January 17, 2024
A recent Law.com article by Adam J. Levitt, “Arguing Class Actions: Objections to Class Action Settlements” reports on the role of class action objectors in the settlement process. This article was posted with permission. The article reads:
After years of litigating and negotiating, the parties and their counsel seek approval from the court of a class action settlement. All parties are eager for final approval but objections start flowing in. But final approval and ultimate disbursement of much-needed relief to class members is delayed for months, if not years, as the objectors appeal. This scene has played out time and time again, particularly in the case of large, well-publicized class action settlements.
Federal Rule of Civil Procedure 23(e) guarantees each class member who does not opt out the right to object to a class action settlement. Fed. R. Civ. P. 23(e)(4), (5). Objectors can sometimes play a role in helping the court or the parties evaluate a settlement. Indeed, one court noted that objectors can add value to the class action settlement process by: “(1) transforming the fairness hearing into a truly adversarial proceeding; (2) supplying the Court with both precedent and argument to gauge the reasonableness of the settlement and lead counsel’s fee request; and (3) preventing collusion between lead plaintiff and defendants.” In re Cardinal Health, Inc. Sec. Litig., 550 F. Supp. 3d 751, 753 (S.D. Ohio 2008). Objections may also address uniquely-situated class members with independent, unusual circumstances that may affect the adequacy of their recovery under the proposed settlement.
But all too often, objectors only object to class action settlements for personal gain, an individual (often undefined) animus toward the class action mechanism, or for purportedly policy-based or “principled” reasons that are generally ham-fisted attacks on the plaintiffs’ bar in general. These bad-faith objectors are often referred to as “professional objectors.” Professional objectors file meritless objections, seeking, in a small number of cases, to extract a payoff in exchange for withdrawing the objection. Other “professional objectors” have a well-known agenda and animus against class action attorneys, filing “gotcha” appeals which do nothing to materially improve settlements, but instead prolong when settlement payments are made. Either flavor of professional objector is bad. The first kind puts pressure on class counsel to engage in blackmail to finalize settlements so that class members can get paid. The second kind only helps defense counsel, who are paid hourly, while advancing the personal view of one person and holding up payments to potentially millions of others who are happy with the settlement.
Courts across the United States have noted the havoc that professional objectors can wreak on the settlement approval process. One court held that “settlement funds of $147 million, the product of four years of hard-fought litigation, have hung in limbo for more than eight months because a person who knows he has no right to object to the settlement nonetheless refuses to withdraw his meritless Objection.” In re Polyurethane Foam Antitrust Litig., 165 F. Supp. 3d 664, 670–71 (N.D. Ohio 2015). Another referenced professional objectors as “a pariah to the functionality of class action lawsuits.” Snell v. Allianz Life Ins. Co. of N. Am., No. 97-cv-2786, 2000 WL 133640, at *9 (D. Minn. Sep. 8, 2000). In a particularly egregious case, an objector sent class counsel a letter stating “[s]ettle with me for $10,000 and not a penny more or a penny less to remove me and only me from the equation of the case. . . You have one week to decide.” The judge ordered the objector to show cause “why his communications with class counsel should not be referred to the United States Attorneys Office” for possible wire or mail fraud. Junge v. Geron Corp., No. C 20-00547, 2023 WL 2940048, at *1 (N.D. Cal. Apr. 13, 2023)). Any objector still has the ability to appeal approval of a class settlement, regardless of a district court’s findings about their motivations. For example, a settlement that would resolve antitrust claims against Blue Cross Blue Shield of Michigan was held up for over a year before the United States Court of Appeals for the Sixth Circuit was able to address an objector’s “raft of objections, many of them undeveloped, all of them meritless.” Shane Grp., Inc. v. Blue Cross Blue Shield of Michigan, 833 F. App’x 430, 431 (6th Cir. 2021). Even after an appellate court ruling, objectors can still file a petition for a writ of certiorari with the United States Supreme Court, and the class has to wait until the petition is rejected before any settlement relief becomes available—a process which, itself, could take yet another year. By way of example, members of my firm helped to resolve the class action against Equifax related to its 2017 data breach in April 2019. The settlement was upheld, but an endless litany of objectors’ spurious appeals resulted in payments being delayed until January 2022. See, e.g., In re Equifax Inc. Customer Data Sec. Breach Litig., 999 F.3d 1247 (11th Cir. 2021), cert. denied sub nom. Huang v. Spector, 142 S. Ct. 431 (2021), and cert. denied sub nom. Watkins v. Spector, 142 S. Ct. 765 (2022).
