NFL Concussion Settlement Affirmed in a Magnificent Third Circuit Opinion

In re NFL Players Concussion Injury Litig., 821 F.3d 410 (3d Cir. 2016).  Too often, objectors to settlements of class action litigation “risk making the perfect the enemy of the good,” to quote Judge Ambro’s opinion for the Third Circuit in this case today.  But “perfect” is not the test.  Instead, class action settlements need only be “fair, reasonable, and adequate” for the class.  Applying the abuse of discretion standard, today’s opinion upholds a $1 billion settlement for a class of professional football players against challenges to the adequacy of the settlement and the certification of a class.  (The Third Circuit had earlier ruled, as discussed here, that preliminary approval of the settlement in this case was not immediately appealable).

This opinion covers much of the landscape in terms of issues connected to class action settlement approval.  It also dealt with some unusual, but unavailing, objections to the settlement.  To summarize some of the highlights of Judge Ambro’s 70-page opinion, it addressed at least the following:

Whether the District Court failed to find that it had subject matter jurisdiction over the case, a prerequisite to proceeding at all, because the court never decided the NFL’s motion to dismiss.  Judge Ambro found that what mattered was that plaintiffs had “properly alleged jurisdiction based on the diversity of the parties and the amount in controversy.”  The absence of a decision on the motion to dismiss was immaterial.

What the standard of review is for settlement approval and settlement class certification.  As prior cases had stated, the abuse of discretion standard applies to both.  And there is a presumption that a settlement is fair, reasonable, and adequate where “(1) the negotiations occurred at arms length; (2) there was sufficient discovery; (3) the proponents of the settlement are experienced in similar litigation; and (4) only a small fraction of the class objected.”

The numerosity criterion for class certification under Federal Rule of Civil Procedure 23(a)(1).  “There is no magic number of class members needed for a suit to proceed as a class action,” but “numerosity is generally satisfied if there are more than 40 class members.”  Here, there were 20,000 retired players, and no one challenged numerosity.

The commonality criterion for class certification under Rule 23(a)(2).  “Meeting this requirement is easy enough: [the Third Circuit has] acknowledged commonality to be present to be present even when not all members of the plaintiff class suffered an actual injury, when class members did not have identical claims, and, most dramatically, when some members’ claims were arguably not even viable.”  Objectors had argued lack of commonality based on the differing length of player careers and exposure to concussion-causing contact, but Judge Ambro did not endorse their view.  “Even if players’ particular injuries are unique, their negligence and fraud claims still depend on the same common questions regarding the NFL’s conduct.”  This focus on common defendant conduct, as opposed to manufactured differences among class members, is an important principle of class litigation.

The typicality criterion for class certification under Rule 23(a)(3).  There is “a low threshold” for typicality.  Objectors’ contentions based on differences between class representatives and class members in terms of “number of seasons played and injuries caused by head trauma” did not undo typicality where the class representatives “seek recovery under the same legal theories for the same wrongful conduct as the subclasses they seek to represent.”

The adequacy of representation criterion for class certification under Rule 23(a)(4).  The panel rebuffed two arguments as to the adequacy of counsel for subclass counsel, as well as a demand that five additional subclasses should have been created.  Judge Ambro also rejected the contention that there was a conflict between current and future claimants (that is, those already injured and those not yet injured) that defeated adequacy of representation.

The predominance requirement under Rule 23(b)(3).  “[F]actual questions regarding the NFL’s knowledge and conduct as well as common scientific questions regarding causation” predominated over any individual issues.  Judge Ambro rejected objectors’ contention that individualized damage claims in a mass tort context such as this inevitably defeated predominance.

The ability of a District Court to strike untimely objections.  Judge Ambro found that it was within the District Court’s discretion in the management of a class action to reject late objections.

The sufficiency of informal discovery to support a settlement.  Objectors complained that plaintiffs settled the case without having done formal discovery.  But plaintiffs’ counsel had “undertaken significant informal discovery,” which sufficed to make them “aware of the strengths and weaknesses of their case.  Judge Ambro rightly declined objectors’ invitation “to require formal discovery before presuming that a settlement is fair.”

The factors that go into determining the fairness, reasonableness, and adequacy of a settlement.  In Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975), the Third Circuit laid out a number of factors that are to guide review of class action settlements.   In In re Prudential Ins. Co. of America Sales Practices Litig., 148 F.3d 283 (3d Cir. 1998), the court identified some additional “permissive and non-exhaustive factors.”  Today’s opinion carefully illuminated many of those factors on the facts of this case.

Issues relating to attorneys’ fees.  Class counsel deferred their fee request for a subsequent proceeding, so the amount of the fee was not at issue here as it often is.  But two fee issues were addressed.

First, Judge Ambro found no denial of due process or violation of Rule 23(h) in the fact that fees were deferred to a later date.  The Third Circuit and other courts have seen that procedure before, and nothing in Rule 23(h) “mandates the simultaneous notice of a class action settlement and notice of a fee petition.”  Nor was it a violation of due process.

Second, objectors attacked the “clear sailing” provision, under which the NFL agreed not to object to a fee request of up to a certain amount.  Judge Ambro observed that “numerous cases … have approved agreements containing such clear-sailing clauses.”  The concern about such provisions is that there might have been collusion that would afford class counsel large fees in exchange for selling out the class.  But there was no indication of that here, where “the issue of fees was not discussed until after the principal terms of the settlement were agreed to, the fee award will not diminish class recovery, and the agreed amount is just over 10% of the class recovery.”  The panel “join[ed] our sister circuits in declining to hold that clear sailing provisions are per se bars to settlement approval while nonetheless emphasizing that they deserve careful scrutiny in any class action settlement.”

Much of this opinion is not new.  But it does collect numerous useful principles in one place and disposes of a number of fallacious arguments against settlement approval and settlement class certification.  It will be a valuable resource for advocates on all sides of class action settlements.