Information Famine, Due Process, and the Revised Class Action Rule: When Should Courts Provide a Second Opportunity to Opt Out?
Notre Dame Law Review
Imagine your friend Alice, a young mother, comes to you for advice. Her baby has severe birth defects, which likely resulted from the morning sickness drug Alice took when she was pregnant. Alice has incurred tremendous hospital bills for her child and is afraid she will not have enough money to pay for the additional surgeries her child will need in the future. After looking over the documents she recently received, you tell her she has a fast-approaching deadline to decide whether to commit herself to accepting a settlement from the company that manufactured the morning sickness drug. Understandably, Alice wants to know how much she would receive under the settlement and is frustrated because the documents she received do not give her this information. To her great astonishment, you explain that the settlement does not yet exist and there is no way to predict how much the settlement might ultimately provide her. Anticipating her next question, you then tell her that she will not be able to learn the settlement's terms before the deadline for accepting or rejecting them. In fact, you know the attorney who represents her has barely begun negotiations with the pharmaceutical company.
What you are explaining to Alice is that her claim against the pharmaceutical company has become part of a traditional class action under Federal Rule of Civil Procedure 23(b) (3). The class action allows a court to deal with the large number of similar claims against the pharmaceutical company in a single lawsuit that will more than likely result in a court-approved settlement. If Alice stays in the class action, her claim will be conclusively decided by the class action and she will-hopefully-receive a check from the pharmaceutical company. Alice also has the option to exclude herself from the class, or "opt out," if she thinks she can obtain a more favorable settlement or judgment by bringing an individual lawsuit. The catch is that Alice must decide, right now, whether to bind herself to accept the settlement that the class action will ultimately yield or to opt out and go it alone. 1 If she stays in the class action, settlement negotiations will be entirely out of her hands. She will have no authority to reject proposed settlements and will simply receive whatever remedy the class settlement provides. If she feels the settlement is unfair, her recourse will be to become an objector and attempt to persuade the court to withhold its approval of the settlement. Alternatively, she may entreat class counsel to renegotiate with the defendant. Neither avenue of protest is likely to be successful. 2 So, Alice must choose today whether she will opt out of the settlement or accept whatever amount the class action ultimately provides.
With a lawyer's help, Alice can roughly estimate how much she could recover in an individual lawsuit, but this information is not sufficient to make an informed opt-out decision because she cannot know the value of the class settlement. The class action might be a better option or it might be much worse. Either way, Alice is stuck. Her choice is a painful real life parallel to the dilemma often posed to game show contestants: whether to accept a prize they have seen or reject it in favor of the unknown prize behind door number two. For Alice, the choice is not simply a gamble for the greater of two windfalls. Rather, her gamble is to pick the avenue that will come closest to covering her debt to the hospital and her child's future surgeries. If she does not opt out of the class action, she commits herself to accepting whatever money the class settlement provides and forgoes her opportunity to pursue an individual lawsuit.
This Note contends that, in appropriate circumstances, judges overseeing class litigation should exercise their discretion to provide class members like Alice a second chance to opt out at the time when settlement terms are known.
Copyright © 2004, University of Notre Dame
University of Notre Dame
Cox, Jeannette, "Information Famine, Due Process, and the Revised Class Action Rule: When Should Courts Provide a Second Opportunity to Opt Out?" (2004). School of Law Faculty Publications. 81.
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