Changed Circumstances Surrounding Proposed Class Action Settlement Requires Class Members Receive Another Opportunity to Request Exclusion from Settlement Maine Federal Court Holds
Plaintiff filed a class action against Knox County challenging the jail’s policy to strip search arrestees at the Knox County Jail; after the district court certified the lawsuit as a class action, defense and plaintiff attorneys reached a proposed settlement and requested court approval. Dare v. Knox County, 457 F.Supp.2d 52, 52-53 (D. Me. 2006). Ironically, the parties could not agree on the terms of the proposed settlement, and the terms submitted by the defense attorneys differed from the terms submitted by the plaintiff’s lawyer. Once the parties agreed upon the language of the proposed settlement, the district court rejected the proposal.
The federal court found that, given the circumstances of the case, class members must be afforded an additional opportunity to opt out as provided by Rule 23(e)(3) of the Federal Rules of Civil Procedure. Dare, at 53. Rule 23(e) gives the district court discretion to give class members a “second opportunity to opt out,” and the Advisory Committee’s Note identifies “changes in the information available to class members since expiration of the first opportunity to request exclusion” as a basis for exercising that discretion. Id. The district court found this to be an appropriate case for a second chance based on several factors, explaining at page 53:
These include the breadth of the type of searches and actors covered by the settlement, thereby foreclosing further litigation by members of the class; the recent development that Laurie Tardiff was replaced as class representative; Laurie Tardiff’s objection to the terms of the Settlement Agreement and contention that she is not bound by it; the Court’s prior indication that it would not approve a proposed “bonus” of Fifty Thousand Dollars ($50,000.00) to be paid to Laurie Tardiff as provided for by the terms of the first proposed Settlement Agreements . . .; a controversy over the entry, timing and terms of the Permanent Injunction to be entered; the Parties’ preservation of a right of appeal of the settlement if an injunction at variance with that proposed by the parties is entered; and the settlement’s allocation of a recovery to each individual that does not vary by the number of times that individual was searched.
Accordingly, the federal court refused to approve the settlement unless it is redrafted to include another opportunity to opt out of the settlement, and unless the parties resolve outstanding issues concerning the scope of injunctive relief to be afforded by the settlement as specified by the district court. Dare, at 53-54. If the parties submit a new settlement agreement that addresses the district court’s concerns, then the court agreed to move the settlement process forward. Id., at 54. That said, however, the court made it clear that it was not determining the settlement to be fair or reasonable: “Because a judicial determination of ‘preliminary fairness’ unjustifiably suggests a headwind against objections to the settlement agreement, the Court will, if the Third Final Settlement Agreement is filed, determine whether the then proposed Third Final Settlement Agreement satisfies the Court’s requirements herein for approval of the settlement, deserves consideration by the class and whether the notice is appropriate. The Court reserves all determinations of the proposed settlement’s fairness and reasonableness to its consideration of the relevant facts on the record after the April 23, 2007 hearing.” Id.
NOTE: This class action presented the uncommon situation where the named class representative (Laurie Tardiff) objected to the settlement and sought to withdraw as the class representative. The district court “advised her to promptly consult individual counsel.” Dare, at *52 n.1. Her prior counsel (now class counsel) filed a motion to strike her as class representative, which it later dropped. Eventually, class counsel moved to substitute in a new class representative (Dale Dare) and Tardiff filed a motion to withdraw as class representative. Id.
FURTHER NOTE: The parties subsequently filed a Third Final Class Settlement Agreement, which the district court approved.