Published on:

Class Action Defense Cases- In re Electrical Carbon: Class Members Who Opt Out Of Class Action Settlement May Rejoin Class With Court Approval New Jersey Federal Court Holds

In Case of First Impression New Jersey Federal Court Permits Class Members Who Opted Out of Initial Proposed Class Action Settlement to Rejoin Class for Amended Class Action Settlement Finding it in the Best Interests of the Class

Plaintiffs filed putative class action lawsuits against several defendants alleging a conspiracy to fix prices of electrical carbon products in violation of the Sherman Act following the investigation and criminal prosecution of various entities by the United States Department of Justice. In re Electrical Carbon Products Antitrust Litig., 447 F.Supp.2d 389, 391-92 (D. N.J. 2006). After the Judicial Panel on Multidistrict Litigation centralized the various lawsuits in the federal court for the District of New Jersey, defense attorneys and class counsel reached proposed settlements and sought certification of a class for purposes of settlement, id., at 392. Thirteen entities elected to opt-out of the proposed class action, 12 of which (referred to herein as the “12 Opt-Outs”) had made purchases totaling several hundred million dollars out of the $600 million in purchases at issue in the lawsuit, triggering a defense right to back out of the proposed agreements. Id., at 393. Defense and plaintiff lawyers negotiated new settlements and again sought court approval, id., at 394. The 12 Opt-Outs sought court permission to rejoin the class and participate in the new settlements, id., at 396. The federal court held that opt-out plaintiffs may rejoin a class action, and found that it would be in the best interests of the class to permit the 12 Opt-Outs to do so in this case.

In analyzing this issue, the district court noted that the question before it appeared to be one of first impression: “Where a putative class member has timely filed an opt-out notice, the rules are silent on the procedure to be followed when the party seeks to rejoin the class.” In re Electrical Carbon, at 396-97. By analogy to Federal Rules of Civil Procedure Rule 23(e)(4)(B) – which requires court approval for an objector to withdraw an objection to a proposed settlement – the court concluded that opt-out plaintiffs may be permitted to rejoin the class so long as they receive court approval, but stressed that “the Court must scrutinize the decision to assure that no special benefit is conferred upon them at the expense of the other class members, and that the resulting settlements are in the best interests of those class members.” Id., at 397. The district court concluded that permitting “re-joinder” would benefit the class because it would prevent the settling defendants from again exercising their right to back out of the proposed settlements based upon the dollar value exposure to the opt-out claimants. Id. The court further found that the class members were “actually better off” with the 12 Opt-Outs in the class. Id., at 397-98.

Download PDF file of In re Electrical Carbon