PRATTER, District Judge.
The Court approved a settlement of the direct purchaser class claims against Cal-Maine (the "Cal-Maine Settlement") in November 2014. The "Settlement Class," as defined by the Cal-Maine Settlement, included the Kraft
Following an evidentiary hearing on July 1, 2015, the Court finds that the Kraft DAPs' failure to opt out was a result of excusable neglect. As a result, the Court will extend the deadline for the Kraft DAPs to opt out of the Cal-Maine Settlement.
The initial class complaints in this litigation were filed in September 2008 and were consolidated in this Court by the Judicial Panel on Multidistrict Litigation. The Kraft DAPs filed their original complaint in December 2011 in the U.S. District Court for the Northern District of Illinois, and the case was then transferred to this Court for coordinated pretrial proceedings. The Kraft DAPs filed their Second Amended Complaint on March 6, 2013.
In August 2013, the direct purchaser plaintiffs and Cal-Maine announced that they had reached a settlement of the direct purchaser class claims against Cal-Maine and would seek Court approval of it. The Settlement Agreement between the DPPs and Cal-Maine states that it is entered into by Cal-Maine and the "Direct Purchaser Plaintiffs' Class representatives." (Docket No. 848-2, p. 1).
On October 18, 2013, two months after the Cal-Maine Settlement was announced but before the Court granted the motion for preliminary approval, the Kraft DAPs' counsel, along with other DAPs' counsel, engaged in a mediation session with Cal-Maine, facilitated by mediator Eric Green. That effort was unsuccessful. Cal-Maine filed its answer on January 31, 2014,
The Kraft DAPs received notices of the Cal-Maine Settlement in April 2014, but did not submit a formal opt-out letter. They claim that the decision not to submit a formal opt-out letter was based on their counsel's belief that a formal opt-out letter was unnecessary because (1) the Kraft DAPs had filed and prosecuted their own separate action, which was treated as a separate action against Cal-Maine under Case Management Order 15
On January 14, 2015, Cal-Maine's counsel sent a letter to the Kraft DAPs' counsel, stating that the Kraft DAPs' lawsuit against Cal-Maine was barred by the Cal-Maine Settlement. On January 23, 2015, the Kraft DAPs filed the instant motion. After a conference in Chambers on the motion, and supplemental briefing on the issue of whether there was need for an evidentiary hearing, the Court scheduled an evidentiary hearing for July 1, 2015.
The Kraft DAPs make two basic arguments in support of their Motion. First, they argue that there was no need for the Kraft DAPs to opt out. Second, they argue that the failure to opt out was a result of excusable neglect. The Court will address each of these arguments in turn.
The Kraft DAPs first argue that they are not bound by the Cal-Maine Settlement because (1) the text of the Cal-Maine Settlement and Notice were so ambiguous as to the Cal-Maine Settlement's effect on the Kraft DAPs' pending lawsuit that it would violate due process to find that it bars the pending lawsuit, and (2) the Kraft DAPs' post-settlement conduct unambiguously demonstrated their intent to opt out of the Cal-Maine Settlement, thereby serving as the functional equivalent of opting out. For the reasons that follow, the Court will reject the Kraft DAPs' arguments.
The failure of a class member to opt out of a class action settlement will bar
Nevertheless, the Kraft DAPs argue that the warnings in the Cal-Maine Settlement and Notice were not clear enough for the Kraft DAPs to know that their pending lawsuit would be barred if they did not opt out of the Cal-Maine Settlement. The Kraft DAPs rely heavily on McCubbrey v. Boise Cascade Home & Land Corp., 71 F.R.D. 62 (N.D.Cal.1976). In McCubbrey, the court held that a class settlement notice was insufficient as a matter of due process to bar the claims of parties who had pending complaints when they received the settlement notice and did not submit opt-out letters. Id. at 67. Citing Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950), in which the Supreme Court explained that "[a]n elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections," id. at 314, 70 S.Ct. 652, the court explained that "[n]othing in the detailed, 29-page Notice would alert even a careful reader that he must satisfy the exclusion requirements or suffer the consequence of permitting his ongoing litigation to evaporate." McCubbrey, 71 F.R.D. at 67.
