The Ninth Circuit recently ruled in favor of President Trump. That was not a typo, and this is not fake news. The ruling was not in favor of Trump in his official capacity, but in his capacity as a class action defendant. And it was in a case where the plaintiffs were on his side, seeking to defend the lower court’s approval of a class action settlement involving Trump University. The key practice pointer from this decision for those who litigate class actions is that if a class is certified before you reach a settlement, you don’t have to give the class members a second chance to opt out when you later reach a settlement. You might want to make it explicit that there will not be a second chance to opt out.
In Low v. Trump Univ., LLC, No. 17-55635,2018 U.S. App. LEXIS 2920 (9th Cir. Feb. 6, 2018), an objector challenged the district court’s approval of a settlement of several class actions involving allegations of false advertising and fraudulent practices by Trump University, which provided real estate investment seminars. The objector argued that she was entitled to a second opportunity to opt out of the class after a settlement was reached.
The Ninth Circuit first held that the notice that was sent to class members when the class was certified and before a settlement was reached did not promise them as second opportunity to opt out. The Ninth Circuit adopted a standard focusing on “what an average class member would have understood the notice to guarantee.” Id. at *19. The objector focused on a statement in the notice that if “the Plaintiffs obtain money or benefits, either as a result of the trial or a settlement, you will be notified about how to obtain a share (or how to ask to be excluded from any settlement).” Id. at *16. The court concluded that the notice, which was based on a Federal Judicial Center form, when read as a whole, made clear that there was a single deadline to opt out, and the decision had to be made when the first notice was sent. Based on the notice as a whole, a class member being excluded from the settlement could refer to simply declining to submit a claim form in a claims made settlement, and it was unclear at that point what type of settlement might be reached.
The Ninth Circuit then held that due process did not require a second opportunity to opt out, applying binding precedent in Officers for Justice v. Civil Service Commission of San Francisco, 688 F.2d 615 (9th Cir. 1982), which reasoned that class members’ rights were adequately protected by the opportunity to object to the settlement, the district court’s fairness hearing, and the right to appeal from the approval of a settlement. The court found no intervening Supreme Court authority on point. In a footnote, the court suggested that a district court might have the power to withhold approval of a settlement that did not provide a second opportunity to opt out, in an appropriate case.
Although large numbers of opt outs are relatively rare in the context of a class notice, regardless of whether a settlement has been reached, it may be advisable not to offer class members a second chance to opt out. If the parties think ahead about this issue, they can address it explicitly when the first notice is issued to class members.