, 143 F.R.D. 141 (S.D. Ohio 1993), appeal dismissed, 1993 WL 533489 (6th Cir. Dec. 21, 1993), cert. denied sub nom., Ridgeway v. Pfizer, 115 S. Ct. 294 (1994); see generally Timothy A. Duffy, "The Appealability of Class Action Settlements by Unnamed Parties," 60 U. Chi. L. Rev. 933, 934-40 (1993)(discussing circuit split). Another petition for a writ of certiorari on this issue is pending. Braman v. Barnett Banks, Inc., 38 F.3d 572 (11th Cir. 1994)(Table), cert. pending sub nom., Wagshal v. Bramon, No. 94-1506 (U.S. filed Mar. 13, 1995).
4. American Pipe and Construction Co. v. Utah, 414 U.S. 538, 551 (1974).
5. Zahn v. International Paper Co., 414 U.S. 291 (1973).
6. Fed. R. Civ. P. 23(c)(2)(C); Advisory Committee Note to Fed. R. Civ. P. (d)(2); Manual for Complex Litigation 2d § 30.44 & n.99 (2d ed. 1985).
7. 143 F.R.D. 141 (S.D. Ohio 1993).
8. See 3B Moore's Federal Practice ¶ 23.80 & n.1, p. 23-496 (2d ed. 1995)(citing Cohen v. Young, 127 F.2d 721 (6th Cir. 1942)); Bell Atlantic Corp. v. Bolger, 2 F.3d 1304, 1308 (3d Cir. 1993). Since that time, the Sixth Circuit has distinguished its prior precedents and required that, in most cases, absent class members be intervenors to have standing to appeal. Shults v. Champion International Corp., 35 F.3d 1056 (6th Cir. 1994).
9. In Re Domestic Air Transportation Antitrust Litig., 148 F.R.D. 297 (N.D. Ga. 1993).
10. Id. at 337.
11. See Guthrie v. Evans, 815 F.2d 626 (11th Cir. 1987).
12. MDL No. 991 (E.D. La.).
13. Loran v. Furr's/Bishop's Inc., 988 F.2d 554, 554 (5th Cir. 1993); Walker v. City of Mesquite, 858 F.2d 1071, 1074-75 (5th Cir. 1988).
14. In re Ford Motor Co. Bronco II Products Liab. Litig., MDL No. 991 (E.D. La., Memorandum and Order entered Jan. 13, 1995).
15. See In re Ford Motor Co. Bronco II Products Liab. Litig., 1995 U.S. Dist. Lexis 3507 (E.D. La. Mar. 21, 1995).
16. See Manual for Complex Litigation 2d § 41.43 (2d ed. 1985).