The Kraft DAPs claim that the Cal-Maine Settlement Notice is similarly deficient because it does not expressly say that the Cal-Maine Settlement will bar all pending lawsuits involving claims that are or could be part of the class action. Thus, emphasize the Kraft DAPs, under McCubbrey, a court may "[allow] parties to opt out when they had lawsuits pending that were filed before the notice period began and the class action settlement notice was defective, in that it did not warn those parties with pending lawsuits that the pendency of those suits was not enough to signal an intention to opt out." In re Imprelis Herbicide Mktg., Sales Practices & Prod. Liab. Litig., No. 11-MD-02884, 2014 WL 6901120, at *7 n. 5 (E.D.Pa. Dec. 5, 2014) ("Imprelis I").
The Court finds that the Notice in this case satisfied due process. First, as explained above, the Kraft DAPs clearly fall within the scope of the "Settlement Class" as defined in the Cal-Maine Settlement and Notice. The Notice then expressly states, "If you do nothing, you will remain a member of both the Cal-Maine
Second, with respect to the effect of remaining a member of the Settlement Class, the Cal-Maine Settlement and Notice included numerous statements that "would alert ... a careful reader" that he or she must opt out in order to continue prosecuting a pending lawsuit otherwise within the scope of the Cal-Maine Settlement. Such statements include: (1) "If you fall within the definition of the `Settlement Class' as defined herein, you will be bound by the settlement unless you expressly exclude yourself in writing pursuant to the instructions below"; (2) By taking no action, "[y]ou will receive the non-monetary benefits of the Cal-Maine Settlement and give up the right to sue Cal-Maine with respect to the claims asserted in this case"; (3) "By remaining part of the Cal-Maine Settlement, if approved, you will give up any claims against Cal-Maine relating to the claims made or which could have been made in this lawsuit"; (4) Opting out "is the only option that allows you to ever be a part of any other lawsuit with respect to the claims asserted in this case"; and (5) "
While the Cal-Maine Settlement and Notice could have more clearly described the Cal-Maine Settlement's effect on pending direct action lawsuits, that is not enough to demonstrate a due process violation if the Kraft DAPs are held bound by the Cal-Maine Settlement. The fact that the Notice did not specifically define "any other lawsuit" to include the DAPs' pending lawsuits, or specifically define "Plaintiffs" to include the DAPs with separate pending lawsuits, will not render the Notice defective as to the Kraft DAPs. The language of the Cal-Maine Settlement and Notice was sufficient to put the Kraft DAPs on notice that failure to opt out might result in pending claims being barred.
Where a party fails to file an opt-out form, "[t]he law requires a `reasonable indication' of a party's intent to opt-out for an opt-out to be proper. In determining whether a party has given a reasonable indication of its intent to opt out, courts use considerable flexibility." In re Linerboard Antitrust Litig., 223 F.R.D. 357, 366 (E.D.Pa.2004); see also Plummer v. Chem. Bank, 668 F.2d 654, 657 n. 2 (2d Cir.1982) ("Any reasonable indication of a desire to get out should suffice."); In re Four Seasons Sec. Laws Litig., 493 F.2d 1288 (10th Cir.1974); McCubbrey, 71 F.R.D. at 70-71 ("[N]o reasonable person could view their conduct as expressing a desire to participate in the proposed settlement.").
In order for a party to give a "reasonable indication" of its intent to opt out, the party must perform some action that is unambiguously inconsistent with an intention to participate in the settlement. For example, in Imprelis I, a party argued that it had opted out of a class action settlement when it sent a letter to the defendant stating that "[a]fter consulting with an attorney, our preference is not to take any legal action against Dupont [sic] or [the lawn care company], not to join in any class action lawsuit, and to resolve this as quickly as possible." 2014 WL 6901120, at *3. The court held that the letter was insufficient to constitute the functional equivalent of submitting an opt-out form because it evinced intentions that "were far from clear," as the statement "could be read simply as a desire not to get involved with the legal system, especially since Mr. Greener said in the same sentence that he did not wish to take legal action against DuPont." Id. at *7.
