Emmet G. Sullivan, United State District Judge.
This case places the Court in the unenviable position of enforcing a five-year-old bargain that nobody likes. The bargain at issue is not any old contract; rather, it is a settlement agreement that resolved a major civil-rights class action, was approved by the Court in accordance with the Federal Rules of Civil Procedure, and was made final by that approval and the lack of appeal therefrom. The story that led this
The agreement was finalized before the claims process began, so no one anticipated such a large amount of excess funds. But the parties did anticipate that some money might be leftover, so they included in their settlement agreement a cy pres provision, which directs that all leftover funds be distributed in equal shares to a group of charities that serve Native American farmers and ranchers that were to be chosen by Class Counsel. Now, faced with the prospect of over half of the plaintiffs' damages being distributed in equal shares to charities nominated by Class Counsel, many class members regret that part of their agreement and want to change it. Principal among those class members is Marilyn Keepseagle, who has asked the Court to modify the agreement to create a renewed claims process to distribute more of the money to individual class members. Others, including Class Counsel, ask to modify only the charitable-distribution procedures to accommodate the large amount of money to be distributed by: (1) allowing it to be distributed in unequal shares scaled to an organization's capacity; (2) spreading the distribution over twenty years; and (3) placing distribution decisions in the hands of a trust run by Native American leaders.
Unless there is a legal basis for this Court to modify the agreement, the Court must enforce the agreement reached in 2011. Doing so would frustrate all parties' goals. Contrary to the Keepseagles's wishes, the funds would remain entirely for charitable distribution. Contrary to the goals of Class Counsel and the government, that charitable distribution would be pursuant to the arguably inefficient procedures that were designed to handle a much smaller amount of money. This result could be viewed as both unjust and inefficient. Over half of the class's damages would be distributed to third parties, despite the relative ease with which class members could be identified, the claims process reopened, and previously successful claimants permitted to prove that they suffered damages in excess of the compensation they have obtained.
The Court's role is not to craft a new compromise based upon the Court's own views about the appropriate amount of compensation due to class members who alleged decades-long, and, in many cases, life-altering discrimination at the hands of their federal government. Nor is it to create a preferred process for distributing the funds to charity. Before the Court is a simple question: Are any of the narrow circumstances in which a court's final judgment may be modified present in this case?
The avenues proposed by the parties for unilateral modification—Class Counsel's attempt to realign the charitable-distribution procedures pursuant to Federal Rule of Civil Procedure 60(b)(5), and the Keepseagles's attempt to reopen the claims process pursuant to the legal doctrine governing unclaimed funds as well as Rules 60(b)(5) and 60(b)(6)—are simply inapplicable, as the Court discusses in detail in Parts II.A and II.B of this Opinion. Absent a way to modify the agreement unilaterally,
Before beginning its legal analysis, the Court makes some observations regarding the government's arguments. The government has chosen to oppose any modification of the settlement agreement that would alter the cy pres nature of the funds in any way, based upon concerns that class members might receive a "windfall" in excess of the damages they suffered and that reopening the claims process would undermine the government's interest in the finality of court judgments.
The Executive Branch's narrow position today stands in stark contrast to the messages of respect and reconciliation it expressed upon the settlement of this case. Upon announcement of the settlement in 2010, the President issued the following statement:
Statement by the President on Settlement Agreement in the Native American Farmers Lawsuit Against USDA, White House Office of the Press Secretary (Oct. 19, 2010), https://www.whitehouse.gov/thepress-office/2010/10/19/statement-president-settlement-agreement-native-american-farmers-lawsuit. A statement issued by Secretary Vilsack and then-Attorney General Holder expressed similar sentiments:
Agriculture Secretary Vilsack and Attorney General Holder Announce Settlement Agreement with Native American Farmers Who Claim to Have Faced Discrimination by USDA in Past Decades, USDA Office of Communications (Oct. 19, 2010), http:// www.usda.gov/wps/portal/usda/usdamediafb?contentid=2010/10/0539.xml & printable=true & contentidonly=true.
The Court is sympathetic to the government's legal argument that the settlement is a final judgment and that respect for final judgments is a cornerstone of our legal system. Indeed, that argument ultimately binds the Court. That is the Court's role: To resolve legal disputes, not make policy decisions, even when the law dictates a result the Court may disfavor. The Executive Branch, however, has a broader role: To defend itself in litigation, for sure, but also to seek justice on a broader stage. It is for that reason, the Court presumes, that the government sometimes settles cases that implicate deep-seated interests of justice, even where the government's legal defense may be relatively strong.
This case was not an abstract legal dispute. It was a major class-action seeking to remedy what many felt was the latest chapter in the federal government's sordid history of mistreating Native Americans. The statements of the President, Secretary Vilsack, and then-Attorney General Holder make clear that the government in 2010 understood this dimension of the case. The government's position lately evinces a failure to grapple with that dimension. The government would do well to remove its legalistic blinders.
The result is that $380,000,000 of taxpayer funds is set to be distributed inefficiently to third-party groups that had no legal claim against the government. Although a $380,000,000 donation by the federal government to charities serving Native American farmers and ranchers might well be in the public interest, the Court doubts that the judgment fund from which this money came was intended to serve such a purpose. The public would do well to ask why $380,000,000 is being spent in such a manner.
Because these considerations move beyond the realm of the law and into the realm of politics and policy, this Court can only make observations, bound as it is to the final judgment in this case and the narrow legal doctrines for modifying a final judgment. This Court has confronted an analogous situation before and its words are equally applicable here: "Were this Court empowered to judge by its sense of justice, the heart-breaking accounts of" life-altering discrimination suffered by members of the class at the hands of their federal government "would be more than sufficient justification for granting all the relief that they request." Roeder v. Islamic Republic of Iran, 195 F.Supp.2d 140, 145 (D.D.C.2002). As in Roeder, however, the authority to grant such relief lies with another branch of
On November 24, 1999, the plaintiffs filed this lawsuit against the Secretary of Agriculture on behalf of a class of Native American farmers and ranchers who applied to the United States Department of Agriculture's farm loan and benefits programs between January 1, 1981 and November 24, 1999. The plaintiffs alleged that the Department of Agriculture discriminated against them in a variety of ways in connection with these applications and its treatment of complaints of discrimination arising therefrom. The plaintiffs alleged that these actions violated the Equal Credit Opportunity Act, 15 U.S.C. § 1691e; the Administrative Procedure Act, 5 U.S.C. § 706(2)(A), and Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d, et seq.
