Despite Girsh v. Jepson, A District Court Need Not Always Determine the Best Potential Recovery in Order to Approve a Class Action Settlement

Halley v. Honeywell International, Inc., ___ F.3d ___ (3d Cir. 2017).  This was an environmental contamination class action involving lands in Jersey City, New Jersey.  After “five years of extensive fact discovery produced little evidence that liability could be established,” plaintiffs and defendant Honeywell agreed to settle the case for $10,017,000.  (There is another defendant, who did not settle.)  The settlement included an award of attorneys’ fees and reimbursement of expenses of class counsel.

The District Court approved the settlement and the fee and costs request.  An objector appealed, challenging the settlement, as well as the award of fees and costs.  The Third Circuit affirmed the approval of the settlement and the fee award, but remanded for further consideration of the issue of costs.  Judge Scirica wrote the panel’s opinion.

Judge Scirica first addressed whether settlement class certification, a requirement for approval of a class action settlement, was appropriate.  He concluded that it was.  Regardless, the objector had not complained about that.

The main issue was the fairness, reasonableness, and adequacy of the settlement, to which the abuse of discretion standard of review applied.  Judge Scirica went through the settlement approval factors of Girsh v. Jepson, 521 F.3d 153 (3d Cir. 1975), and In re Prudential Ins. Co. of America Sales Practices Litig., 148 F.3d 283 (3d Cir. 1998), and found that the District Court had not abused its discretion in approving the settlement.  He also addressed four specific arguments made by the objector regarding the settlement.

The first objection was that the record contained no expert testimony regarding the presence or absence of contamination on any of the properties encompassed by the settlement class.  The objector asserted that without such information, the District Court could not assess the reasonableness of the settlement with reference to the best possible recovery or in light of the risks of the case, two of the Girsh factors.  She relied on In re Pet Food Products Liab. Litig., 629 F.3d 333 (3d Cir. 2010).  Judge Scirica, however, found that case distinguishable because the parties there had not told the court whether relevant information existed.  Here, the District Court had before it a number of studies relating to the alleged contamination, “which put forth conflicting views on the extent of contamination and migration.”

“[W]jhere valuation of plaintiffs’ claims is difficult or impossible without expert testimony, and expert reports have not been exchanged or depositions taken, the District Court need not delay approval of an otherwise fair and adequate settlement if it has sufficient other information to judge the fairness of the settlement.”  Even Pet Food had stated that “precise value determinations are not required” in evaluating a class action settlement.  The fact that the District Court did not put a value on the settlement, or the best possible settlement, did not require reversal of the settlement approval.

The District Court had observed, in approving the settlement, that class members could still make claims for remediation under the Spill Act, N.J.S.A. 58:10-23.11 et seq.  The objector’s second argument challenged that conclusion, but Judge Scirica found it accurate and rebuffed the objection.

The objector’s third complaint related to the scope of the settlement release, which included “unknown” and “unforeseen” claims.  Judge Scirica found no abuse of discretion there either.  “It is not unusual for a class settlement to release all claims arising out of a transaction or occurrence.  The District Court had considered the scope of the release in relation to the claims asserted, the evidence supporting those claims, and the benefits of the settlement.  That was a fact-intensive inquiry, and the result would not be overturned.

Finally, the objector claimed that the District Court had erred in failing to consider that, at a public meeting, class members allegedly reacted negatively to the settlement.  The “reaction of the class” is one of the Girsh factors, and the District Court relied on the small number of objections (three) and opt-outs (28)in finding that that factor favored settlement approval.  Judge Scirica stated that there was no formal record of the meeting, and no informal record of the meeting was presented to the District Court.  That court did not abuse its discretion in finding that any informal negative reaction at the meeting did not “overcome the presumption created by the small number of objections and opt-outs.”

Turning to fees, the objector contended that the District Court erred in awarding as a fee a percentage of the settlement fund without having deducted costs, which were payable out of that fund, from the amount of the fund, citing New Jersey Court Rule 1:21-7, which requires such a deduction.  Judge Scirica found that the Rule should have been applied, but that the District Court had ruled that, with or without that deduction, the fee was a reasonable percentage, and the panel affirmed that ruling.   The objector complained that the notice showed a lower percentage fee than the percentage that resulted once costs were deducted from the fund, but Judge Scirica did not find that troublesome.  The amount of the fee is what counted, and that amount was disclosed in the notice.

The only objection that did not fail outright was as to costs.  The objector’s argument that class counsel should have been required to itemize costs in detail did not prevail, but Judge Scirica found that the District Court had not offered sufficient reasoning to support the costs award.  The matter was remanded for further consideration on that issue only.

 

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