15

Guidelines and Best Practices Implementing Guidance on new 2018 Amendments to Rule 23 — Provision EDITORIAL BOARD Rule 23 class action JOHN BEISNER, Skadden Arps Slate Meagher & Flom LLP MELISSA HOLYOAK, Competitive Enterprise Institute settlement provisions ADAM MOSKOWITZ, The Moskowitz Law Firm HASSAN ZAVAREEI , Tycko & Zavareei LLP Executive Summary CALEB MARKER, Zimmerman Reed LLP Developed and published by AARON VAN OORT, Faegre Baker Daniels LLP STEVE HERMAN, Herman Herman & Katz LLC MARY the Bolch Judicial Institute MASSARON, Plunkett Cooney PC of Duke Law School November 2018 CONTRIBUTORS JENNIE ANDERSON, Andrus Anderson LLP ELIZABETH CABRASER, Lieff Cabraser Heimann & Bernstein LLP CHRISTIAN CLAPP, Angeion Group GEORGE DOUGHERTY, Shook Hardy Bacon LLP ON DEC. 1, 2018, AMENDMENTS TO Class Action Settlement Conference. A ELLEN GUSIKOFF, Robbins Geller Rudman & Dowd LLP FEDERAL RULE OF CIVIL PROCEDURE 23 near-final version was posted for public BETHANY KRISTOVICH, Munger Tolles & Olson LLP TAKE EFFECT. The amendments require comment for a six-week period. GARY MASON, Whitfield Bryson & Mason LLP CATHY lawyers to provide additional informa- The Guidelines and Best Practices MOSES, Irell & Manella LLP tion up front for the court to preliminarily Implementing 2018 Amendments to Rule ROBERT SHELQUIST, Lockridge Grindal Nauen PLLP approve settlements (“frontloading”), 23 — Class Action Settlement Provision are TODD STENERSON LAUREN , Hunton & Williams LLP permit notice by electronic means, impose intended to help the bench and bar comply BARNES, Hagens Berman Sobol Shapiro LLP JAMES limitations on compensating objectors, and with the 2018 amendments to Rule 23. CECCHI, Carella Byrne Cecchi Olstein Brody & clarify final-settlement criteria. Many of the They add significant detail to the general Agnello P.C. amendments codify best practices of courts. guidance provided in the amended rule and DAVID COHEN, Stephan Zouras LLP JEANNE FINEGAN, HF Media LLC Under the auspices of the Bolch Judicial committee note. VICTOR JIH, Irell & Manella LLP Institute of Duke Law School, 38 promi- Because many in the bench and bar had ADAM LEVITT, DiCello Levitt & Casey nent defense and plaintiff practitioners and already adopted several of the new provi- NIKI MENDOZA, Epic experts well experienced in class action liti- sions in the amended rule in their practice, MIKE PENNINGTON, Bradley Arant Boult Cummings gation have worked together in four teams the recommendations in the Guidelines and LLP RICHARD SIMMONS, Analytics Consulting LLC for the past 20 months to develop guide- Best Practices are based on a solid founda- STEVEN WEISBROT, Angeion Group lines and best practices for implementing tion. These guidelines and best practices CHARLES ZIMMERMAN , Zimmerman Reed LLP the amendments. have proven useful across cases and have SHEILA BRODBECK, Pfizer Inc. The draft guidelines and best prac- been adopted by multiple courts. STEVE CIRAMI, Epic tices went through a thorough vetting An executive summary of the Guidelines CHRISTINA DIAZ, GlaxoSmithKline and Best Practices ANDRA GREENE, Irell & Manella LLP process that included significant input and follows, along with brief JOE JUENGER, Garretson Resolution Group comment from six federal and state court section introductions from the team leaders RICH LEWIS, Hausfeld judges. Multiple iterations were circulated who led the drafting effort. The entire docu- DARRELL MILLER, Duke University for comment and edit among the teams. ment is posted on the Bolch Judicial Institute CHRIS SEEGER, Seeger Seeger Weiss A later draft was forwarded for comment website at judicialstudies.duke.edu/ TOM SOBOL, Hagens Berman Sobol Shapiro LLP JOE to a larger group of 125 practitioners and publications/. 4 WHATLEY, Whatley Kallas LLP judges, who attended an earlier Institute 16 VOL. 102 NO. 3

Guidelines and Best Practices Implementing 2018 Amendments to Rule 23 Class Action Settlement Provisions