On December 12, 2001, this Court granted in part the plaintiffs' motion for class certification. See Keepseagle v. Veneman, No. 99-3119, 2001 WL 34676944 (D.D.C. Dec. 12, 2001). Upon finding that the requirements of Federal Rule of Civil Procedure 23 had been met, the Court:
Id. at *15. The Court did not address certification of plaintiffs' claims for monetary relief:
Id. at *14. Accordingly, the Court stated that it would consider certification of the plaintiffs' monetary claims "in the event that, after the completion of discovery and the identification of appropriate sub-class representatives, plaintiffs are able to demonstrate to the Court the existence of a class properly certifiable as a hybrid class or pursuant to Rule 23(b)(3)." Id. The D.C. Circuit declined the government's petition for interlocutory review of the Court's class-certification order. See In re Veneman, 309 F.3d 789 (D.C.Cir.2002).
For nearly ten years, the parties engaged in extensive and contentious discovery and motions practice. A recounting of the full history of this phase is unnecessary at this time, but this nearly decade-long battle resulted in a narrowing of the plaintiffs' claims. The Court granted in part a motion for judgment on the pleadings, dismissing the plaintiffs' Title VI claim, which the plaintiffs had ultimately conceded was barred by the law in this jurisdiction at that time. See Opinion & Order, ECF No. 275. Plaintiffs filed a series of Amended Complaints, and ultimately rested in their Eighth Amended Complaint on their Equal Credit Opportunity Act claim. Eighth Am. Compl., ECF
On October 19, 2010, the parties informed the Court that they had reached a settlement. See Notice, ECF No. 570. Three days later, the plaintiffs moved for preliminary approval of that settlement. See Mot. for Prelim. Approval, ECF No. 571. In connection with this motion, the plaintiffs noted that their expert witness had come to a conclusion that the damages suffered by the class were approximately $776,000,000, making the $680,000,000 settlement award nearly 90% of the plaintiffs' estimated total damages. See Pls.' Suppl. Br., ECF No. 572 at 4.
On November 1, 2010, the Court granted preliminary approval of the settlement. See Order, ECF No. 577. In so doing, the Court affirmed its prior certification of the class's injunctive claims and also certified the class's claims for monetary relief under Federal Rule of Civil Procedure 23(b)(3). See id. at 2. The Court also approved the parties' plan for disseminating notice of the Agreement, required that objections to the Agreement and requests to opt out be postmarked by no later than February 28, 2011, and scheduled a fairness hearing for April 28, 2011. See id. at 3.
The relevant provisions of the settlement agreement were described in a prior Opinion of this Court:
Keepseagle v. Vilsack ("Keepseagle I"), No. 99-3119, 307 F.R.D. 233, 237, 2014 WL 5796751, at *2 (D.D.C. Nov. 7, 2014) (alterations in original).
The Court has also summarized the proceedings that followed:
Id. at 238, 2014 WL 5796751, at *3.
By design under the Agreement, the Court was largely uninvolved in the distribution process that followed final approval of the Agreement, with one exception. Over the course of the distribution, a handful
Because this case had settled, the Court's jurisdiction was limited. See Order Denying LaBatte Mot., ECF No. 692 at 7-8. The putative intervenors had to rely on the Court's ancillary jurisdiction, but "[a]ncillary jurisdiction . . . is a relatively limited source of jurisdiction[,] aris[ing]: `(1) to permit disposition by a single court of claims that are, in varying respects and degrees, factually interdependent . . . and (2) to enable a court to function successfully, that is, to manage its proceedings, vindicate its authority, and effectuate its decrees.'" Id. at 8 (quoting Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 379-80, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994)). Neither criterion was satisfied, however. The first was inapplicable because the facts alleged by each putative intervenor—erroneous determinations during the Non-Judicial Claims Process—were distinct from the underlying claims of discrimination. See, e.g., id. The second was inapplicable because "`[d]istrict courts enjoy no free-ranging `ancillary' jurisdiction to enforce consent decrees, but are instead constrained by the terms of the decree and related order.'" Id. at 8-9 (quoting Pigford v. Veneman, 292 F.3d 918, 924 (D.C.Cir.2002)). "The Agreement sharply limits the circumstances under which the Court may exercise jurisdiction," and although the Court retained jurisdiction "`to supervise the distribution of the Fund and to ensure that Debt Relief Awards issued by the Track A and Track B Neutrals are applied by USDA,'" "that provision is limited by a more specific provision of the Agreement precluding the Court from reviewing any `Claim Determinations, and any other determinations made under th[e] Non-Judicial Claims Process.'" Id. at 9 (quoting Agreement, ECF No. 621-1 ¶¶ V.A.7 (p. 40), IX.A.9 (p. 19)). These provisions, the Court held, are reconciled by "foreclos[ing] judicial review of certain decisions as to who is entitled to receive an award, while permitting judicial supervision over distribution of the Fund . . . after those decisions have been made." Id. (quoting Order Denying Smith Mot., ECF No. 633 at 8).
The Court previously described what occurred at the end of the distribution process:
Keepseagle I, 307 F.R.D. at 238-39, 2014 WL 5796751, at *3-4.
On November 7, 2014, the Court issued an Opinion denying both requests to intervene for lack of standing, which the Court found was a prerequisite for intervention as of right and for permissive intervention. See id.
