Respondents Brief — William Yeatman, Petitioner v. Kathryn Hyland, et al.

Nos. 22-566, 22-634

In the Supreme Court of the United States

______________________

WILLIAM YEATMAN,

Petitioner,

v.

KATHRYN HYLAND, ET AL.,

Respondents.

______________________

RICHARD ESTLE CARSON, III

Petitioner,

v.

KATHRYN HYLAND, ET AL.,

Respondents.

______________________

On Petitions for Writs of Certiorari to the United

States Court of Appeals for the Second Circuit

———————————

BRIEF OF THE NAVIENT RESPONDENTS

IN OPPOSITION

———————————

Andrew A. Ruffino

S. Conrad Scott

COVINGTON & BURLING LLP

New York Times Building

620 Eighth Avenue

New York, NY 10018

Ashley M. Simonsen

COVINGTON & BURLING LLP

1999 Avenue of the Stars

Los Angeles, CA 90067

Beth S. Brinkmann

Counsel of Record

COVINGTON & BURLING LLP

One CityCenter

850 Tenth Street, NW

Washington, DC 20001

(202) 662-6000

bbrinkmann@cov.com

Counsel for the Navient Respondents

i

QUESTIONS PRESENTED

In Yeatman v. Hyland, No. 22-566, the question

presented is whether a district court has discretion to

approve a settlement of a Rule 23(b)(2) class action in

which, in addition to agreeing to injunctive relief, the

defendant provides money cy pres to an organization

formed to address the harms alleged by the plaintiffs.

In Carson v. Hyland, No. 22-634, the question presented is whether reasonable incentive payments may

be provided as part of a class-action settlement to

class members who served as named plaintiffs and

class representatives throughout the litigation.

ii

CORPORATE DISCLOSURE STATEMENT

Pursuant to this Court’s Rule 29.6, Navient Corporation and Navient Solutions, LLC (together, “Navient”) state as follows: Navient Solutions, LLC is a

wholly owned, direct subsidiary of Navient Corporation, which is a publicly held company. Neither Navient Corporation nor Navient Solutions, LLC has any

other parent company, and no publicly held company

owns 10% or more of the stock of either.

