INTRODUCTIO
Federal Judicial Center materials, particularly the Manual for Complex Litigation, Fourth (MCL 4th), have devoted considerable attention to class actions, perhaps yielding more information than busy judges can absorb. Hence, the need for a pocket guide.

In enacting the Class Action Fairness Act of 2005 (CAFA) (Pub. L. No. 109-2, 119 Stat. 4 (2005)), Congress found both that class actions “are an important and valuable part of the legal system when they permit the fair and efficient resolution of legitimate claims of numerous parties” and that “abuses in class actions undermine the National judicial system . . . in that State and local courts are . . . keeping cases of national importance out of Federal courts.” 28 U.S.C. § 1711 note (2009). This guide can assist you in discharging the responsibilities those cases entail.

The guide distills the elements of CAFA’s federal jurisdictional changes and many of the most important practices for managing class actions found in the MCL 4th, and it provides citations to cases decided after publication of the MCL 4th to illustrate many points. For your convenience, cross-references to the MCL 4th are also provided in the guide. Cases and other references are presented in the Bibliography and Case Annotations by Topic at the end of the guide.

As Congress found, class action litigation allows for the resolution of many claims that might otherwise evade legal enforcement. Class actions may also help regulators control conduct that threatens to harm various markets.

Securities and other consumer class actions serve to enforce regulatory standards designed to deter fraudulent marketplace conduct that might otherwise escape regulation. Members of Congress and others who assert class actions’ general utility also point, however, to abuses that threaten to undermine their usefulness.

Critics single out cases in which the benefits accruing to the class as a whole and to the public seem minimal. Class actions demand that judges play a unique role. There is no such thing as a simple class action. Every one has hidden hazards that can surface without warning. Your role includes anticipating the consequences of poorly equipped class representatives or attorneys, inadequate class settlement provisions, and overly generous fee stipulations.

The high stakes of the litigation heighten your responsibility, and what’s more, you cannot rely on the adversaries to shape the issues that you must resolve in the class context. Indeed, you have to decide first which individuals on the plaintiff side—class representatives and class counsel—can represent the class adequately and whom you should appoint to do so. And, once the adversaries agree on a settlement, you must decide—largely without any clash of views from class counsel, class representatives, or the defendant—whether that settlement is fair, reasonable, and adequate to satisfy the interests of the class as a whole.

This guide attempts to clarify the class action standards that inform those decisions and to make the application of those standards more transparent and available to judges and to policy makers faced with the task of improving them. It is designed to help you determine when class representatives and counsel are “adequate” and whether a settlement’s terms are “fair” to the class as a whole, “reasonable” in relation to the class’s legitimate claims, and “adequate” to redress class members’ actual losses.

Recent empirical research indicates that class action settlement administration has often not produced the transparent information that judges and policy makers need for reviewing class action settlements and setting clear standards for such reviews. Nicholas M. Pace & William B. Rubenstein, How Transparent Are Case Outcomes: Empirical Research on the Availability of Class Action Claims Data (RAND Corp. 2008). Not only are data about class member claims rates and actual recoveries not available to judges attempting to evaluate the benefits of a settlement to the class, information needed to determine which claims rates are acceptable is not available to judges and policy makers concerned with setting standards for future cases. This guide discusses remedies for these deficiencies.

Now that CAFA is on the books and Federal Rule of Civil Procedure 23 has been amended, you can expect to encounter the following class action responsibilities:

• applying CAFA’s federal jurisdiction and removal rules, such as its $5 million amount in controversy for the class as a whole, minimum diversity of citizenship between class members and defendants, and complex set of rules regarding federal jurisdiction when the “primary” or “significant” defendants are local citizens (discussed in part I);
• appointing counsel who have the professional skills, legal support staff, and financial resources needed to provide the class with adequate representation (discussed in part II);
• determining when and how to decide class certification motions (discussed in part III);
• establishing effective standards and procedures for evaluating the actual value to the class of proposed settlements and for determining whether the settlements are fair, reasonable, and adequate for class members (discussed in part IV);
• assessing reasonable attorney fees for class counsel by ensuring that fee awards are commensurate with the value of the results to the class as a whole (discussed in part V);
• coordinating with state judges the management of competing and overlapping class actions (discussed in part VI); and 
• deciding when to use special masters and court-appointed experts to assist in managing class actions and reviewing settlements (discussed in part VII).

Download Managing Class Action Litigation: A Pocket Guide for Judges

PDF format, 283KB, 48Pages.

Second Edition
Barbara J. Rothstein & Thomas E. Willging
Federal Judicial Center
2009

PREFACE
This pocket guide is designed to help federal judges manage the increased number of class action cases filed in or removed to federal courts as a result of the Class Action Fairness Act of 2005 (CAFA).

The 2005 legislation expresses congressional confidence in the abilities of federal judges to “assure fair and prompt recoveries for class members with legitimate claims” and to provide appropriate “consideration of interstate cases of national importance under diversity jurisdiction.” CAFA § 2(b). This second edition includes a new section on determining federal jurisdiction that incorporates case-management practices and judicial interpretations of CAFA.

CAFA also calls on the judiciary to develop and implement “best practices” for achieving the goals of ensuring that settlements are fair to class members and ensuring that class members are the primary beneficiaries of any settlement. This guide is part of the federal judiciary’s continuing effort to achieve those goals.

This edition incorporates suggestions based on recent empirical research indicating that the administration of settlements has been less than transparent, especially regarding the disclosure of claims rates and actual payments to class members, to the detriment of litigants and policy makers.

A note of appreciation goes to Judge D. Brock Hornby (D. Me.) for his detailed suggestions and outline of topics, which served as a catalyst and road map for the original publication. We are also grateful to Jared Bataillon, Christina Franklin, and Neil Marchand, who contributed valuable research assistance for the second edition.

I hope you find this guide useful in meeting the challenges Congress has entrusted to us in managing class action litigation.

Barbara Jacobs Rothstein
Director, Federal Judicial Center

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