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NEWS & INSIGHTS
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27 MAY 2009
California: Defendants May No Longer Request Dismissal Of Settled Class Actions
CLASS ACTION ALERT
Edward D. Totino Joshua M. Briones Anahit Tagvoryan
A recent and little known change to the California Rules of Court now prevents defendants from requesting a dismissal of a settled action. This rule change will require adjustments in the ways that defendants settle class actions. Rule 3.769 of the California Rules of Court governs court approval of class action settlements. Under the prior subdivision (h) of that rule, if a court approved a settlement and entered judgment, it was required to retain jurisdiction to enforce the terms of the judgment. Many defendants asked that the court dismiss the class action as part of its final approval of the settlement. The reason for the request for dismissal was straightforward: a defendant would want to dismiss the action because having a judgment against it implies wrongdoing, and one of the motivating factors for entering into the settlement is to avoid any admission of fault. However, tension existed between continuing jurisdiction, on the one hand, and dismissal, on the other. Amended Rules Address Perceived Discrepancy In January 2009, the Judicial Council amended Rules 3.769 and 3.770 of the California Rules of Court to provide that, on the approval of a class settlement and entry of judgment, a court may not also enter dismissal of the action. The amended rules (with the key changes highlighted) now provide as follows:
http://www.dlapiper.com/defendants-may-no-longer-request-dismissal-of-settled-class-acti... 5/28/2009
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Rule 3.769. Settlement of class actions. (h) Judgment and retention of jurisdiction to enforce. If the court approves the settlement agreement after the final approval hearing, the court must make and enter judgment. The judgment must include a provision for the retention of the court’s jurisdiction over the parties to enforce the terms of the judgment. The court may not enter an order dismissing the action at the same time as, or after, entry of judgment. Rule 3.770. Dismissal of class actions. (a) Court approval of dismissal. A dismissal of an entire class action, or of any party or cause of action in a class action, requires court approval. The court may not grant a request to dismiss a class action if the court has entered judgment following final approval of a settlement. Requests for dismissal must be accompanied by a declaration setting forth the facts on which the party relies. The declaration must clearly state whether consideration, direct or indirect, is being given for the dismissal and must describe the consideration in detail. The Judicial Council explained that the rationale for this amendment was the concern expressed by judges and others “that settlement of the case and dismissal of the class claims are inconsistent.” (See Report, Judicial Council of California Administrative Office of the Courts, dated August 12, 2008, pg. 2.) The Judicial Council went on to state that the purpose of requiring court approval of the dismissal of a class action “is to protect the interests of the class and its members” and therefore concludes that “[r] ules prohibiting the concurrent entry of judgment following settlement with retention of jurisdiction and entry of dismissal will advance this purpose.” (Id. at 3.) Of course, the plaintiffs’ bar was likely in favor of the amendment, because it diminishes the ability of the defendants to claim that the dismissal somehow exonerates them. Addressing Clients’ Desires While Meeting New Requirement As stated, clients generally want to dismiss actions brought against them simply because being the subject of a judgment implies wrongdoing. So how can counsel address this desire while at the same time complying with the new rule? One approach is to dismiss those claims that are not part of the settlement. Rule 3.769 prohibits dismissal of the action, but says nothing about a defendant’s ability to dismiss claims. Yet, because settlement of a class action will involve settling some or all class claims- typically in exchange for a monetary or equitable remedy-the opportunity to dismiss class claims may be limited. In many cases, however, a representative plaintiff’s complaint may include non-class claims brought on his or her own behalf individually. When settling the class claims and requesting final judgment on those claims, a defendant may seek to obtain dismissal of these individual claims. In such a case, the amended rule would allow the court to dismiss the non-class claims as part of the larger class settlement and judgment, thereby providing the defendant with some modicum of victory.
http://www.dlapiper.com/defendants-may-no-longer-request-dismissal-of-settled-class-acti... 5/28/2009