The Court finds that the Kraft DAPs' post-settlement conduct did not unambiguously indicate that they intended to opt out of the Cal-Maine Settlement. None of the Kraft DAPs' post-settlement actions foreclosed the possibility that the Kraft DAPs would elect to participate in the Cal-Maine Settlement. As Cal-Maine correctly observes, the Kraft DAPs could have been "hedging their bets" by "continuing to see how the separate case would develop as the pleadings were closed and the parties moved forward through discovery, yet retaining the strategic ability to either remain in or `opt-out' of the Cal-Maine settlement class up until the deadline." Def.'s Post-Hr'g Br., Docket No. 1255, 22 (emphasis omitted). For example, by going to mediation after the announcement of the Cal-Maine Settlement, the Kraft DAPs may have been exploring the possibility of entering into a more favorable direct settlement with Cal-Maine instead of participating in the Cal-Maine Settlement, while at the same time keeping open their ability to join the Cal-Maine Settlement. Similarly, the fact that Cal-Maine filed a counterclaim against the Kraft DAPs after the Cal-Maine Settlement was announced but before the opt-out period ended, suggests only that Cal-Maine was not confident that the Kraft DAPs would participate in the Cal-Maine Settlement. It is by no means an admission that the Kraft DAPs were clearly not going to participate in the Cal-Maine Settlement.
In the alternative, the Kraft DAPs move for leave to opt out under Rules 6(b) and 60(b)(1). Rule 6(b) states that "[w]hen an act may or must be done within a specified time, the court may, for good cause, extend the time ... on motion made after the time has expired if the party failed to act because of excusable neglect." Similarly, Rule 60(b)(1) provides that "on motion and just terms, the court may relieve a party ... from a final judgment ... for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect." The Kraft DAPs claim that their failure to opt out was a result of excusable neglect.
"The determination of whether a party's failure to meet a given deadline is excusable `is at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission.'" In re Imprelis Herbicide Mktg., Sales Practices & Prods. Liab. Litig., No. 11-MD2284, 2014 WL 348593, at *3 (E.D.Pa. Oct. 23, 2009) ("Imprelis II") (quoting Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 395, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993)). The Supreme Court articulated four factors in Pioneer for determining whether a party's neglect is excusable: (1) the danger of prejudice to the non-movant; (2) the length of the delay and its potential effect on judicial proceedings: (3) the reason for the delay, including whether it was within the reasonable control of the movant: and (4) whether the movant acted in good faith. See Orthopedic Bone Screw, 246 F.3d at 322-23. For the reasons that follow, the Court will grant the Kraft DAPs' motion because three of the four Pioneer factors weigh in favor of finding excusable neglect.
Under Pioneer, "prejudice is not an imagined or hypothetical harm; a finding of prejudice should be a conclusion based on facts in evidence." In re O'Brien Envt'l Energy, Inc., 188 F.3d 116, 127 (3d Cir.1999). Cal-Maine argues that it will suffer prejudice in the form of having to defend against the Kraft DAPs' claims on the merits, and has presented no evidence of any other prejudice that may result.
