Class Waiver of Appeals from Award Determinations Enforced by Fifth Circuit, Sidestepping the Issue of Who the Proper Appellee Might Be

In Frego v. Settlement Class Counsel, No. 20-30596 (5th Cir. Oct. 27, 2021), the panel sidesteps an “odd” question of who the proper appellee might be in a “closed” fund class settlement, holding instead that the plaintiff-appellants waived the right to appeal the award under the class settlement.

“After ten years of litigation, a class of homeowners settled their claims against a Chinese company for manufacturing and selling toxic drywall. The agreement divided the settlement class into three groups based on when a plaintiff joined the litigation. Each plaintiff then received an award under a formula that considered, among other factors, the group to which they belonged.” Three plaintiffs disputed the group in which the class counsel had placed them and argued that “[h]ad they been correctly classified, their recovery would have been much greater.” The district court denied the plaintiffs relief, and they appealed to the Fifth Circuit.

In an extended footnote, the panel chews over the vexing issue of who ought to be the appellee in an appeal of an award from a class settlement involving “‘closed funds,’ which is a fixed amount of money that the defendant has already paid to the class.” The panel observes here that “[a]lthough the underlying litigation is between the class plaintiffs and Taishan, Settlement Class Counsel is listed as the appellee. We do not see similar appeals from settlement fund distributions in which class counsel is a party.” The panel suggests that “[p]erhaps the claims administrator” rather than class counsel “is the proper appellee.”

Nevertheless, this novel question need not be answered, the panel holds, “because the settlement agreement—to which appellants are parties—waives a plaintiff’s right to challenge award determinations beyond the district court.” The class settlement expressly “prohibited further appeal to ‘any other court including the U.S. Court of Appeals for the Fifth Circuit,’ specifying that ‘such right of appeal [had] been knowingly and intentionally waived by each Settlement Class Member.”

“When a case settles, the parties give up their constitutional right to a jury trial. See U.S. Const. amend. VII. It follows that they may also give up their statutory right to appeal . . . . Although appeal waivers eliminate an avenue for error correction, they also offer advantages. Among other things, appeal waivers promote finality and timely resolution . . . . Appeal waivers can also serve as a bargaining chip to facilitate negotiation . . . . And if the time and expense appeal waivers save can make them attractive in ordinary litigation, these benefits are exponentially greater in the mass torts context.” The panel notes, for instance, that “[a]ppeal waivers are common in criminal cases, in which defendants exchange them for plea bargains,” and they are “routinely enforced.”

The plaintiffs argued that they were not appealing the award determination per se, but rather the “categorization of their claims is an administrative error separate from, or preliminary to, the determination of how much they are owed.” But the panel holds that the appeal “falls squarely within the appeal waiver. It does not matter that plaintiffs labeled their motion as one under Rules 59(e) or 60(b). The appeal waiver makes final any decision of the district court ‘with respect to appeals from Allocation Amount determinations.’ It does not limit that waiver to certain procedural devices. What matters is the substance—whether the district court considered an appeal ‘from Allocation Amount determinations.’ Because appellants were challenging the determination of their award, the district court had the last word.”