Petitioners Brief — Devlin v. Scardelletti

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No. 01-417

IN THE

Supreme Court of the United States

ROBERT J. DEVLIN,

Petitioner,

Vv.

ROBERT A. SCARDELLETTI, Trustee of the Transportation

Communications International Union Staff Retirement Plan, et a/.,

Respondents.

On Writ of Certiorari

to the United States Court of Appeals for the Fourth Circuit

BRIEF FOR THE PETITIONER

BRIAN WOLFMAN THOMAS C. GOLDSTEIN

PUBLIC CITIZEN LITIGATION (Counsel of Record)

GROUP AMY HOWE

GOLDSTEIN & HOWE, P.C.

4607 Asbury PI., N.W.

Washington, DC 20016

(202) 237-7543

1600 20th St., N.W.

Washington, DC 20009

ERIK S. JAFFE

ERIK S. JAFFE, P.C.

5101 34th St., N.W.

Washington, DC. 20008

January 24,2002, FILED

eae ATOLL TE LCA IRE AI IPI EIT TSOTSI ITSO EIDE IES

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 - WASHINGTON, D. C. 20001

“Wy

QUESTION PRESENTED

Whether a class member who, upon receiving notice of a

proposed class action settlement, objects and moves to

intervene has standing to appeal the district court’s approval

of the settlement?

PARTIES TO THE PROCEEDINGS BELOW

Petitioner Robert J. Devlin was an appellant below. The

Retired Employees Protective Association was also an

appellant below.

The respondents in this Court, appellees below, are:

Robert A. Scardelletti, Frank Ferlin, Jr., Joel Parker, and Don

Bujold, as Trustees of the Transportation Communications

International Union Staff Retirement Plan; and George

Thomas Debarr and Anthony Santoro, Sr., individually and as

representatives of subclasses of all persons similarly situated.

Other persons named in the court of appeals’ caption, but

who neither participated in the court of appeals nor are

respondents here, are: Donald A. Bobo, R.I. Kilroy, F.T.

Lynch, and Frank Mazur, Defendants; and A. Meaders, James

H. Groskopf, Thomas C. Robinson, Doyle W. Beat, Miriam

E. Parrish, Robert A. Parrish, Desmond Fraser, James L.

Bailey, Dorothy Deerwester, Thomas J. Hewson, Clay B.

Wolfe, Kenneth B. Lane, Brian A. Jones, and Charles O.

Swasy, Parties in Interest.

TABLE OF CONTENTS

Pages

ny Se PEE ererennnencncnscensnsssmupassesessneasevesseseetnnece i

PARTIES TO THE PROCEEDINGS BELOW ..................... il

a etctrctnecensntensseccsceniesesensereccenssmsessccneet ill

ee ee I cccncncccsstennesseseisanntenrecsscsvtteemennees Vv

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eT ends derstnendatienenndnsnensnninndne equnedengnignemmmennens 2

EAR RETS CI BMD CR iccecceccccccccsecccscssecossccssscosssescesese 2

SUMMARY OF ARGUMENT ............:c.sccccssssssssssesscsesseenees 12

FI chcscantaninstanatntinsentseennncenentennesnennneaengemnenemnneennes 14

I. OBJECTORS SATISFY EVERY REQUIREMENT FOR

APPEALING ESTABLISHED BY STATUTE, RULE, AND

SE Te ae a aa 14

II. OBJECTING CLASS MEMBERS ARE “PARTIES”

HAVING THE RIGHT TO APPEAL. .............cccccccccccccccceeee 16

A. The Term “Parties” Encompasses All Persons

Directly Bound by a Judgment, Not Merely the

Named Representatives Acting as Agents for

SI UIIIIIED, cccasnnccmnsescnenstnnsnnscensnsssacesces 16

B. Once the Class Is Certified, Objectors Are

“Parties to the Judgment,” and Therefore Have

III. THE FOURTH CIRCUIT’S RATIONALE FOR DENYING

UNNAMED CLASS MEMBERS THE RIGHT TO APPEAL

GRE SE IE, Ree CEE 28

A. An Objector’s Appeal Does Not Usurp the Role

of the Class Representative. «0.0.00... 29

B. Appeals by Objectors Further Sound Principles of

Judicial Administration And Preserve Objectors’

ee 32

C. Requiring Prophylactic Intervention in the

District Court Poses a Greater Threat to Class

Management than Does a Right to Appeal Based

on Objections under Rule 23(€).............0000000 36

IV. IF INTERVENTION IS REQUIRED, IT SHOULD BE

FREELY GRANTED AND DEEMED S" !FFICIENT FOR

PURPOSES OF APPEAL IF AT LEAS: SOUGHT SOON

AFTER THE DENIAL OF OBJECTIONS. ...............cc0e0eeee00 41

TTT SELLA A ORT TD: MADERA 43

TABLE OF AUTHORITIES

Pages

Cases .

Adams v. Robertson, 520 US 83 (1997) .......cccccccccseeeeeeeeeeees 34

Amchem Products, Inc. v. Windsor, 521 U.S. 591

GEO Pactensiitncntpeansneneremcermentanemnicnmmenmnmenengetimnanceneenns passim

American Pipe & Construction Co. v. Utah, 414 U.S.

er passim

Bayard v. Lombard, 50 U.S. (9 How.) 530 (1850)............... 19

Bell Atl. Corp. v. Bolger, 2 F.3d 1304 (CA3 1993)........ 11, 33

Berger v. Iron Workers Reinforced Rodmen, 170 F.3d

ee Ny Se cciiccerpeenstsitnrnenrmasiacineneieteccmmmmeimnmeens 34

Blossom v. The Miiwaukee R.R., 68 U.S. (1 Wall.) 655

SEE censhinntstinstiranniy chemmmneninnmeniignatinnagnentsnmennenmmeneen 22, 23

Board of School Comm'rs v. Jacobs, 420 U.S. 128

(1975) (Per CUriasA).. ........cscressesneeseersenseneerensenesneneensenenees 29

Bowling v. Pfizer, inc., 102 F.3d 777 (CA6 1996)............... 25

California Pub. Employees’ Retirement Sys. v. Felzen,

525 U.S. 315 (1999) (equally divided court).......... 2, 16, 18

Chardon v. Fumero Soto, 462 U.S. 650 (1983).............00c0000 42

Cooper v. Federal Reserve Bank of Richmond, 467 U.S.

Ee ee nee Cee 27

Crawford v. Equifax Payment Servs., Inc., 201 F.3d 877

SE 36

Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983).... 42

Felzen v. Andreas, 134 F.3d 873 (CA7), aff'd by equally

divided Court, 525 U.S. 315 (1999) .....cccccccccscesssssssvessseee 18

Franks v. Bowman, 42 U.S. 747 (1976) ..........ccccccccceceeeeeees 29

General Telephone Co. of the Southwest v. Falcon, 457

Re BG Ga creneteterpmennsesngruintapianinsieiannanaiaginanin 45

Guthrie v. Evans, 815 F.2d 626 (CAI11 1987)... 44

Hansberry v. Lee, 311 U.S. 32 (1940)..........ccccccccceeesseeeneenee 28

Hinckley v. Gilman, Clinton, & Springfield R.R. Co., 94

ee Ce Sy Cee csicertenemeicntieniemmennmneen 19, 23

Hovey v. McDonald, 109 U.S. 150 (1883) ...........ccccccceeeeees 23

In re Brand Name Prescription Drugs Antitrust Litig.,

Re OE 18

In re General Motors Corp. Engine Interchange Litig.,

594 F.2d 1106 (CA7), cert. denied, 444 U.S. 870

gree enerencasadenmsctnnienennamnsaimeciditiseitiinepmnmeineanenets 31

In Re Leaf Tobacco Board of Trade, 222 U.S. 578 (1911)

(per curiam) ................ sti ceeateaianiilastaninbreinmappbaammannemasiitiemeaes 19

In re Navigant Consulting, Inc., Secur. Litig., -- F.3d --,

201 WL 1646846 (CA7 Dec. 26, 2001) ............... 16, 18, 25

In re PaineWebber, Inc. Ltd. P'ships Litig., 94 F.3d 49

GED Cpe Pavtrncvecsncncenthisintinastingniienidmestiinipeneieaintatnmmpenesicie 11

Indiana Southern R. Co. v. Liverpool, London & Globe

SB Gg FE i Be ee eratecetiintsoriccmecticcrmnimminecits 20

Kaplan v. Rand, 192 F.3d 60 (CA2 1999) .000.....ccccccceeeee 33, 43

Kremens v. Bartley, 431 U.S. 119 (1977)..........cccccccceceeeeeeees 29

Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992)............ 15

Marino v. Ortiz, 484 U.S. 301 (1988) ................ 10, 17, 19, 21

Mars Steel Corp. v. Continental Ill. Nat'l Bank & Trust

een 38

Marshall v. Holiday Magic, Inc., 550 F.2d 1173 (CA9

SPT Ui cucrnctittunmnnstncinimmesiimniammnainetinintaiedementes 11

Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367

Oe rrinesnaptanadicerssnipeipionemesenenniniviseutepiienptiguatctenmenint 27, 40

vii

Minnesota Co. v. St. Paul Co., 69 U.S. (2 Wall.) 609

ETE hichcneriasinennapnindiiimtepesnenestunibinencunienbemttammmentnetemenmen 23

National Center for Immigrants’ Rights v. INS, 892 F.2d

ee SI i iircnsntecesintennciuentndentictncsuntesteecnneersnandzeaninine 18

Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999)........... passim

Phillips Petroleum Co. v. Shutts, 472 U.S. 797

eae iiidsinstiideinsinnianmmnenienetpedienseasniesiiiiaieniieemeaines 28, 39, 43

Rogers v. National Union Fire Ins. Co. of Pittsburgh,

ws Be 24

Rosenbaum v. MacAllister, 64 F.3d 1439 (CA10 1995) ...... 26

Sage v. Railroad Co., 96 U.S. 712 (1878) .......c.ccccccceeseeeeeeees 23

Scardelletti v. Bobo, 897 F. Supp. 913 (D. Md. 1995)........... 4

Scardelletti v. Bobo, No. JFM-95-52, 1997 U.S. Dist. _

LEXIS 14498 (D. Md. Sept. 8, 1997) .0...........cccccecsceseeeseees 4

Smith v. Swormstedt, 57 U.S. 288 (1850)...........cccc00e0000 27, 28

Snyder v. Harris, 394 U.S. 332 (1969) .........cccccccecseeesessereees 25

Sosna v. Towa, 419 U.S. 393 (1975) .......ccccccseesseeseeeseenseeeeees 29

Stewart v. Dunham, 115 U.S. 61 (1885)............cccccccceeeeseees 26

Supreme Tribe of Ben-Hur v. Cauble, 255 U.S. 356

Se ececonsenessensesonceseesececvenenseneacoseesoneee 25, 26

Torres v. Oakland Scavenger Co., 487 U.S. 312 (1988)...... 18

Trustees v. Greenough, 105 U.S. 527 (1882) ...........cccccceeeees 23

United Airlines v. MacDonald, 432 U.S. 385 (1977)........... 46

United States Catholic Conference v. Abortion Rights

Mobilization, Inc., 487 U.S. 72 (1988) ........-ssessseeseeeseeenes 24

United States ex rel. Louisiana v. Jack, 244 U.S. 397

ES Re SO ee 19

United States Parole Comm'n v. Geraghty, 445 U.S. 388

SET icnirnesthndiisitedalicheitsisapentiestadtutederentinsnsepngeninetvcsinenpenenenes 29

