SHARE

April 11, 2022

Fourth Circuit Explains How Burdens Should be Allocated for Objections to Class Settlement

You've Reached Your
Free Article Limit This Month
Register for free to get unlimited access to all Law.com OnPractice content.
Register Now

The Fourth Circuit has jurisdiction over Maryland, North Carolina, South Carolina, Virginia, and West Virginia.

Background

The parties in the long-running class action reached a proposed $40 million settlement that would provide a minimum of $100 recovery in partial premium refunds for each member of the class of life insurance policyholders. The federal district court in Maryland granted preliminary class certification and preliminary settlement approval. Eighty-nine class members opted out (less than one percent of the class) and one class member objected to the settlement.

The district court overruled the objection, certified the class for settlement purposes, and granted final approval to the settlement agreement. The objector appealed, contending the court abused its discretion in certifying the class and in finding the proposed settlement fair, reasonable, and adequate. The objector also argued the court improperly shifted the burden to the objector to demonstrate that the parties seeking approval failed to show class certification requirements were met and the settlement was fair.

Fourth Circuit Ruling

The Fourth Circuit affirmed the district court's ruling. The panel's decision explained "who bears what burdens when a class member objects to a proposed settlement" under Federal Rule of Civil Procedure 23(e)(5).

The court explained:

  • The objector must state the basis for the objection with sufficient specificity to allow the parties seeking settlement approval to respond and the court to evaluate the issues in dispute.
  • The parties seeking approval of the class settlement have the usual burdens to show that the proposed class satisfies Rule 23(a) requirements for certification, and also that the proposed settlement is "fair, reasonable, and adequate."
  • The parties seeking approval bear the burden of showing that the objection does not demonstrate that the class failed to satisfy the above burdens. The extent of this showing will vary "with the strength of the objection itself."
  • Finally, as the fiduciary of the class, the court must protect the class both from parties (and their counsel) that are overeager to settle and from frivolous objectors.

A district court has discretion to allow the objector to conduct discovery to aid the court in evaluating the merits of the objection, the Fourth Circuit said. (Here, the district court continued the final fairness hearing to allow interim discovery — "an extremely unusual occurrence," the appeals court pointed out, particularly where there had already been protracted discovery.)

In this case, the appeals court held the district court correctly applied the respective burdens and did not improperly place the settling parties' burdens on the objector.

The Fourth Circuit also held the district court did not abuse its discretion in certifying the class after evaluating the objector's arguments (noting the "substantial deference" given to trial courts, which have greater experience than appellate courts "managing the practical problems of a class action") or in concluding that the proposed class settlement was fair, reasonable, and adequate.

Workplace class actions frequently end in settlement, often after lengthy negotiations and a delicate balancing of the parties' interests. Objections to a settlement can make it significantly more challenging to resolve the dispute. Contact your Jackson Lewis attorney if you have questions about the requirements for obtaining court approval of a proposed class action settlement when faced with a class member objector.


©2022 Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.

Focused on labor and employment law since 1958, Jackson Lewis P.C.'s 950+ attorneys located in major cities nationwide consistently identify and respond to new ways workplace law intersects business. We help employers develop proactive strategies, strong policies and business-oriented solutions to cultivate high-functioning workforces that are engaged, stable and diverse, and share our clients' goals to emphasize inclusivity and respect for the contribution of every employee. For more information, visit https://www.jacksonlewis.com.

ALM expressly disclaims any express or implied warranty regarding the OnPractice Content, including any implied warranty that the OnPractice Content is accurate, has been corrected or is otherwise free from errors.

More From Jackson Lewis P.C.

President Biden Calls on Congress to Avoid Mass Railroad Strike

By Jonathan J. Spitz Jackson Lewis P.C. December 07 , 2022

President Joe Biden has asked Congress to step in and enact legislation in the hopes of preventing a nationwide railway strike.

City of Atlanta Adopts New Protections for Criminal History Status, Gender Expression

By Emily S. Borna Jackson Lewis P.C. December 07 , 2022

The Atlanta City Council has amended the City of Atlanta Anti-Discrimination Ordinance to extend protections to citizens on the basis of criminal history status and gender expression in employment, housing, and public accommodations.

Congress Votes to Impose Bargaining Agreement to Avoid Nationwide Railroad Strike

By Jonathan J. Spitz Jackson Lewis P.C. December 02 , 2022

Both the House and Senate have passed legislation under the Railway Labor Act to avoid a railroad strike by imposing the bargaining agreement brokered by President Joe Biden in September 2022.

More From Class Actions

City of Atlanta Adopts New Protections for Criminal History Status, Gender Expression

By Emily S. Borna Jackson Lewis P.C. December 07 , 2022

The Atlanta City Council has amended the City of Atlanta Anti-Discrimination Ordinance to extend protections to citizens on the basis of criminal history status and gender expression in employment, housing, and public accommodations.

Trade Secret Law Evolution Podcast Episode 51: The Sixth Circuit Analyzes Key Concepts in Trade Secret Law in Affirming Major Jury Verdict

By Jordan D. Grotzinger Greenberg Traurig December 02 , 2022

You are invited to listen to Episode 51 of Greenberg Traurig’s Trade Secret Law Evolution Podcast, "The Sixth Circuit Analyzes Key Concepts in Trade Secret Law in Affirming Major Jury Verdict."

A Tsunami of Lawsuits Is Expected to Slam Institutions in the Wake of New York Adult Survivors Act

By Greer Griffith McDermott Will & Emery December 01 , 2022

A new revival window opened on Thanksgiving Day for filing sexual assault and abuse lawsuits that would otherwise be time-barred by the New York statute of limitations.

Featured Stories
Closeclose
Search
Menu

Working...