iii

TABLE OF CONTENTS

INTRODUCTION .......................................................1

STATEMENT .............................................................4

A. Plaintiffs Sued Navient for Allegedly

Misleading Student Borrowers About

Eligibility for Public Service Loan

Forgiveness (PSLF). ........................................4

B. Plaintiffs and Navient Reached a

Settlement........................................................5

C. The District Court Certified a Rule

23(b)(2) Settlement Class and Approved

the Settlement. ................................................7

D. The Court of Appeals Affirmed. ......................8

ARGUMENT ............................................................10

The Court Should Deny Both Petitions. ............10

I. Yeatman’s Petition on Cy Pres Remedies

Does Not Implicate a Circuit Split or

Otherwise Merit This Court’s Review. ...............10

A. Yeatman’s Purported Circuit Conflicts

Are Illusory or Not Implicated Here. ............11

B. Yeatman’s Dissatisfaction with Cy Pres

Remedies Does Not Warrant This

Court’s Review, Which Should Once

Again Be Denied. ...........................................18

C. This Case Is a Poor Vehicle for

Addressing Issues of Cy Pres Remedies........21

iv

II. Carson’s Petition on Incentive Payments to

Class Representatives Does Not Warrant

Review at This Juncture. ....................................23

A. This Court’s Review of Whether

Incentive

Payments

for

Class

Representatives

Are

Categorically

Prohibited Would Be Premature. ..................23

B. There Has Not Been a Showing That the

Issue Raises Significant Problems in

Class Settlements Because Rule 23 Is

Available to Address Unreasonable

Payments. ......................................................26

CONCLUSION .........................................................27

v

TABLE OF AUTHORITIES

Cases

In re Apple Inc. Device Performance Litig.,

50 F.4th 769 (9th Cir. 2022) .......................... 25, 27

In re Baby Prods. Antitrust Litig.,

708 F.3d 163 (3d Cir. 2013) ........................... 12, 20

In re BankAmerica Corp. Secs. Litig.,

775 F.3d 1060 (8th Cir. 2015) .............................. 12

Berni v. Barilla S.p.A.,

964 F.3d 141 (2d Cir. 2020) ................................. 17

Caligiuri v. Symantec Corp.,

855 F.3d 860 (8th Cir. 2017) ................................ 12

Cent. R.R. & Banking Co. v. Pettus,

113 U.S. 116 (1885) .............................. 9, 23, 24, 25

In re Citigroup Inc. Secs. Litig.,

199 F. Supp. 3d 845 (S.D.N.Y. 2016) ................... 15

Daniel v. Navient Sols., LLC,

No. 8:17-cv-2503, 2019 WL 4671169

(M.D. Fla. Apr. 26, 2019) ....................................... 5

Dornberger v. Met. Life Ins. Co.,

203 F.R.D. 118 (S.D.N.Y. 2001) ........................... 27

In re Easysaver Rewards Litig.,

906 F.3d 747 (9th Cir. 2018) ................................ 12

vi

Fairchild v. AOL, LLC,

No. 09-cv-03568, 2009 WL 10680758

(C.D. Cal. Dec. 31, 2009) ...................................... 19

Fears v. Wilhelmina Model Agency, Inc.,

315 F. App’x 333 (2d Cir. 2009) ........................... 12

Fraley v. Batman,

638 F. App’x 594 (9th Cir. 2016)) ........................ 12

Frank v. Gaos,

139 S. Ct. 1041 (2019) (per curiam) ........ 10, 18, 20

In re Google Inc. Cookie Placement

Consumer Privacy Litig.,

934 F.3d 316 (3d Cir. 2019) ... 12, 13, 14, 15, 17, 22

In re Google Inc. St. View Elec. Commc’ns Litig.,

21 F.4th 1102 (9th Cir. 2021) .................. 12, 15, 20

Hughes v. Kore of Ind. Enter., Inc.,

731 F.3d 672 (7th Cir. 2013) ................................ 12

Janus v. AFSCME, Council 31,

138 S. Ct. 2448 (2018) .......................................... 16

Johnson v. NPAS Sols., LLC,

975 F.3d 1244 (11th Cir. 2020) ................ 24, 25, 27

Johnson v. NPAS Sols., LLC,

43 F.4th 1138 (11th Cir. 2022) ...................... 24, 25

Klier v. Elf Atochem N. Am., Inc.,

658 F.3d 468 (5th Cir. 2011) .................... 12, 14, 19

vii

Lane v. Facebook, Inc.,

696 F.3d 811 (9th Cir. 2012) ................................ 19

Lowery v. Joffe,

143 S. Ct. 107 (2022) ............................................ 10

In re Lupron Mktg. & Sales Pracs. Litig.,

677 F.3d 21 (1st Cir. 2012) .................................. 12

Manhattan Cmty. Access Corp. v. Halleck,

139 S. Ct. 1921 (2019) .......................................... 16

Marek v. Lake,

571 U.S. 1003 (2013) ............................................ 18

Masters v. Wilhelmina Model Agency, Inc.,

473 F.3d 423 (2d Cir. 2007) ..................... 12, 15, 20

McCray v. New York,

461 U.S. 961 (1983) .............................................. 26

Melito v. Experian Mktg. Sols., Inc.,

923 F.3d 85 (2d Cir. 2019) ............................... 9, 25

Jones v. Monsanto Co.,

38 F.4th 693 (8th Cir. 2022) ............................... 12

In re Motor Fuel Temp. Sales Practices Litig.,

872 F.3d 1094 (10th Cir. 2017) ............................ 16

Murray v. Grocery Delivery E-Servs. USA,

55 F.4th 340 (1st Cir. 2022) ........................... 25, 27

Nachshin v. AOL, LLC,

663 F.3d 1034 (2011)............................................ 20

viii

Pearson v. NBTY, Inc.,

772 F.3d 778 (7th Cir. 2014) ................................ 12

In re Pharm. Indus. Average Wholesale Price Litig.,

588 F.3d 24 (1st Cir. 2009) .................................. 12

Spokeo, Inc. v. Robins,

578 U.S. 330 (2016) .............................................. 19

Sullivan v. DB Invs., Inc.,

667 F.3d 273 (3d Cir. 2011) (en banc) ................. 24

Sykes v. Mel S. Harris & Assocs. LLC,

780 F.3d 70 (2d Cir. 2015) ................................... 17

Transunion LLC v. Ramirez,

141 S. Ct. 2190 (2021) .......................................... 19

Trustees v. Greenough,

105 U.S. 527 (1882) .............................. 9, 23, 24, 25

Wal-Mart Stores, Inc. v. Dukes,

564 U.S. 338 (2011) ........................................ 10, 22

Statutes

20 U.S.C. § 1087e ........................................................ 4

College Cost Reduction and Access Act, Pub. L.

No. 110-84, 121 Stat. 784 (2007) ........................... 4

Other Authorities

Agenda Book of the Advisory Committee on

Civil Rules (Nov. 5–6, 2015) ................................ 21

ix

Agenda Book of the Advisory Committee on

Civil Rules (Apr. 14–15, 2016)............................. 21

Fed. R. Civ. P. 23 ..................................... 1, 2, 5, 22, 26

William B. Rubenstein, Newberg &

Rubenstein on Class Actions (6th ed.

2022) ............................................. 12, 19, 21, 24, 26

Stephen M. Shapiro et al., Supreme Court

Practice (11th ed. 2019) ....................................... 15

1

INTRODUCTION

After litigating this case for more than a year, the

plaintiffs faced the prospect that their efforts to obtain

classwide relief would be for naught. The district

court (Cote, J.) dismissed on the pleadings all but one

of their claims and made clear that the final remaining claim—a state-law claim alleging that Navient

representatives provided inaccurate information in

individual telephone conversations with student-loan

borrowers about their eligibility for Public Service

Loan Forgiveness (“PSLF”)—was highly unlikely to be

certified as a damages class. Pet. App. 5a-6a; see Fed.

R. Civ. P. 23(b)(3). 1

Despite the weakness of their case, plaintiffs managed to negotiate a settlement that provides meaningful relief to the class certified under Rule 23(b)(2).

Without admitting liability, Navient has implemented

and committed to maintaining specific measures to

improve how it communicates with borrowers who

may be eligible for PSLF. The company will also pay

more than $2 million to fund the creation of Public

Service Promise, a newly formed nonprofit solely dedicated to counseling and educating borrowers about

PSLF. Plaintiffs released their claims for nonmonetary relief, but borrowers remain free to sue Navient

individually for monetary relief.

Petitioners William Yeatman and Richard Carson

are members of the class who raised a litany of objections to the settlement, two of which they now assert

1 All appendix citations refer to the appendix to the petition for

certiorari in Yeatman v. Hyland, No. 22-566.

2

for this Court’s review. Yeatman objects to the settlement’s “cy pres award” and asks the Court to provide

“overarching guidance” about whether and when cy

pres remedies are ever permitted in class-action litigation. Carson objects to a provision of the settlement

providing for $15,000 incentive payments for class

members who were the named plaintiffs and served as

representatives of the class throughout the litigation,

to compensate them for the burdens they incurred litigating the case. The district court rejected petitioners’ objections. The court upheld the settlement as

fair, reasonable, and adequate, and in the best interests of the class. The court of appeals affirmed.

Yeatman contends that the courts of appeals are

deeply divided about when courts may order cy pres

remedies in class action settlements. But that division is largely illusory. Every court of appeals to consider the issue has concluded that courts may, in

appropriate circumstances, approve class-action settlements that provide for cy pres remedies. For the

most part, slight variances in how courts have described the limitations on cy pres are a reflection of

those courts’ being presented with different facts but

applying the same legal requirement—i.e., that classaction settlements must be “fair, reasonable, and adequate” under the circumstances presented. Fed. R.

Civ. P. 23(e).

At bottom, Yeatman’s petition misunderstands the

settlement at issue and the decisions below. The district court certified the class under Rule 23(b)(2),

which provides for only unitary classwide relief, not

for individual damages awards. By arguing that the

decision below conflicts with cases addressing when

3

courts should approve cy pres remedies in individualdamages class actions certified under Rule 23(b)(3),

Yeatman compares apples to oranges. This distinction between (b)(2) and (b)(3) classes underscores why

Yeatman’s First-Amendment arguments lack merit:

Even accepting Yeatman’s unprecedented premise

that approval of a class-action settlement constitutes

state action, the money Navient agreed to pay Public

Service Promise was never his money. And, at a minimum, this distinction makes this case, which involves

a Rule 23(b)(2) class, the wrong vehicle for addressing

his criticisms regarding the use of cy pres in damages

actions under Rule 23(b)(3).