Walker v. City of Mesquite, 858 F.2d 1071 (CAS 1988)...... 12

vill

Weinberger v. Great Northern Nekoosa Corp., 925 F.2d

Fe Fe ccctesreesttnictantteirsietimmnennnsenmmnnnniiiiine 37

Williams v. Morgan, 111 U.S. 684 (1884)... 23, 24

Zahn v. International Paper Co., 414 U.S. 291 (1973)........ 25

Statutes

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Se Ae Oe We crvencntsertnnteniarntonnpniensnnatiatamniagianissindia 2,15

ln We We cccttrtinnecteninteseentnncnenniitnibaininiatatcciittiinsbebedieinn 25

Be re Oe BD kccasictersinscnserssessagtinenrenncininnnineninees 25

2B U.S.C. § 1F3S2ALCS)1)...0ccccecrecececceeeee soiilagetatevemnedbeeiibenstaiias 26

Ba Plies We Bee iaiintctecccciccinciseninnuinnenienincninncsiatinbipsenteiention 4

Other Authorities

2 H. Newberg & A. Conte, NEWBERG ON CLASS ACTIONS

DD BEF Cees Wee cresesnesscssesntapemntnessnsersistsemnisesinasiots 28

2 NEWBERG, CLASS ACTIONS § 2755 (1977) .......cccccecceeeseeees 25

Charles Alan Wright et a/., FEDERAL PRACTICE &

EE ccccessasccnsmnesestnsiinnaspernseentnnseecnseesinanestesgoeante 10, 30

Continuing Work of the Civil Committee: 1966

Amendments of the Federal Rules of Civil Procedure

(1), 81 HARV. L. REV. 356 (1967) ...........cccccsesccessrreeeseeeeees 39

Federal Judicial Center, EMPIRICAL STUDY OF CLASS

ACTIONS IN FOUR FEDERAL DISTRICT COURTS (1996)...... 35

John C. Coffee, Jr., Class Wars: The Dilemma of the

Mass Tort Class Action, 95 COLUM. L. REV. 1343

Jonathan R. Macey & Geoffrey P. Miller, The Plaintiffs’

Attorney's Role in Class Action & Derivative

Litigation: Economic Analysis and Recommendations

for Reform, 58 U. CHI. L. REV. 1 (1991).......cccccesceeeeeeees 35

Joseph Story, COMMENTARIES ON EQUITY PLEADINGS

CG Pee cierdnccccsrremacicignitciintieuasivapiibiciniadeinbuiagnsemsin 11

Kahan & Silberman, The Inadequate Search for

‘Adequacy’ in Class Actions: A Critique of Epstein v.

MCA, Inc., 73 N.Y.U. L. REV. 765 (1998).........cccccccccceseees 40

MANUAL ON COMPLEX LITIGATION THIRD (Federal ;

PE EE Ge Pitetrcecincedtcnnsescntneidnsissiionscccsssenscins 34, 38

No. 97-1732, Oral Arg. Trams. at 37...........cccccccssseecerseesseesens 15

Samuel Issacharoff, Class Action Conflicts, 30 U.C.D. L.

SAE UII chinahinectgninsinddapupenegetndsidiienesedeinemeconintésucese 35

Steven Shavell, The Appeals Process as a Means of

Error Correction, 24 J. LEGAL STUD. 379 (1995)............. 35

Rules

I a 15

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6 RET ae Eee Se DE nee 18

SN Tinie ciiertdeiasibdlnesinniaianiaateenisaaacecnineaanints 34

8 I ee ee ee 42

tS ERS er Te 42

a NTE III traced nena siatsttirtncnatinteiininniintndhians passim

Se SUN UI Te inccinenttinccseeneetateteneutnasnsiebadusieess 14, 16, 27

Ne ile Ms Ts i icnecnccientocsnarntenienctctibientatareetese 10, 40, 42, 43

SE Sy TT TIT TTT vciniteseetichiadnecgnibactennbipndiccbnibeseessenecstei 40

EERE ZNSE CN eee DT 29

SUED es EE: TA Ui eticedleihinicattieibeseenndisienemembabibdananeeteteentedsecenes 29

8 EEE ES eee Ce 29

TITIES MIEN, UN Iaiictctesindtcliaatuiidhinditiaiintaaipaaiatnesatdsnbaahtatenaias 29

jE eee ate aiestiadnccnpetesciesienatinnenenitsctentiitdeneneiaeccsctentinnasee 13

IN THE

Supreme Court of the United States

ROBERT J. DEVLIN,

Petitioner,

ROBERT A. SCARDELLETTI, Trustee of the Transportation

Communications International Union Staff Retirement Plan, et a/.,

Respondents.

On Writ of Certiorari

to the United States Court of Appeals for the Fourth Circuit

OPINIONS BELOW

Petitioner seeks to appeal a judgment approving a class

action settlement. The district court’s orders denying

petitioner’s motion to intervene, approving the settlement,

and entering a final judgment (Pet. App. B1, Cl-C3) are

unpublished. The Fourth Circuit’s opinion (per Williams, J.,

joined by Anderson, D.J., sitting by designation; Michael, J.,

concurring in part and concurring in the judgment) (id. Al-

A35) holding that petitioner lacks standing to appeal the

settlement because he was not a named party in the district

court is published at 265 F.3d 195.

JURISDICTION

The Fourth Circuit entered its opinion on July 27, 2001.

The petition for certiorari was filed on September 7, 2001,

and granted om December 10, 2001. This Court has

jurisdiction pursuant to 28 U.S.C. § 1254 (1).

STATUTE INVOLVED

28 U.S.C. § 1291 provides in relevant part: “The courts

of appeals * * * shall have jurisdiction of appeals from all

final decisions of the district courts of the United States

***”

STATEMENT OF THE CASE

This case presents the question whether petitioner has the

right to appeal a district court judgment that approves a class

action settlement and thereby substantially reduces his

retirement benefits. It is undisputed that petitioner is a class

member directly bound by the judgment, timely objected to

the settlement in the district court, has a substantial personal

stake in overturning the judgment, and timely sought to

appeal. A divided panel of the Fourth Circuit nonetheless

held that petitioner could not appeal because, in the majority’s

view, appeals by class action objectors could undermine the

orderly litigation of the case. Nor could petitioner appea! as

an intervenor, the majority held, because he acted too late by

not moving to intervene until he learned of the proposed

- settlement. ,

The court of appeals’ decision is wrong as a matter of !aw

and logic. Class action objectors -— like derivative

shareholders (cf. California Pub. Employees’ Retirement Sys.

v. Felzen, 525 U.S. 315 (1999) (equally divided court)) —

satisfy all the criteria for appealing set forth in applicable

rules, statutes, and the Constitution. Even if derivative

shareholders do not have the right to appeal, the same cannot

be said of members of a properly certified class, for (unlike

derivative shareholders) they are “parties” directly bound by

the judgment and they pursue their own personal interests on

appeal (as opposed to the interest of a_ third-party

corporation). Petitioner’s right to appeal cannot be abrogated

by the prudential concerns articulated by the majority below,

which, in any event, rest on profound misconceptions about

class action litigation. In particular, appeals by objectors

benefit the process of class action litigation not only by

identifying legal errors by the district court (e.g., Amchem

Products, Inc. v. Windsor, 521 U.S. 591 (1997)) but also by

deterring collusive settlements. Finally, if objectors

technically must intervene to appeal the approval of a

setilement, then petitioner’s motion to intervene was timely as

a matter of law because he filed it as soon as he received a

copy of the proposed settlement. The judgment below

accordingly should be reversed.

1. The suit underlying this petition involves the ERISA-

governed retirement plan for the staff of the Transportation

Communications International Union. Petitioner was a full-

time employee of the Union from 1963 until his retirement in

1983, at which time he began receiving retirement benefits

under the Plan.

By virtue of a 1989 amendment, the Plan provided for a

one-time, ten-percent cost of living adjustment (“COLA”)

effective five years after retirement. In early 1991, the Plan’s

trustees adopted a plan amendment (“the 1991 Amendmert’”)

to provide a more substantial COLA to offset the substantial

reduction in retirees’ effective benefits that had been caused

by inflation. The 1991 Amendment provided that, every three

years, beneficiaries would receive a COLA equivalent to the

rate of inflation for that period, up to a maximum of ten

percent per COLA (“the 1991 COLA”).

Later in 1991, the Plan elected new trustees. Those

trustees determined that the financial projections underlying

the 1991 Amendment were incorrect, and in 1993 they

eliminated the 1991 COLA for ail subsequent retirees. The

trustees determined, however, that as to persons (such as

petitioner) who had already retired and were receiving

benefits under the 1991 Amendment, the COLA was an

“accrued” benefit that could not be eliminated through a plan

amendment. See 29 U.S.C. § 1054(g)(1).

To recoup the costs of this accrued benefit to the Plan, the

new trustees sued the old trustees, seeking damages for

breach of fiduciary duties. The district court agreed that the

old trustees had breached their fiduciary duties in approving

the 1991 COLA based on faulty financial assumptions. The

district court also initially agreed with the new trustees that

the COLA was an accrued benefit for persons who had

retired, see Scardelletti v. Bobo, 897 F. Supp. 913 (D. Md.

1995), but subsequently reversed itself, see Scardelletti v.

Bobo, No. JFM-95-52, 1997 U.S. Dist. LEXIS 14498 (D. Md.

Sept. 8, 1997). Petitioner was not a party to that litigation,

and no party had any interest in appealing from the district

court’s decision as a result of a subsequent settlement.

2. In response to the district court’s decision reversing

itself, the new trustees unilaterally eliminated the 1991 COLA

for all past and future retirees. Petitioner’s retirement benefits

were reduced by approximately forty percent as a result. To

confirm their right to eliminate the COLA, the new trustees

instituted this litigation, leading to the settlement that

petitioner seeks to appeal. Petitioner is a member of the

defendant class. Respondents are the plaintiffs — the plan

trustees -— and the named defendants - the class

representatives.

_ a. To confirm their right to eliminate the 1991 COLA, the

new trustees brought this defendant class action in the District

of Maryland against all participants and beneficiaries of the

plan, approximately 700 persons in total. The district court

subsequently divided the defendant class into subclasses of

retired plan beneficiaries and active plan participants.

Because class certification was not sought pursuant to Rule

' Throughout the case, the Union has paid the attorney’s fees of the class

-representatives. The settlement provides that the Piaz will reimburse the

Union for those costs.

23(b)(3), the individual class members were prohibited from

opting out.