The Choctaw Movants lacked Article III standing "because any injury [they may face] will arise only if a multitude of speculative events occur." Id. at 240, 2014 WL 5796751, at *6. Their purported economic injury was conjectural: "The Choctaw Movants have no existing involvement with the Cy Pres Fund. They have not received a cy pres distribution, been approved to receive one, or had their eligibility assessed. Accordingly, modification of the cy pres provision would not affect them in the direct ways described in the cases they cite." Id. It was unclear whether they would even satisfy the requirements for obtaining a cy pres distribution under the existing agreement as the Choctaw Nation was a tribal government and "the Agreement does not include tribal governments as potential recipients of cy pres distributions." Id. at 241, 2014 WL 5796751, at *7. In any event, the Choctaw Movants had not yet been recommended by Class Counsel to receive a distribution, which was "problematic for standing, as the Supreme Court is `reluctant to endorse standing theories that require guesswork as to how independent decisionmakers will exercise their judgment.'" Id. at 242, 2014 WL 5796751, at *8 (quoting Clapper v. Amnesty Int'l, ___ U.S. ___, 133 S.Ct. 1138, 1150, 185 L.Ed.2d 264 (2013)). The Court also noted the "highly speculative" nature of predicting what amount the Choctaw Movants might receive if they were approved under the Agreement. See id. "These twin uncertainties—whether the Choctaw Movants would receive an
The Choctaw Movants also independently lacked prudential standing because they sought to "assert a legal right to compete under the existing procedures for cy pres distribution that were created by a settlement (which has nothing to do with them), to be distributed for the benefit of a class (of which they are not a part), to remedy claims of discrimination (which they did not suffer)." Id. at 243-44, 2014 WL 5796751, at *9. "In doing so, they assert rights under the Agreement that do not belong to them." Id. Because the Choctaw Movants could not show that they were in any way intended beneficiaries they could not seek to enforce rights purportedly created by that Agreement. See id. at 243-45, 2014 WL 5796751, at *9-10. The Court rejected their argument that the Agreement created a trust of which the Choctaw Movants were intended beneficiaries: Both the purpose of cy pres and the text of the Agreement itself "confirm[ed] that [the cy pres provision's] purpose was geared toward the Class." Id. at 245, 2014 WL 5796751, at *10.
The Court also found that the Great Plains Claimants lacked Article III standing. Those individuals were all class members who had successfully pursued claims under the Agreement. See id. at 246-47, 2014 WL 5796751, at *12. Although none had objected to the cy pres provision when the Agreement was approved and none had filed an appeal from that approval, they sought to intervene to undo the cy pres provision, on the ground that they had a legally protected interest in the leftover funds. Id. The Court noted, however, that the class members had "intentionally satisfied their legal claims" by entering into the Agreement and thereby gave up any legal claim they may have had. See id. This Court also surveyed the law governing unclaimed settlement funds, which counseled strongly in favor of finding that "`neither the class members nor the settling defendants have any legal right to unclaimed or excess funds.'" Id. (quoting Diamond Chem. Co. v. Akzo Nobel Chems. B.V., 517 F.Supp.2d 212, 217 (D.D.C. 2007)). Accordingly, the Court held:
Id. at 247-48, 2014 WL 5796751, at *13 (quoting Transcript of April 28, 2011 Fairness Hearing, ECF No. 609 at 24:9-18).
The Choctaw Movants timely appealed the Court's intervention decision. See Notice of Appeal, ECF No. 746. Their appeal remains pending before the D.C. Circuit, Keepseagle v. Vilsack, No. 15-5011 (D.C. Cir. filed Jan. 20, 2015), and they have indicated that they will not move to stay proceedings before this Court unless and until the Court grants any motion for modification of the Agreement. See Choctaw Mot. to Extend Deadline for Mot. to Stay, ECF No. 750 at 2. The Great Plains Claimants did not appeal the Court's decision.
Shortly before the Court issued its Opinion denying the motions to intervene, the Court scheduled a status hearing for December 2, 2014 and informed the parties that once the intervention issue was resolved, the Court would address the following issues:
Minute Order of October 20, 2014.
In advance of the December 2, 2014 status hearing, the Court's staff was contacted by individuals on behalf of class representative Marilyn Keepseagle, who indicated that Ms. Keepseagle would attend the December 2, 2014 hearing, and requested an opportunity to be heard by the Court. A recent Opinion of this Court summarized what transpired next:
Keepseagle v. Vilsack ("Keepseagle II"), No. 99-3119, 102 F.Supp.3d 205, 209, 2015 WL 1851093, at *2 (D.D.C. Apr. 23, 2015).
Ms. Keepseagle's new attorneys entered their appearances on February 9, 2015 and
On April 23, 2015, the Court denied both motions. See id. The Court found that Porter Holder and Claryca Mandan remained adequate class representatives because their position—while unpopular with many class members—was a principled outgrowth of their representation of the entire class and consideration of various litigation risks. See id. at 213-18, 2015 WL 1851093, at *5-8. In any event, the Court found that it would lack the authority to remove class representatives at this stage of litigation because Federal Rules of Civil Procedure 23(a)(4) and 23(c)(1)(C) do not "permit the Court to modify the class certification order in light of allegedly inadequate representation by a class representative . . . where post-judgment actions will not affect class members' legal rights." Id. at 211, 2015 WL 1851093, at *3. This was such a situation, as "the class members in this case have no legal right to the Cy Pres Fund," and thus "the proposed modification would not implicate a class member's legal right." Id. at 213, 2015 WL 1851093, at *5. As for the motion to compel, the Court found that the Keepseagles failed to supply an appropriate legal basis for such discovery at this stage of proceedings. See id. at 217-22, 2015 WL 1851093, at *8-11.
Having resolved all pending requests for intervention, Ms. Keepseagle's representation status, and the preliminary motions filed by her counsel, the Court set a schedule for the simultaneous briefing of the Keepseagles's motion to modify and Class Counsel's motion to modify. See Order, ECF No. 771 at 1-2. The Court also scheduled a hearing on these motions for June 29, 2015. See id. at 2.