Carson seeks review based on a recent division in

the courts of appeals regarding whether two nineteenth-century decisions by this Court categorically

bar “incentive” or “service” payments to named plaintiffs in Rule 23 class actions. But only one court of

appeals—the Eleventh Circuit—has held that incentive payments are categorically impermissible. The

courts of appeals that have rejected Carson’s categorical rule nevertheless prohibit unreasonable incentive

payments. Thus, the split concerns only whether

courts may approve otherwise-reasonable incentive

payments, and remains narrow and lopsided. The

Court should allow more courts of appeals to consider

the arguments against incentive payments before deciding whether to take up the issue.

This Court should deny both petitions.

4

STATEMENT

A. Plaintiffs Sued Navient for Allegedly Misleading Student Borrowers About Eligibility for Public Service Loan Forgiveness

(PSLF).

PSLF is a federal program, enacted with broad bipartisan support in 2007, that allows individuals who

make qualifying payments for the requisite period of

time while working in public service to cancel the remaining balance on student loans originated by the

U.S. Department of Education (“Federal Direct”

loans). 20 U.S.C. § 1087e(m). See College Cost Reduction and Access Act § 401, Pub. L. No. 110-84, 121

Stat. 784 (2007). In creating PSLF, Congress and the

Department of Education imposed stringent criteria

on who could obtain loan forgiveness and when they

could do so. As a result, some public-service workers

were unable to obtain loan forgiveness, including

those who had taken out student loans other than

Federal Direct loans, who failed to make the requisite

number of payments, or whose jobs the Department of

Education deemed not to qualify as “public service.”

Plaintiffs here alleged that call-center representatives of the respondents Navient Corporation and

Navient Solutions, LLC (together, “Navient”) conveyed inaccurate information in phone conversations

about whether they qualified for PSLF and what steps

they needed to take to obtain loan forgiveness under

this program. See Am. Compl., DC Dkt. 32 (Jan. 16,

2019).

At the pleading stage, the district court dismissed

for failure to state a claim 14 of the 15 claims plaintiffs

5

asserted against Navient. Op. & Order, DC Dkt. 53

(July 8, 2019).

After the parties commenced discovery on the sole

surviving claim, the district court observed an “enormous hurdle” to certifying a damages class under

Rule 23(b)(3) because Plaintiffs’ claims were based on

“very individual conversation[s]” between borrowers

and Navient call-center representatives. July 6, 2019

Hr’g Tr. 17:18-19, 19:2-3, DC Dkt. 63. A lawsuit, like

this one, based on allegations of individualized misrepresentations and omissions, cannot satisfy Rule

23(b)(3)’s requirement “that the questions of law or

fact common to class members predominate over any

questions affecting only individual members.” See

Fed. R. Civ. P. 23(b)(3) advisory committee’s note to

1966 amendment (“[A]lthough having some common

core, a fraud case may be unsuited for treatment as a

class action if there was material variation in the representations made ....”). The district court’s comments

echoed another district court’s conclusion that nearly

identical claims brought against Navient by different

borrowers could not be certified as a class action under

Rule 23(b)(3) because those claims were premised on

alleged oral communications that varied from borrower to borrower. See Daniel v. Navient Sols., LLC,

No. 8:17-cv-2503, 2019 WL 4671169, at *8 (M.D. Fla.

Apr. 26, 2019).

B. Plaintiffs and Navient Reached a Settlement.

“Spurred in part by Judge Cote’s comments” that

certification of an individual-damages class under

Rule 23(b)(3) was improbable, Pet. App. 6a, and by the

prospect that Navient would likely have to defend

6

against the named plaintiffs’ individual claims even if

no Rule 23(b)(3) class were certified, the parties commenced settlement discussions. See also id. 41a. After mediation before a federal magistrate judge and

months of hard-fought negotiations, the parties

agreed in principle to settle the case.

The agreement that emerged from these arms’

length negotiations was premised on certification of

an injunctive-relief class for settlement purposes under Rule 23(b)(2). As part of the settlement, Navient

agreedwithout admitting liabilityto implement

certain servicing enhancements regarding communications with borrowers, to ensure that its representatives identify borrowers potentially eligible for PSLF

and provide accurate information about the program,

Pet. App. 61a-66a; and to pay $1.75 million to create

Public Service Promise, a newly formed nonprofit dedicated to “provid[ing] education and student loan

counseling to borrowers employed in public service,”

and which the parties estimated would reach 7,70011,250 student-loan borrowers per year, Pet. App.

66a-68a, 93a-102a. Navient also agreed to make

$15,000 incentive payments to the ten class members

who served as class representatives. Id. 75a.

In exchange, class members released their ability

to sue Navient based on these facts either for nonmonetary relief or in a class or other aggregate action,

while the unnamed plaintiffs retained their right to

sue Navient individually for damages. Id. 48a, 53a,

77a.

7

C. The District Court Certified a Rule

23(b)(2) Settlement Class and Approved

the Settlement.

Following a hearing, the district court preliminarily approved the settlement. DC Dkt. 108 (June 19,

2020). After considering and rejecting objections to

the settlement (including petitioners’ objections), the

district court later granted final approval and certified an injunctive-relief class pursuant to

Rule 23(b)(2), concluding that the proposed settlement was fair, reasonable, and adequate. See Pet.

App. 24a-31a, 39a-46a; DC Dkt. 183 (Oct. 2, 2020).

The district court explained that there was “a grave

risk that there would have been no recovery at all” and

“certainly none for the class,” given the enormous obstacles to certification of a Rule 23(b)(3) class. Pet.

App. 43-44a; see also id. 42a (observing that there was

“no sound argument” in favor of certification of

Rule 23(b)(3) class “because the circumstances for

each individual member differ so dramatically”). At

the same time, Navient still would have faced the prospect of having to defend the named plaintiffs’ individual actions through trial, with all the cost that would

entail, even if no Rule 23(b)(3) class were certified. Id.

41a.