Petitioner is a member of the retiree subclass. He is also

the president of the Retired Employees Protective Association

(“REPA”), a group composed of a majority of Union retirees,

more than four hundred persons in all, which seeks to

preserve the retirees’ benefits under the plan. The new

trustees originally named petitioner as a defendant and a class

representative, but he declined to serve in that capacity. The

trustees subsequently named a new class representative as a

defendant in their suit.

The plaintiff trustees subsequently reached a proposed

settlement with the class representatives. The details of the

settlement are not relevant here, but in broad outline it

abrogates the 1991 Amendment and essentially eliminates the

1991 COLA for the retirees for the future. The settlement

thus has a very substantial negative financial effect on

approximately 400 retirees such as petitioner, drastically

reducing the retirement benefits that they had been receiving.

The district court conditionally certified the case to permit

the settlement to be preliminarily approved and, pursuant to

Fed. R. Civ. P. 23(e), distributed to the class members to

submit objections. J.A. 30-33. Respondents subsequently

submitted the settlement and notice, which the court

approved. Id. 47-55, 76-79.

The district court’s order provides that “[m]Jembers of the

Class may object to the proposed settlement” by submitting

all objections in advance of the fairness hearing. J.A. 78.

Furthermore, “[a]ny member of the Class who does not make

his or her objection or opposition to the proposed settlement

in the manner provided herein shall be deemed to have

waived all objections and opposition to any and all matters to

be considered at the Hearing and any and all subsequent

hearings on these matters.” Jd. 79.

The class notice advises each class member in jts first

sentence that their “rights may be affected by this class action

litigation” (J.A. 54 (capitalization omitted)) and subsequently

acknowledges that “members of the Retiree Subclass have an

interest in restoring and maintaining the 1991 COLA.” The

notice further specifies that class members have the “right . . .

to present [their] views to the court” (id. 50) and that “the

Court must examine the terms of this settlement and consider

any objections to the settlement that may be made by any

member of the Class” (id.). !t advises each class member that

“you may enter a legal appearance individually or through

your own counsel at your expense.” Jd. 51-52. “Any me. ber

of the Class who does not enter an appearance through

counsel in the Action will be represented by counsel for his or

her Subclass.” Jd. 52.

The class notice (which, as noted, was drafted by

respondents and approved by the district court) also

specifically contemplated that class members could appeal the

entry of the settlement. “[I]f an appeal is filed, the settlement

will remain contingent until all appellate proceedings are

concluded. Therefore, if an appeal is taken, it may be several

months before the settlement becomes final, assuming the

appellate court also approves the settlement.” J.A. 51,

b. Promptly upon learning the terms of the proposed

settlement, petitioner formally moved to intervene in the case.

J.A. 56-71." Petitioner styled his motion to intervene as a

“Cross-Motion” to respondents’ motion for preliminary

approval of the settlement. As a party intervenor, petitioner

sought to oppose the settlement, as well as to take discovery,

secure an injunction against eliminating the 1991 COLA, and

disqualify the class counsel. The trustees opposed the motion

2 Petitioner moved to intervene approximately two weeks after the

settlement was submitted to the district court for preliminary approval —

well before notice of the settlement was provided to the class and far in

advance of the deadline for filing objections.

)

as it pertained to petitioner’s objections to the settlement on

the ground that he should “raise any objections to the

proposed settlement agreement at the fairness hearing” in the

manner specified by the class notice. J.A. 80. The trustees

thus asserted that intervention should be denied because,

[m]ost importantly, as a member of the Retiree Class,

Mr. Devlin will have a full opportunity to raise all of his

concerns about the settlement agreement, the

negotiations, and the adequacy of the class

representatives at the fairness hearing on November 12,

1999, prior to any approval of the proposed settlement.

Intervention is not required to achieve that end. Because

intervention is wholly unnecessary to allow Mr. Devlin

to raise any factual or legal issues concerning the

settlement and because of the substantial delay and

likely prejudice that would otherwise result, the Trustees

respectfully urge the Court to deny Mr. Devlin’s motion

to intervene.

J.A. 92 (emphases added).’ The trustees also maintained that

the class representatives were entirely adequate, necessarily

precluding intervention as a matter of right. Jd. 86-90.

The district court denied petitioner’s motion to intervene.

Pet. App. B1. Because petitioner therefore lacked status as a

named party, the district court also denied as moot his

motions for discovery, for an injunction, and to disqualify.

Id.

c. Petitioner separately filed timely objections to the

settlement on behalf of himself individually and also on

: Although the trustees argued that petitioner should have moved to

behalf of REPA. J.A. 104-16. Petitioner argued, for

example, that the settlement was unlawful because (as the

new trustees had themselves maintained in their prior suit

against the old trustees) the 1991 COLA was in fact an

accrued benefit under ERISA for pre-1991 retirees. Based on

the district court’s earlier, unappealed ruling to the contrary,

respondents disagreed.

Petitioner also maintained that the district court should not

approve the settlement because it was unfair. In petitioner’s

view, the plan could afford to maintain the COLA at least in

part by requiring active employees to make pension

contributions, just as petitioner had done for many years

before the plan became entirely employer funded.

Respondents disagreed, arguing that the retiree: had already

recouped the value of their individual contributions.

Respondents also argued that the settlement fairly reflected

the risks to all parties in litigating the case to judgment.

The district court agreed with respondents and rejected

petitioner’s objections to the settlement. The district court

advised petitioner’s counsel, “if I’m wrong [in rejecting

petitioner’s objections], you got an appeal.” J.A. 154; see

also C.A. Supp. App. 1240 (“I am perfectly clear that my

order approving the class settlement should be appealed,

should be reviewed by the Fourth Circuit in due course.”).

The court accordingly entered a final judgment approving the

settlement. Pet. App. C1-C3.*

3. The trustee respondents subsequently invoked the final

judgment to seek an injunction (enforced upon threat of

contempt sanctions) prohibiting class members from making

any court filing in any other jurisdiction that related to the

subject matter of the settlement. According to the trustees,

* The final judgment was delayed while the parties modified the

settlement to accommodate the objections of a class member that the

settlement was unfair as applied to him individually. See J.A. 15-17

(Nos. 115, 118, 124).

“{ajll those attacks [on the settlement] really belong, if

anywhere, here and in the Fourth Circuit.” C.A. Supp. App.

897 (injunction hearing). The basis for the injunction was

that each class member was bound to the settlement as a

matter of res judicata. The district court agreed and enjoined

all class members “from making any filing in any forum

against any person * * * that raises issues encompassed

within the settlement of this action or that directly or

collaterally attacks the settlement of this matter, except in this

Court or on appeal from the Orders of this Court.” J.A. 170-

71.

4. On petitioner’s appeal from the district court’s final

judgment, a panel of the Fourth Circuit held (i) that the

district court properly denied petitioner’s motion to intervene

and denied as moot petitioner’s further motions that depended

on his status as a formal party, and (ii) that petitioner lacked

standing to appeal the district court’s approval of the

settlement.

a. The Fourth Circuit did not doubt that petitioner had the

right to appeal the district court’s denial of his motion to

intervene, notwithstanding that petitioner was not a named

party in the district court. Rather, the Fourth Circuit held that

the -district court properly refused to permit petitioner to

intervene on the ground that his motion was untimely. Pet.

App. A1l0 (“Under either Rule 24(a) or 24(b), the application

for intervention must be timely.”). Permitting petitioner to

intervene at the conclusion of settlement negotiations, the

court concluded, “would have likely resulted in further delay

and substantial additional litigation.” Jd. Al2. On that basis,

the court of appeals also affirmed the district court’s denial of

petitioner’s motions for discovery, for an injunction, and to

disqualify, all of which depended on petitioner’s status as a

named party. Jd. Al3 n.11.

b. The panel divided on the distinct question whether

petitioner nonetheless could appeal the district court’s

approval of the settlement over his objections. The majority

held that petitioner lacked standing and therefore refused to

reach the merits of his appeal. The panel majority concluded

that “the need for effective class management and to avoid

class fragmentation weighs strongly in favor of limiting the

possibility that last-minute ‘spoilers’ who were not entitled to

intervene below might unduly delay class settlement on

appeal.” /d. A21. The majority “fail[ed] to see how effective

class management can be accomplished if non-named class

members who were not entitled to intervene before the district

court can nevertheless usurp the role of the class

representative and, in effect, act as intervenors by contesting

the merits of the class settlement on appeal.” Jd.

The panel majority rejected, however, the view of some

circuits that objectors’ standing is precluded on the basis of

this Court’s three-paragraph per curiam opinion in Marino v.

Ortiz, 484 U.S. 301, 304 (1988), which states that “[t}he rule

that only parties to a lawsuit, or those that properly become

parties, may appeal an adverse judgment, is well settled,” and

that “the better practice is for such a nonparty to seek

intervention for purposes of appeal.” Marino involved only

an attempt to appeal a class action judgment by persons who

were neither named parties nor even class members. The

majority below therefore agreed with the Second and Third

Circuits that Marino is properly distinguished because it “did

not involve members of a class action who were objecting to

a class settlement.” Pet. App. Al6 n.12.

c. Judge Michael would have adopted what he regarded

as the “better reasoned precedent hold[ing]} that an unnamed,

objecting class member has standing to appeal a district court

order approving a class action settlement.” Pet. App. A30

(citing In re PaineWebber Inc. Lid. P’ships Litig., 94 F.3d 49

(CA2 1996); Bell Atl. Corp. v. Bolger, 2 F.3d 1304 (CA3

1993); Marshall v. Holiday Magic, Inc., 550 F.2d 1173 (CA9

1977); 7B Charles Alan Wright et a/., FEDERAL PRACTICE &

PROCEDURE, § 1797 (“Of course, if the class member appears

in response to the notice and puts forth his, objections, he can

attack the dismissal or compromise [of the class action] on

appeal from the entry of the final judgment.”)).

Judge Michael explained that the right of an objecting

class member to appeal dates to early equity practice and is

furthermore supported by constitutional and practical

considerations. _ Pet. App. A31l (citing Joseph Story,

COMMENTARIES ON EQUITY PLEADINGS § 94 (10th ed. 1892)).

Because a class action settlement affects the rights of all class

members, a rule refusing to permit non-named class members”

to appeal raises due process concerns. /d. Under the

majority’s approach, class members will be largely unable to

protect their interests because they generally do not learn of

their interest in intervening until provided with notice of the

proposed settlement by the district court, by which point

(under the panel majority’s holding) it is too late to intervene

and thereby preserve their right to appeal. Jd. A33-A34.

Judge Michael also maintained that the majority’s

approach undermines district courts’ administration of class

actions. The prospect that objectors may appeal provides an

important check on collusive settlements by the class

representatives and their counsel. Pet. App. A32. Moreover,

if prohibited from appealing, objectors will be more likely to

opt out from the class or to institute collateral attacks on

settlement orders. Jd. A33 (citing Walker v. City of Mesquite,

858 F.2d 1071, 1075 (CAS 1988) (unnamed class members

may “challenge the adequacy of class representation * * * by

filing a separate lawsuit for that purpose”)). Alternatively,

district courts will be burdened with unnecessary motions to

intervene, while courts of appeals, in turn, will be burdened

by interlocutory appeals if intervention is denied. Id. A34.

