Can Class Members Opt Out Of A Class Settlement But Not The Action? No, Says E.D.N.Y.
Edited by Archis A. Parasharami and Kevin S. Ranlett
Keywords:antitrust, class settlement, E.D.N.Y., Gleeson, Precision Associates Inc. v. Panalpina World Transport
Antitrust class actions differ in a number of respects from the ordinary run of consumer class actions. Perhaps most notably, they frequently involve classes made up, not of individual consumers, but of highly sophisticated businesses with potentially enormous sums of money on the line. These class members sometimes take an active role in the litigation, using innovative tactics to advance their individual interests within the broader context of the class action.
It doesn't always work. In Precision Associates, Inc. v. Panalpina World Transport (pdf), a class action under Section 1 of the Sherman Act, several large class members intervened and filed an objection to an early proposed settlement agreement with one of the many defendants named in the action. These objectors didn't challenge the substance of the agreement—under which the defendant's relatively modest payment to the class was offset by its agreement to cooperate with class counsel in pursuing claims against the other defendants —but instead to the opt-out provision of the agreement. That provision required class members to opt out not only from the settlement but also from the action as a whole "for all purposes," including any further settlements with or judgments against any of the other defendants. Several class members argued the all-or-nothing opt-out provision was unfair, and they should not be forced to opt out of the entire litigation just because they wish to opt out of an early settlement with a single defendant, at least not without first knowing what benefits future settlements may hold.
Judge Gleeson of the Eastern District of New York rejected that argument, holding that class members "do not have an independent right to pick-and-choose" which elements of a class action to join and which to exclude themselves from. He noted that the intervenors can challenge the one-off settlement on fairness grounds if they think the settlement sum insufficient, but he would not "second-guess" the litigation strategy of class counsel, who are "charged with a fiduciary duty to litigate the action in the best interests of the class."
Practical considerations cut both ways. One the one hand, a rule contrary to the one adopted by Judge Gleeson both risks complications...
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