Now that the Class Action Fairness Act is a few years old, it may be easy to forget about the requirement that certain state and federal officials be given notice of class action settlements in federal court. However, the consequences of forgetting to do so could be disastrous.
The official notification requirement, codified at 28 U.S.C. 1715, requires that notice be given to an “appropriate Federal official” and an “appropriate State official.” In most cases, this means the United States attorney general and either the state official primarily responsible for regulating the defendant or the state attorney general if there is no regulator. The notice must be given within “10 days after a proposed settlement of a class action is filed in court.” 28 U.S.C. 1715(b). The notice must contain various materials, which are specified in Section 1715(b).
If the required notice is not given, the settlement becomes subject to possible collateral attack: “A class member may refuse to comply with and may choose not to be bound by a settlement agreement or consent decree in a class action if the class member demonstrates that the notice . . . has not been provided.” 28 U.S.C. 1715(e)(1).
A few government agencies have provided guidance on the manner in which the notice should be given, but many have not. The Federal Reserve has issued guidelines on how notice is to be given in certain banking cases in which it is the “appropriate Federal official.” http://www.federalreserve.gov/boarddocs/SRLETTERS/2007/SR0707.htm. The California Attorney General has also issued guidelines. http://ag.ca.gov/contact/court.php. I recently sent an inquiry to the DOJ to ask whether there were any specific guidelines for service on the United States Attorney General but did not receive a response.
Many professional class action administrators have developed protocols for complying with the official notice requirement, so a defense lawyer is not completely without resources to ensure compliance. However, given the potential consequences of not complying with the requirement, it is a good idea for counsel to monitor this process by asking to whom and how the administrator intends to give the notice.
Curiously, although CAFA required officials to be notified of class action settlements, it provided no guidance on what the government officials should do once notified. A few state officials that I have interviewed or heard speak at seminars following CAFA have stated that they are not likely to get involved in most class action settlements after receiving the required notice. One would assume that this attitude would change in a case in which the governmental entity has been pursuing related or parallel proceedings against the defendant involving the same subject matter.