Federal Trade Commission Provides Comments on Proposed Amendments to Federal Rule of Civil Procedure 23 Governing Class Action Lawsuits

FTC Urges Greater Scrutiny of Class Action Attorney Fees and of Coupon Settlements and Increased Competition in Selection of Class Counsel

The Federal Trade Commission today filed comments with the Judicial Conference's Committee on Rules of Practice and Procedure concerning proposed amendments to Rule 23 of the Federal Rules of Civil Procedure, governing class action litigation. The proposed amendments would affect the form and content of notices to class members, the review of class action settlements, the procedures for appointment of class counsel, and the calculation of class action attorney fees. The FTC comments focus particularly on issues that may arise when a class action follows or parallels a prior lawsuit or enforcement action by a government agency, and seek to ensure that the interests of injured consumers and potential class members will be fully protected by the Federal Rules.

Overall, the comments state, the FTC supports the proposed amendments to Rule 23 because they will help protect the interests of injured consumers who are potential class members. The Commission believes, however, that Rule 23 could be strengthened further by:

• including a provision in the Rule that would require the parties to a class action to: (i) notify the Court of related actions by government agencies, to the extent those notices are not required by other rules, and (ii) notify government agencies involved in actions or investigations of the related private class action; and
• amending the Committee Note to Rule 23 to recommend that courts: (i) take into account the existence of related actions conducted by the government when calculating awards of attorney fees, and (ii) make specific findings about the value of coupon settlements.

The FTC believes these additions would assist both government agencies and the courts in ensuring that consumers achieve the fairest possible settlements and relief. In addition, the Commission believes that two of the existing amendments significantly would benefit consumersby: 1) fostering competition in the appointment of class counsel; and 2) requiring that notice to class members be provided in plain, easily understood language. Indeed, the Commission recommends that the former amendment, promoting competition in the appointment of class counsel, be moved from the Committee Note to the text of the Rule.

The Commission vote authorizing the filing of the comments was 5-0. The comments represent the views of the Federal Trade Commission.