Chapter § 5.16 The Final Approval (or “Fairness”) Hearing

• Jurisdiction: United States
• Publication year: 2020

§ 5.16 The Final Approval (or “Fairness”) Hearing

Under Rule 23(e)(2), the court must hold a fairness hearing before deciding whether or not a proposed settlement is “fair, reasonable, and adequate.”³²⁴ At these hearings, courts hear from counsel for the settling parties and those objectors (or their counsel) who requested the opportunity to present argument. The hearing is the “day in court” for class members who want to voice their positions.³²⁵ Most courts set time limits for participants to address the court.³²⁶

[1] Settling Parties, Objectors, and Unrepresented Class Members

Often, courts will engage in a group examination to address the class members’ concerns in a timely and efficient manner.³²⁷ In particular, courts allow objectors and unrepresented class members to raise their concerns both before and during the hearing. The court may also consider written objections at the hearing.

Class member attendance at fairness hearings is infrequent, and objections are usually negligible. A 1996 study conducted by the Federal Judicial Center found that, “only about a quarter to a half of the class representatives attended the fairness hearing.”³²⁸ The study also found that “in about half of the class actions, not a single member filed a written objection.”³²⁹ Another study found that “objections occurred in less than one in a thousand class actions in which a published opinion was available.”³³⁰ According to the Federal Judicial Center, written objections most frequently challenge the requested attorneys’ fees and the benefits the settlement provided to class members. Objectors also argue, at times, that the settlement favors some subgroups over others.³³¹

[2] Nonmonetary Relief

The court may consider remedies that don’t have an apparent cash value during the fairness hearing. The Class Action Fairness Act of 2005, for instance, requires heightened judicial scrutiny of coupon settlement.³³² As such, when evaluating the benefits of coupon settlements, courts consider the fairness factors under Rule 23(e)(2) and case law, in addition to “whether the proposed coupons are transferable; have a secondary market in which they can be discounted and converted to cash; compare favorably with bargains generally available to a frugal shopper; and are likely to be redeemed by class members.”³³³ Courts consider the typical fairness factors when evaluating other nonmonetary relief, such as an injunction.³³⁴

[3] Evaluating the Adequacy of the Settlement Agreement

The...