Judicial supervision of individual settlements with class members in Australia, Canada, and the United States

SUMMARY I. INTRODUCTION 664 II. CONCEPTUAL FRAMEWORK 668 A. The Class Action Device 66% B. Vulnerable Position of Class Members 670 C. Status of Class Members 674 D. Relationship Between Class Counsel and Class Members 676 E. Individual Settlements in Class Actions-Potential Risks 679 III. INDIVIDUAL SETTLEMENTS IN ONTARIO 687 A. Ontario's Class Proceedings Act 1992 687 B. Judicial Supervision of Individual Settlements with Class Members 688 1. Analysis of Lewis 690 2. Post-Lewis Developments 694 C. Conclusion 698 IV. INDIVIDUAL SETTLEMENTS IN THE FEDERAL COURT OF AUSTRALIA 699 A. Part IVA of the Federal Court of Australia Act of 1976 699 B. Relationship Between Class Counsel and Class Members 701 C. The Federal Court 's Supervision of Individual Settlements 703 1. Justice Stone's judgment in Courtney 704 2. King 706 3. Justice Sackville's judgment in Courtney 708 4. Contributions of Unrepresented Class Members to the Costs of Part IVA Proceedings 711 D. Conclusion 713 V. INDIVIDUAL SETTLEMENTS IN THE UNITED STATES 713 A. Rule 23 of the United States Federal Rules of Civil Procedure 713 B. Relationship Between Class Counsel and Class Members 715 C. Judicial Supervision of Pre-certification Settlement Negotiations 717 D. Judicial Supervision of Post-certification Settlement Negotiations 719 E. Judicial Approval of Individual Settlements 720 VI. CONCLUSION 723 I. INTRODUCTION Indeed, if anything strikes this Court as unfair or unreasonable it is the paternalistic notion that it is in the best interests of competent adults that they be deprived of their right to receive and freely choose whether to accept or reject defendants' compromise offer.1 The Court does not believe that the defendant should be permitted to negotiate, in any way, individual settlements, such as release or covenant not to sue, or any other device, with the individual members of the existing class of plaintiffs.2 The observations above highlight, quite effectively, the varying responses that have been provided by courts in the United States, Canada, and Australia to an important issue concerning the operation of the class action procedure that has, surprisingly, largely been ignored by legal commentators. The issue in question concerns the ability of defendants (or respondents as they are known in the Federal Court of Australia) who oppose a class action to settle the individual claims of class members4 other than the representative plaintiffs, without any judicial supervision and/or the involvement of the representative plaintiffs and their legal representatives.5 The regimes governing the class action procedure, at the federal level, in the United States;6 in the Canadian provinces of Quebec,7 Ontario,8 British Columbia,9 Saskatchewan,10 Newfoundland and Labrador,11 and Manitoba,12 and in the Federal Court of Canada;13 in the Federal Court of Australia,14 and in the Australian States of Victoria15 and South Australia16 do not expressly deal with this issue. Instead, they only deal with the settlement, dismissal, or compromise of the class action proceeding itself, by mandating that such events do not bind class members unless they have been approved by the court presiding over the class action. …

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