Conversely, as demonstrated by the experience of other

circuits, there is no substantial risk that objectors will file

meritless appeals of settlements, doubtless because in all but

the most meritorious cases “the projected expenses will

outweigh the potential for convincing the appeals court that

the district court abused its discretion in approving a

settlement after considering the objector’s concerns.” Jd.

A32.

d. The Fourth Circuit separately addressed petitioner’s

appeal from the district court’s injunction against class

members making any court filing in any other jurisdiction that

relates to the subject matter of the settlement. The injunction

rested on the fact that the entire class was bound by the

settlement as a matter of res judicata. Notwithstanding the

court of appeals’ holding that objectors could not appeal the

settlement, it nonetheless held that they could properly be

enjoined from acting in derogation of it. Pet. App. A29.

Rejecting petitioner’s substantive challenges to the injunction,

the court simply remanded the injunction for the district court

to reenter it in the form required by Fed. R. Civ. P. 65. Jd.

On remand, the district court reinstated the injunction. J.A.

174-77.

SUMMARY OF ARGUMENT

Neither respondents nor any of the courts of appeals

dispute that objectors meet the settled statutory and

constitutional requirements for appealing. A district court’s

approval of a settlement is an appealable “final decision” for

purposes of the appellate jurisdiction statute. Class members

furthermore have Article III standing to appeal the district

court’s judgment because they have a direct and personal

interest in the outcome of the case that would be remedied by

a favorable ruling on appeal. Unlike derivative shareholders,

that interest is entirely personal to the appealing class

member. Accordingly, objectors could be denied the right to

appeal only if (i) they do not satisfy the general rule that only

“parties” may appeal, or (ii) some special restriction on

appealability (not embodied in the governing statutes or rules)

could and should be announced. Neither of those assertions

can be sustained under this Court’s precedents and sound

principles of judicial administration.

— s

Most courts that deny standing to objectors rely on the

rule that only “parties” may appeal. That reasoning is flawed,

however, because this Court’s precedents settle that the right

to appeal extends to all parties to the judgment as opposed to

merely named parties. Under those precedents, the relevant

question is not whether the appellant is individually, as

opposed to categorically, identified in the caption of the

complaint, but rather whether the appellant is directly bound

by the ruling from which he appeals. The same conclusion

follows from this Court’s precedents holding that “quasi-

parties” and even certain “nonparties” may appeal. All

members of a class, once certified, are bound by the court’s

judgment, and therefore are entitled to appeal if they have

filed objections and thus preserved the arguments they seek to

raise. The absence of a class certification procedure under

Rule 23.1 again distinguishes class actions under Rule 23

from appeals brought by objecting derivative shareholders.

The policy reasons offered by the Fourth Circuit for

nonetheless denying objecting class members the right to

appeal cannot abrogate the basic statutory right to appeal and,

in any event, are unpersuasive. When class members pursue

their objections to a settlement on appeal, they do not in any

sense “usurp” the role of the class representative. The

representative has no right to preclude objections; to the

contrary, Rule 23(e) guarantees every class member the right

to present any objection to a settlement. Furthermore, appeals

by objectors identify legal errors in orders approving

settlements and deter collusive settlements.

Although the court of appeals held that objectors could

preserve their right to appeal by intervening, this Court has

squarely rejected that reasoning in closely related

circumstances on the ground that it would undermine orderly

class action proceedings. In any event, if intervention is

required, the district court erred in refusing to permit

petitioner to intervene limited to the right to contest and

subsequently appeal the settlement.

ARGUMENT

I. OBJECTORS SATISFY EVERY REQUIREMENT FOR

APPEALING ESTABLISHED BY STATUTE, RULE, AND THE

CONSTITUTION.

While disagreeing over whether non-intervening class

members are “parties” for the purpose of any rule that only

parties can appeal, the litigants in this case, and all of the

courts of appeals, necessarily agree that class members who

have objected to a settlement and who are bound by the

judgment satisfy all of the other requirements for an appeal as

of right under the governing statute and rules, as well as under

Article III of the Constitution.

The district court’s approval of a class action settlement is

appealable because it is embodied in a “final judgment” that

terminates the case on the merits. See Pet. App. C1l-C2

(“Final Order”; “This action is dismissed with prejudice.”);

28 U.S.C. § 1291 (“The courts of appeals * * * shall have

jurisdiction of appeals from all final decisions of the district

courts of the United States * * *.”). The Federal Rules of

Appellate Procedure, in turn, are coextensive with the

statute’s jurisdictional grant. See Fed. R. App. P. 1(b)

(“These rules do not extend or limit the jurisdiction of the

courts of appeals.”).

An objecting class member’s appeal of the settlement also

presents a cognizable “case or controversy” for purposes of

Article III of the Constitution. The class member asserts that

the settlement did not provide him all the relief he seeks and

to which he is entitled under the law. The class member thus

presents a claim that he suffered an “actual” invasion of a

“legally protected interest” that is “concrete and

particularized,” that is “fairly traceable” to the settlement

being challenged, and that is “likely * * * [to] be redressed by

a favorable decision” on his objections. Lujan v. Defenders

of Wildlife, 504 U.S. 555, 598-61 (1992) (citations and

quotation marks omitted). Indeed, as Judge Easterbrook, in

his most recent opinion on the subject, has recognized:

Although several decisions (again Scardelletti is a

good example) discuss the problem as if the question

were whether class members have “standing” to appeal,

we do not think that this is apt. Class members suffer

injury in fact if a faulty settlement is approved, and that

injury may be redressed if the court of appeals reverses.

What more is needed for standing?

In re Navigant Consulting, Inc., Secur. Litig., -- F.3d --, 2001

WL 1646846, at *-- (CA7 Dec. 26, 2001).

In this respect, there is arguably a distinction between the

unquestionably direct personal interest of objecting class

members under Rule 23 and the indirect interest pursued by

objecting derivative shareholders under Rule 23.1. The

Felzen respondents, argued in this Court that derivative

Shareholders pursue only the direct interests of the

corporation, as opposed to their own direct personal interests,

contrasting derivative suits with actions in which shareholders

sue to recoup the lost value of their shares. The Felzen

respondents thus essentially retreated to the position that,

although unnamed class members under Rule 23 do have the

right to appeal, derivative shareholders lack a sufficiently

direct personal interest to pursue an appeal. See, e.g., No. 97-

1732, Oral Arg. Trans. at 37.

Notwithstanding the absence of any plausible objection

under the applicable statute, rules, and the Constitution, some

circuits refuse to hear appeals by objecting, but non-

intervening, class members on two bases: (1) That they are

not “parties”; and (2) that policy considerations disfavor such

appeals. Neither of those grounds is persuasive. Objectors

are “parties” for purposes of the general rule that only

“parties” may appeal from a final decision. Furthermore,

objectors’ right to appeal is consistent with sound principles

of judicial administration and, in any event, there is no basis

for adopting a special restriction on appealability nowhere

embodied in the governing statutes or rules.

II. OBJECTING CLASS MEMBERS ARE “PARTIES” HAVING

THE RIGHT TO APPEAL.

A. The Term “Parties” Encompasses All Persons

Directly Bound by a Judgment, Not Merely the

Named Representatives Acting as Agents for

Multiple Individuals.

One justification offered for denying non-intervening

class members the right to appeal a class settlement order is

the general rule that only “parties” are permitted to appeal.

Although the Fourth Circuit in this case seemed to reject that

view, see Pet. App. A15-A16 n.12, the issue bears discussing

because the “party” requirement is the only formal rule that

could conceivably be argued to preclude petitioner’s appeal.

If petitioner is indeed a “party,” or if the rule is not so formal

as some circuits might suggest, then the preclusion of

petitioner’s appeal rests entirely on an exercise in judicial

policy making untethered from any restrictions imposed by

statute, rule, or the Constitution, which cannot overcome an

otherwise clear right to appeal.

In Marino v. Ortiz, this Court stated in its per curiam

opinion that “[t}he rule that only parties to a lawsuit, or those

that properly become parties, may appeal an adverse

judgment, is well settled.” 484 U.S. at 304. Some cases

extrapolate from this general rule to the proposition that,

because unnamed class members are, by definition, not

individually named in the caption of the case, they are not

“parties” entitled to appeal a final decision. £.g., In re

Navigant, -- F.3d at --, 2001 WL 1646846, at *-- (“members

of a class (other than the named representatives) are not

automatically parties”); Jn re Brand Name Prescription Drugs

Antitrust Litig., 115 F.3d 456, 457 (CA7 1997) (appellant

class members “are not named plaintiffs”); cf. Felzen v.

Andreas, 134 F.3d 873, 874-75 (CA7) (discussing view that

unnamed shareholders in derivative suits are nonparties), aff'd

by equally divided Court, 525 U.S. 315 (1999). The flaw in

this reasoning is that it begs the question of who is a “party”

for purposes of the right to appeal.

Under this Court’s settled precedents, “party” status for

purposes of the right to appeal is not limited to individually

identified or “named” parties to a case, as some courts

assume.’ _ Instead, appellate “party” status extends to all

persons over whom a district ceurt exercises jurisdiction, who

are directly bound by a final order or judgment of that court,

and hence whc are “parties” to the particular final decision

from which they appeal. Thus, in the case cited by Marino

for the proposition that only parties may appeal, United States

ex rel. Louisiana v. Jack, the settled rule was described as

precluding appeals from a judgment by a person “‘who is not

a party or privy to the record’” and that “‘one who is not a

party to a record and judgment is not entitled to appeal

therefrom.’” 244 U.S. 397, 402 (1917) (quoting Bayard v.

* Furthermore, it is a somewhat inaccurate usage to say that an objecting

member of a properly certified class is not a “named” party in the case.

While petitioner is not individually named in the caption of the case, he is

certainly “named” categorically through the description of the class on

whose behalf the individual representative purports to act. If that

description is sufficient to identify petitioner for purposes of exercising

jurisdiction over him and binding him by the resulting judgment, then it

should be sufficient to “name” him as a party for purposes of Federal Rule

of Appellate Procedure 3(c). Cf. Torres v. Oakland Scavenger Co., 487

U.S. 312, 318 (1988) (“The purpose of the specificity requirement of Rule

3(c) is to provide notice both to the opposition and to the court of the

identity of the appellant or appellants.”; use of generic designation “ef

al.” would “leave the appellee and the court unable to determine with

certitude whether a losing party not named in the notice of appeal should

be bound by an adverse judgment * * *.”); National Center for

Immigrants’ Rights v. INS, 892 F.2d 814, 816 (CA9 1989) (“Torres does

not require that the individual names of the appealing parties be listed in

instances in which a generic term, such as plaintiffs or defendants,

adequately identifies them.”).

Lombard, 50 U.S. (9 How.) 530, 551 (1850); In Re Leaf

Tobacco Board of Trade, 222 U.S. 578 (1911) (per curiam)).

The precise scope of the term “party” for purposes of

appeal was succinctly described in Hinckley v. Gilman,

Clinton, & Springfield R.R. Co., 94 U.S. (4 Otto) 467 (1876),

in which this Court allowed an appeal by a receiver charged

with distributing the proceeds of a foreclosure action, but who

was not involved in or a party to the underlying litigation.

