What is Rule 23?

Federal Rule 23 went into effect on December 1, 2018. In part, the rule governing class action lawsuits and settlements allows class members to opt-out of a class action lawsuit, instead of opt-in. The rule also dictates when a class can be certified, what type of notice (if any) is required to class members if certified, and what procedures and processes must be adhered to with regard to class certification.

Email Notice

In the past, courts required class notice by U.S. mail, which is considered most reliable. However, many companies today prefer to contact consumers via email, text messages, social media, and web advertisements. The rule retains the right of the court to “direct to class members the best notice that is practicable under the circumstances,” but now states that a notice can be made by “mail, electronic means, or other appropriate means.”

Preliminary Approval

The settlement process generally moves from preliminary approval and class notice to a fairness hearing and final approval. Rule 23 standardizes the preliminary approval process by recommending that parties “should ordinarily provide the court with all available materials they intend to submit” in seeking preliminary approval.

Final Approval

The courts have made their own interpretations about what constitutes a “fair, reasonable, and adequate” class settlement. Rule 23 highlights four core issues courts must evaluate before granting final approval:

  • Have the class representatives and class counsel adequately represented the class?
  • Was the proposal negotiated in a neutral manner, with fair attorney fees?
  • Is the relief provided for the class adequate, relative to the costs and risks of delayed trial?
  • Are class members treated equitably, compared to one another?

Professional Objectors

Rule 23 seeks to combat meritless objections by requiring objectors to openly state whether the objection applies to the whole class or remains self-serving in its specificity (which could be adequate grounds of dismissal). The rule also prohibits payment to anyone in connection with “forgoing, dismissing, or abandoning an appeal from a judgment approving the settlement.” Objections can now be withdrawn at any time, without court approval.

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