Adding its voice to the several circuits that have already ruled on the issue, the Third Circuit holds in Perrigo Institutional Investor Group v. Papa, No. 24-2861 (3d Cir. Aug. 12, 2025) that absent class members must be held to strict compliance with court procedures to opt-out of a Rule 23(b)(3) class action. It thus joins the Seventh Circuit and rejects the more forgiving “reasonable indication” standard of the Second and Tenth Circuits.
Plaintiffs Sculptor Master Fund, Ltd. and Sculptor Enhanced Master Fund, Ltd. (Sculptor) were putative class members in a shareholder class action filed against Perrigo Company plc, Roofer’s Pension Fund v. Papa, No. 16-CV-2805-MCA-LDW (D.N.J.). “[T]he District Court certified a class that included Sculptor and specified how class members could request exclusion. Despite its intention to do so, counsel for Sculptor never opted out. But no one spotted that failure at the time, and the parties litigated Sculptor’s separate individual action for years until Perrigo realized Sculptor never complied with the District Court’s instructions for requesting exclusion.”
Specifically, class members in the original Roofer’s class case “had until December 3, 2020 to opt out. Sculptor admits it knew about the notice and instructions for requesting exclusion. The opt-out deadline came and went, and Sculptor never submitted an exclusion request.” Nevertheless, they filed an individual action against Perrigo in the same district court. The individual case continued for over three years, through discovery and a dispositive motion.
“In April 2024, class counsel and Perrigo sought approval of a proposed settlement of the class action. The District Court preliminarily approved the settlement, which included a provision requiring all class members pursuing individual actions to dismiss those actions within thirty days of the preliminary approval or risk forfeiting participation in the settlement. At that point, Sculptor’s failure to opt out came to light.”
“So it came to pass, nearly three-and-a-half years after the deadline, that Sculptor moved belatedly to opt out of the class [in Roofer’s]. It first argued that its maintenance of an individual action against Perrigo throughout the pendency of the class action, along with other related conduct, provided a ‘reasonable indication’ of its intent to opt out and, thus, it should be deemed to have timely requested exclusion. Alternatively, Sculptor contended, it should have been permitted to opt out after the deadline because it had demonstrated ‘excusable neglect.’” The district court denied the relief, and thus – under the settlement –they were obliged to dismiss their individual action or else receive no relief at all.
The Third Circuit affirms. It holds that, under Fed. R. Civ. P. 23(c)(2)(B) (v) and (vi), an absent class member must strictly comply with the court’s opt-out procedures and a district court may not indulge a class member’s non-compliance based on a “reasonable indication” that they intended to opt-out.
“A Rule 23(b)(3) class member’s right to request exclusion—commonly known as ‘opting out’—reflects ‘our deep-rooted historic tradition that everyone should have his own day in court.’” The rule does not specify a way to opt-out, though, leaving that issue up to case management by the district court.
“Sculptor does not dispute that district courts have substantial discretion to manage class actions and establish the procedures for absent class members to request exclusion. Instead, it contends that, irrespective of which measures a district court directs class members to use, a class member must be excluded from the class whenever it has ‘provided a ‘reasonable indication’ of its intention to opt out of a class action.’” In support of that standard, Sculptor cited In re Four Seasons Sec. L. Litig., 493 F.2d 1288, 1291 (10th Cir. 1974), and Plummer v. Chem. Bank, 668 F.2d 654, 657 n.2 (2d Cir. 1982).
Yet the Third Circuit holds that the plain language of Rule 23 precludes such forgiveness. Fed. R. Civ. P. 23(c)(2)(B)(v)–(vi) provides that a district court directs that notice be sent to class members informing them “that the court will exclude from the class any member who requests exclusion” and “the time and manner for requesting exclusion.” The rule thus provides just one route to exclusion from the class, i.e., the one that the district court specifies in the notice with which the absent class member must affirmatively comply.
The panel also cites “practical consequences . . . that also militate against adopting the ‘reasonable indication’ standard . . . . [P]ermitting parties to opt out through mere ‘indication’ rather than following the directed means of requesting exclusion promises to make administering class actions even more difficult,” requiring the court to make subtle factual determinations “to determine whether class members are in or out of the class at any point during the pendency of the action.” By contrast, strict compliance is “easily administrable and making opt-outs readily determinable.” In support of this argument, the panel cites In re Navistar MaxxForce Engines Mktg., Sales Pracs., & Prods. Liab. Litig., 990 F.3d 1048 (7th Cir. 2021).
A “reasonable indication” standard might even lead to gamesmanship by absent class members. “[A] savvy class member might recognize that it can minimize its downside by litigating an individual action while simultaneously not opting out of the class. If the class member’s individual action proves successful, it enjoys the recovery that comes with it. If not, it can argue that the lack of a formal opt-out notice means that it is entitled to take part in the class settlement.”
“We expect class members to comply with court orders to pursue and vindicate their rights. The right to opt out is no different. Accordingly, we join the Seventh Circuit in holding what intuition posits. Because Rule 23 requires a district court to prescribe the way for class members to request exclusion, they have to follow those instructions in order to opt out—a mere ‘reasonable indication’ of an intent to opt out will not do. So Sculptor cannot now recast its conduct as an indication of its decision to opt out in order to cure its noncompliance with the District Court’s clear instruction.”
(The panel also considers and rejects a challenge by Sculptor that the district court abused its discretion by not allowing an untimely opt-out under Fed. R. Civ. P. 6(b)(1)(B).)
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