This Court defined the receiver’s appellate rights and party

status according to the authority exercised by the lower court

and the scope of the judgment or order being appealed:

The receiver cannot and does not attempt to appeal

from the decree of foreclosure, or from any order or

decree of the court, except such as relates to the

settlement of his accounts. To that extent he has been

subjected to the jurisdiction of the court, and made

liable to its orders and decrees. He has, therefore, the

corresponding right to contend against all claims made

against him. For this purpose he occupies the position of

a party to the suit, although an officer of the court, and

after the final decree below has the right to his appeal

here.

94 U.S. (4 Otto) at 469 (emphasis added); see also /ndiana

Southern R. Co. v. Liverpool, London & Globe Ins. Co., 109

U.S. 168, 173 (1883) (person seeking to appeal from a decree

in a suit to which he was denied intervention was “not a party

to the decree from which he appeals” (emphasis added)).

In the present case, of course, petitioner is undeniably a

“party to the decree from which he appeals” because the

settlement order expressly acts upon a certified class of

persons that includes petitioner. That order also plainly

adjudicates petitioner’s individual rights, as confirmed by the

injunction entered against him on the basis of the settlement

order. Furthermore, petitioner is also a party to the “record”

as it relates to the order approving the settlement. He entered

his objections on the record and appeared before the court to

advance those objections. And he did so not as a matter of

grace, but as a matter of right, pursuant to Rule 23(e).°

Mere citation to Marino’s general rule that only “parties”

may appeal thus ultimately begs the question of whether non-

intervening class members bound by a judgment are already

“parties” for such purpose. An analysis of the actual facts and

holding in Marino, however, strongly supports the

proposition that class members who are bound by a court’s

judgment are parties for purposes of appealing that judgment.

Marino was a class action brought by minority police

officers alleging that the New York Police Department’s

sergeant’s examination was _ discriminatory. Class

representatives and the Police Department reached a

settlement, and at the final fairness hearing a group of white

police officers, who were not class members and who had not

sought to intervene, appeared and presented their objections

to the settlement. The district court nonetheless approved the

settlement, and the group of white officers appealed. The

Second Circuit affirmed, not on the merits, but on the ground

that the appellants were not parties to the action.

This Court affirmed, per curiam, applying the “well

settled” principle “that only parties to a lawsuit, or those that

properly become parties, may appeal an adverse judgment.”

Marino, 484 U.S. at 304. Responding to the Second Circuit's

suggestion that there might be some exception to this general

principle, the Court noted that “the better practice is for such

° The right to object on the record and appear in defense of those

objections is tantamount to a per se grant of limited intervention for the

purposes of challenging a settlement. Having exercised that right,

petitioner became a party to the record, and upon entry of the final order

certifying the class and disposing of his claims, he became a party to the

judgment as well. That he may or may not have been a “party” to other

aspects of the proceedings is entirely irrelevant when he only seeks appeal

from the final decision to which he was a party.

a nonparty to seek intervention for purposes of — a

(emphasis added).

Marino, however, emphasized that the appellants were not

class members, had not intervened, and hence were

effectively strangers to the proceedings. See 484 U.S. at 303

(contrasting depiction of the black and Hispanic plaintiff class

members with the non-party white officers). The strong

implication of that emphasis and distinction is that had the

appellants in fact been class members, intervention would

have been unnecessary. Thus, if anything, Marino supports

the view that objecting class members are already “parties”

who need not also intervene to appeal from approval of a

class action settlement. -

That “party” status for purposes of appeal is a function of

being bound by a judgment or order, rather than a function of

being individually named in the caption of a case, can be seen

from a variety of circumstances in which appeals are

uniformly allowed. Two general lines of precedents illustrate

the point. In both, the appellants were not named plaintiffs or

defendants but nonetheless participated in the district court

and were bound by a ruling of the court. It would be

profoundly inconsistent with those precedents to hold that

unnamed plaintiffs and defendants to a judgment who

similarly participate in the case may not appeal despite their

direct personal stake in the outcome.

First, this Court has long recognized the right to appeal of

“quasi-parties” — viz., persons who, like petitioner, are not

individually named as formal parties to the litigation but (i)

have a direct stake in the outcome, (ii) have a recognized right

to participate in the case, and (iii) do in fact participate. For

example, in Blossom v. The Milwaukee Railroad, 68 U.S. (1

Wall.) 655 (1863), Blossom had requested that the district

court complete a foreclosure sale in which he had bid on the

property, but the district court refused. When Blossom

subsequently sought to appeal that ruling, the respondents

objected that he was not a formal party to the case. This

Court answered the question “[i}s the appellant so far a party

to the original suit that he can appeal” in the affirmative,

explaining that Blossom was entitled to appeal with respect to

that part of the case in which he had properly participated.

The Court found it clear that Blossom could not “appeal from

the original decree of foreclosure, nor from any other order or

decree of the court made prior to his bid.” 68 U.S. (1 Wall.)

at 655. But the Court found it equally “well settled, that after

a decree adjudicating certain rights between the parties to a

suit, other persons having no previous interest in the litigation

may become connected with the case, in the course of the

subsequent proceedings, in such a manner as to subject them

to the jurisdiction of the court, and render them liable to its

orders; and that they may in like manner acquire rights in

regard to the subject-matter of the litigation, which the court

is bound to protect.” Jd. at 655-56. The Court cited as

examples appeals by “[s]ureties, signing appeal bonds, stay

bonds, delivery bonds, and receipters under writs of

attachment,” all of wrom “become quasi parties to the

proceedings, and subject themselves to the jurisdiction of the

court.” Jd.

Subsequently, this Court held that a district court order

approving fees for a trustee could be appealed by objectors

who had appeared in the trial court but had not formally

intervened. Williams v. Morgan, 111 U.S. 684 (1884). The

Court cited Blossom and its progeny as sustaining quasi-

parties’ right “to come into this court, or to be brought here

on appeal, when a final decision of their right or claim has

been made by the court below.” 111 U.S. at 699.’ The Court

’ Blossom’s progeny include Hovey v. McDonald, 109 U.S. 150, 155-56

(1883) (when non-party receiver received order in his favor, appeal could

be brought against him); Trustees v. Greenough, 105 U.S. 527, 531 (1882)

(trustees may appeal award in favor of complaina.t suing on behalf of a

trust fund); Sage v. Railroad Co., 96 U.S. 712, 714 (1878) (quasi-parties

interested in order confirming a sale may appeal); Hinckley v. Gilman,

Clinton & Springfield R.R. Co., 94 U.S. 467, 469 (1877) (non-party

accordingly concluded that the objectors “had such an interest

[in the trustee charges], and were so situated in the cause, that

they had a right, by leave of the court, to except and object to

the charges and allowances presented by the trustees and

receivers, and that they had a right to appeal from the decree

of the Circuit Court to this court.” Jd. at 700.*

Second, this Court has explicitly held, and the circuits

have uniformly recognized, that certain “nonparties” to the

case may nonetheless appeal various orders applicable to

them. Such holdings recognize that, for purposes of appeal,

those persons are “parties” to the final decision from which

they appeal notwithstanding that they did not participate as

named parties to the litigation. One example is Marino’s

explicit recognition that “denials of [motions to intervene]

are, of course, appealable.” 484 U.S. at 304. Other examples

include: appeals from contempt orders, United States

Catholic Conference v. Abortion Rights Mobilization, Inc.,

487 U.S. 72, 76 (1988) (“The right of a nonparty to appeal an

adjudication of contempt cannot be questioned.”); appeals

from orders imposing attorney sanctions, Rogers v. National

Union Fire Ins. Co. of Pittsburgh, 864 F.2d 557, 559-60

(CA7 1988) (“When a district court sanctions attorneys the

attorneys are the real parties in interest, and the attorneys

must appeal in their own names. A notice of appeal naming

the party (in this case the plaintiffs) as the appellant, not the

attorneys, does not create jurisdiction over the attorneys’

appeal. Because the notice of appeal does not name [the

attorneys] as the parties taking this appeal, we have no

jurisdiction over their appeal.” (citations omitted)); and

receiver may appeal order directing him to pay money); and Minnesota

Co. v. St. Paul Co., 69 U.S. (2 Wall.) 609, 633-34 (1865) (appeal may be

brought against persons who were “nominal parties” but not formal parties

to the judgment).

* Even if this Court were to conclude that petitioner was not a “party” for

purposes of the right to appeal, he would be entitled to appeal urder the

“quasi-party” line of decisions. F

appeals from orders limiting attorney’s fees, Bowling v.

Pfizer, Inc., 102 F.3d 777, 779 (CA6 1996) (class counsel

and various other law firms appeal as “separate parties” from

district court orders relating to fee award).

The Seventh Circuit’s view that class members are not

automatically parties because they are not counted towards

the jurisdictional requirement of “complete” diversity in suits

raising state-law claims (Jn re Navigant, -- F.3d at --, 2001

WL 1646846, at *--.) is incorrect The diversity jurisdiction

statute does not refer to “parties” but rather requires that the

suit be “between . . . citizens of different States.” 28 U.S.C. §

1332(a). This Court settled in Supreme Tribe of Ben-Hur v.

Cauble, 255 U.S. 356, 365 (1921), that the residency of

unnamed class members is irrelevant not because they are not

“parties” but because they are similarly situated to

intervenors, who are not considered for purposes of diversity

jurisdiction. 255 U.S. at 363-66. This Court has since

described the import of Ben-Hur as requiring that “no

nondiverse members are named parties.” Snyder v. Harris,

394 U.S. 332, 340 (1969) (emphasis added).”

At bottom, the Seventh Circuit’s reasoning confuses

“party” status under Fed. R. App. P. 3 with the wholly

separate question of whether any given person is included in

the diversity analysis. The two issues are simply not

coextensive. There are instances in which persons who are

indisputably “parties” for purposes of appeal are not counted

towards the complete diversity requirement, and there are

likewise instances in which persons with only an indirect

relation to the litigation are counted in the diversity analysis.

* This explanation of Ben-Hur is fully consistent with another of this

Court’s precedents that makes clear that absent class members are parties

to the litigation: Zahn v. International Paper Co., 414 U.S. 291 (1973), in

which the Court held that the claims of non-named plaintiffs, like those of

named plaintiffs, must meet the requisite jurisdictional amount in diversity

cases under 28 U.S.C. § 1332.

Compare Ben-Hur, 255 U.S. at 365 (citing Stewart v.

Dunham, 115 U.S. 61, 64 (1885), for the proposition that

citizenship of intervenors is not counted for diversity), with

28 U.S.C. § 1332(¢X(1) (citizenship of nonparty insureds

counted for diversity).'" Because class members are not

actually brought into the case until the class is certified, see

infra at 24-28, and hence well after jurisdiction over the case

has attached, their status as non-diverse “parties” would have

no impact on existing diversity jurisdiction. Ben-Hur, 255

U.S. at 366 (“intervention of [non-diverse] citizens in the suit

would not have defeated the jurisdiction already acquired”).''