The district court carefully scrutinized the settlement’s provision for incentive payments to the named

plaintiffs who served as class representatives. DC

Dkt. 183, at 49-53. The court observed that incentive

payments can “encourage collusion” and that the

court was generally “reluctant” to approve incentive

payments that exceeded reimbursement for individual plaintiffs’ out-of-pocket costs and lost wages. Id.

49:24-50:13. This case, however, presented “reduced

8

concern ... of collusion” because it cannot be certified

as a damages class, and hence “there is little risk that

the class representatives breached their duty in

agreeing to this settlement.” Id. 50:23-51:6. The court

determined that the payments were reasonable given

the extent to which the named plaintiffs “opened their

lives to scrutiny,” “laid bare their financial circumstances, their career choices, and their personal histories” and were subject to “attack personally” by third

parties. Id. 52:5-7.

The court denied plaintiffs’ request for attorney’s

fees because counsel had not disclosed a funding relationship with the American Federation of Teachers, of

which the named plaintiffs were members. Pet.

App. 44a-46a. As a result, the court ordered that

$500,000 originally allocated for attorney’s fees (8% of

class counsel’s lodestar fees) revert to Public Service

Promise once the settlement becomes final.

D. The Court of Appeals Affirmed.

The court of appeals affirmed the district court’s

judgment in full against challenges by petitioners

Yeatman and Carson.

As relevant here, the Second Circuit rejected the

argument that cy pres payments are categorically

barred in class-action settlements because they do not

directly benefit class members. The court explained

that class members in this case stood to benefit from

the cy pres remedy because it “funds Public Service

Promise and thereby assists all class members in navigating PSLF” Pet. App. 17a-18a. The court of appeals also rejected Petitioners’ contention that the cy

9

pres remedy was inappropriate because the settlement fund could have been distributed directly to

class members, explaining that “this argument ... misconstrues the settlement fund.” Id. 18a. In the context of the Rule 23(b)(2) injunctive-relief class

certified by the district court here, the fund did not

represent damages that would otherwise be paid to individual plaintiffs, but was rather “more accurately

described as a mandatory injunction to establish or

contribute to a selected organization than as a refashioning of monetary relief.” Id. 13a n.2.

The court of appeals further concluded that Carson’s objection to the incentive payments was without

merit. According to the court, circuit precedent foreclosed Carson’s argument that Trustees v. Greenough,

105 U.S. 527 (1882), and Central Railroad & Banking

Co. v. Pettus, 113 U.S. 116 (1885), categorically prohibited payment of “incentive” or “service” awards to

named plaintiffs in class actions. Pet. App. 21a-22a

(citing Melito v. Experian Mktg. Sols., Inc., 923 F.3d

85, 96 (2d Cir. 2019)). Insofar as Carson asserted that

the incentive payments were excessive, the Second

Circuit noted that the district court had “offered compelling reasons for compensating the class representatives,” whom third parties had harshly criticized

online for their personal choices and their efforts to

obtain student loan forgiveness. Pet. App. 22a.

10

ARGUMENT

THE COURT SHOULD DENY BOTH PETITIONS.

I. Yeatman’s Petition on Cy Pres Remedies

Does Not Implicate a Circuit Split or Otherwise Merit This Court’s Review.

Petitioner Yeatman fails to identify a conflict

among the courts of appeals on his challenge to cy pres

remedies. To the extent Yeatman implies that cy pres

remedies are categorically impermissible in class-action settlements, the courts of appeals have uniformly

accepted that cy pres remedies may be acceptable as a

means of distributing unclaimed funds or when distributions of damages to individual class members are

not feasible, while rejecting settlements that abuse

the doctrine. And insofar as Yeatman’s counsel once

again asks this Court to provide “overarching guidance” about the circumstances in which federal courts

may approve class-action settlements that provide for

cy pres relief, the Court has twice rebuffed his previous attempts. See Yeatman Pet. 2; Lowery v. Joffe,

143 S. Ct. 107 (2022) (denying certiorari); Frank v.

Gaos, 139 S. Ct. 1041 (2019) (per curiam) (remanding

on other grounds). It should do the same here.

Even if circuit courts were divided over precisely

when courts may approve cy pres remedies in lieu of

individual damages awards, this case does not implicate any such split, and would be a poor vehicle for

addressing that issue. The only class in this case was

certified under Rule 23(b)(2), which does not allow for

individual damages awards. See Wal-Mart Stores,

Inc. v. Dukes, 564 U.S. 338, 360-361 (2011). In this

context, as the Second Circuit observed, the cy pres

11

remedy functions “as a mandatory injunction to establish or contribute to a selected organization” to deliver

prospective relief to the class. Pet. App. 13a n.2. This

case thus simply does not present the question of

when cy pres remedies can be used in lieu of damages

awards to plaintiffs in individual-damages class actions certified under Rule 23(b)(3).

A. Yeatman’s Purported Circuit Conflicts

Are Illusory or Not Implicated Here.

Yeatman contends that the courts of appeals are

“fractured” on the circumstances in which courts can

order cy pres remedies in class actions. Yeatman Pet.

2, 18. But his claims of various circuit splits mischaracterize the decision below or the decisions of other

courts, or elide key distinctions between (b)(2) and

(b)(3) class actions.

1. Yeatman contends that the decision below

adopted an “extreme” position in a six-way, “multiCircuit split remarkable for its lack of uniformity” regarding when a court may approve a cy pres remedy if

the court determines that making damages awards to

individual class members would be infeasible. Yeatman Pet. 18-22. But every court of appeals to consider

the issue—including the Second Circuit—has approved of cy pres remedies when it is infeasible to distribute damages to individual class members, as when

there is no reliable method of identifying class members or when the amounts to be distributed to each

class member would be de minimis. 2 Likewise,

2 See In re Google Inc. St. View Elec. Commc’ns Litig., 21 F.4th

12

“[c]ourts in every circuit, and appellate courts in most,

have approved the use of cy pres for unclaimed class

action funds,” 4 William B. Rubenstein, Newberg &

Rubenstein on Class Actions § 12:32 (6th ed. 2022)

(“Newberg & Rubenstein”), at least when redistributing the remaining funds to class members who have

already been fully compensated would cause an inequitable windfall. 3

The decision below does not conflict with these

other decisions. As noted, this case could not be certified as an individual-damages class action because

1102, 1115 (9th Cir. 2021) (“If it were feasible to distribute the

settlement fund to the class members, a cy pres settlement would

not be employed.”), cert. denied sub nom. Lowery v. Joffe, 143

S. Ct. 107 (2022); In re Google Inc. Cookie Placement Consumer

Privacy Litig., 934 F.3d 316, 327-28 (3d Cir. 2019); In re

Easysaver Rewards Litig., 906 F.3d 747, 761 (9th Cir. 2018); Caligiuri v. Symantec Corp., 855 F.3d 860, 867 (8th Cir. 2017); In

re BankAmerica Corp. Secs. Litig., 775 F.3d 1060, 1064 (8th Cir.