In anticipation of this hearing, the Court resolved the last preliminary issue: the applicability of Federal Rule of Civil Procedure 23(e). Agreeing with the government and Class Counsel, the Court found Rule 23(e) inapplicable to Class Counsel's proposed modification. See Keepseagle v. Vilsack ("Keepseagle III"), No. 99-3119, 102 F.Supp.3d 306, 311-17, 2015 WL 1969814, at *4-8 (D.D.C. May 4, 2015). The Court first held that Rule 23(e) "applies only when a modification materially hinders a class member's legal right." Id. at 312, 2015 WL 1969814, at *4. This is so because the entire purpose of Rule 23—and in particular Rule 23(e)—is to provide procedural protections at various stages of class-action litigation to ensure that the rights of absent class members are appropriately protected. See id. Unless a proposed modification would hinder such a class member's legal right in some way—whether by expanding the scope of the res judicata effect of the judgment or otherwise limiting the remedy available to a class member—there would be no need for such protections. See id. at 313-15, 2015 WL 1969814, at *5-6. The Court found—for reasons similar to its findings that the Great Plains Claimants lacked a legal interest
The June 29, 2015 hearing lasted the entire day in the Court's Ceremonial Courtroom. After hearing extensive argument from counsel, the Court was able to hear oral statements from all individuals who wished to give them. See generally Transcript of June 29, 2015 Hearing, ECF No. 806. Many individuals spoke in favor of a proposal akin to Ms. Keepseagle's, under which the excess funds would be distributed to class members directly. Many also shared the heart-wrenching stories of discrimination they allegedly suffered at the hands of the federal government, and the lasting effects of that discrimination.
The motions for modification of the settlement agreement are now ripe for resolution. As described above, Class Counsel seeks a modification of the procedures for the cy pres distribution, and the government does not oppose that motion. See Class Counsel Mot., ECF No. 709. The Keepseagles request a modification that would either provide pro rata distribution to class members who were successful under the initial Claims Process or, in the alternative, provide for a second claims period for those who were not successful under the original process and then distribute the remainder pro rata to all who were successful in either round of the distribution process. See Keepseagle Mot., ECF No. 779. The Court has received amicus curiae briefs from three groups—(1) the Association of American Indian Farmers, (2) the Great Plains Claimants, and (3) the Indian Land Tenure Foundation and Intertribal Agriculture Council. See Assoc. of Am. Indian Farmers Br., ECF No. 740; Great Plains Claimants Br., ECF No. 784; Indian Land Tenure Br., ECF No. 787. Finally, the Court has received extensive correspondence from class members and others expressing their views on the proposals.
The Court begins with the undisputed proposition that the Agreement is a final judgment. As this Court has noted on two recent occasions, "[a]n agreement between the parties dismissing all claims is the equivalent of a decision on the merits and thus claims settled by agreement are barred by res judicata." Chandler v. Bernanke, 531 F.Supp.2d 193, 197 (D.D.C.
Because the Agreement is a final judgment, the Court's authority is circumscribed. "[D]istrict courts enjoy no free-ranging `ancillary' jurisdiction to enforce consent decrees, but are instead constrained by the terms of the decree and related order." Pigford, 292 F.3d at 924 (quoting Kokkonen, 511 U.S. at 381, 114 S.Ct. 1673). "As our court of appeals has rhetorically asked: `Who would sign a consent decree if district courts had free-ranging interpretive or enforcement authority untethered from the decree's negotiated terms?'" In re Black Farmers Discrim. Litig., 950 F.Supp.2d 196, 200 (D.D.C.2013) (quoting Pigford, 292 F.3d at 925). Indeed, the importance of respecting the finality of a judgment is deeply embedded in our legal system. See, e.g., Massaro v. United States, 538 U.S. 500, 504, 123 S.Ct. 1690, 155 L.Ed.2d 714 (2003) (noting "the law's important interest in the finality of judgments"). Any party seeking to overrule, modify, or rescind the Agreement therefore bears the burden of demonstrating a legal basis for doing so. Three avenues have been raised by one or more of the parties: (1) the law governing the disposition of unclaimed settlement funds; (2) Federal Rule of Civil Procedure 60(b); and (3) the modification provision of the Agreement itself. The Keepseagles rely upon the first and second avenues, while Class Counsel relies upon the second and third.
The Keepseagles focus a large portion of their arguments—both in favor of their proposal and in opposition to Class Counsel's proposal—on the legal doctrine governing the distribution of excess funds. Their argument is that this doctrine has become increasingly inhospitable to the use of cy pres except as a last resort. They assert that the current circumstances of this case do not render other distribution methods unworkable, so the Court should not utilize a cy pres remedy. Class Counsel and the defendant note that the Keepseagles are eliding an important fact that renders this case unique: The question is not which distribution method the Court should choose in a vacuum; rather, the Court is presented with specific and mandatory language in a final settlement that was never challenged or appealed.
Courts in this Circuit have approved generally of the use of cy pres in distributing leftover settlement proceeds. See Democratic Cent. Comm. of D.C. v. Washington Metro. Area Transit Comm'n, 84 F.3d 451, 455, 457 (D.C.Cir.1996); In re Living Social Marketing & Sales Practice
Marek v. Lane, ___ U.S. ___, 134 S.Ct. 8, 9, 187 L.Ed.2d 392 (2013) (Roberts, C.J.). The American Law Institute has also set forth principles to govern the use of cy pres, which limit the circumstances in which a court may choose cy pres over other distribution methods:
Principles of the Law of Aggregate Litigation § 3.07 (2010). The Keepseagles urge the Court to follow these Principles and thereby decline to utilize a cy pres remedy in this case because individual distributions to class members would not be especially difficult. Their argument is reasonable: This is not a case where further distribution of unclaimed funds to the class would be terribly inefficient. The large amount of money remaining to be distributed, combined with the large number of identifiable potential claimants would make further distributions relatively straightforward. Those who were unsuccessful during the previous claims process could be put through a renewed process, while those who previously received compensation could prove that they suffered damages in
In urging the Court to resort immediately to the ALI Principles—which address whether to use a cy pres remedy in the first place—the Keepseagles gloss over a key fact that places this case in a unique posture: "[T]his is not a case where parties seek to . . . address whether cy pres is appropriate in the first instance," Keepseagle I, 307 F.R.D. at 236, 2014 WL 5796751, at *1, nor is it one in which the Court is presented with a settlement agreement that contains a cy pres provision and must assess whether it is "fair, reasonable, and adequate" before approving it. Fed. R.Civ.P. 23(e)(2); cf. Keepseagle III, 102 F.Supp.3d at 314, 2015 WL 1969814, at *6 ("The question . . . is not whether choosing to utilize a cy pres remedy in the first instance would alter the class's legal rights if the Settlement Agreement were silent on the disposition of excess funds (that ship sailed in 2011)."). If the Court were presented with such a blank slate and asked to decide how to distribute $380,000,000 in leftover funds, the Keepseagles would likely be correct that of the four general options available to a court considering how to distribute unclaimed funds—(1) allowing the funds to revert to the defendant; (2) pro rata distribution to class members who filed claims; (3) escheat to the state or federal government; or (4) cy pres distribution—the Court would choose a pro rata distribution. See Newberg on Class Actions § 12:28 (5th ed.2015) (as a general matter, "a court's goal in distributing class action damages is to get as much of the money to the class members in as simple a manner as possible").