B. Once the Class Is Certified, Objectors Are “Parties

to the Judgment,” and Therefore Have the Right to

Appeal.

When a district court certifies a class action pursuant to

Rule 23 and resolves the case by entering a final judgment

approving a settlement, each class member is a “party” to the

judgment. The class representative holds that title not merely

because his claims are “representative” — i.e., typical — of the

other class members, but because he affirmatively

“represents” the class members who are parties bound by the

court’s ruling without personally participating in the litigation

on an ongoing basis. Long ago, this Court adopted the

'© The fact that unnamed class members are “parties” for purposes of the

right to appeal is fully consistent with the rule that only the residency of

the class representatives is relevant to the determination of diversity

isdiction.

'' The Tenth Circuit has implicitly rejected the view that objectors are

not “parties”; while that court generally agrees with the Seventh Circuit

that objectors may not appeal, it does permit objectors to appeal orders

awarding attorney's fees. Rosenbaum v. MacAllister, 64 F.3d 1439, 1442-

43 (1995). That limited right of appeal makes no sense under a theory that

objectors are not parties. If objectors are not permitted to appeal the

approval of the settlement itself, there is no basis for nonetheless

permitting them to appeal a collateral ruling that less directly affects their

interests.

English rule that a court of equity could permit “a portion of

the parties in interest to represent the entire body, and the

decree binds all of them the same as if all were before the

court.” Smith v. Swormstedt, 57 U.S. 288, 303 (1850). Under

current practice, “‘[A]ll members of the class, whether of a

plaintiff or a defendant class, are bound by the judgment

entered in the action unless, in a Rule 23(b)(3) action, they

make a timely election for exclusion.’” Matsushita Elec.

Indus. Co. v. Epstein, 516 U.S. 367, 379 (1996) (quoting 2

NEWBERG, CLASS ACTIONS § 2755, at 1224 (1977), and citing

Cooper v. Federal Reserve Bank of Richmond, 467 U.S. 867,

874 (1984))."?

As this Court’s precedents consistently recognize, an

unnamed class member who is bound by the judgment is

therefore not a “nonparty.” To the contrary, the entire point

of class actions is that “[i]t is manifest that to require all the

parties to be brought upon the record * * * would amount to a

denial of justice.” Swormstedt, 57 U.S. at 303 (emphasis

added). Thus, this Court’s leading precedents on the binding

effect of class action judgments explain that “[t}he absent

parties would be bound by the decree so long as the named

parties adequately represented the absent class and the

prosecution of the litigation was within the common interest.”

Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 808 (1985)

(emphasis added) (discussing reasoning of Hansberry v. Lee,

311 U.S. 32, 41 (1940)).

The critical stage of the proceeding for triggering

objectors’ right to appeal is class certification. Once the class

is certified (and, in (b)(3) class actions, class members are

given the opportunity to opt out), class members “are either

nonparties to the suit and ineligible to participate in a

recovery or to be bound by a judgment, or else they are full

'2 As noted supra at 5, because this class action was not certified under

subsection (b)(3), petitioner and other objectors had no opportunity to opt

out.

members who must abide by the final judgment, whether

favorable or adverse.” American Pipe & Construction Co. v.

Utah, 414 U.S. 538, 549 (1974). See also, e.g., Ortiz v.

Fibreboard Corp., 527 U.S. 815, 836 (1999) (describing

unnamed class members as “absent parties”); Hansberry, 311

U.S. at 42 (same)."

This Court’s precedents addressing mootness issues in the

context of class actions similarly support the conclusion that

every class member is a “party” in a properly certified class

action. In Sosna v. Jowa, 419 U.S. 393 (1975), for example,

this Court held that when a class representative’s individual

claim is mooted on appeal, a live case or controversy remains

in light of the claims of the remaining class members. “When

the District Court certified the propriety of the class action,

the class of unnamed persons described in the certification

acquired a legal status separate from the interest asserted by

[the] appellant [class representative].” 419 U.S. at 399. In an

accompanying footnote, the Court reasoned that class

certification has “important consequences” because “[i]f the

suit proceeds to judgment on the merits, it is contemplated

that the decision will bind all persons who have been found at

the time of the certification to be members of the class.” Jd.

at 399 n.8. It is only the fact that some parties to the case

retain a continuing interest that precludes mootness despite

the elimination of any personal interest on the part of the class

representative.

The Court has consistently adhered to the principle that

members of a properly certified class have a concrete interest

in the litigation independent of that of the representative.

Compare Franks v. Bowman, 424 U.S. 747 (1976) (applying

Sosna to hold Title VII class action not moot notwithstanding

that named plaintiff no longer had viable claim), and United

'3 The absence of a class certification procedure under Rule 23.1 is yet

another respect in which Rule 23 class actions are distinct from derivative

suits.

States Parole Comm'n v. Geraghty, 445 U.S. 388 (1980)

(extending Sosna to hold claim not moot even in absence of

certified class because claim was “capable of repetition, yet

evading review”) with Kremens v. Bartley, 431 U.S. 119

(1977) (holding Sosna inapplicable when intervening

developments seriously called class certification into

question), and Board of School Comm'rs v. Jacobs, 420 U.S.

128 (1975) (per curiam) (holding Sosna inapplicable when no

class action was properly certified).

This case illustrates perfectly that the right to appeal is not

limited to “named parties.” If petitioner is not a “party” with

the right to appeal the settlement, he similarly could not

appeal the district court’s denial of his motion to intervene or

the district court’s entry of an injunction against him. But

neither respondents nor the court of appeals even attempts to

take that untenable position.

If petitioner does have the right to appeal the denial of his

intervention motion and the injunction — as he must — that

must be because the rulings directly affected petitioner and

were binding upon him. Party status for purposes of appeal

thus is measured by reference to the specific final judgment or

order from which the appeal is taken, not by reference to the

case caption or to the case as a whole. A person whose rights

were adjudicated by a particular final ruling — be that ruling a

denial of a motion or the final disposition of the case — is a

party to that ruling and thus meets all of the formal

requirements for appealing from that ruling as a “party * * *

taking the appeal.”

The same logic that allows petitioner to appeal from the

denial of intervention or the entry of an injunction against him

thus establishes that he may appeal the entry of the settlement

over his objection. The plan trustees brought this lawsuit

precisely for the purpose of resolving their obligations vis-d-

vis all the plan members, each of whom was defined as a

member of the mandatory class. The trustees and the class

representatives then jointly sought class certification for the

purpose of settling the case and binding each class member to

the court’s judgment. Petitioner properly presented his

objections to the settlement to the district court, which

rejected them. The judgment, moreover, binds petitioner (as

respondents and the district court invoked in entering an

injunction against petitioner from acting in contravention of

the settlement). The court’s final judgment approves a

substantial reduction in petitioner’s pension and furthermore

extinguishes petitioner’s personal right to sue the plan to

reinstate his benefits and to challenge the trustees’ actions

through litigation. '*

There accordingly can be no reasonable dispute that

petitioner is thus a party to the judgment, and his formal

objections to the settlement — submitted on the record and as

of right under Rule 23(e) — make him a party for purposes of

appealing that judgment based on those objections.

III. THE FOURTH CIRCUIT’S RATIONALE FOR DENYING

UNNAMED CLASS MEMBERS THE RIGHT TO APPEAL IS

FLAWED.

The Fourth Circuit held that objectors lack “standing” to

appeal a class action settlement not due to any formal defect

in status, but rather because of its view that such appeals

'* That the Federal Rules of Civil Procedure recognize objectors as

“parties” is also implicit in the fact that absent class members are often

allowed discovery into the justification for a class settlement, precisely

because of their undisputed interest in the litigation. 2 H. Newberg & A.

Conte, NEWBERG ON CLASS ACTIONS § 11.57 (3d ed. 1992); see, e.g., Jn

re General Motors Corp. Engine Interchange Litig., 594 F.2d 1106, 1126

(CA7), cert. denied, 444 U.S. 870 (1979). Since, under the Federal Rules

of Civil Procedure, discovery may be obtained only by parties to the

action, or those expecting to become parties, Fed. R. Civ. P. 27, it is clear

that the courts view absent class members as parties for discovery

purposes. See Fed. R. Civ. P. 26(b)(1) (“/p/arties may obtain discovery”

regarding relevant, non-privileged matters), Fed. R. Civ. P. 33 (“any party

may serve upon any other party written interrogatories”), Fed. R. Civ. P.

34 (“/ajny party may serve upon any other party” document requests).

would undermine orderly class action litigation as a policy

matter. As we explain infra, the court of appeals was

mistaken in its policy analysis. But at the outset, there was no

warrant for the Fourth Circuit to impose its own policy-based

restriction on appeals “as of right” that lacks any basis in

statute, rules, or the Constitution (see supra Part I) or in this

Court’s precedents recognizing the traditional rule that

appeals are generally limited to “parties” (see supra Part II).

No doubt, class actions — like all suits — could be made

more “efficient” if fewer appeals were allowed or if the right

to object were eliminated altogether. But the appropriate

means of balancing efficiency against fairness concerns is

through legislation or the established procedures for revising

the Federal Rules of Civil and Appellate Procedure, subject to

due process constraints. Cf. Ortiz, 527 U.S. at 861 (“The nub

of our position is that wé are bound to follow Rule 23 as we

understood it upon its adoption, and that we are not free to

alter it except through the process prescribed by Congress in

the Rules Enabling Act.”’).

A. An Objector’s Appeal Does Not Usurp the Role of

the Class Representative.

Contrary to the view of the majority below, an objector’s

appeal of the approval of a class action settlement does not

“usurp” the prerogatives of the class representative, for the

simple reason that Congress has not granted the representative

the power independently to settle the case or to prevent other

class members from appealing. ‘Throughout much of the case,

the representative acts as the champion of the absent class

members and thus has extensive authority to act in their

interests with respect to matters such as discovery and the

course of trial litigation. The adversarial posture of the case

provides assurance that the interests of absent class members

will be protected. Class members therefore have no per se

right to object to the course of the litigation except by

asserting that the representative is not acting in the interests of

the class or by moving to intervene in the ongoing conduct of

the case.

By contrast, when the representative enters into a

proposed settlement with the opposing party and urges the

district court to approve the settlement, “the procedural

protections built into the Rule to protect the rights of absent

class members during litigation” are essentially absent. Ortiz,

527 U.S. at 847. Rule 23(e) therefore provides that no

settlement may be approved “without the approval of the

court, and notice of the proposed dismissal or compromise

shall be given to all members of the class in such manner as

the court directs.”

The protections provided by Rule 23(e) are critical. As

this Court explained in Amchem, “The inquiry appropriate

under Rule 23(e) * * * protects unnamed class members

‘from unjust or unfair settlements affecting their rights when

the representatives become fainthearted before the action is

adjudicated or are able to secure satisfaction of their

individual claims by a compromise.’” 521 U.S. at 623

(quoting 7A Wright et al. at 518-19). As the Second and

Third Circuits have recognized, “It is no secret that in

‘seeking court approval of their settlement proposal,

plaintiffs’ attorneys’ and defendants’ interests coalesce and

mutual interest may result in mutual indulgence.” Kaplan v.

