Koby v. Helmuth - Ninth Circuit

Headline: The Ninth Circuit panel held that a magistrate judge was not required to obtain consent from four million class members before approving a class action settlement, but also held that the magistrate judge abused her discretion by approving the settlement because there was no evidence that the injunctive relief afforded by the settlement had any value to the class members, yet to obtain it they had to relinquish their right to seek damages in any other class action.

Areas of Law: Federal Rules of Civil Procedure 23(e)(2), 28 United States Code § 363(c), Article III and Due Process Clause of United States Constitution

Issues Presented: 
(1)(a) Whether 28 U.S.C. § 363(c) required the magistrate judge to obtain the consent of the four million class members before entering final judgment, and (b) whether not requiring the class members’ consent would violate their Article III rights.
(2) Whether the magistrate judge abused her discretion in applying the FRCP 23(e)(2) “fairness” standard, when she approved a settlement which gave the unnamed plaintiffs nothing of value.

Brief Summary: After the parties engaged in settlement discussions for with the assistance of a magistrate judge, the named plaintiffs eventually consented to having the same magistrate judge conduct all further proceedings in the case, including the entry of final judgment, without the consent of the four million class members.. The district court entered an order authorizing the magistrate judge to exercise jurisdiction over the case, and she presided over all further proceedings. Under the terms of the settlement agreement ultimately reached, the parties agreed to seek certification of a nationwide, settlement-only class under Federal Rule of Civil Procedure 23(b)(2). The magistrate judge approved the settlement, without consent of the class members. The settlement gave the class members’ monetary reward to a San Diego veterans charity, as well as injunctive relief rendered ineffective by an escape clause. The panel held that the magistrate had authority to enter judgment under 28 U.S.C. § 363(c) with only the consent of the named plaintiffs. The panel also found the settlement terms approved by the magistrate to be unfair to the class members under FRCP 23(e)(2), because the relief offered was of no real value them but only to the named plaintiffs and the class counsel.

 

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