Class action settlements are complicated. They often take months to negotiate. The last thing the lawyers or their clients on either side want to happen is for the trial court to deny approval or, even worse, for an appellate court to overturn a decision approving the settlement when an objector appeals. That happened earlier this week in the Ninth Circuit. Its decision provides some guidance on how counsel can help the trial court through the approval process.

The Ninth Circuit is a hotbed of class action litigation, and it seems to apply a higher level of scrutiny than other circuits in reviewing settlement approval decisions. In Roes v. SFBSC Management, LLC, No. 170079 (9th Cir. Dec. 11, 2019), objectors appealed from a Northern District of California decision approving a settlement of an employment class action alleging that exotic dancers were misclassified as independent contractors rather than employees. The Ninth Circuit found problems with both the notice to the class and the extent of the district court’s scrutiny of the settlement terms.

Notice to the Class: Approximately 12% of the notices mailed to class members (560 out of 4,681) were undeliverable, even after the administrator searched for new addresses. The Ninth Circuit concluded that there should have been additional means attempted to try to reach former employees, for whom the only means of notice was by mail. It suggested that some form of electronic notice to the former employees should have been used. The lesson here? If it turns out that notice has not reached more than 10% of the class (depending on the circumstances), consider a supplemental form of notice before final approval is sought.

The Ninth Circuit rejected an argument that the notice to the class should have informed class members about other pending putative class cases against defendants involving the same issues. It found that is simply not required by Rule 23.

Settlement Terms: The Ninth Circuit requires a “higher level of scrutiny” and “a more probing inquiry” by district courts when a settlement is reached before a ruling on class certification (although that is very common). The district court’s opinion, however, did not cite this precedent, and suggested that there was a presumption of fairness. (Slip op. at 26.) The lesson here: the parties should make sure that they are citing the correct standard under the most recent case law in the circuit, and helping the district court apply it.

The Ninth Circuit found that the district court had not adequately explained why $950,000 of attorneys’ fees were justified, where the total available settlement cash was $2 million and the valuation of a $1 million dance fee payment pool for class members was not sufficiently justified in the Ninth Circuit’s view. The court noted that the district court had not made any specific findings regarding that valuation, or regarding why the attorneys’ fees would be reasonable even if the value of that portion of the class relief were disregarded. This is another area where the parties potentially could aid the trial court by proposing such findings.

The Ninth Circuit also found problematic that the settlement provided for $20,000 payments to two named plaintiffs in exchange for a general release. The court expressed concerns about “draw[ing] such large amounts from the common fund to pay the named plaintiffs for what is essentially a side settlement,” further stating that “the handsome amounts of those incentive payments, relative to the size of the cash payments that can be claimed by class members, raise serious red flags . . . .” (Slip op. at 41, 43.) The lesson here: incentive payments should not be a minor afterthought in negotiations; they need to be carefully justified.

The Ninth Circuit also expressed concerns about reversionary aspects of the settlement, where funds would revert to the defendants rather than be distributed to the class in some other manner, or by cy pres relief. This is another area for parties to consider carefully in structuring their deal, and in their briefing to the district court.

The Ninth Circuit noted in an footnote that the Northern District of California has published procedural guidance on class action settlements, which recommends that the parties provide various pieces of information to the district court in seeking settlement approval. (Slip op. at 47 n.22.) Even if you are not in the Northern District of California, that is a useful checklist for what you might need or want to include in your preliminary and final approval papers.

Next time you have a class settlement, don’t just take your last brief in support of preliminary or final approval and reframe it for your newest settlement. Study the most recent authority in your circuit, think through potential objections, and help the trial court through the approval process. That can save you and your client some headaches down the road.

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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.