Rand, 192 F.3d 60, 67 (CA2 1999) (quoting Bell Atl. Corp. v.

Bolger, 2 F.3d 1304, 1310 (CA3 1993)).

The Fourth Circuit failed to recognize this important limit

on the class representative’s power and thus failed to

recognize that the representative has no more authority to

prevent a settlement from being challenged on appeal than to

prevent objections from being presented in the first place. To

the contrary, once the settlement is approved, concerns that

the class representatives are no longer acting adverse to the

opposing parties (and thus are less responsive to the interests

of other class members) are even greater. At least in the

district court, the class representatives and opposing parties

have some incentive to accommodate objections in order to

secure approval of the settlement. But once the district court

enters an order approving the settlement, the class

representative unquestionably will not pursue an appeal on

behalf of the objectors.

Nor do objectors “usurp” the role of the class

representatives when they appeal. Rather, after a settlement

is reached, the interests of the class representatives and the

objecting class members necessarily diverge and the

representative effectively ceases to pursue the interests of the

objectors. In the court of appeals, the objector proceeds in his

individual capacity rather than as a representative of the class

as a whole and he has no obligation to pursue any interest

other than his own.'® Straightforward examples include

appeals by objectors challenging the application of a

settlement to their unique circumstances (cf. supra at 8 n.4

(discussing objections of individual class member)) or

challenging the district court’s refusal to permit them to opt

out (e.g., Adams v. Robertson, 520 US 83 (1997)) or to

include them within the class (e.g., Berger v. Iron Workers

Reinforced Rodmen, 170 F.3d 1111 (CADC 1999)). The

Fourth Circuit’s rule, however, prohibits objectors from

pursuing even these wholly individual interests on appeal.

In other instances, the objector’s argument on appeal will

have broader application. That was true in Amchem, in which

the objector successfully raised an array of challenges to a

settlement class action. It is also true in this case. But the

fact that a settlement will likely be invalidated if an objector

prevails on an argument of general applicability to the class

does not mean that the objector is improperly acting as the

class “representative.” The objector is simply pursuing his

individual interest on appeal just as he did in the district court,

'S The appeal thus would not proceed if the appealing objector withdrew

it (unless another objector were permitted to intervene on appeal and take

his place).

where the settlement would have been similarly invalidated if

the district judge had agreed with the objection. That result is

merely the consequence of the principle of judgments that

“any objection [of a class member] sustained would inure to

the benefit of all.” Mullane, 339 U.S. at 319.

B. Appeals by Objectors Further Sound Principles of

Judicial Administration And Preserve Objectors’

Due Process Rights.

The majority below similarly erred in asserting that

objector appeals would undermine “effective class

management.” Pet. App. A2l. As already noted, a class

member has an absolute right to present objections to the

settlement under Rule 23(e) and thus to challenge the class

representative’s management of a particular aspect of the case

— viz., settlement. But the adversarial procedure of objectors

and the class representative does not undermine effective

class management; it is effective class management because it

is essential that settlements affecting absent class members be

subjected to adversarial testing. There is no reason to believe

that “effective class management” would be undermined if

the identical objections were considered by the court of

appeals. It is therefore not surprising that neither respondents

nor the Fourth Circuit identified any evidence that adverse

effects had arisen in the several circuits that permit objector

appeals.

Nor is there any merit to the argument that appeals by

objectors should be prohibited in order to speed the

disposition of the case. That argument proves too much, for it

improperly elevates finality above the error-correcting

function of the appellate courts and would justify eliminating

all appeals from any judgment or order in any case. As Judge

Easterbrook has recognized in concluding that intervention

must be freely granted to objectors for the purpose of appeal,

the “possibility that [the appellate court] would see merit to

their appeal cannot be called ‘prejudice’; appellate correction

of a district court’s errors is a benefit to the class.” Crawford

v. Equifax Payment Servs., Inc., 201 F.3d 877, 881 (CA7

2000).'

If anything, a rule permitting objectors to appeal enhances

the integrity and efficacy of class action proceedings. Rule

23(e) guarantees class members notice and an opportunity to

be heard, in part, because objections advise the district court

of potential flaws in the settlement and furthermore deter

collusive settlements. While class actions can be enormously

useful tools for the efficient provision of justice, they have

substantial and well-recognized dangers. See Weinberger v.

Great Northern Nekoosa Corp., 925 F.2d 518, 524 (CAI

1991) (“[Class] lawyers might urge a class settlement at a low

figure or on a less-than-optimal basis in exchange for red-

carpet treatment on fees.”). Permitting objections to be

pursued on appeal provides an additional layer of deterrence

against self-dealing by the class representatives and their

lawyers. In particular, the attorneys negotiating the

settlement will be more attentive to the interests of the entire

class if they know that objections will receive a thorough

review, including on appeal if necessary.

The dynamics of the settlement process in the district

court generally tend to undermine the effectiveness of

'® Restricting appellate review of class actions will also create an incentive

to abuse the procedure at the outset. When a class is not sufficiently

“numerous” to satisfy Rule 23, the action may be permitted to proceed

only if each individual is formally joined as a named party. Fed. R. Civ.

P. 19. In that circumstance, the joined parties will frequently be

represented by a single counsel who handles the course of litigation. But

there can be no serious argument denying that each of the joined parties

has an independent right to appeal an adverse judgment. The only result

of holding that a similarly situated class action objector — effectively a

party joined categorically rather than by name, and represented by joint

counsel — nonetheless may not appeal would be to encourage the use of

class actions as a tool to eliminate the rights of objectors rather than as a

tool to protect the interests of class members by reducing the burden of

litigation.

existing safeguards against problematic settlements. Once a

class action settlement is reached, the district court’s first

action is usually to grant “preliminary approval,” which is a

finding — almost always untested by adversarial presentation —

that the settlement contains no obvious substantive or

procedural defects. MANUAL ON COMPLEX LITIGATION

THIRD, § 30.41, at 237 (Federal Judicial Center 1995)

(“MANUAL”).'” After preliminary approval, the proponents of

the settlement expend a considerable sum notifying the class

of the settlement. Thereafter, the same district judge who

preliminarily approved the settlement presides over a

“fairness hearing” and decides whether to give final approval

under Rule 23(e). See id. §§ 30.41-.42. Given the initial

blessing of the district court, the expense of mounting

objections, and the complexity of many settlements, the

settlement may rightly be viewed by class members as a “fait

accompli.” Mars Steel Corp. v. Continental Ill. Nat'l Bank &

Trust Co., 834 F.2d 677, 681 (CA7 1987).

Not surprisingly, the presentation of an unchallenged

proposed settlement to a district court therefore can create a

hydraulic pressure for approval, a fact apparent from data

showing that fairness hearings in district courts tend to be

brief and generally do not result in changes to settlements

crafted by the class representative and opposing parties. See

John C. Coffee, Jr., Class Wars: The Dilemma of the Mass

Tort Class Action, 95 COLUM. L. REV. 1343, 1348 & n.14

(1995) (empirical evidence suggests that “courts have little

ability or incentive to resist [proposed] settlements”; data

shows mec _ hearing lengths in two districts of 38 and 40

minutes); Fe eral Judicial Center, EMPIRICAL STUDY OF

'7 In almost all cases, potential objectors are not even aware of the

preliminary hearing because they have yet to receive notice of a

settlement. Indeed, in settlement class actions such as Amchem, in which

settlement and certification are simultaneous, at the time of the

preliminary hearing the class members have no idea that a lawsuit even

exists.

CLASS ACTIONS IN FOUR FEDERAL DisTricT CourTs 58

(1996) (“Approximately 90% or more of the proposed [class]

settlements were approved without changes in each of the

four districts.”). Fairness hearings in some courts are

“typically pep rallies jointly orchestrated by plaintiffs’

counsel and defense counsel” in which the district courts

“engage in paeans of praise for counsel or lambaste anyone

rash enough to object to the settlement.” Jonathan R. Macey

& Geoffrey P. Miller, The Plaintiffs’ Attorney's Role in Class

Action & Derivative Litigation: Economic Analysis and

— for Reform, 58 U. Cui. L. REv. 1, 46-47

1991).

The prospect of appellate review of judgments approving

class action settlements (like the prospect of appellate review

in every case) also causes the district judge to be fully

attentive to the objections before him. A principal value of

the appeals process is that it “induc[es] trial court judges to

make fewer errors because of their fear of reversal.” Steven

Shavell, The Appeals Process as a Means of Error

Correction, 24 J. LEGAL STUD. 379, 408-11, 425-26 (1995).

Moreover, appeals correct errors. Decisions such as Amchem

~ which reached this Court only because the Third Circuit

permits objectors to appeal — demonstrate that there is a

substantial role for the appellate courts to play in evaluating

class action settlements.

Finally, any doubt must be resolved in favor of permitting

class members to appeal because it would be inconsistent

with due process to limit an objector’s recourse to a “likely

futile objection at the fairness hearing required by Rule

23(e).” Samuel Issacharoff, Class Action Conflicts, 30

U.C.D. L. REv. 805, 822 (1977), quoted in Ortiz, 527 U.S. at

850 n.27. This Court’s decision in Shutts settled that “before

an absent class member’s right of action was extinguishable

due process required that the member ‘receive notice plus an

opportunity to be heard and participate in the litigation.’”

Ortiz, 527 U.S. at 848 (quoting Shutts, 472 U.S. at 812); see

also Mullane, 339 U.S. at 314 (class action procedures must

“afford [class members] an opportunity to present their

objections”); cf. Matsushita, 516 U.S. at 399 (Ginsburg, J.,

concurring in part and dissenting in part) (writing separately

to “stress” applicability of procedural due process protections

for absent parties in class actions, “emphatically including

those resolved by settlement”). Due process concerns are

only heightened when, as in this case, objectors are not

permitted to opt out: “The inherent tension between

representative suits and the day-in-court ideal is only

magnified if applied to damage claims gathered in a

mandatory class.” Ortiz, 527 U.S. at 846.

Cc. uiring Prophylactic Intervention in the District

aon 5 a Greater Threat to Class

Management than Does a Fight to Appeal Based

on Objections under Rule 23(e).

If anything, it is the Fourth Circuit’s holding that

objec tors have the right to appeal only if they intervene that

has the greatest potential to undermine orderly class

management. Rather than channel class-member

participation through the Rule 23(e) procedures, as the district

court sought to do in this case, the Fourth ae

id , her ,

proceedings.'® Class rhe wong m4 would not otherwise

move to intervene will do so protectively because they cannot

know ex ante if (i) the case will be settled, (ii) what the

= settlement also implicates the class member's Seventh Amendment

intetsemntnedatantaerthe Cf. Ortiz, 527 U.S. at 846 (“By its

nature, however, a mandatory settlement-only class action with legal

issues and future claimants compromises their Seventh Amendment rights

without their consent.”).