GUIDELINES 1-5: Providing Information to the Court GUIDELINE 2: At both the notice and to Decide Whether to Send Notice to Class Members and approval stages, a court has wide Approve Settlement (“Front-Loading”) discretion in determining how much information is sufficient to determine “Front-Loading” Information are in place, the court should lighten the that a proposed settlement is fair, reason- able, and adequate. COMMENTS FROM TEAM LEADERS AARON VAN burden on counsel at the fairness hearing OORT (FAEGRE BAKER DANIELS LLP) AND ADAM and place heavier reliance on the repre- Best Practice 2A: In general, if a settlement MOSKOWITZ (THE MOSKOWITZ LAW FIRM) sentations of counsel as to the settlement’s proposal lacks any indicia of collusion, conflict, fairness, adequacy, and reasonableness. or lack of fairness to the class members, a Before notice of a proposed settlement In assessing the adequacy of the court should not require an exhaustive study is approved, the amendments require proposed settlement, the relief provided and extensive information to make its find- the parties to provide information suffi- to class members by the settlement should ings that the proposal is fair, reasonable, and cient for the judge to decide preliminarily be compared with assessments of the adequate. Conversely, if doubts arise about whether the proposed settlement will be range and likelihood of possible classwide the fairness of the proposed settlement, the approved. But that does not mean that recoveries from litigated outcomes. The court should require additional information every proposed settlement requires the assessments may include best-case, worst- in making its determinations. same amount of extensive information. case, and likely case results, along with Best Practice 2B: Parties should provide In deciding whether to approve notice of estimates of the likelihood that each type information to the court showing that a proposed settlement, the court should of result will be realized. At both the notice class representatives and counsel have exercise its discretion in appropriate and approval stages, the parties should adequately represented the class. cases to require less information from provide the court with information sufficient the parties if there are no indications that for it to decide that the proposed settle- the settlement is unfair, unreasonable, or ment is fair, reasonable, and adequate, in GUIDELINE 3: Parties should provide inadequate. A court should rely on certain accordance with the topics enumerated in information to the court showing that the indicators that strengthen the showing that Rule 23(e)(2). Amended Rule 23(e)(2) sets settlement was negotiated at arm’s length. the proposed settlement is fair, reason- out broad topics to help the court deter- Best Practice 3A: Parties should provide able, and adequate. If indicia of fairness mine whether a proposed settlement is fair, information to the court showing that the are apparent and protections for the class reasonable, and adequate. expected relief of the proposed settlement to class members is adequate. GUIDELINE 1: Parties should request a Best Practice 1A: At both the notice and Best Practice 3A(i): The parties should court to approve sending notice to class approval stages, the parties should provide provide information to the court on costs, members of a proposed settlement only the court with information sufficient for it to risks, and delay of and appeal in assess- if the court is likely to be able to: (1) decide that the proposed settlement is fair, ing whether relief provided for the class is approve the settlement after a hearing reasonable, and adequate, in accordance adequate. and a finding that it is fair, reasonable, with the topics enumerated in Rule 23(e)(2). Best Practice 3A(ii): The parties should and adequate under Rule 23(e)(2); and provide information on the effectiveness of (2) certify the class. the proposed method of distributing relief to class members when assessing whether relief provided for the class is adequate. JUDICATURE 17

Best Practice 3B: The parties should Best Practice 5C: The parties should provide each other under Rule 23(e)(2)(D), a court consider using a professional claims admin- information on how the proposed settle- should give due regard to the advantages istrator to send notice and claim forms and ment treats class members relative to each of simplifying the treatment of claims to distribute benefits. other, particularly if the proposed settle- achieve efficiency and finality. Best Practice 3C: In determining whether ment addresses subclasses or other special Best Practice 5D: Although not required by the proposed method of distributing relief categories of class members. Rule 23(e)(1), a court should consider hold- is effective, a court should not assume that Best Practice 5C(i): If the differences in the ing a hearing on whether to direct notice automatically distributing benefits to all treatment between class members are mate- to the class of a proposed settlement in an class members is superior to distributing rial or the conflicts of interest are real, a court appropriate case if the court has