United States District Court, S.D. New York
putative class action alleges a conspiracy among several
large banks to fix the secondary market prices of GSE bonds.
Previously, the Court had preliminarily approved a settlement
between plaintiffs and Deutsche Bank ("DB") and
First Tennessee Bank ("FTN"). See Opinion and
Order, ECF No. 298 ("DB & FTN Op."). Now,
plaintiffs have moved for preliminary approval of a
stipulation and settlement agreement with defendant Goldman
Sachs ("GS"). See Mot. for Prelim. Approval, ECF
No. 316; Burke Decl., Exh. 1, ECF No. 318 ("GS
Settlement Agreement"). On December 9, 2019, the Court
held a preliminary approval fairness hearing on the proposed
settlement, and on December 12, 2019 the Court preliminarily
approved the proposed settlement. The Court now elaborates on
the reasons for this latest preliminary approval.
Civ. P. 23(e) requires judicial approval for any class action
settlement. A class action settlement approval procedure
typically occurs in two stages: (1) preliminary approval,
where "prior to notice to the class a court makes a
preliminary evaluation of fairness," and (2) final
approval, where "notice of a hearing is given to the
class members, [and] class members and settling parties are
provided the opportunity to be heard on the question of final
court approval." In re Payment Card Interchange Fee and
Merchant Discount Antitrust Litig., 330 F.R.D. 11, 28
(E.D.N.Y. 2019). Even at the preliminary approval stage, the
Court's role in reviewing the proposed settlement
"is demanding because the adversariness of litigation is
often lost after the agreement to settle." Zink v. First
Niagara Bank, N.A., 155 F.Supp.3d 297, 308 (W.D.N.Y. 2016)
December 1, 2018, new amendments to Rule 23 took effect which
altered the standards that guide a court's preliminary
approval analysis. Prior to these changes, Rule 23 did not
specify a standard, and courts in the Second Circuit
interpreted Rule 23 to only require the settlement to be
"within the range of possible final approval." In
re NASDAQ Market-Makers Antitrust Litig., 176 F.R.D. 99, 102
(S.D.N.Y. 1997). Under the new, more exacting standards, a
district court must consider whether the court "will
likely be able to: (i) approve the proposal under Rule
23(e)(2); and (ii) certify the class for purposes of judgment
on the proposal." In re Payment Card., 330 F.R.D. at 28.
Likelihood of Approval Under Rule 23(e)(2) and the Grinnell
likely to approve a proposed settlement under Rule 23(e)(2),
the Court must find "that it is fair, reasonable, and
adequate." The newly amended Rule 23 enumerates four
factors for the Court to consider as part of this inquiry:
(1) adequacy of representation, (2) existence of
arm's-length negotiations, (3) adequacy of relief, and
(4) equitableness of treatment of class members. Fed.R.Civ.P.
23(e)(2). Prior to the 2018 amendments, courts in the Second
Circuit considered whether a settlement was "fair,
reasonable, and adequate" under nine factors set out in
City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir.
1974). The Advisory Committee Notes to the 2018 amendments
indicate that the four new Rule 23 factors were intended to
supplement rather than displace these "Grinnell"
factors. See 2018 Advisory Notes to Fed.R.Civ.P. 23, Subdiv.
(e)(2) ("2018 Advisory Note"). Accordingly, the
Court considers both sets of factors in its analysis.
Adequacy of Representation
23(e) (2) (A) requires a Court to find that "the class
representatives and class counsel have adequately represented
the class" before preliminarily approving a settlement.
Because counsel has not changed since the Deutsche Bank
("DB") and First Tennessee Bank ("FTN")
settlements, the Court finds that Rule 23(e)(2)(A)'s
adequacy of representation prong weighs in favor of
preliminary approval for the reasons outlined in the DB and
FTN settlement. Opinion and Order 4-5, ECF No. 298 ("DB
& FTN Op.").
Presence of Arm's-Length Negotiations
23(e)(2)(B) requires procedural fairness, as evidenced by the
fact that "the proposal was negotiated at arms
length." If a class settlement is reached through
arm's-length negotiations between experienced, capable
counsel knowledgeable in complex class litigation, "the
Settlement will enjoy a presumption of fairness." In re
Austrian & German Bank Holocaust Litig., 80 F.Supp.2d
164, 173-74 (S.D.N.Y. 2000), aff'd sub nom., D'Amato
v. Deutsche Bank, 236 F.3d 78 (2d Cir. 2001). Further, a
mediator's involvement in settlement negations can help
demonstrate their fairness. In re Payment Card, 330 F.R.D. at
35. Here, as before in the case of the DB and FTN
settlements, DB & FTN Op. at 5, the parties engaged in
mediation and the mediator's declaration confirms that
the settlement agreement was "a product of extensive and
informed negotiations conducted at arm's length" by
"sophisticated and capable counsel." Melnick Decl.
¶ 6, ECF. 318 Exh. 2. Rule 23(e)(2)(B) thus weighs in
favdr of preliminary approval.
Adequacy of Relief
23(e) (2) (C) requires examining whether relief for the class
is adequate, taking into account:
(i) the costs, risks, and delay of trial and appeal; (ii) the
effectiveness of any proposed method of distributing relief
to the class, including the method of processing class-member
claims, if required; (iii) the terms of any proposed award of
attorney's fees, including timing of payment; and (iv)
any agreement required to be identified under Rule 23(e)(3).
This inquiry overlaps significantly with a No. of Grinnell
factors, which help guide the Court's application of Rule
23(e)(2)(C)(i). In re Payment Card, 330 F.R.D. at 36. Most of
these factors weigh in ...