Cal-Maine relies on In re Diet Drugs (Phentermine/Fenfluramine/Dexfenfluramine) Prods. Liab. Litig., 92 Fed.Appx. 890 (3d Cir.2004) and Imprelis II to argue that a single additional lawsuit constitutes prejudice under the first Pioneer factor. In particular, Cal-Maine argues that those courts cited the possibility of "significantly greater damages" and the cost "of continued litigation against an additional party" as grounds for finding prejudice. But in those cases, the settlements had special provisions that permitted the defendants to terminate the settlements based on the number of opt-outs, so even a single additional opt-out would impair the bargained-for value of the settlements. In In re Diet Drugs, the court found prejudice in the fact that other plaintiffs might opt out because the situation of the party seeking leave to opt out late was "neither unique nor compelling." 92 Fed.Appx. at 894. Similarly, in Imprelis II, the court found prejudice based on several factors including "the potential for future requests from similarly situated class members" and the chance that the defendant might lose its "bargained-for certainty." 2014 WL 348593, at *4. Consequently, because there was no indication that the defendants in those cases were in positions to unwind their respective settlements in response to the untimely opt-outs, permitting late opt-outs threatened to impair the value of those bargained-for terms in the overall settlement agreements. In other words, the defendants would be at risk of being bound by a settlement with a less-than-satisfactory number of plaintiffs if the plaintiffs were permitted to opt out after defendants declined to exercise their right to terminate the settlement. That situation created a risk that the defendants would have to defend many additional lawsuits
Cal-Maine argues that the Kraft DAPs' delay in opting-out has unduly prejudiced Cal-Maine in this litigation, but Cal-Maine never articulates how it has been prejudiced by the delay. Instead, Cal-Maine admits that "the length of the delay is not likely to significantly impact the overall litigation...." Def.'s Br., Docket No. 1133, 23. Cal-Maine comes close to articulating an alleged form of prejudice when it asserts that it "has been forced to divert substantial resources away from its work preparing for the IPP class certification hearing on April 20-21, 2015 and ongoing merits expert discovery involving complex econometric work with a number of experts whose reports are due on March 13 to respond to the Kraft Plaintiffs' Motion." Id. This is not the type of effect on proceedings about which the Pioneer court was concerned, especially in light of the fact that there is presently no evidence that the Kraft DAPs delayed in bad-faith or for tactical reasons. Although the Kraft DAPs waited until January 2015 to file their motion (despite having access to the opt-out list prior to the final approval of the settlement back in August 2014), which could be enough time to prejudice a defendant under appropriate circumstances, the litigation between the Kraft DAPs and Cal-Maine has continued without any significant interruption. Therefore, this factor weighs in favor of finding excusable neglect.
In Pioneer, the Supreme Court explained, "Although inadvertence, ignorance of the rules, or mistakes construing the rules do not usually constitute `excusable' neglect, it is clear that `excusable neglect' under Rule 6(b) is a somewhat `elastic concept' and is not limited strictly to omissions caused by circumstances beyond the control of the movant." 507 U.S. at 392, 113 S.Ct. 1489. Indeed, Pioneer declined to "erect[ ] a rigid barrier against late filings attributable in any degree to the movant's negligence ..." Id. at 395 n. 14, 113 S.Ct. 1489. The Third Circuit Court of Appeals later noted that the Supreme Court "explicitly rejected the argument that excusable neglect applies only to those situations where the failure to comply is a result of circumstances beyond the [movant]'s reasonable control." O'Brien, 188 F.3d at 125.
Cal-Maine argues that it was "objectively unreasonable" for the Kraft DAPs to believe that they were not required to opt
Our Court of Appeals explained in Kimberg v. Univ. of Scranton, 411 Fed.Appx. 473 (3d Cir.2010), that "an honest oversight that is not part of a sinister, well-conceived plan to frustrate" the opponent will not bar a finding of excusable neglect. Id. at 478. Upon consideration of the evidence presented at the evidentiary hearing and the parties' post-hearing briefing, the Kraft DAPs have demonstrated that the mistake in failing to opt out was made in good faith. When examining the totality of the circumstances facing the Kraft DAPs' counsel when the decision was made that an opt-out letter was not necessary, such a decision, while ultimately wrong, was not unreasonable and was certainly not part of a "sinister, well-conceived plan to frustrate the opponent." Furthermore, the emails sent by the Kraft DAPs' counsel following the receipt of the Notice and the receipt of Cal-Maine's letter of January 14, 2015 do not give any indication of bad faith or sinister, "well-conceived" plans. Evid. Hr'g, Docket No. 1290, KDAP Exs. 8, 9, 18. On the contrary, those communications indicate confusion and surprise. While arguing that the Kraft DAPs' counsel made a mistake in performing only a cursory review of the Notice and deciding that no action was necessary, Cal-Maine fails to point out any sinister plans or strategic advantages gained by the Kraft DAPs as a result of those mistakes. As a result, and given counsel's candid admission of having been wrong, this factor weighs in favor of finding excusable neglect.
The Cal-Maine Settlement and Notice satisfied due process with respect to the Kraft DAPs and their pending lawsuit against Cal-Maine, and the Kraft DAPs' post-settlement conduct was not sufficient