questions benefits based on submitted claims. should consider whether certain safeguards or concerns about whether the information protect the class members and whether the presented by the parties is sufficient under benefits of having a classwide settlement the multiple Rule 23(e)(2) factors for it to GUIDELINE 4: The parties should otherwise outweigh the risks. decide that settlement approval at a later provide information on the proposed Best Practice 5C(ii): In assessing the equi- stage is likely. attorney’s fees, including timing of table treatment of class members relative to payments, in assessing whether relief provided for the class is adequate. GUIDELINES 6-9: Procedures and Standards for Object- ions and Resolution of Objections Under Rule 23(e)(5) GUIDELINE 5: At the final approval stage, Safeguarding Good-Faith Objectors bad-faith objectors file general objections the court should consider relief deliv- COMMENTS FROM TEAM LEADERS MELISSA to simply preserve their ability to proceed ered to class members in determining HOLYOAK (COMPETITIVE ENTERPRISE on appeal. Although the amendments the appropriate award of attorney’s INSTITUTE) AND ZAVAREEI HASSAN (TYCKO & discourage bad-faith objectors by requir- fees in accordance with Rule 23(h). In ZAVAREEI LLP) ing careful analysis of the settlement and appropriate cases, a court may consider specific grounds for the objection, the non-monetary benefits as part of the Courts recognize that objectors can some- amendments should not be applied so total relief in relation to the proposed times play a critical role in class actions by strictly as to unduly burden good-faith, award of attorney’s fees in evaluating flagging weaknesses in proposed settle- including pro se, class member objections. whether the proposed settlement is fair, ments. Some objectors, however, bring Second, new Rule 23(e)(5)(B) and (C) reasonable, and adequate. objections in bad faith with the sole purpose require district court approval, after a hear- Best Practice 5A: In an appropriate case, of seeking side payments in exchange ing, of any “payment or other consideration” a court may consider awarding attorney’s for dismissing an appeal. This tactic often provided for “forgoing or withdrawing an fees in a class action settlement based on causes great delay in administering the objection” or “forgoing, dismissing, or aban- a percentage of the total monetary awards benefits of a settlement to the class. doning an appeal.” These amendments made available to the class, as opposed to These Guidelines and Best Practices will dissuade improper objections if courts the actual claimed value of the settlement. discuss how the 2018 amendments can reject agreements that pay objectors for Best Practice 5B: The parties should provide be applied to deter bad-faith objections simply “getting out of the way” of the settle- information on any agreement made in while not interfering with good-faith objec- ment. If objectors are compensated only connection with the proposed settlement in tions that may advance the interests of the when they bring value or a benefit to the accordance with Rule 23(e)(3). class. First, new Rule 23(e)(5)(A) requires class, objectors will be discouraged from greater specificity of objections. Many bringing bad-faith objections. 4 18 VOL. 102 NO. 3

GUIDELINE 6: A court should interpret Best Practice 8B: A court should inquire GUIDELINES 10-11: the language of Rule 23(e)(5) broadly into communications that class counsel may The Role of Court-Appointed and liberally to accomplish its stated have had with individuals who decided not Lead Counsel Vis-á-Vis intent to avoid perpetuating a system to pursue (forgo) objections. Others that facilitates objections advanced for Best Practice 8C: If the consideration improper purposes. involves a payment to counsel for an Complex-Litigation Managers Best Practice 6A: A court may consider any objector, the proper procedure to obtain a COMMENTS FROM TEAM LEADERS JOHN objection raised by a class member, even payment is by under Rule 23(h). The BEISNER (SKADDEN ARPS SLATE MEAGHER if the objector has nothing personally at court should evaluate whether the objection & FLOM LLP) AND STEVE HERMAN (HERMAN stake in regard to the matter raised by the added value to the class and therefore justi- HERMAN & KATZ LLC) . THE TEAM LEADERS objection. fies the proposed payment. GRATEFULLY ACKNOWLEDGE THE SUBSTAN- TIAL ASSISTANCE PROVIDED BY ELIZABETH CABRASER (LIEFF CABRASER HEIMANN & GUIDELINE 7: A class member objecting GUIDELINE 9: If approval to forgo