Sixth Circuit Dashes the Concept of a Rule 23 “Negotiating” Class

In In re Nat’l Prescription Opiate Litig., No. 19-4097 (6th Cir. Sept. 24, 2020), a divided panel of the Sixth Circuit rebuffs a novel attempt to certify a Rule 23 class in a massive multi-district litigation (MDL) proceeding, solely for the purpose of giving the parties a vehicle for negotiating a global resolution.

“The national prescription opioid MDL … consists of over 1,300 public-entity-led lawsuits, primarily filed by cities and counties . . . . These cities and counties allege that opioid manufacturers, opioid distributors, and opioid-selling pharmacies and retailers acted in concert to mislead medical professionals into prescribing, and millions of Americans into taking and often becoming addicted to, opiates.” The cases allege a wide variety of tort and statutory claims, including federal racketeering under RICO.

“[O]n June 14, 2019, attorneys representing fifty-one cities and counties moved to certify a negotiation class under Federal Rule of Civil Procedure 23(b)(3). Plaintiffs sought to include within the class every city and county within the United States, some 34,458 identified municipal entities … unless a prospective class member exercised its right to opt-out within sixty days of class certification.”

As the majority opinion summarized, “the negotiation class is designed to attempt to reach a settlement while the individual MDL cases continue along their respective litigation paths.” Nevertheless, it is not a settlement class, as authorized by Fed. R. Civ. P 23(e). “[T]he class certification and opt-out process occur[s] prior to a settlement being reached . . . . This is to ‘fix a class size and provide the Defendants a sense of the precise scope of the group with whom they are negotiating,’ before settlement talks begin. . . . . The court indicated that class members would likely not have a second opportunity to opt-out; they must decide at the negotiation class certification stage—without knowing the settlement figure—whether they wish to ‘bind themselves to a negotiation process.’”

The district court certified the class over the objections of several defendants, plus “six putative city class members, thirty-seven state Attorneys General, and the Attorneys General of the District of Columbia and Guam.” The district court found that “there is nothing coercive about this process: no Defendant has to employ it. There is nothing exclusive about this process: it does not interfere with the States settling their own cases any way they want, and it does not stop parties in the MDL from settling in other ways.”

The panel majority vacates the class certification. The panel finds that the objectors had appellate standing, despite plaintiffs’ argument that defendants supposedly could “simply ignore the negotiation class ‘with no legal consequences …’” While a defendant formally did not have to negotiate, “its presence [in this class] obviously affects the state of play. The negotiation class is designed to fundamentally alter the nature of the MDL—to foster settlement through a novel means of class action that binds an unprecedented number of municipalities into a single bloc. The district court noted that the purpose of the certification order was to ‘promote global settlement.’ … Defendants are pressured, or at least strongly incentivized, to negotiate with the class.”

On the merits, the panel majority holds that there is no basis in Rule 23 for a “negotiation class.” While “Rule 23 is replete with references to litigation and settlement classes,” the majority observes, it “does not mention certification for purposes of ‘negotiation’ or anything along those lines. While negotiation may lead to settlement, there is no discussion in Rule 23 identifying negotiation as a separate category of certification distinct from settlement.” Plaintiffs argued that “the lack of express textual authorization is not necessarily fatal to a novel form of class action” and that district courts had innovated with class actions for decades, often without direct guidance from Rule 23. Yet in all class actions heretofore, the class was certified either to try a case with binding effect on the class or “after a deal has been reached and the parties wish to formalize their arrangement.” No class had ever been allowed solely to explore the possibility of a global settlement.

The panel majority also notes that the proposed negotiation class lack the guardrails of settlement classes. “[B]efore approving a proposed settlement, the court must determine that ‘class representative and class counsel have adequately represented the class,’ that ‘the proposal was negotiated at arm’s length,’ and ‘the relief provided for the class is adequate. ‘ Fed. R. Civ. P. 23(e)(2) (emphasis added). None of these determinations can be made in the case of a negotiation class because there is no proposal to consider at the time the negotiation class is presented to the court for approval . . . . It avoids some of the procedural requirements of litigation class certification without halting the underlying litigation and ideally settling the claims instead, as in the case of a settlement class.”

At bottom, “[t]he primary problem here is that the negotiation class ordered by the district court simply is not authorized by the structure, framework, or language of Rule 23. But even if not unauthorized, it is unlikely that the problems presented by the negotiation class, as conceived by the district court, can be overcome.”

In a dissent that runs twice the length of the majority opinion, Judge Karen Nelson Moore combs the extensive scholarly literature on the history and equitable roots of federal civil procedure. “The Federal Rules of Civil Procedure were not written and have never been interpreted to manacle district courts that innovate within the Rules’ textual borders. The district court has breathed life into a novel concept—a class certified for negotiation purposes—to aid in its Promethean duty to secure the just, speedy, and inexpensive resolution of this byzantine multidistrict litigation. We should be in the business of encouraging, not exterminating, such resourcefulness. Certifying a negotiation class honors the Rules’ equitable heritage, complements the settlement class’s history, hews to Federal Rule of Civil Procedure 23’s textual requisites, and stirs no constitutional or policy qualms.”

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