The Federal Class Action Practice Manual

Chapter 7: Objections to and Intervention in Class Action Proceedings

[§44] Objections

Class members who do not opt-out of the proceedings may be bound to any judgment entered therein. In the event a settlement is proposed, the fact that res judicata would bind the class members provides them with an incentive to raise any objections they may have to the proposal. Those who are not class members, because they are outside the definition of the class or have opted out, are on a different footing. Class action settlements typically leave intact the claim of others. That is one of the reasons why nonsettling parties in multi-party cases lack standing to object. See Gould v. Alleco, Inc., 883 F.2d 281, 284 (4th Cir. 1989), cert. denied, 493 U.S. 1058 (1990).

Generally, individuals who opt-out of a class action do not have standing to object to any subsequent settlement thereof. Mayfield v. Barr, 300 U.S. App. D.C. 31, 985 F.2d 1090 (D.C. Cir. 1993) is illustrative of this principle..There the court held that class members who have opted out of a 23(b)(3) class action have no standing to object to a subsequent class settlement becuase by opting out they "escape[d] the binding effect of the class settlement." 985 F.2d at 1093. The decision rests on the sound principle that those who fully preserve their legal rights cannot challenge an order approving an agreement resolving the legal rights of others. There is an exception to the rule that a non-party [opt-out] may not appeal a settlement. Indeed, as Mayfield makes clear, one may challenge a settlement agreement to which he is not a party if the agreement will cause him " 'plain legal prejudice,' as when 'the settlement strips the party of a legal claim or cause of action.' " Mayfield, 985 F.2d at 1093 (quoting Agretti, 982 F.2d at 247); see also Alumax Mill Prods. v. Congress Fin. Corp., 912 F.2d 996, 1002 (8th Cir. 1990) (allowing nonsettling defendant to challenge a partial settlement that dismissed with prejudice its cross-claims and stripped it of indemnity and contribution rights)

Courts will impose deadlines on the filings of objections by absent class members. In order for an objection to be heard, the objection must be timely. Ordinarily, objections are heard at the final fairness hearing; however, it is within the discretion of the court to allow hearings on objections prior to the final hearing.

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[§45] Intervention

Intervention is the appropriate mechanism for nonparties to protect interests that may adversely be affected by a trial court's judgment. In re Discovery Zone Securities Litig., 181 F.R.D. 582 (ED Ill 1998); Feltzen v. Andreas, 134 F.3d 873, 874 (7th Cir. 1998), cert. granted in part, 141 L. Ed. 2d 789, 119 S. Ct. 29 (1998). In some circuits, a nonparty may be unable to appeal without first intervening in the district court proceedings, no matter how crucial their interests. See Id.; In re Brand Name Prescription Drugs Antitrust Litig., 115 F.3d 456, 457 (7th Cir. 1997).

[§45.1] Intervention as of Right under Rule 24(a)

Rule 24, Fed. R. Civ. P., contemplates two grounds for intervention: Intervention as of right under Rule 24(a), and permissive intervention under Rule 24(b). Intervention as of right has four requirements: (1) the proposed intervener must have an "interest" in the property or transaction with is the subject of the action; (2) disposition of the action as a practical matter may impede or impair the applicant's ability to protect that interest; (3) the application is timely; and (4) no existing party adequately represents the applicant's interest. Security Ins. Co. of Hartford v. Schipporeit, Inc., 69 F.3d 1377, 1380 (7th Cir. 1995); Reich v. ABC/York-Estes Corp., 64 F.3d 316, 321 (7th Cir. 1995).

[§45.2] Permissive Intervention under Rule 24(b)

Permissive intervention has three requirements: (1) the application to intervene must be timely; (2) the proposed intervener's claim or defense and the main action must have a question or fact in common; and (3) the court has independent jurisdiction over the proposed intervener's claims. See Security Ins. Co. of Hartford v. Schipporeit, Inc., 69 F.3d 1377, 1381 (7th Cir. 1995); Romasanta v. United Airlines, Inc., 537 F.2d 915, 917 -18 (7th Cir. 1976), aff'd sub. nom. United Airlines, Inc. v. McDonald, 432 U.S. 385, 53 L. Ed. 2d 413, 97 S. Ct. 2464 (1977). Other than these three requirements, "intervention under Rule 24(b) is entirely discretionary . . . . In exercising that discretion, the court must give some weight to the impact of the intervention on the rights of the original parties." Security Ins. Co. of Hartford v. Schipporeit, Inc., 69 F.3d at 1381.

