Chicago Business Litigation Lawyer Blog
A truck manufacturer was agreed to a settlement after it was sued for selling trucks with defective engines. Two members of the litigation class had filed separate suits against the company in state court. After the settlement was finalized, the manufacturer sought to have those suits dismissed. The plaintiffs attempted to intervene in the court where the settlement was approved, seeking to opt-out of the terms of the settlement. The district court refused and the plaintiffs appealed. The appellate panel affirmed the decision of the district court. The panel found that the plaintiffs had not shown that their decision to refrain from timely objecting to the settlement was an excusable one. The panel determined that the plaintiffs were attempting to obtain the benefit of both the settlement and their separate litigation, as a way of receiving whichever of the judgments was larger. The panel found that the district court did not abuse its discretion in binding the plaintiffs to the terms of the settlement.
A class of owners accused Navistar of selling trucks with defective engines. The suit was settled for $135 million. In June 2019, the district court gave the settlement its preliminary approval. Before the approval could become final, the court had to notify class members of their right to opt out, and it needed to consider any substantive objections by class members who elected to be bound by the settlement. In August 2019 such a notice was sent to all class members. The court held a fairness hearing in November 2019 and rejected some objections to the settlement. In January 2020 the court entered a final judgment implementing the settlement.
Two members of the class (Drasc) had sued Navistar in Ohio concerning the engines of Navistar’s trucks. The federal court declined to enjoin parallel suits in state court, so the Ohio case proceeded while the federal action was pending. After the district court approved the settlement, Navistar’s lawyers notified Drasc’s counsel that its suit was barred by the release in the settlement and the final judgment. Drasc argued that it should not be bound by the settlement because it did not receive notice of the need to opt-out and that its effort to continue litigating in Ohio should be deemed a “reasonable indication” of a desire to opt-out.
The district court permitted Drasc to intervene in order to present its argument for exclusion from the class. After receiving evidence, the court determined that two properly addressed letters had been sent to Drasc at its business address, Drasc had chosen not to provide an email address to Navistar for notice, Drasc’s lawyers in the Ohio suit had actual notice of the settlement and must have known about the need to opt-out, and because Drasc had actual knowledge of the need to opt-out via the letters and its counsel, it could not show excusable neglect that would justify an extension of the opt-out deadline. Drasc then appealed.
The appellate panel began by stating that none of the findings the district court made was clearly erroneous. Drasc insisted that notice by first-class mail is insufficient under the Due Process Clause of the Fifth Amendment. The panel rejected that argument. Citing Dusenbery v. Untied States, the panel stated that mail satisfies the constitutional requirement that notice be reasonably calculated to give actual knowledge, and that the district judge found that neither of the letters sent to Drasc were returned. The panel noted further that the court’s unchallenged finding that Drasc’s lawyers in Ohio had actual knowledge of the litigation and its settlement eliminated any opportunity for Drasc to argue that mail must be certified rather than first-class as a lawyer’s knowledge is imputed to the client.
The panel then stated that a district judge has the discretion to permit an untimely opt-out when the delay is excusable. The panel found that the district judge did not abuse her discretion in finding that Drasc’s delay was inexcusable. The panel then rejected Drasc’s argument that its pending litigation should be construed as a reasonable indication of a desire to opt-out. The panel stated that such an approach could make class actions difficult if not impossible to administer. The panel determined that Drasc did not opt-out of the settlement and its effort to litigate separately in Ohio was therefore barred by the release in the settlement. The panel thus affirmed the decision of the district court.
You can read the Court’s decision here.
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