Earlier this year, the Judicial Conference Advisory Committees on Appellate, Bankruptcy, Civil, and Criminal Rules submitted proposed amendments to a number of Rules, including Federal Rules of Civil Procedure Rule 23 (which governs class actions), and requested that the proposals be circulated to the bench, bar, and public for comments.  The proposed amendments, advisory committee reports, and related information can be found on the Judiciary’s website and a copy is available here.

The Judicial Conference Committee on Rules of Practice and Procedure then approved publication of the proposed amendments to Rule 23 for a comment period from August 12, 2016 through February 15, 2017.  The Advisory Committee will hold public hearings on November 3, 2016, January 4, 2017, and February 16, 2017 regarding the proposed amendments to the Civil Rules, including Rule 23.

As a result, significant changes to Rule 23 of Fed. R. Civ. P. are likely, and employers should understand how these proposed changes may impact the defense of class action lawsuits going forward. A brief summary of some of the more notable changes are as follows:

Form of Notice to Class Members: If implemented, individual notice to any class certified under Rule 23(b) (3) or to a class proposed to be certified for purposes of settlement may be issued not only by U.S. mail, which is generally required, but also through “electronic means, or other appropriate means.”  This change would permit electronic notice to be issued via e-mail or social media.  The Committee Note cautions that, while e-mail may be the most promising method for notice, it is important to keep in mind that a significant portion of class members in certain cases may have limited or no access to e-mail or the Internet.  The amended rule emphasizes that the Court must exercise its discretion to select the appropriate means of disseminating notice.  For employers, this may be an opportunity to highlight the potential disruption that could be caused by notice being issued to a company e-mail address or to an employee’s social media account, which may be accessible at work.

Settlement Approval: The proposed amendments outline factors that courts must consider when approving settlement and determining whether a proposal is “fair, reasonable, and adequate.” Namely, courts will now need to consider whether the “class representatives and class counsel have adequately represented the class”; whether the settlement was “negotiated at arm’s length”; whether the relief provided for the class is adequate (taking into account several factors such as costs, risks, effectiveness of the proposed method of distributing relief to the class, among others); and whether “class members are treated equitably relative to each other.”  These factors will direct the approval process and are helpful points to consider when drafting settlement agreements prior to the amendments actually taking effect.

Class-Member Objections: Another notable proposed change is to Rule 23(e)(5), which governs objections by class members to proposed settlements.  This section would be revised to require that an objector state “with specificity” the grounds for the objection, in hopes of preventing baseless objections from being filed.  The objection must also state whether it applies to the entire class, a subset of the class, or to the objector alone.  Amended Rule 23(e)(5) deletes language requiring court approval for the withdrawal of an objection, instead adding section (b), which requires court approval for payment to an objector or objector’s counsel in connection with “forgoing or withdrawing an objection” or “forgoing, dismissing, or abandoning an appeal of a judgment approving the proposal.”  The proposed amendments also include provision (e)(5)(c), which states that if approval under Rule 23(e)(5)(B) has not been obtained prior to an appeal being docketed, the procedure outlined in Rule 62.1 applies, which permits a district court to issue an indicative ruling.

Appeals: Amended Rule 23(f) states that interlocutory appeals can be pursued from an order granting or denying class-action certification, but not from an order to give notice under Rule 23(e)(1). The time within which a party must file a petition for permission to appeal remains 14 days after the order is entered, unless any party is the United States, a United States agency, or a United States officer, in which case it is 45 days after the order is entered.

After the public comment period concludes, the Advisory Committee will decide whether to submit the proposed amendments to the Committee on Rules of Practice and Procedure.  If approved, the proposed amendments would become effective on December 1, 2018.