2015); Pearson v. NBTY, Inc., 772 F.3d 778, 784 (7th Cir. 2014);

Hughes v. Kore of Ind. Enter., Inc., 731 F.3d 672, 675-76 (7th Cir.

2013); In re Baby Prods. Antitrust Litig., 708 F.3d 163, 173 (3d

Cir. 2013); Klier v. Elf Atochem N. Am., Inc., 658 F.3d 468, 475

(5th Cir. 2011); In re Pharm. Indus. Average Wholesale Price

Litig., 588 F.3d 24, 34 (1st Cir. 2009); Masters v. Wilhelmina

Model Agency, Inc., 473 F.3d 423, 436 (2d Cir. 2007); Fraley v.

Batman, 638 F. App’x 594, 599 (9th Cir. 2016) (Bea, J., dissenting) (cy pres acceptable if district court finds that distributions

are infeasible or uneconomical); 4 William B. Rubenstein, Newberg & Rubenstein on Class Actions § 12:26 (6th ed. 2022).

3 E.g., Jones v. Monsanto Co., 38 F.4th 693, 699 (8th Cir. 2022;

Baby Prods., 708 F.3d at 172; In re Lupron Mktg. & Sales Pracs.

Litig., 677 F.3d 21, 30 (1st Cir. 2012); Klier, 658 F.3d at 475;

Pharm. Indus. Average Wholesale Price, 588 F.3d at 34; Fears v.

Wilhelmina Model Agency, Inc., 315 F. App’x 333, 336 (2d Cir.

2009).

13

Plaintiffs’ claims relied on highly individualized factual questions about the telephone conversations each

Plaintiff allegedly had with Navient call-center representatives. See supra p.4. As a result, the settlement

provides for class certification only under

Rule 23(b)(2) and for prospective relief that includes

both business-practice enhancements by Navient and

the counseling services that will be offered by Public

Service Promise. See supra pp.5-6.

As the Second Circuit recognized, in this settlement, the cy pres remedy functions as a “mandatory

injunction to establish or contribute to a selected organization,” which will provide class members with

additional prospective relief, and not “as a refashioning of monetary relief.” Pet. App. 13a n.2. Because

the members of a (b)(2) class are not entitled to individual monetary damages, there was no need for the

courts below to consider whether it would be feasible

to distribute the settlement fund to individual class

members, id. at 18a, and the decision could not have

created a circuit split with other decisions addressing

prerequisites to cy pres relief in (b)(3) damages actions.

Indeed, Yeatman tacitly acknowledges that the

only court of appeals decision discussing the propriety

of cy pres in the settlement of a Rule 23(b)(2) class action comports with the decision below. In Google

Cookie Placement, the Third Circuit rejected the argument that a cy pres award was improper because the

money dedicated to the cy pres recipient could have

been used to compensate at least a subset of class

members, either by narrowing the class through a

claims process or by awarding damages to individual

class members selected through a lottery. In re Google

14

Inc. Cookie Placement Consumer Privacy Litig., 934

F.3d 316, 328 (3d Cir. 2019). As the Third Circuit explained, that argument flouted Rule 23(b)(2)’s purpose of providing remedies that benefit the class as a

whole, not compensating individual class members.

Id. (seeing “no reason why a cy pres-only (b)(2) settlement that satisfies Rule 23’s certification and fairness

requirements could not ‘belong’ to the class as a whole,

and not to individual class members as monetary compensation”). Even if Yeatman were correct that the

Third Circuit has taken a more restrictive approach to

cy pres in settlements of (b)(3) class actions, Yeatman

Pet. 22-23, that only underscores the poor vehicle for

review that this (b)(2) class settlement presents.

The distinction between Rule 23(b)(2) and (b)(3)

also explains why the decision below does not create a

split with the Fifth Circuit’s decision in Klier v. Elf

Atochem North America, Inc., 658 F.3d 468 (5th

Cir. 2011), regarding whether the settlement fund

“belonged to class members as damages.” Because the

class in this case was certified under Rule 23(b)(2), the

fund that resulted from the settlement was to benefit

the class as a whole, and did not belong to individual

class members. See Google Cookie Placement, 934

F.3d at 328. The decision below is therefore not in

conflict with the Fifth Circuit’s decision about individual class members’ rights to the settlement fund in a

(b)(3) action.

2. Yeatman stretches further in contending that

the Second Circuit “deepens an existing split” between

the Third and Ninth Circuits by “rejecting” a comment

to Section 3.07 of the American Law Institute’s (“ALI”)

Principles of the Law of Aggregate Litigation. Yeatman Pet. 23 (citing Google Cookie Placement, 934 F.3d

15

at 331; In re Google Inc. St. View Elec. Commc’ns

Litig., 21 F.4th 1102, 1120 (9th Cir. 2021)). 4 But the

Second Circuit neither discussed nor even cited Section 3.07 or the ALI’s “significant prior affiliation”

standard, and thus could not have created a circuit

split on that ground. See Stephen M. Shapiro et al.,

Supreme Court Practice § 4:10 (11th ed. 2019) (“inconsistency in dicta or in the general principles utilized”

does not create a circuit split).

To the contrary, both the Second Circuit and district courts in the Circuit have favorably cited the

ALI’s Principles, casting further doubt on Yeatman’s

contention that the court below “reject[ed]” this comment. See Masters v. Wilhelmina Model Agency, Inc.,

473 F.3d 423, 436 (2d Cir. 2007) (citing draft language); In re Citigroup Inc. Secs. Litig., 199 F. Supp.

3d 845, 849 (S.D.N.Y. 2016) (collecting cases); id. at

854 (applying “significant prior relation” test).