As Professor Rubenstein notes in Newberg on Class Actions, the existence of mandatory language in a final settlement agreement cannot be ignored:
Id. The Keepseagles ignore the fact that a final judgment speaks directly to the issue in this case and mandates the use of a cy pres remedy. The Court, however, must recognize the powerful force of a final judgment agreed upon by all parties, approved by the Court, and neither objected to nor appealed from, "even if the court (or objectors) might have chosen a different path" knowing what is known now. Id.
The authorities on which the Keepseagles rely for the proposition that a cy pres distribution is inappropriate in this case largely addressed situations in which no final settlement agreement spoke to the issue. See, e.g., In re Baby Prods. Antitrust Litig., 708 F.3d 163, 169, 172, 173 (3d Cir.2013) (reviewing objector's direct appeal of the district court's approval of a settlement that directed excess funds to "one or more charitable organizations proposed by the parties and selected by the Court," finding "that a district court does
In the case In re Lupron Marketing & Sales Practices Litigation, 677 F.3d 21 (1st Cir.2012), a class of "medical patient consumers . . . alleging fraud in overcharging for the medication Lupron" reached a settlement agreement which the district court approved. Id. at 23-24. A fairness hearing was held, at which time a group of dissident class members—one of whom had been allowed to intervene to "participat[e] in the process established by the court for the evaluation of the proposed settlement"—objected "that the amount of the settlement allocated to the class of consumer purchasers of Lupron was inadequate." Id. at 25. After the district court approved the settlement over objection, the dissidents "said they would pursue appeals of the settlement agreement unless they received more," so the parties negotiated an "implementation agreement" which increased the payments available to the consumer class in exchange for the withdrawal of the objectors' appeals and objections. See id. at 26. The district court approved the settlement and the implementation agreement. See id. After a four-year-long claims period, over $11,000,000 remained in unclaimed funds. See id. The district court heard proposals on the disposition of those funds and ultimately "decided to make a cy pres award of all of the unclaimed settlement funds" to a hospital. See id. at 27. Three of the dissidents noted an appeal of this decision. See id. at 28. The First Circuit affirmed the decision to use cy pres because class members had received the full amount of their damages and the class's relief "was established for the benefit of all consumer purchasers of Lupron, not just the 11,000 who filed claims." Id. at 34. Although the First Circuit found that application of the
The issue is therefore very fact-specific when it arises in a case resolved by a settlement agreement, as the Fifth Circuit explained in Klier v. Elf Atochem N. Am., Inc., 658 F.3d 468 (5th Cir.2011). In Klier, the Fifth Circuit was presented with a class-action settlement resolving "claims of persons assertedly injured by the toxic emissions of an industrial plant near Bryan, Texas." Id. at 471. The settlement created three subclasses and allocated monetary relief among them. See id. One subclass—of individuals who did not yet have medical conditions resulting from the emissions—obtained medical monitoring as relief. See id. at 472. Another class included individuals "suffering serious injuries," who received direct payments. See id. at 470, 472. Upon completion of the medical-monitoring, the funds allocated to that subclass were not exhausted, but the fund for the subclass of individuals who suffered injury was exhausted. See id. at 473. The district court then granted the defendant's request to distribute the funds as cy pres, and a class member opposed the proposal, arguing "that an additional distribution to members of [the injury subclass] was economically feasible and would be equitable since the members of [that subclass] had been found to suffer [serious injuries] that are compensable under the settlement." Id. The Fifth Circuit reversed the district court's decision to utilize a cy pres remedy, focusing on the fact that the settlement agreement itself contained no such remedy and in fact contained three interrelated provisions that counseled in favor of redistribution to members of the other subclass. See id. at 476-77 (one provision required "that any money left over in any subclass fund `shall be distributed pro rata to all Claimants in that subclass," another provision permitted the court to "make changes to the terms of this protocol as necessary for the benefit of the Settlement Class Members," and a third provision allowed the settlement administrator to petition the court "for reallocation of available funds among the [subclasses] on a showing of good cause if . . . he determines that considerations of equity and fairness require reallocation") (alterations in original). The Fifth Circuit emphasized a district court's role in administering a class-action settlement:
Only one decision cited by the Keepseagles addressed the situation in which a settlement agreement mandated the use of cy pres. That decision found it appropriate to overrule an agreement that had been approved by a district court and affirmed as fair by the Eighth Circuit, all without objection to the cy pres provision.
In re BankAmerica Corp. Securities Litigation ("BankAmerica II"), 775 F.3d 1060 (8th Cir.2015) involved a settlement of a securities-fraud class action, resulting in a $333,200,000 fund for a subclass of shareholders of NationsBank. See id. at 1062. A class representative objected that the class should receive more money because of the strength of its claims. See id. That objection was overruled, and the objector appealed. See id. at 1069. "At that time[, the objector] did not raise any objection to . . . the provision that settlement funds remaining after one or two distributions `may be contributed as a donation to one or more non-sectarian, not-for-profit 501(c)(3) organizations as determined by the Court in its sole discretion.'" Id. (emphasis in original). The Eighth Circuit affirmed the district court's approval of the settlement agreement, which included that term. See In re BankAmerica Secs. Litig. ("BankAmerica I"), 350 F.3d 747, 752 (8th Cir.2003). A round of distributions occurred in 2004 and another took place in 2009, after which approximately $2,400,000 remained. See BankAmerica II, 775 F.3d at 1062. In 2012, class counsel moved, over objection of the same objector who brought the appeal in BankAmerica I, to distribute the remainder as cy pres, and the district court agreed and ordered the funds distributed to Legal Services of Eastern Missouri. See id. The objector appealed from that determination and the Eighth Circuit reversed. In so doing, the Eighth Circuit discussed extensively the ALI Principles and the Court's belief that cy pres was inappropriate in the case. See id. at 1063-66.