or BERNSTEIN LLP). to a proposed settlement must state with withdraw an objection has not been specificity the grounds for objection suffi- obtained before an appeal is docketed This section addresses selection of lead cient to enable the parties to respond to in the court of appeals, Appellate Rule counsel in multiple contexts: standalone them and the court to evaluate them. 12.1 and Civil Rule 62.1 indicative- class actions, MDLs comprised entirely of putative class actions, and “hybrid” MDLs Best Practice 7A: An objection should iden- ruling procedures apply while the appeal tify the specific settlement term or structure is pending. comprised of both putative class actions and individual tort claims. The Rule 23(g)(1)-(3) that is being challenged and the reasons for Best Practice 9A: If the parties intend to such challenge. settle with an objector, they should seek factors that guide class counsel appoint- approval of the objection settlement prior to ments have been adopted by courts in other the filing of the appeal to avoid the delay of MDL contexts to inform the courts’ broad GUIDELINE 8: No payment or other appeal. discretion to select lead counsel who will, consideration for forgoing or withdraw- individually or collectively, have the finan- Best Practice 9B: A court should hold a ing an objection or forgoing, dismissing, cial and human resources, expertise, and hearing and issue an indicative ruling once or abandoning an appeal can be provided experience to lead the prosecution of all an appeal is filed and Rule 62.1 is in effect. unless a court approves payment after forms of complex litigation. But effective holding a hearing. Best Practice 9C: If the objector has filed leadership does not end with appointment. a motion for attorney’s fees, the district To lead effectively, appointed counsel must Best Practice 8A: The parties must disclose court may inquire into settlement discus- work well with others. the terms of all agreements between sions between the objector and the parties Lead counsel selection is a judicial talent objector and the parties. What constitutes regarding the fee motion. search for counsel with the resources and payment or other consideration to an objec- expertise, as well as the management and tor for forgoing or withdrawing an objection administrative skills, to advance the case. or forgoing, dismissing, or abandoning an The human factors in lead counsel selection appeal should be broadly construed. are as critical to successful case management as are the express Rule 23(g) criteria. Lead counsel have administrative, managerial, and diplomatic roles to play. Lead counsel JUDICATURE 19

must advance substantial costs, and devote GUIDELINE 10: In an MDL action consist- GUIDELINE 11: A court should, at an considerable time and energy, to prosecut- ing of multiple putative class actions, early point in its management of the ing the case for plaintiffs as a whole. But the court should, in connection with an proceedings before it, schedule pretrial they must also work with the court and other early and prompt initial conference with proceedings (including class certifica- counsel in a cooperative manner, as Fed. R. the parties, prescribe an application tion briefing and hearing dates, and, as Civ. P. 1 directs, toward the “just, speedy, process for appointment of one or more early as practicable, a trial date on class and inexpensive” determination of the case. firms, as appropriate, to serve as Interim claims); obtain information and estab- Chambers conferences with lead counsel Class Counsel under Rule 23(g)(3), upon lish procedures for coordination with any from both sides help implement Rule 1’s considering factors pertinent to the case, related putative class action litigation cooperation imperative in a more candid including those specified in Rule 23(g)(1). pending in other courts; designate coun- atmosphere than would be practicable in Best Practice 10A: In an MDL proceed- sel with responsibility to coordinate with open court. This places a premium on the ing involving multiple actions that include counterparts in related litigation; and trustworthiness and professionalism of lead putative class actions, the court should remind all parties and counsel of their counsel on both sides. Lead counsel selec- determine, in connection with an early and duty to timely update the court and each tion that takes into account all these traits prompt initial conference with the parties, other on developments in related actions is more art than science. Personality traits the nature and