3. Yeatman briefly adverts to First Amendment

concerns with class-action settlements and suggests

that the decision below created a circuit split by approving an award to an organization “engaged in political advocacy.” Yeatman Pet. 18, 30-32. 5 But “[t]he

Free Speech Clause of the First Amendment con-

4 The ALI comment states that “[a] cy pres remedy should not be

ordered if the court or any party has any significant prior affiliation with the intended recipient that would raise substantial

questions about whether the selection of the recipient was made

on the merits.”

5 See also Br. of Amicus Curiae Manhattan Inst. 19-22; Br. of

Amici Curiae Montana et al. 8-12; Br. of Amicus Curiae Ctr. for

Am. Liberty 4-11.

16

strains governmental actors,” Manhattan Cmty. Access Corp. v. Halleck, 139 S. Ct. 1921, 1926 (2019), and

Yeatman cites no decision holding that a district

court’s review of a class-action settlement is state action triggering the protections of the First Amendment, see Pet. App. 18a-19a; In re Motor Fuel Temp.

Sales Practices Litig., 872 F.3d 1094, 1113-1114 (10th

Cir. 2017).

Even if approval of a settlement were state action,

Yeatman fails to identify any decision holding that a

member of a Rule 23(b)(2) class has standing to challenge on First Amendment grounds the relief the defendant in such an action agrees to provide the class

as a whole. Navient’s contribution of money to fund

efforts to educate student-loan borrowers—like its

agreement to adopt certain servicing enhancements—

neither compels Yeatman to speak nor prevents him

from doing so. Although Yeatman and his amici analogize this case to Janus v. AFSCME, Council 31, 138

S. Ct. 2448 (2018), their analogy rests on the mistaken

premise that the settlement “divert[ed] each class

member’s money to a third party.” Yeatman Pet. 4.

Because the class was certified under Rule 23(b)(2),

the settlement fund was to benefit the class as a

whole, and did not belong to individual class members, so no one class member has any constitutional

right to veto the class settlement. See Google Cookie

Placement, 934 F.3d at 328; supra p.13-14.

4. Yeatman’s other attempts to try to identify a

circuit conflict are similarly meritless. Yeatman asserts that the decision below created an “outlier rule

that class member funds may be directed to third parties (i) engaged in political advocacy, (ii) selected by

conflicted representatives, (iii) even when the funds

17

can feasibly be distributed to class members—just so

long as there is no evidence of actual bad faith among

the conflicted parties.” Yeatman Pet. 18. The decision

adopted no such “rule,” but merely concluded that the

district court did not abuse its discretion in concluding

that the settlement—which the court of appeals characterized quite differently—satisfied Rule 23(e) under

the particular circumstances of this case. See Pet.

App. 9a, 16a-20a. Yeatman’s highly factbound objection to the district court’s and Second Circuit’s application of Rule 23(e) to the facts of this settlement does

not warrant certiorari.

Yeatman also incorrectly asserts that the decision

below created a circuit split about whether class-action settlements must benefit the class. Even if this

argument—raised only in a footnote, see Yeatman Pet.

19 n.1—were properly presented for this Court’s review, the decision below unsurprisingly did not hold

that district courts may approve class settlements

that do not benefit class members. And Circuit precedent holds otherwise. See, e.g., Berni v. Barilla

S.p.A., 964 F.3d 141, 147-149 (2d Cir. 2020); Sykes v.

Mel S. Harris & Assocs. LLC, 780 F.3d 70, 97 (2d Cir.

2015). In keeping with that precedent, the Second

Circuit described at length the benefits the class will

obtain from the settlement. See Pet. App. 12a-13a &

n.2; see also DC Dkt. 183, 55:21-56:10. Yeatman’s

factbound disagreement with those descriptions does

not merit certiorari.

18

B. Yeatman’s Dissatisfaction with Cy Pres

Remedies Does Not Warrant This Court’s

Review, Which Should Once Again Be Denied.

Not only does Yeatman fail to allege a circuit split,

but the question his petition presents is also declining

in importance and can be addressed by another body.

The Court has twice declined to review this issue and

should do the same here.

1. Just last year, petitioner’s counsel similarly

sought “much-needed guidance” about “[w]hether, or

in what circumstances,” courts may approve class-action settlements that include cy pres relief. Pet. for

Cert. ii, 16, Lowery v. Joffe, No. 21-1535 (U.S. Oct. 3,

2022). The Court denied review, however, without

any noted dissent. That denial came only a few years

after the Court had granted certiorari on a question

similar to the one Yeatman presents here, Pet. for

Cert., Frank v. Gaos, No. 17-961 (U.S. Mar. 20, 2019),

but then remanded on standing grounds without

reaching the merits. Having twice declined to review

this question, the Court should also deny review here.

2. Review is particularly unwarranted because

this issue continues to decline in importance. Statements by members of this Court and other jurists have

led to increased scrutiny of cy pres in class-action settlements. See, e.g., Frank v. Gaos, 139 S. Ct. at 10461048 (Thomas, J., dissenting); Marek v. Lake, 571 U.S.

1003 (2013) (Roberts, C.J., respecting the denial of

certiorari); Lane v. Facebook, Inc., 696 F.3d 811, 833834 (9th Cir. 2012) (Kleinfeld, J., dissenting); Klier,

658 F.3d at 480-482 (Jones, C.J., concurring). In response, courts have narrowed the circumstances in

19

which a cy pres is available, including by requiring

closer alignment between the cy pres payment and the

claims asserted. 4 Newberg & Rubenstein § 12:32. As

a result—and contrary to Yeatman’s claim that “the

use of cy pres in class action settlements has proliferated”—the leading class-action treatise notes “something of a trend away from cy pres.” Id. Recent

decisions enforcing Article III standing requirements

may also reduce the perceived need for cy pres remedies in some cases, by making it less likely that cases

will be pursued in which settlement funds are distributed cy pres because it is difficult to identify genuinely

harmed plaintiffs. See, e.g., Transunion LLC v.

Ramirez, 141 S. Ct. 2190 (2021); Spokeo, Inc. v. Robins, 578 U.S. 330 (2016).