The Eighth Circuit addressed only briefly the fact that the language of the final settlement agreement, to which the very same objector had failed to object originally and failed to mention in his prior appeal, "stat[ed] that the balance in the settlement fund `shall be contributed' to non-profit organizations `determined by the court in its sole discretion." Id. at 1066. The Eighth Circuit's reasoning for ignoring the settlement agreement was as follows:
First, the Court is not persuaded that it has any authority to declare void portions of an agreement that was negotiated by the parties, approved by the Court pursuant to Federal Rule of Civil Procedure 23, and finalized on appeal (either by affirmance of the Court of Appeals or by the lack of any timely appeal). The Eighth Circuit's finding that the cy pres provision with which it was presented was nonetheless "void ab initio" is difficult to square with this reality, and the Eighth Circuit cited no authority for the proposition that courts may line-item-veto final settlements in this manner.
Second, the Eighth Circuit's reliance on a decision of the Ninth Circuit for the proposition that cy pres distributions must comply with legal standards governing whether cy pres is appropriate "regardless of whether the award was fashioned by the settling parties or the trial court," Nachshin, 663 F.3d at 1040, is unhelpful because that decision was a direct review of a district court's approval of a settlement agreement, so it was the Ninth Circuit's job to confirm whether the entire settlement, including the cy pres provision, was fair, reasonable, and adequate in the face of objections. At that stage, a court obviously must apply the doctrine governing the appropriate disposition of unclaimed funds. Nachshin does not address a court's role after final approval and affirmance on appeal (or when no appeal is filed).
Third, the final sentence of the Eighth Circuit's reasoning on this point criticizes class counsel in that case for "misstat[ing] the holding of Klier, which overturned the district court's cy pres award because `a cy pres distribution to a third party of unclaimed settlement funds is permissible only when it is not feasible to make further distributions to class members." 658 F.3d at 475. Klier, however, is a paean to the sanctity of class-action settlement agreements. Indeed, the Fifth Circuit in that case found that the applicable settlement agreement not only failed to provide affirmatively for a cy pres distribution, but actually contained provisions indicating that pro rata distribution to another subclass was appropriate. See id. at 476-77. The Fifth Circuit specifically distinguished the circumstance presented in BankAmerica II and in this case: "This is not a case where the settlement agreement itself provides that residual funds shall be distributed via cy pres." Id. at 476. And the Fifth Circuit could not have been clearer on the
Id. at 475-76.
In this Court's view, the Eighth Circuit's reasoning for overruling a final settlement is unpersuasive. Courts are appropriately bound by the language of final settlement agreements and may deviate from them only when authorized by law. In the context of class actions, settlement agreements reflect the considered judgment of the class, its counsel, the defendant, and the Court, after following extensive procedural protections. The truly terrible facts of the case before this Court arguably cry out for a resolution that does not result in $380,000,000 being distributed as cy pres where class members are readily identifiable and may either prove their previously unsuccessful claims or prove that they suffered damages in excess of what they already received. Notwithstanding this reality, the Court must resist the temptation to allow these bad facts to make bad law. Following the Eighth Circuit's holding would make bad law by undermining the finality of a judgment without a clear legal basis for doing so.
For these reasons, the Court is bound to the final judgment proposed by the parties and approved by the Court after full compliance with Rule 23 procedures—an approval to which no class member objected in relevant part or appealed from at all. Whether the cy pres doctrine as it exists in 2015 may bar a finding that a cy pres provision like the one approved by this Court in 2011 is fair, reasonable, and adequate is not an issue before the Court.
The parties each seek modification of the Agreement pursuant to Federal Rule of Civil Procedure 60(b). Class Counsel relies upon Rule 60(b)(5), while the Keepseagles invoke Rules 60(b)(5) and 60(b)(6). Under Rule 60(b)(5), both parties argue that the far-larger-than-expected amount of excess funds is a changed circumstance that renders prospective application of the Agreement inequitable. Under Rule 60(b)(6), the Keepseagles argue that the issue is so important that it meets the extraordinary-circumstances test necessary for application of that Rule. Neither party has a convincing argument.
"`[T]he decision to grant or deny a Rule 60(b) motion is committed to the discretion of the District Court.'" Green v. AFL-CIO, 287 F.R.D. 107, 109 (D.D.C.2012) (quoting Kareem v. FDIC, 811 F.Supp.2d 279, 282 (D.D.C.2011)) (alteration in original). "`The movant has the burden to establish that [he is] entitled to relief under Rule 60(b).'" Cohen v. Bd. of Trustees of Univ. of D.C., No. 14-754, 307 F.R.D. 287, 289, 2014 WL 6890705, at *2 (D.D.C. Dec. 9, 2014) (quoting F.S. v. District of Columbia, 307 F.R.D. 28, 30 (D.D.C.2014)) (alteration in original). Ultimately, "under Rule 60(b) the trial judge must strike a `delicate balance between the sanctity of final judgments and the incessant command of a court's conscience that justice be done in light of all the facts.'" Twelve John Does v. District of Columbia, 841 F.2d 1133, 1138 (D.C.Cir.1988) (alteration omitted; emphasis in original).
Federal Rule of Civil Procedure 60(b)(5) provides: "On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding [when] the judgment has been satisfied, released or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable." The parties rely only on the final clause—when prospective application of the judgment is inequitable due to changed circumstances. Two elements are inherent in this clause: (1) that the judgment has prospective application; and (2) that circumstances have changed to make that application inequitable. Neither element is satisfied here.