Both the plaintiff and defense class action bar agree on the need to reform the objection process. The April 2016 Minutes from the Meeting of the Civil Rules Advisory Committee note that “there was virtually unanimous agreement that something should be done to address the problem of ‘bad’ objectors.” Civ. Rules Advisory Comm., Draft Minutes, at 13 (Apr. 14, 2016). On December 1, 2018, new language was added to the Federal Rules of Civil Procedure to address professional objectors. Rule 23(e)(5) now requires objectors to: (1) state “with specificity the grounds for the objection;” and (2) requires court approval for “forgoing or withdrawing an objection” or “forgoing, dismissing, or abandoning an appeal from a judgement approving the proposal.” Fed. R. Civ. P. 23(e)(5).
While it appears these changes have resulted in some reduction in the number of frivolous objections, courts have continued to approve side payments to professional objectors. See Brian Fitzpatrick, Objector Blackmail Update: What Have the 2018 Amendments Done?, 89 Fordham L. Rev. 437, 437-38 (2020). More can still be done.
The difficulty in reforming the objection process is balancing the approach so that good-faith objectors are not deterred while professional objectors are sufficiently deterred. For example, barring side payments to objectors, as proposed by Professor Brian Fitzpatrick, id., would potentially eliminate the professional objector problem, but others have voiced the concern that it would also discourage good-faith objectors from raising objections that might improve the settlement agreement. See Robert Klonoff, Class Action Objectors: The Good, The Bad, and The Ugly, 89 Fordham L. Rev. 475, 492-93 n.99 (2020).
One oft-proposed reform is requiring objectors to post an appeals bond under Federal Rule of Appellate Procedure 7. Requiring hefty appeals bonds for frivolous appeals could deter professional objectors but again there is a concern that this could deter good-faith objectors (i.e., those without any agenda or personal bent against class actions, but who legitimately want to make the settlement materially better, rather than engage in seriatim “gotcha” appeals) who may be pro se and have limited funds. Id. at 497. Courts, however, can use their discretion to assess whether the objection is in good faith and determine whether an appeals bond is appropriate.
Class counsel can also request that courts conduct an expedited review of objections and appeals. For example, if an objector files an appeal, class counsel and the defendant can file a motion for summary affirmance where “no substantial question is presented” in the objection. See id. at 501 n.160. This would allow the appellate court to quickly dismiss a frivolous appeal without full briefing. Both the Seventh and Ninth Circuits have recently granted summary affirmance in cases involving professional objectors. Id. at 502. Another option is simply for the parties to move for expedited review with an accelerated briefing and oral argument schedule.
Courts can take a more active role in sanctioning and barring professional objectors from practicing in their jurisdiction. Reform along these lines has been somewhat limited, as a judge in one federal district court cannot bar a professional objector from practicing before another court. This practice could be aided if courts coordinated at the national level to maintain a list of problematic professional objectors, along with information about the number of times each has objected and whether the objector has been barred from practicing in any court. See id. at 499. This list could then be easily cited by class counsel in an objection response or sanctions motion. Such a database could also assist courts in determining whether to require an appeals bond and if expedited review is appropriate. If managed well, it may be the most promising mechanism for deterring serial professional objectors without deterring good faith objections.
Finally, another reform that can serve as an effective check on settlement objectors is adopting provisions in settlement agreements that allow for the payment of fees and expenses before objector appeals are resolved. While settlement objectors and other class action opponents characterize these as “quick pay” provisions, they are actually anything but—as settlements usually only come after a significant amount of time and resources are spent litigating a case without any guarantee of recovery. Provisions for fee payments before objector appeals are resolved serve to deter professional objectors, because enabling plaintiffs’ counsel to be paid for their work in achieving a settlement removes the ransom payment tool from the objector’s extortionate toolbox. A survey from the Western Alliance Bank Class Action Law Forum in April 2021 found that nearly two-thirds of the survey’s respondents had participated in class action settlements permitting timely payments to settling plaintiffs’ counsel.
Complex issues such as navigating objections to class action settlements require complex, balanced, and intersectional solutions. We encourage judges and class action practitioners to use their creativity and judgment to address the continuing problem of professional objectors—as well as the problem of purported “principled objectors,” whose sole “principle” is to undermine the class action process for their own political ends—and to point out and criticize this bad behavior in the hopes of deterrence. And, in the future, we would also encourage the Rules Committee to consider additional measures—such as requiring objectors to successfully intervene before they may file an objection, which prevents the class from being paid after an already long wait.
Adam J. Levitt is a founding partner of DiCello Levitt, where he heads the firm’s class action and public client practice groups.