United States: Rule 23(f) Petition To Appeal "Negotiation Class" Certification

Background

On September 11, 2019, Judge Polster of the Northern District of Ohio granted certification of a novel "negotiation class" of cities and counties in the opioid MDL. The impetus for the creation of the negotiation class was to encourage global settlement of the claims against opioid distributors and manufacturers, which has thus far been impeded by the possibility that many of the cities and counties that are already litigating their claims would opt out of a settlement class. To counter this, Judge Polster's order requires cities and counties that wish to opt-out of the negotiation class to do so before any settlement is reached, which will allow the parties' knowledge of the exact size of the class to inform the negotiations.¹ Any settlement requires preliminary approval by the court, an approval of at least 75% of the voting class members, and final court approval.

Rule 23(f) Petition

On September 26, 2019, six Ohio cities that filed objections prior to certification petitioned the Sixth Circuit to review Judge Polster's certification order under Rule 23(f).² The cities argue that immediate appellate review of the certification order is warranted, as the certification order will commence an "arduous process" of notification of thousands of absent local governments, negotiations with those that do not opt out, voting to approve any settlement, and litigation regarding settlement fairness.³ Appellate review of Judge Polster's decision now, the cities argue, would prevent the parties from undertaking this process only to have certification invalidated later.

Substantively, the objecting cities raise a number of arguments against the adoption of a negotiation class. First, the cities contend that certification of the negotiation class violates Rule 23. The rule, the cities argue, only allows for certification of litigation or settlement classes. Certification of the negotiation class falls into the latter category because it "has no purpose or authority other than to seek to reach a settlement."⁴ However, certification here precedes rather than follows an agreement to settle, even though Rule 23 requires a settlement to exist prior to certification of a settlement class. Further, certification of settlement classes gives putative class members the opportunity to opt out of the class with knowledge of the settlement terms; here, plaintiffs would only have knowledge of the share of any settlement they would receive, not the actual amount. The cities emphasized that in certifying the negotiation class, Judge Polster assessed a set of provisions presented by a group of "self-selected plaintiffs that the defendants have never indicated they would ever accept," which was inadequate to initiate notice procedures.⁵

The cities also highlight the lack of set procedures in Rule 23 that would protect absent class members in the negotiation class context, specifically the information that is required to be presented to absent class members before they can be bound. Not only will the plaintiffs not know the amount of money they would receive pursuant to a settlement before having to decide whether to opt-out or be bound by the negotiation class, but they would also not have knowledge of other important provisions of the settlement, such as whether the settlement would include non-monetary benefits, and cities and towns would not even know the proportion of a settlement they would receive. The cities contend that if the Sixth Circuit does not reverse certification, parties in "essentially any class action" in the future will rely on negotiation classes to evade settlement class procedures mandated by Rule 23.⁶ The cities argue that Judge Polster's cited justification, that defendants insist on "global peace," would be applicable in many collective actions.

Second, the cities raised multiple constitutional arguments. In particular, the cities contend that class counsel faces incentives antithetical to the interests of the class: because counsel for the negotiation class would not have the opportunity to proceed to a trial, they would face an undue pressure to settle as the only way to receive attorneys' fees.⁷ Moreover, their advocacy for the negotiation class itself, the cities argue, is evidence of the inadequate incentives. The cities also argue that the requirement that they choose whether to opt out with insufficient knowledge violates their due process rights.⁸

We will continue to monitor these developments and report on the outcome of the cities' petition. Read about the petition here.

Footnotes

1. In re Nat'l Prescription Opiate Litig., —F.R.D.—, No. 1:17-MD-2804, 2019 WL 4307851, at *2 (N.D. Ohio Sept. 11, 2019).

2. See Petition for Permission to Appeal Pursuant to Fed. R. Civ. P. 23(f), In re Nat'l Prescription Opiate Litig., No. 19-306 (6th Cir. Sept. 26, 2019), ECF No. 1-2.

3. See id. at 4-6.

4. See id. at 6-14.

5. Id. at 9.

6. Id. at 11-12.

7. See id. at 16-18.

8. See id. at 18-20.

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