Objection to proposed settlement process explained

Where a class member objects to a proposed settlement, it must first state its objection with specificity. Then the settling parties must demonstrate that the proposed settlement satisfies the requirements of Fed. R. Civ. P. 23(a). The district court must balance both the class’s interests and the interests of objectors.

Background

After the district court preliminarily approved a settlement of a yearslong class action suit, one class member objected. The court delayed approval of the settlement and permitted the objector substantial discovery. Upon completion of that discovery, the court overruled the objection and approved the settlement. The sole objector now appeals.

Burden of proof

This court has never clearly described who bears what burdens when a class member objects to a proposed settlement. It does so now.

First, an objector to a class settlement must state the basis for its objection with enough specificity to allow the parties to respond and the court to evaluate the issues at hand. Second, the parties propounding the settlement, in addition to bearing the initial burden to show that the proposed class meets the Rule 23(a) requirements for certification and that a proposed settlement is fair, reasonable and adequate, must show that the objection does not demonstrate that the proposed settlement fails one of those requirements.

Third, the district court must protect the class’s interests from parties and counsel overeager to settle (who may deny absent class members relief that they would otherwise receive) and frivolous objectors (who may impede or delay valuable compensation to others). The district court may, in its discretion, grant an objector discovery to assist the court in determining an objection’s merit.

Here, the district court required the objector to specify and support its objection, while keeping the ultimate burden on the proponents of the settlement to demonstrate its fairness. Thus, the objector argument that the court improperly placed upon it the burden of overcoming the settlement provides no basis for reversal.

Commonality

Pursuant to Rule 23(b)(3), the district court found that common questions “clearly … predominate … because the central question to be decided here is whether Banner and William Penn’s implementation of the COI rate increases breached the standardized policy language.” After the Allen Trust objected to these preliminary findings, the district court took the unusual step of permitting discovery.

After reviewing the information revealed in discovery, the district court stated at the final approval hearing: “it’s clear to me that the Allen Trust is within the ambit of the class,” and that “questions of law, in fact, are common to the class.” Moreover, “the common questions predominate over any questions affecting only individual members.” This finding, made after the grant of discovery to the Allen Trust, did not constitute an abuse of discretion.

Typicality

At the preliminary approval hearing, the district court held “that the Plaintiffs’ fraud claims are typical of [the] settlement class because their claims arise from the Defendants’ same conduct.” And the court reiterated that holding at the final approval hearing, concluding that the Allen Trust’s claim did not defeat typicality because its asserted harm, the year-21 balloon payment, turned on unlawful COI charges — just like the Dickman class’s claims. The district court did not abuse its discretion in doing so.

Adequacy

The Allen Trust asserts that a conflict arises from the fact that, in the future, it may need to make a year-21 balloon payment if it wants to prolong its policy. But as the Dickman parties argue and as the district court found, this is entirely speculative. Because the notion that the Allen Trust does (or will ever) have a distinct claim is “merely speculative or hypothetical,” it cannot defeat adequacy.

Rule 23(e)(2)

In addition to its challenge to the district court’s decision to certify the Dickman class under Rule 23(a), the Allen Trust also argues that the court erred in approving the settlement under Rule 23(e)(2). The court disagrees.

Affirmed.

Concurring opinion

Rushing, J., concurring in part and concurring in the judgment:

On appeal, the Allen Trust argues that the Dickman plaintiffs, as former policyholders, cannot adequately represent the interests of current policyholders like the Allen Trust because their remedial goals are not aligned. But the Allen Trust did not advance this argument in the district court. I would hold the Allen Trust’s adequacy challenge forfeited and would not address its merits.

The 1988 Trust for Allen Children Dated 8/8/88 v. Banner Life Insurance Company, Case No. 20-1630, March 15, 2022. 4th Cir. (Motz), from DMD at Baltimore (Bennett). Jeven Robinson Sloan for Appellant. George Walton Walker III and Timothy J. O’Driscoll for Appellees. VLW 022-2-073. 25 pp.