As a result of these shifts in the uses of cy pres, the

abuses Yeatman alleges are increasingly unlikely to

recur. It is telling that the examples he cites are at

least a decade old. And it speaks volumes that Yeatman cites a law review article regarding a “case of cy

pres to charity where judge’s spouse sat on board,” not

the district-court case itself, which the Ninth Circuit

reversed in a decision that restricted the use of cy pres

and required a closer nexus between the plaintiffs’

claims and the cy pres recipient. Fairchild v. AOL,

LLC, No. 09-cv-03568, 2009 WL 10680758 (C.D. Cal.

Dec. 31, 2009), rev’d sub nom. Nachshin v. AOL, LLC,

663 F.3d 1034 (9th Cir. 2011).

Yeatman objects that class counsel can use cy pres

payments to justify outsized attorney’s fee awards.

Yeatman Pet. 28-29. But courts of appeals are aware

of this possibility and have reminded district courts to

reduce attorney’s fee awards when appropriate. See,

e.g., Google Street View, 21 F.4th at 1121-1122; In re

20

Baby Products Antitrust Litig., 708 F.3d 163, 178-179

(3d Cir. 2013); Masters, 473 F.3d at 437. In any event,

this case presents no such concerns, given that the

district court denied class counsel any fees at all.

Yeatman also misses the mark in asserting that

this settlement involves “lawyers’ use of cy pres to promote their own personal, financial, political, or charitable preferences.” Yeatman Pet. 29. Courts have

increasingly reined in cy pres by requiring the recipient to have a close nexus to the plaintiffs and their

claims. E.g., Nachshin v. AOL, LLC, 663 F.3d 1034,

1038-1041 (2011). Here, Public Service Promise was

formed solely for the purpose of educating student

borrowers about PSLF. It is difficult to imagine how

the cy pres remedy could be better aligned with class

members and their claims.

3. Yeatman’s call for prescriptive rules about the

proper uses of cy pres may be answered through revisions to Rule 23, rather than by using this case to

opine on cy pres remedies generally. See Br. of Legal

Aid Orgs. at 17-22, Frank v. Gaos, 139 S. Ct. 1041

(2019) (No. 17-961).

Just a few years ago, the Advisory Committee on

Civil Rules considered a proposed amendment to

Rule 23(e) that would have expressly addressed cy

pres in class-action settlements. That proposed

amendment was modeled on Section 3.07 of the ALI’s

Principles. Draft Minutes of the Meeting of the Advisory Committee on Civil Rules 37 (Apr. 9, 2015), in

Agenda Book of the Advisory Committee on Civil Rules

59 (Nov. 5–6, 2015). The Committee agreed that it

“probably is not a good idea” to forbid cy pres remedies

altogether, id. at 39, but it ultimately abandoned the

21

proposed amendment in light of the prevalence of cy

pres remedies and “the difficulty of knowing how to

craft a good rule.” Draft Minutes of the Meeting of the

Advisory Committee on Civil Rules 25 (Nov. 5, 2015),

in Agenda Book of the Advisory Committee on Civil

Rules 65 (Apr. 14–15, 2016). The same factors that

led the Advisory Committee to drop the effort to craft

a generally applicable rule also weigh against the

Court’s granting review here to offer the “guidance”

Yeatman seeks.

C. This Case Is a Poor Vehicle for Addressing

Issues of Cy Pres Remedies.

This case would be a poor vehicle for the Court to

provide “guidance” about the use of cy pres in class action settlements, as a general matter. Questions

about the propriety of cy pres awards typically arise in

Rule 23(b)(3) damages class actions where they are

used when it is infeasible to distribute settlement

funds to individual class members or when doing so

would provide some class members an unjustified

windfall. In those contexts, a cy pres remedy is the

“next best” thing to awarding money damages to individual plaintiffs—the principal goal of class actions

certified under Rule 23(b)(3). See 4 Newberg & Rubenstein § 4:47 (“Rule 23(b)(3) class actions are money

damages class actions.”).

As noted, however, this class was certified under

Rule 23(b)(2), which is principally used to secure

classwide prospective relief and is not a means of obtaining individual money damages awards. See Fed.

R. Civ. P. 23(b)(2) advisory committee’s note to 1966

amendment; see Wal-Mart, 564 U.S. at 360-363.

22

When used in a (b)(2) action to fund an entity that provides injunctive-like forward-looking relief, cy pres relief serves a function that is different from cy pres

awards in (b)(3) damages cases. See Pet. App. 13a n.2;

Google Cookie Placement, 934 F.3d at 328. That difference addresses many of the questions Yeatman

poses, see supra pp.11-14, 15-18, and also makes this

case an unsuitable vehicle for the Court to address

when and how cy pres relief may be used in (b)(3)

cases.

The settlement at issue here does not short-change

the absent class members. Facing a near certainty

that they would be denied class certification under

Rule 23(b)(3), and thus obtain nothing for the class,

plaintiffs and their counsel obtained meaningful injunctive relief, in the form of tangible business-practice enhancements by Navient, and the formation of a

nonprofit dedicated to educating borrowers about

PSLF. Among other things, those measures will benefit borrowers who seek to obtain PSLF (including

those who borrowed from private lenders but can obtain PSLF by refinancing their debt with a Direct Consolidation Loan). In exchange, class members waive

the ability to sue Navient on these facts for injunctive

or declaratory relief. They cede the right to aggregate

their individual damages claims in a class or mass action, but the prospects that a class could ever be certified on plaintiffs’ theory were remote, at best.

Significantly, class members (other than the named

class representatives) preserve the ability to sue Navient individually for damages, a right that remains

meaningful. Yeatman Pet. 7-8; DC Dkt. 127-136.

23

II. Carson’s Petition on Incentive Payments to

Class Representatives Does Not Warrant Review at This Juncture.

The Court should deny Carson’s petition in No. 22566. Carson is correct that one court of appeals has

concluded that this Court’s decisions in two nineteenth-century cases, Trustees v. Greenough, 105 U.S.

527 (1882), and Central Railroad & Banking Co. v.

Pettus, 113 U.S. 116 (1885), categorically bar courts

from providing for “incentive” or “service” payments to

class representatives in Rule 23 class actions. Carson

Pet. i. But the circuit split is recent, having solidified

less than a year ago. It is also shallow, posing three

circuits against the Eleventh Circuit, which stands

alone in categorically forbidding incentive awards.