scope of the leadership struc- pending in other courts. of candor, accountability, credibility — and ture it intends to appoint, including whether Best Practice 11A: To assure that all tracks ability to listen — are as important as techni- the appointment of Interim Class Counsel are managed effectively, a transferee court cal skills. Experience and reputation matter; under Rule 23(g) is necessary or appro- in a hybrid MDL should typically appoint courts should strive to provide opportunities priate, and should specify and delineate different counsel to take primary responsi- to the next generation of leaders to develop with appropriate precision the roles and bility for personal injury claims on the one these qualities. responsibilities of the counsel it appoints to hand, and economic loss claims on the Those appointed to leadership positions leadership positions. other. can provide such opportunities by assign- Best Practice 11B: An MDL transferee judge ing common benefit tasks among, and who is appointed to manage individual and beyond, the appointed leadership structure. class claims concurrently should prioritize Appointment to a lead role does not guar- his or her judicial resources in assuring that antee popularity. Lead counsel take on roles both types of claims move forward appropri- and responsibilities that others might wish ately, through , pretrial disposition, to preserve for themselves. It is important settlement where appropriate, and trial, for leads to provide information and assign either in the MDL transferee court, through work where appropriate (under a court order bellwether , or upon remand to districts that authorizes this process) so that coun- of origin. sel remain informed participants in the litigation. Best Practice 11C: In a “hybrid” MDL, the court’s order appointing a leadership struc- ture should clearly delineate the roles and responsibilities for the class lead counsel and tort lead counsel and their respective committees. 4 20 VOL. 102 NO. 3

GUIDELINES 12-18: Means, Format, and Contents GUIDELINE 12: In determining whether the “best practicable notice” can be sent of Settlement Notice in a reasonable manner, the court should Death of the Mailman? sending a single postcard, electronic notice focus on the means or combination of COMMENTS FROM TEAM LEADERS MARY can result in notice being seen by a class means most likely to be effective in the MASSARON (PLUNKETT COONEY PC) AND member many times across many devices, case. CALEB MARKER (ZIMMERMAN REED LLP) resulting in a higher frequency. Reach and Best Practice 12A: In assessing whether the frequency are two key components of any particular means of sending notice is most The gold standard for notice under Rule 23 notice plan. effective, a court should take into account has been first-class mail for more than 50 Electronic notice also offers interac- the following general considerations: (1) years. The introduction of email, the inter- tive and instant ways for class members will the notice effectively reach the class; (2) net, and social media, and the explosion to participate. Instead of filling out claim will the notice actually come to the attention of mobile devices have changed the ways forms by hand and returning them by mail, of the class; (3) are the notices informative we communicate. First-class mail volume class members can now quickly click their and easy to understand; and (4) are all class peaked in 2003 and is now down to 1979 way through auto-populated forms that members’ rights and options easy to act levels, when 100 million fewer people lived calculate claims and check for errors along upon? in the United States. The 2018 amend- the way. The result is a faster and better Best Practice 12B: When selecting a means ments recognize these seismic changes in claims process that is far less expensive of giving notice, the parties and court should communication and now expressly permit than that of the old days. begin by assessing the reliability of the class notice by electronic means. Attorneys should reach out to notice method of communication typically used These best practices will help you experts and claims administrators as appro- by the defendant in its regular business to determine the best notice under the priate. Such professionals can offer a wealth notify its customers or clients. circumstances, in part, by helping you ask of knowledge in devising, implementing, the right questions. Electronic means may and executing any notice program. not always be the best form of notice. There Lastly, these best