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[§45.3] Intervention in Class Actions

In the class action context, absent class members generally can intervene if the class representatives are no longer adequately representing their interests, provided the absent class members demonstrate intervention proper under 24(a) or (b). See In re Discovery Zone Securities Litig., 181 F.R.D. 582 (ED Ill 1998); Newberg & Conte, Newberg on Class Actions 3d 16.06 - 39 (1992) and Supplement. Applicants for intervention under Rule 24 often will rely on subdivision (a) or (b) in the alternative, and courts will often grant intervention without specifying which provision permits the motion to be granted. See In re Discovery Zone Securities Litig., 181 F.R.D. 582 (ED Ill 1998).

Courts have placed conditions on parties participation in the proceedings when granting intervention petitions. On type of condition courts have imposed on interventions as of right is to grant it for the limited purposes of allowing the intervener to participate in future settlement negotiations and appeal any settlement approved by the court. See Buchet v. Itt Consumer Finance Corp., 845 F. Supp. 584, 697 (D. Minn 1994). In addition some circuits, such as the Seventh Circuit has permitted putative class members to intervene solely for the purposes of appealing an earlier denial of class certification that became a final order when the court approved a settlement for the individual plaintiffs. See Romasanta v. United Airlines, Inc., 537 F.2d 915, 919 (7th Cir. 1978).

When considering a motion to intervene, the court "must accept as true the non-conclusory allegations in the motion." Reich v. ABC/York-Estes Corp., 64 F.3d 316, 321 (7th Cir. 1995). "A motion to intervene as a matter of right, moreover, should not be dismissed unless it appears to a certainty that the intervener is not entitled to relief under any set of facts which could be proved under the complaint." Id. (citing Lake Investors Dev. Group v. Egidi Dev. Group, 715 F.2d 1256, 1258 (7th Cir. 1983)). Each intervention case is highly fact specific, and tends to resist comparison to prior cases. Reich v. ABC/York-Estes Corp., 64 F.3d at 321.

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[§45.4] The Interest Required and Timeliness Issue

The interest required by Rule 24(a)(2) has never been defined with particular precision." Security Ins. Co. of Hartford v. Schipporeit, Inc., 69 F.3d at 1380. The applicant's interest must, however, be a "direct significant, legally protectable one .... It is something more than a mere "betting" interest, but less than a property right ...." Id. at 1380. "Interests in property are the most elementary type of right that type of right that Rule 24(a) is designed to protect," and many courts find this requirement met with a "readily identifiable interest in land, funds, or some other form or property." In re Discovery Zone Securities Litig., 181 F.R.D. 582 (ED Ill 1998)(citing 7C Wright et al., Federal Practice and Procedure 1908 (1986).

A representative plaintiff acts as a fiduciary for the others. Crawford v. Equifax Payment Services, 201 F.3d 877 (7th Cir. 2000). Only when the class members suspect that the representative is not acting in their best interests is there a need to intervene. Thus, in determining whether a motion to intervene is timely, the delay in seeking intervention must be measured from the time the would-be intervenors learned (or should have known) of the representative's shortcomings. United Airlines, Inc. v. McDonald, 432 U.S. 385, 394, 53 L.Ed.2d 423, 97 S.Ct. 2464 (1977)(intervention by a member of the class is timely when the intervenor acts "as soon as it [becomes] clear . . . that the interests of the unnamed class members would no longer be represented by the named class representatives"). Unnamed members of the class rarely will suspect a shortfall in the adequacy of representation before learning of the terms of a [potentially inadequate] settlement or problems in the class definition -- and given the possibility of opt-out, even that may not occasion intervention. Crawford v. Equifax Payment Services, 201 F.3d 877 (7th Cir. 2000). As a general rule, the time for unnamed members of the class to intervene can not commence until notice has issued under Rule 23. Id.

The test for timeliness is "essentially one of reasonableness: potential interveners need to be reasonably diligent in learning of a suit that might affect their rights, and upon so learning, they need to act reasonably promptly. Reich v. ABC/York-Estes Corp., 64 F.3d 316, 321 (7th Cir. 1995). The timeliness determination "requires a consideration of all the circumstances of a case and not just to the point to which the suit has progressed. Ragsdale v. Turnock, 941 F.2d 501, 504 (7th Cir. 1991). The Ragsdale court outlined four factors for consideration: "(1) the length of time the intervener knew or should have known of his or her interest in the case; (2) the prejudice to the original party caused by the delay; (3) the resulting prejudice to the intervener if the motion is denied; and, (4) any unusual circumstances." Id.

[§45.5] Appellate Review of Intervention Orders

The denial of a motion to intervene as of right is a final order from which an immediate appeal may be taken by the nonnamed class members. See Cook v. Powell Buick, Inc., 155 F.3d 758 (5th Cir. 1998). See also, Credit Francais Int'l v. Bio-vita, Ltd., 78 F.3d 698 (1st Cir. 1996)(holding that an appeal from the denial of a motion to intervene must be taken within thirty days of the entry of the order, or not at all); United States v. City of Milwaukee, 144 F.3d 524 (7th Cir. 1998)(same).

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