For an appellate panel whose decision will be known to posterity as Cobell XXIII, the prospect of preventing a two-dozenth published opinion must be tempting. (The district court was already describing this case in Jarndycian terms back in Cobell XX.) The D.C. Circuit yielded to the allure of finality yesterday when it upheld a $3.4 billion settlement in a class action brought 16 years ago by American Indians against the Secretary of the Interior for mismanagement of “Individual Indian Money” trust accounts. The accounts were supposed to collect income from lands held in trust for individual Indians pursuant to allotments dating from 1887.
The plaintiffs originally sought a historical accounting, but over the years it became clear that the requested relief would cost more than Congress was willing to appropriate for the purpose — and perhaps more than the value of plaintiffs’ claims. Because of the government’s failure to keep track of the assets, any feasible settlement was bound to require some degree of squinting. Last July, the district court approved a settlement involving two overlapping classes and a combination of per capita, lump sum payments and pro rata payments.
The objectors argued that the settlement’s use of lump sum payments improperly treats unlike claims alike, creating intra-class conflicts between members with valuable claims and those whose claims are negligible. Specifically, the objectors alleged that the district court’s certification of one class under Rule 23(b)(2) — on the theory that the government’s failure to undertake an accounting was a “refus[al] to act on grounds that apply generally to the class” — violates the Supreme Court’s recent holding in Wal-mart v. Dukes that Rule 23(b)(2) “does not authorize class certification when each class member would be entitled to an individualized award of monetary damages.” For similar reasons the objectors argued that the district court should have disallowed lump sum payments to members of the Rule 23(b)(3) class as unfair under Rule 23(e). The D.C. Circuit held that even if the lump-sum payments theoretically over- and under-compensate individual members of the two classes, the practical impossibility of determining who received too much and who too little would overcome the objectors’ challenge to the certification of the class and the fairness of the settlement.
The opinion also suggests in passing that a fairness challenge based on disparities among class members would necessarily fail if none of them chose to opt out of the class. (“[T]he existence of the opt-out alternative effectively negates any inference that those who did not exercise that option considered the settlement unfair.”). But permitting class members to effectively waive a fairness inquiry by failing to opt out seems at odds with the district court’s independent duty under Rule 23(e) to “find that [the settlement] is fair, reasonable, and adequate” before approving it. The court’s primary response to the objectors’ fairness challenge seems to be on surer footing: “[A]ny historical accounting that would result from continued litigation would likely be severely limited in scope, heavily restrained by cost, and thus unlikely to reveal the existence of — much less remedy — the intra-class conflict [the objector] alleges.”
Judge Rogers’s opinion goes to some lengths to explain that its conclusions are limited to the “unusual circumstances surrounding this litigation.” Those circumstances include the prohibitive cost and inevitable uncertainty of an accounting, and Congress’s appropriation of funds to cover the settlement:
Given that any additional accounting funded by Congress would likely rely heavily on statistical sampling, even if latent intraclass conflicts did exist, they would be unlikely ever to be discovered. All of this suggests that the information produced from an historical accounting is not likely to be worth significantly more to some class members than to others, and thus the $1,000 settlement payment is properly viewed as nonindividualized and does not run afoul of Wal-Mart [v. Dukes].
Moreover, this case is extraordinary in that Congress not only expressly authorized, ratified, and confirmed the settlement, but also appropriated $3.4 billion to fund it. Although Congress made no express findings about the propriety of (b)(2) certification of the Historical Accounting Class, given the lengthy litigation and the limited funds available for further accounting, Congress’s judgment that uniform payments would adequately compensate class members for an accounting right that it created carries significant weight and sets this case apart from others.
. . .
In view of these realities, this court in July 2009 instructed “the district court to use its equitable power to enforce the best accounting that Interior can provide, with the resources it receives, or expects to receive, from Congress.” Cobell XXII, 573 F.3d at 811. This instruction underscored the reality that the original goal of the litigation — a complete historical accounting for each class member — would not be realized. Instead, any historical accounting that would result from continued litigation would likely be severely limited in scope, heavily restrained by cost, and thus unlikely to reveal the existence of — much less remedy — the intra-class conflict Craven alleges.
. . .
For Craven to characterize the settlement as “tak[ing] shortcuts to solve the problem at the expense of individual rights,” and “tak[ing] a series of impermissible shortcuts that abuse the class action process to settle this case,” is to ignore the history of this hard-fought litigation and the obstacles to producing an historical accounting.
The D.C. Circuit also upheld the district court’s award of $99 million in attorneys’ fees to class counsel and $2 million as an incentive payment to the lead plaintiff, Elouise Cobell, who died three months after the district court approved the settlement.
- Order Approving Settlement (D.D.C. July 27, 2011)
- Settlement Agreement and Modifications
- Lawrence Hurley, Appeals Court Upholds Historic Cobell Settlement, Greenwire (May 22, 2012) (A “second appeal, concerning objections made by Carol Good Bear, Charles Colombe and Mary Aurelia Johns, was rejected by a different three-judge panel, which declined to hear oral arguments and issued only a two-page judgment.”)
- Matt Volz, $3.4 Billion Indian Land Royalty Settlement Upheld, AP (May 22, 2012) (” ‘Our deepest regret is that Ms Cobell did not live long enough to see this victory,’ [class counsel Dennis] Gingold said in a statement.”)
- Mike Scarcella, D.C. Circuit Upholds $3.4B Native American Class Settlement, Blog of Legal Times (May 22, 2012)
- James Vicini, Court Upholds $3.4 Billion Native American Deal, Reuters (May 22, 2012)
- Wal-mart v. Dukes, 131 S. Ct. 2541, 2560 (2011) (“In Allison v. Citgo Petroleum Corp., 151 F.3d 402, 415 (C.A.5 1998), the Fifth Circuit held that a (b)(2) class would permit the certification of monetary relief that is ‘incidental to requested injunctive or declaratory relief,’ which it defined as ‘damages that flow directly from liability to the class as a whole on the claims forming the basis of the injunctive or declaratory relief.’ In that court’s view, such ‘incidental damage should not require additional hearings to resolve the disparate merits of each individual’s case; it should neither introduce new substantial legal or factual issues, nor entail complex individualized determinations.’ Ibid. We need not decide in this case whether there are any forms of ‘incidental’ monetary relief that are consistent with the interpretation of Rule 23(b)(2) we have announced and that comply with the Due Process Clause. Respondents do not argue that they can satisfy this standard, and in any event they cannot.”).
- In re Vitamins Antitrust Class Actions, 215 F.3d 26, 30 (D.C. Cir. 2000) (“Of course, in passing on the proposed settlement agreement, the district court has a duty under Fed.R.Civ.P. 23(e) to ensure that it is fair, adequate, and reasonable and is not the product of collusion between the parties. Thus Rule 23(e) provides a check against settlement dynamics that may ‘lead the negotiating parties-even those with the best intentions-to give insufficient weight to the interests of at least some class members.’ “).