practices remind GUIDELINE 13: Best notice practica- is still a role for U.S. mail in class action practitioners to remember the basics. ble includes individual notice to all notice. Regardless of whether notice is displayed members who can be identified through The benefits of electronic notice should on a letter, postcard, email, or social media reasonable efforts. First-class U.S. mail be obvious. Electronic notice is generally advertisement, the form and content of may often be the preferred primary less expensive. Clicks often cost less than the notice is important. If you want method of notice. stamps. Lower costs often mean better class members to participate, the notice Best Practice 13A: Individual notice to notice. First, the notice can be broader, should be bold, eye-catching, and easy to class members often is practicable when the or have a better reach. Second, instead of understand. defendant communicates directly with class members as part of its regular business, either relying on U.S. mail postal addresses or email addresses. Best Practice 13B: The deliverability rate of communications with customers can offer a useful indicator of the effectiveness of the means of communication. JUDICATURE 21

Best Practice 13C: The parties and court GUIDELINE 15: Notice using social GUIDELINE 17: A class-notice expert or should be skeptical about contact informa- media, a subset of digital media, may be professional claims administrator can tion that is compiled from free offerings, effective. assist the parties and court in ascertain- promotional sign-ups, or promotions. ing the effectiveness of using digital media to send notice. GUIDELINE 16: A court must evaluate the The parties and court GUIDELINE 14: Notice by email communi- effectiveness of a notice program that Best Practice 17A: should ensure that the class notice expert or cation may be the best individual notice relies on digital media, including social claims administrator is competent to assist practicable under the circumstances if media, as a means to send notice. them in evaluating the effectiveness of shown to be reliable. It may also be a If notice is sent by digi- Best Practice 16A: notice by digital media. low-cost supplemental means of notice. tal media, the parties should evaluate and quantify the percentage of class members Best Practice 17B: The parties and court Best Practice 14A: The effectiveness of a that the notice will reach. should carefully review the class-notice notice sent by email can be assessed using expert’s or administrator’s methodology in Best Practice 16B: A low lifetime frequency available metrics. Among the metrics, the concluding that notice sent by an electronic cap (three or fewer) is ordinarily an insuf- read rate is the most reliable. means is most effective. ficient level at which to expose a target Best Practice 14B: The parties and court audience sufficiently to the message. should consider the capacity and limits of Best Practice 16C: The parties should GUIDELINE 18: Language text and email technology when evaluating its effec- provide the court with an analysis of the formatting may appear differently, tiveness for notice purposes. metrics that the parties rely on to deter- depending on the medium it is viewed Best Practice 14C: If individual notice is not mine the effectiveness of the means of on. The differences can be sufficiently practicable or effective, the parties and court class notice. If a notice program is reporting substantial to degrade the effectiveness should consider notice by digital media to reach, it must be supported and validated in of the communication. provide the most effective notice under the a transparent manner. Best Practice 18A: Notices sent by digital circumstances, either to supplement other Best Practice 16D: Social media metrics, media should be formatted appropriately means of notice or as a standalone means. such as clicks, should not be used as a for maximum effectiveness that is consistent Best Practice 14D: The parties and court substitute for a validated reach statistic. with the FJC guidance. should consider whether the notice program Best Practice 16E: The parties and court is using an appropriate media mix that will should monitor the effectiveness of class reach the target population. notice sent by digital media throughout the notice period.

Find the complete Guidelines and Best Practices Implementing 2018 Amendments to Rule 23, as well as other guidelines and best practices produced by the Bolch Judicial Institute, at judicialstudies.duke.edu/publications