And it is narrow, concerning only the permissibility of

otherwise reasonable incentive payments. Regardless

of the merits of Carson’s challenge to incentive payments, Navient respectfully suggests that review

would be premature and the Court could benefit from

allowing other courts of appeals an opportunity to

weigh in on the question before the Court considers

whether to address it.

A. This Court’s Review of Whether Incentive

Payments for Class Representatives Are

Categorically Prohibited Would Be Premature.

1. A circuit split has arisen recently about whether

otherwise-reasonable incentive payments to class representatives are permitted in Rule 23 class actions. In

the last several decades, it has become common in

class actions for the class representatives or named

plaintiffs to receive “special payment[s] in recognition

24

of their service to the class.” 5 Newberg & Rubenstein

§§ 17:3, 17:7. These payments “compensate named

plaintiffs for the services they provided and the risks

they incurred during the course of class action litigation and ... reward the public service of contributing

to the enforcement of mandatory laws.” Sullivan v.

DB Invs., Inc., 667 F.3d 273, 333 n.65 (3d Cir. 2011)

(en banc) (quotation marks omitted).

In 2020, a divided panel of the Eleventh Circuit departed from the apparent consensus view that had approved of incentive payments in class-action

litigation. See Johnson v. NPAS Sols., LLC, 975 F.3d

1244, 1257-1258 (11th Cir. 2020) (“Johnson I”). In the

Eleventh Circuit panel majority’s view, these payments were prohibited by two nineteenth-century

cases, Greenough and Pettus. Greenough held that a

bondholder that successfully sued parties who were

wasting assets pledged as security for the bonds could

be reimbursed by fellow bondholders for the “reasonable costs, counsel fees, charges, and expenses incurred in the fair prosecution of the suit,” but not “a

personal salary for 10 years and lavish travel expenses, totaling more than $1.4 million in today’s dollars.” Johnson v. NPAS Sols., LLC, 43 F.4th 1138,

1143 (11th Cir. 2022) (“Johnson II”) (J. Pryor, J., dissenting from denial of reh’g en banc); see Greenough,

105 U.S. at 537-538. Pettus reiterated this distinction

between chargeable and “personal” expenses while

concluding that attorneys were entitled to be paid for

their professional services from the fund those services created for their clients. 113 U.S. at 127-128. In

the Eleventh Circuit’s view, incentive payments in

modern class-actions are “part salary and part

bounty,” and thus barred by Greenough. Johnson I,

25

975 F.3d at 1258-1259. The Eleventh Circuit subsequently denied rehearing en banc. Johnson II, 43

F.4th 1138.

Petitioner does not identify any other court of appeals that has agreed with the Eleventh Circuit’s

panel decision in NPAS. Three other courts of appeals

have disagreed and concluded that Greenough and

Pettus do not categorically prohibit incentive payments to class representatives in Rule 23 class actions. See Murray v. Grocery Delivery E-Servs. USA,

55 F.4th 340, 352-354 (1st Cir. 2022); In re Apple Inc.

Device Performance Litig., 50 F.4th 769, 785-87 (9th

Cir. 2022); Pet. App. 22a-24a (2d Cir.) (adhering to the

Second Circuit’s pre-NPAS decision in Melito v. Experian Mkt. Sols., Inc., 923 F.3d 85, 96 (2d Cir. 2019)).

2. Regardless of the merits of the dispute, review

by this Court is not warranted at this juncture because the circuit split is recent and shallow. The

panel decision creating the split is less than three

years old, and the split was confirmed only last year,

when the Eleventh Circuit declined, over four judges’

dissent, to rehear the case en banc. Even now, only

four circuits have weighed in on the split, and only

three have addressed the question at any length. And

the split remains lopsided, with only the Eleventh Circuit categorically forbidding incentive payments in

class-action settlements. In these circumstances, this

Court’s review is not urgently needed, and “allow[ing]

the various [circuits] to serve as laboratories in which

the issue receives further study before it is addressed

by this Court” may benefit any consideration the

Court may give this issue in the future. See McCray

v. New York, 461 U.S. 961, 963 (1983) (Stevens, J., respecting the denial of certiorari).

26

B. There Has Not Been a Showing That the

Issue Raises Significant Problems in Class

Settlements Because Rule 23 Is Available

to Address Unreasonable Payments.

The split is also narrower and less important than

Carson contends because courts already have tools to

reject class-action settlements that include excessive

incentive payments. Although incentive payments to

class representatives are common in class settlements, they are typically not very large, averaging between $10,000 and $15,000 per class representative.

5 Newberg & Rubenstein § 17:8. Moreover, Rule 23(e)

already mandates judicial scrutiny of incentive payments to class representatives and requires courts to

reject settlements that inequitably overcompensate

them. See Fed. R. Civ. P. 23(e)(2)(A), (D) (instructing

courts to review whether class-action settlements are

“fair, reasonable and adequate,” based partly on consideration of whether “the class representatives ...

have adequately represented the class” and whether

“the proposal treats class members equitably relative

to each other”).

In light of these provisions, courts that have declined to adopt the Eleventh Circuit’s categorical prohibition have made clear that class settlements

cannot include unreasonable incentive payments. See

Murray, 55 F.4th at 353; Apple Device, 50 F.4th at

786-87; Johnson, 975 F.3d at 1266-67 (Martin, J., concurring in part and dissenting in part); see also Pet.

App. 22a; Dornberger v. Met. Life Ins. Co., 203 F.R.D.

118, 124-125 (S.D.N.Y. 2001). The recent, narrow circuit split thus concerns only whether courts may approve otherwise reasonable incentive payments—a

narrower question than the one Carson presents.

27

CONCLUSION

The petitions for certiorari should be denied.

Respectfully submitted,

Andrew A. Ruffino

S. Conrad Scott

COVINGTON & BURLING LLP

New York Times Building

620 Eighth Avenue

New York, NY 10018

Ashley M. Simonsen

COVINGTON & BURLING LLP

1999 Avenue of the Stars

Los Angeles, CA 90067

Beth S. Brinkmann

Counsel of Record

COVINGTON & BURLING LLP

One CityCenter

850 Tenth Street, NW

Washington, DC 20001

(202) 662-6000

bbrinkmann@cov.com

March 10, 2023

Counsel for the Navient Respondents