Start With A Sound Foundation: Avoiding Intra-Class Conflicts That Can Derail A Settlement
In retrospect it may seem obvious, though perhaps not so obvious at the time. In Murray v. Grocery Delivery E-Services USA Inc., a single group of lawyers represented a single class of plaintiffs that included members with three different substantive claims. Sure, all of the claims were brought under a single statute (the Telephone Consumer Protection Act, or TCPA), but each claim was brought under a different section of the statute, and each section requires a different factual showing to establish a violation and gives rise to different defenses. Because of those differences, a claim based on a defendant's use of an automated dialer to place marketing calls is different from a claim based on calls made to a person listed on the National Do-Not-Call registry which is different from a claim based on a call made to someone who had requested that the defendant not call them. Each call could potentially violate the TCPA, but all violations are not equal.
Plaintiffs' counsel apparently recognized the differences among the class members but concluded they didn't matter. That recognition seems apparent from the settlement class definition, which identified each of the three different types of claims being asserted but did not break the claimants into subclasses.
Objectors saw it differently. Their principal argument was that the absence of separately represented sub-classes meant that class members were not adequately represented in the settlement negotiations, a requirement for class certification under Fed. R. Civ. P. 23(a)(4) and for settlement approval under Fed. R. Civ. P. 23(e). That alleged shortcoming was particularly relevant here because the settlement was structured as a lump sum payment to be evenly distributed among class members regardless of the nature of their claims. The First Circuit's opinion reversing and remanding the district court's approval order clearly laid out the problem:
In the class settlement context, conflicts sometimes arise because there is a common fund -- i.e., an aggregate proposed settlement amount covering all claims -- that must be allocated among class members. In these zero-sum circumstances, a benefit to one group of class members (in the form of a larger portion of the common fund) comes at the detriment of the other class members (who receive a smaller portion as a result). This presents a concern that the class representatives or class counsel may "have sold out some of the class members" by allocating some of their fair share to other class members. . . . Therefore, adequate representation in the settlement context sometimes requires separate representation for groups of class members with different interests.
Sometimes, not always. The court went on to explain that the perceived intra-class conflict may be so immaterial that a single class represented by a single group of lawyers will satisfy the Rule. The opinion describes differences between groups within the proposed TCPA class that would not defeat a finding of adequacy. It also recited the court's own rejection of an adequacy argument in a 2021 Title IX case. Quoting from yet a different First Circuit precedent, the court explained that, to defeat a finding of adequate representation, "the intra-class conflict must be so substantial as to overbalance the common interests of the class members as a whole."
Although the court in Murray held that separate representation of each group within that proposed class was required, it did not hold that the settlement as presented could not be approved. It left that decision to further review by the district court once the lawyers for each separately represented group were engaged, had reviewed the proposed settlement, and had either accepted it or renegotiated it to better ensure its approval.
The Take-Away. The First Circuit's decision in Murray serves as a cautionary tale for any lawyers who hope to settle a class action where the settlement class includes groups that are at least arguably differently situated from each other in some material way. Counsel for both sides in such a case would be well-advised to evaluate and, if necessary, cure any potential intra-class conflicts early in the litigation to avoid the expense and potentially years of delay that could result if the settlement is ultimately disapproved.