- admitted by the district court as named parties, intervenor-

cbjectors will prsunnably foel the need to voice all potential objections at

every step of the proceeding out of a concern that silence will be deemed

acquiescence or waiver.

settlement might provide, (iii) if they will have an objection

to the settlement, (iv) whether the named parties will

accommodate their objection, (v) whether the course of the

litigation will demonstrate that the opposing party has a

strong case, such that the settlement ought to be accepted

notwithstanding its flaws, or (vi) if not, whether the district

judge will sustain the objection. And if district courts instead

deny such protective motions to intervene, then the courts of

appeals will be burdened with interlocutory appeals of denials

of those motions. See supra at 11.

Rule 23 was designed precisely to avoid numerous

individuals becoming deeply involved in the litigation as

named parties, as this Court settled in rejecting an

intervention requirement in the closely analogous

circumstances of American Pipe & Construction Co. v. Utah,

414 U.S. 538 (1974). American Pipe held that the pendency

of a class action tolls the statute of limitations for putative

class members in the event class certification is later denied.

In reaching that holding, the Court specifically rejected the

defendant’s principal argument the statute should be tolled

only if the putative class members intervened to become

individually named parties.

If an intervention requirement were adopted, the Court

explained, “[p]otential class members would be induced to

file protective motions to intervene or to join in the event that

a class was later found unsuitable.” 414 U.S. at 553. This

result “would frustrate the principal function of a class suit”

because litigation over motions to intervene would give rise

to “precisely the multiplicity of activity which Rule 23 was

designed to avoid in those cases in which a class action is

found ‘superior to other available methods for the fair and

efficient adjudication of the controversy.” Jd. at 551

(quoting Fed. R. Civ. P. 23(b)(3)). The Court has

subsequently reiterated the rationale of American Pipe that, if

intervention were required, “members of a class would have

an incentive to protect their interests by intervening in the

class action as named plaintiffs prior to the decision on class

certification” — a “needless duplication of motions” that

would “deprive Rule 23 class actions of the efficiency and

economy of litigation which is a principal purpose of the

procedure.” Chardon v. Fumero Soto, 462 U.S. 650, 659

(1983).

Moreover, if (as the Fourth Circuit held in this case) an

intervention requirement is anything other than pro forma, it

will not protect the interests of objectors because the district

court may simply deny the intervention motion. As this Court

explained in holding that a putative class member who files a

separate action rather than eventually intervening is entitled to

the tolling doctrine of American Pipe, “permission to

intervene might be refused for reasons wholly unrelated to the

merits of the claim”: “Putative class members frequently are

not entitled to intervene as of right under Federal Rule of

Civil Procedure 24(a), and permissive intervention under

Federal Rule of Civil Procedure 24(b) may be denied in the

discretion of the District Court.” Crown, Cork & Seal Co. v.

Parker, 462 U.S. 345, 350 & n.4 (1983). That is, of course,

precisely what happened in this case, in which the district

court denied petitioner’s motion to intervene (which he filed

immediately upon learning of the settlement) as untimely

because he knew of his interest in the litigation at an earlier

date.

An intervention requirement would amount to no more

than a trap for the unwary. When a class action is settled,

notice is sent out to class members (frequently numbering in

the thousands) who, in the main, are not represented by

counsel and are left to their own devices to ascertain their

rights. The notice informs the class members of the nature of

the litigation, the terms of the settlement, and where and when

they must file their objections. MANUAL, § 30.41, at 237.

Thus, even if we assume that a class member represented by

counsel should know of the need to intervene (quite a stretch

given the large number of reported decisions showing

otherwise), imposing that requirement on a pro se objector is

at odds with reality. A layperson will not be aware of the

niceties of federal procedure under Rule 24, and, thus, to

condition the right to appeal on such knowledge would be

illogical and unfair.

Even if objectors understand their rights, an intervention

requirement would impose substantial unwarranted burdens.

Potential intervenors must file a motion to intervene, along

with a “complaint in intervention,” setting out the claims that

they believe are not being adequately advanced by the named

plaintiffs, or a defensive pleading “setting forth the * * *

defense for which intervention is sought.” Fed. R. Civ. P.

24(c). Assuming the motion is granted, intervenors also often

must file mandatory disclosures and are subject to discovery.

Throughout the litigation, they will be forced to incur

substantial fees and costs.””

Alternatively, uncertainty regarding the availability of an

appeal may encourage class members to institute collateral

attacks on the judgment or (in (b)(3) class actions) opt out.

Indeed, one appellate decision has asserted that the

availability of collateral attack is a viable alternative to

appeal, and thus supports an intervention requirement.

Guthrie v. Evans, 815 F.2d 626, 628 (CA11 1987). But that

approach ought not be the rule, for it is unfair to class

members and is far more destructive to finality than is the

availability of direct appeal on the merits of any objections.

° Cf. Shutts, 472 U.S. at 813 (declining to require that class action

plaintiffs “opt in” because “[t}he plaintiff's claim may be so small, of the

plaintiff so unfamiliar with the law, that he would not file suit

individually, nor would he affirmatively request inclusion in the class if

such a request were required by the Constitution,” particularly given the

number of class members “‘who for one reason or another, ignorance,

timidity, unfamiliarity with business or legal matters, will simply not take

the affirmative step’” (quoting Kaplan, Continuing Work of the Civil

Committee: 1966 Amendments of the Federal Rules of Civil Procedure

(D), 81 HARV. L. REV. 356, 397-98 (1967)).

Furthermore, while such collateral attacks should be

disfavored because they create uncertainty regarding the

validity of the settlement, they do not provide the benefits of

appeals from orders approving settlements because collateral

attacks are essentially limited to the assertion that the class

representative was inadequate. See generally Kahan &

Silberman, The Inadequate Search for 'Adequacy' in Class

Actions: A Critique of Epstein v. MCA, Inc., 73 N.Y.U. L.

REV. 765, 780 & n.69 (1998) (hailing superiority of

comprehensive direct review over collateral attack and

criticizing intervention requirement as potential impediment

to appellate review). Regardless of the scope of the collateral

attack, the better rule would be to permit challenges to a class

action settlement to be heard in the original forum, with direct

appellate review, rather than to encourage each ciass member

to file a separate suit, in a distant forum, challenging the res

judicata effect of a previously entered class action judgment.

Rule 23 was amended in 1966 to eliminate “[a] recurrent

source of abuse under the former Rule”: “the potential that

members of the claimed class could in some situations await

developments in the trial or even final judgment on the merits

in order to determine whether participation would be

favorable to their interests.” American Pipe, 414 U.S. at 547.

An intervention requirement is also unwarranted because

that procedural hurdle would produce no benefit to class

action litigation. By definition, absent class members must

hold the same claims as the named plaintiffs. See General

Telephone Co. of the Southwest v. Falcon, 457 U.S. 147, .56

(1982); see also Fed. R. Civ. P. 23(a)(2), (3). Because

objectors challenge the settlement of a previously filed

complaint, it would make no sense to require them to file their

own “complaint in intervention” or any other pleading

seeking to impose liability on the adverse party. Because the

adversity of interests between settlement supporters and

settlement objectors is clear and irreparable, the drafters of

Rule 23 could not have contemplated that objectors would be

put through the Rule 24 process as a matter of course in order

to preserve their right to appeal.

This case illustrates perfectly that the Fourth Circuit’s rule

requiring intervention will only make class action litigation

less efficient. In this appeal, petitioner seeks only to pursue

his objections to the settlement — for example, that it

unlawfully eliminated an accrued benefit to the retiree

subclass and that it unfairly failed to retain the COLA by

requiring current employees to make pension contributions,

just as retirees such as petitioner had done in the past. If

petitioner had been permitted to intervene as a full participant

in the case, he could have pursued not merely those issues but

also his requests for discovery, for an injunction, and to

disqualify the class counsel. And, of course, if the district

court had denied those requests, petitioner would have had the

right to appeal.

IV. IF INTERVENTION IS REQUIRED, IT SHOULD BE FREELY

GRANTED AND DEEMED SUFFICIENT FOR PURPOSES OF

APPEAL IF AT LEAST SOUGHT SOON AFTER THE

DENIAL OF OBJECTIONS.

If this Court does hold that a class member must intervene

in order to appeal, the judgment nonetheless must be

reversed. In United Airlines v. MacDonald, 432 U.S. 385

(1977), the district court denied class certification and

subsequently ruled for the named plaintiffs on the merits.

Because certification had been denied, the putative class

members were not “parties” bound by the judgment with the

right to appeal. They accordingly moved to intervene in order

to appeal the certification ruling. This Court held that

putative class members’ motion to intervene was “timely”

under Rule 24 as a matter of law since they “acted promptly

after the entry of final judgment.” 432 U.S. at 396.

The Court specifically rejected the defendant’s argument

that the class members were required to intervene earlier in

the case. Such a requirement, the Court explained, “would

serve no purpose”: “Intervention at that time would only

have made the respondent a superfluous spectator in the

litigation - for nearly three years, for the denial of class

certification was not appealable until after final judgment.”

432 U.S. at 395 n.15. Citing American Pipe, the Court

continued: “such a rule would induce putative class members

to file protective motions to intervene to guard against the

possibility that the named representatives might not appeal

from the adverse class determination. The result would be the

very ‘multiplicity of activity which Rule 23 was designed to

avoid.’” /d.

On the reasoning of United Airlines, petitioner was a

fortiori entitled to appeal because he formally sought to

intervene promptly upon receiving a copy of the proposed

settlement, well before the proposal was even distributed to

the class and well before his Rule 23(e) objections were

rejected by the court. The Fourth Circuit’s holding that

petitioner was required to intervene earlier in order to

preserve his right to appeal the settlement makes no sense —

and invites a deluge of protective intervention motions —

because the named parties had not even reached a settlement

at that point. And, even if the district court believed that full

participation as an intervenor would have been unduly

disruptive, under the logic of United Airlines, the district

court could have granted petitioner limited intervention rights.

The court did not do so, however, only because it already

believed that petitioner had the right to appeal as an objector.

See supra at 8. Indeed, respondents themselves led the

district court to reach that conclusion when they proposed a

class notice that explicitly contemplated appeals by objectors

and subsequently when they successfully opposed petitioner’s

intervention on the ground that he had the full right to contest

the settlement as an objector. See supra at 6-7.

There is no reasonable dispute that class action objectors

have a sufficient interest in the district court’s judgment

approving a settlement to take an appeal. The Fourth

Circuit’s holding that objectors nonetheless must intervene to

appeal is unsound. The district court may refuse to permit

intervention. If, on the other hand, the intervention

requirement is deemed pro forma, it serves no purpose at all

and promises to be merely a burdensome trap for the unwary.

CONCLUSION

For the foregoing reasons, the decision of the Fourth

Circuit should be reversed.

Respectfully submitted,

BRIAN WOLFMAN THOMAS C. GOLDSTEIN

PUBLIC CITIZEN LITIGATION (Counsel of Record)

GROUP AMY HOWE

1600 20th St., N.W. GOLDSTEIN & Howe, P.C.

Washington, DC 20009 4607 Asbury PI., N.W.

Washington, DC 20016

(202) 237-7543

ERIK S. JAFFE

ERIK S. JAFFE, P.C.

5101 34th St., N.W.

Washington, DC 20008

January 24, 2002

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.