"Rule 60(b)(5) allows a court to amend any judgment that has prospective effect." Kapar v. Islamic Republic of Iran, No. 2-cv-78, 105 F.Supp.3d 99, 104, 2015 WL 2452754, at *3 (D.D.C. May 22, 2015) (quotation marks omitted). "Although the principal significance of this portion of the rule is with regard to injunctions, it is not confined to that form of relief, nor even to relief that historically would have been granted in courts of equity." 11 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2863 (3d ed.2015)). A judgment may also be prospective only in part, in which case Rule 60(b)(5) could permit modification
The D.C. Circuit has described the prospective-effect requirement as follows:
Twelve John Does, 841 F.2d at 1138. Reviewing the Supreme Court's decision in Wheeling & Belmont, as well as a subsequent decision, United States v. Swift & Co., 286 U.S. 106, 52 S.Ct. 460, 76 L.Ed. 999 (1932), the D.C. Circuit concluded that "the standard we apply in determining whether an order or judgment has prospective application within the meaning of Rule 60(b)(5) is whether it is `executory' or involves the supervision of changing conduct or conditions.'" Twelve John Does, 841 F.2d at 1139; see Swift, 286 U.S. at 114, 52 S.Ct. 460 ("A continuing decree of injunction directed to events to come is subject always to adaptation as events may shape the need," but will be found to be continuing only if it "involve[s] the supervision of changing conduct or conditions and [is] thus provisional and tentative"). Accordingly, the D.C. Circuit concluded that an order dismissing the Attorney General as a party to a prison-conditions lawsuit involving District of Columbia inmates "did not have the requisite prospective application": "The order did not compel him to perform, or order him not to perform, any future act; it did not require the court to supervise any continuing interaction between him and the other parties to the case; rather, it definitively discharged the Attorney General from any further involvement in the case." Twelve John Does, 841 F.2d at 1139. By contrast, a prototypical example of a consent decree that is prospective under Rule 60(b)(5) is one that resolved a church's challenge to the denial of building permits by allowing construction with limitations: "[I]t imposes ongoing restrictions on Northridge's ability to build or undertake various activities, all of which are supervised by the district court." Northridge Church v. Charter Twp. of Plymouth, 647 F.3d 606, 613 (6th Cir.2011).
The application of these principles to the case at bar is somewhat novel. "The consensus among Courts of Appeal, including the D.C. Circuit, is that a claim for money damages is not `prospective' for the purposes of Rule 60(b)(5)." Kapar, 105 F.Supp.3d at 104, 2015 WL 2452754, at *3; see also, e.g. Twelve John Does, 841 F.2d at 1138; Stokors S.A. v. Morrison, 147 F.3d 759, 762 (8th Cir.1998); Marshall v. Bd. of Educ., 575 F.2d 417, 425 (3d Cir.1978); Ryan v. U.S. Lines Co., 303 F.2d 430, 434 (2d Cir.1962). The cy pres provision of the Agreement addresses the final step in the payment of damages. Thus, in one sense, it is an execution of the award of money damages, not a prospective judgment.
The cy pres provision arguably has some characteristics of a prospective order, however,
Even if the cy pres provision was prospective, it is not clear that the larger-than-expected excess is the type of factual change that warrants relief under Rule 60(b)(5). Rule 60(b)(5) requires truly changed circumstances, not a difference in
A change in factual conditions—the only change pressed here—may support modification when it "make[s] compliance with the decree substantially more onerous," when "a decree proves to be unworkable because of unforeseen obstacles," or "when enforcement of the decree without modification would be detrimental to the public interest." Id. For example, where a state agency was under a consent decree regarding housing facilities, modification of that decree was warranted where it was not possible to find appropriate housing facilities for certain patients. See id. (citing N.Y. State Ass'n for Retarded Children v. Carey, 706 F.2d 956, 969 (2d Cir.1983)). Another example cited by the Supreme Court was where modification of a prison-conditions decree was necessary to avoid the need to release individuals accused of violent felonies. See id. at 385, 112 S.Ct. 748 (citing Duran v. Elrod, 760 F.2d 756, 759-61 (7th Cir.1985)). Unlike in these decisions, nothing about the need to distribute significantly more money via a cy pres provision is unworkable or against the public interest. To be sure, it may be difficult to distribute under the existing cy pres provision and it may result in an inefficient distribution in view of the need to distribute the funds all at once and in equal shares, but the essence of the provision would still be served: The leftover funds would go to the types of organizations the parties initially contemplated when they entered the Agreement.
The D.C. Circuit's decision in Pigford, 292 F.3d 918 illustrates this distinction. There, the Court addressed the application of Rule 60(b)(5) to a substantially similar settlement of the claims of African-American farmers. Class counsel in that case had failed adequately to represent the many class members whom it was obliged to assist in proving their claims under that settlement's claims process. Id. at 925. The failure to assist the class through that process was "an `unforeseen obstacle' that makes the decree `unworkable'" because it resulted in many class members missing the deadline for filing claims. Id. at 927. In Pigford, the very purpose of the settlement—distributing damages to class members—was totally undermined by the lawyers' actions. The larger-than-expected excess in this case does not undermine the purpose of the settlement in the same way, even if a modification would make the settlement more efficient. Accordingly, circumstances have not changed in a manner that would trigger the application of Rule 60(b)(5).
It is not enough simply to show that the judgment has prospective effect
Under this standard, even if the cy pres provision were prospective and the parties had demonstrated changed circumstances under Rule 60(b)(5), the Keepseagles's proposals would be inappropriate subjects of a Rule 60(b)(5) motion. The changed circumstances cited by the parties are the fact that far more money is leftover than was expected. This would render application of the judgment inequitable, if at all, by virtue of the difficulty it causes under the existing cy pres distribution plan, which requires an immediate distribution in equal shares to a limited set of entities. Neither of the Keepseagles's proposals—an immediate pro rata distribution to successful claimants or a second claims process followed by a pro rata distribution—are tailored to those changed circumstances. Although the Court is very sympathetic to the perspective of class members that the larger-than-expected excess provides an opportunity to distribute more compensation to class members, the goal of Rule 60(b)(5) is to "preserve the essence of the parties' bargain," while accommodating the changed circumstance. Pigford, 292 F.3d at 927. If, as the D.C. Circuit held, it was not properly tailored in Pigford for a court to respond to class counsel's representational failings that caused missed deadlines by permitting the arbitrators to extend the deadlines as justice required, id. it is surely not tailored to respond to a larger-than-expected excess by deleting the entire cy pres provision that the parties included in the Agreement, did not object to, and did not appeal from, and replace it with a term directing a very different disposition of the leftover funds. Whether due to concern with ensuring that excess funds would be used to provide some indirect benefit to those who did not participate in the claims process, or the government's concern that a distribution process that could result in Track A claims exceeding $50,000 in the event of a surplus might lead to pressure to provide similarly higher compensation to participants in the settlements involving other farmers, the parties specifically agreed upon a cy pres remedy for the disposition of excess funds. Whatever the reasons for the provision initially, the Court would not be empowered to undo the bargain entirely, even if Rule 60(b)(5) were otherwise applicable.
Federal Rule of Civil Procedure 60(b)(6) provides: "On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for . . . any other reason that justifies relief." To avoid allowing this exception to swallow the rule,
The Keepseagles appear to rely on the same argument they made under Rule 60(b)(5)—that the larger-than-expected excess is extraordinary. This is simply insufficient for relief under Rule 60(b)(6), which cannot be premised on the bases enumerated in other portions of the Rule. See Green, 287 F.R.D. at 109. Even if the larger-than-expected excess were a cognizable reason for modification under Rule 60(b)(6), all parties to this case chose the terms of the Agreement, which included the cy pres terms. That they no longer like those terms because of factual developments does not constitute an extraordinary circumstance, and Rule 60(b)(6) "may not be employed simply to rescue a litigant from strategic choices that later turn out to be improvident." Salazar ex rel. Salazar v. District of Columbia, 633 F.3d 1110, 1120 (D.C.Cir.2011) (quotation marks omitted). There has been no suggestion of the kinds of extraordinary representational failings or complete lack of notice that has animated prior grants of relief under Rule 60(b)(6). Accordingly, Rule 60(b)(6) does not provide an avenue for modification.
The final legal avenue that was proposed lies in the Agreement itself. The Agreement's modification provision states: "This Settlement Agreement may be modified only with the written agreement of the Parties and with the approval of the District Court, upon such notice to the Class, if any, as the District Court may require." Agreement ¶ XIV (p. 49). The government does not oppose the use of this provision for Class Counsel's proposed modification, so Class Counsel asks the Court to rely on it to grant its motion.
The Court briefly notes that, as all parties appear to agree, the Court retains jurisdiction to enforce this provision. "Federal courts are courts of limited jurisdiction" and "[i]t is to be presumed that a cause lies outside this limited jurisdiction." Kokkonen, 511 U.S. at 377, 114 S.Ct. 1673.
Class Counsel's "unopposed" motion does not meet the substantive requirements for obtaining modification under the Agreement, however. Although the modification provision requires consent of "the Parties," the three represented groups—the government, Class Counsel, and the Keepseagles—all seem to have operated under the assumption that the provision requires consent of Class Counsel and the government alone. The Agreement, however, defines "the Parties" as "the Plaintiffs and the Secretary," Agreement ¶ II.DD (p. 10), and further defines "the Plaintiffs" as "the individual plaintiffs named in Keepseagle v. Vilsack, No. 1:99CV03119 (D.D.C.), the members of the Class, and the Class Representatives." Id. ¶ II.EE (p. 10). The plain language of the Agreement, therefore, does not support a reading that would allow Class Counsel to enter unilaterally into an "unopposed" agreement to modify. Here, the Court is presented with stark disagreement, including a class representative and named plaintiff who has obtained separate counsel and specifically opposed the proposed modification.
The Court raised this issue during the June 29, 2015 hearing and gave the parties time to review the Agreement before responding. The parties' responses were unconvincing. The Agreement plainly does not say that a modification may be approved as "unopposed" when a class representative—who happens to be the named plaintiff who gives this lawsuit its name—has expressed written opposition through separate counsel.
As the Court's discussion with Class Counsel regarding another provision of the Agreement illustrated, even the representational nature of class-action litigation counsels in favor of recognizing that the class representatives must also be on board with a proposal:
Transcript of June 29, 2015 Hearing, ECF No. 806 at 66:10-67:19 (discussing Agreement, ECF No. 621-2 ¶ VI.A.7 (p. 43).
The Court agrees that the modification provision would be absurd were it to recognize the consent of "the Parties" only upon written consent from every single member of the Class. The Agreement, as Class Counsel argued, is representational in nature. But the representational nature of the case does not end with Class Counsel. This Court appointed class representatives for a reason, and the breadth of the modification provision counsels in favor of requiring their consent, as do the other portions of the Agreement cited by
For the foregoing reasons, the Court
These legal rulings are not the end of the matter, however. Over the past year, the Court has issued four published Opinions that addressed a number of legal issues. Some of these conclusions will likely be reviewed by appellate courts. The simplest resolution, however, is the same path that took this case from one of the hardest-fought cases on this Court's docket to one of the more monumental civil-rights settlements in recent memory. The Parties have the ability to reach a compromise that the Court can approve and which would give this case finality. In considering this option, the Executive Branch would do well to consider the remarks of President Obama, given in June 2014 while on the Standing Rock Sioux Reservation (the tribe to which Marilyn Keepseagle and many other class members belong):
Remarks by the President at the Cannon Ball Flag Day Celebration, The White House (June 13, 2014), https://www. whitehouse.gov/photos-and-video/video/2014/06/13/president-obama-speaks-cannon-ball-flag-day-celebration#transcript.
An appropriate Order accompanies this Memorandum Opinion.
That does not leave district courts at the mercy of the accuracy of the parties' predictions, however. To reduce the chances of the circumstances of this case repeating themselves, the Court suggests one of two paths. One option is "to withhold final approval of a settlement until the actual distribution of funds can be estimated with reasonable accuracy." In re Baby Prods., 708 F.3d at 174; see also In re Living Social, 298 F.R.D. at 14 (giving final approval to a settlement that included a cy pres remedy only after the claims process had completed, at which point the court knew that $1,900,000 would be distributed to class members while $2,500,000 would be distributed as cy pres). This could allow the parties to modify certain portions of the preliminary settlement to reflect especially high or low turnout. Another option is for parties to include in the settlement terms that would be triggered in the event of a larger-than-expected excess to ensure that, similar to the result in Klier, class members who did participate are able to benefit, so long as that benefit would not exceed their actual damages. See In re Baby Prods., 708 F.3d at 174 ("[A] court may urge the parties to implement a settlement structure that attempts to maintain an appropriate balance between payments to the class and cy pres awards."). These approaches would have prevented the result in this case. Unfortunately, because this issue arose after final judgment, the ability of the parties and the Court to rectify the problem is much more limited.