Mandujano v. Basic Vegetable Products, Inc.
| Decision Date | 27 August 1976 |
| Docket Number | No. 74-2068,74-2068 |
| Citation | 541 F.2d 832 |
| Parties | 13 Fair Empl.Prac.Cas. 694, 12 Empl. Prac. Dec. P 11,178 Adrian MANDUJANO et al., Plaintiffs, Daniel Perez and Fidel Gutierrez, Plaintiffs-Appellants, v. BASIC VEGETABLE PRODUCTS, INC., et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Before TRASK and SNEED, Circuit Judges, and EAST, * District Judge.
This case comes before us as an appeal from a district court approval of a settlement of a class action suit filed under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and 42 U.S.C. § 1981. The case involves alleged racial, ethnic, and sex discrimination by the employer, Basic Vegetable Products, Inc. ("Basic") and the two Unions representing the workers at the two Basic plants. Appellants challenge the propriety of the class settlement on several grounds. We hold that procedures followed in approving the settlement were inadequate and we remand to the district court for proceedings consistent with this opinion.
This case originated with nine individual charges being filed with the EEOC which alleged that Basic and the Unions representing Basic's employees were guilty of employment discrimination. Subsequently a class action was filed against the Unions and Basic with the same nine individuals as named plaintiffs. 1 The original complaint proposed a class defined as all Chicano workers employed by Basic at its plant in King City, California. An amended complaint, filed some 18 months later and pursuant to Rule 23(b)(2), Fed.R.Civ.P., included Basic's employees at its Vacaville, California plant and enlarged the members of the class to include:
(A)ll past, present, future and potential employees and applicants of Basic who are Negroes, Asians, American Indians, Spanish-surname Americans or females.
This definition included some 2700 Basic employees.
After the original complaint had been filed in district court, the EEOC investigated the charges which had been filed with it. At the conclusion of the investigation the amended complaint was filed and a settlement was negotiated. 2 This settlement is the basis for the present appeal.
Appellants raise a number of questions about the propriety of the class settlement. 3 Several of these contentions are, on the present record, potentially meritorious. We will deal with this problem by first giving our view of the nature of this type of class action and the procedures which must be applied to protect dissidents. Thereafter, we will consider whether the procedure employed in this case meets the prescribed standard. We will conclude with a discussion of the sources of the concern we have with respect to the terms of the settlement agreement.
Our disposition of this case is governed by a few fundamental propositions about the nature of a class action. We start with the notion that a proposed class conforming to the requirements of Rule 23(b)(2) is not a legal entity to which any individual plaintiff's legal rights are to be sacrificed. As a consequence, the attorney for the class is not to be viewed as a negotiator in a process of collective bargaining where majority rule prevails. See Airline Stewards & Stewardesses Ass'n, Local 550 v. American Airlines, Inc., 490 F.2d 636 (7th Cir.1973), cert. denied, 416 U.S. 993, 94 S.Ct. 2406, 40 L.Ed.2d 773 (1974). The class is not the client. The class attorney continues to have responsibilities to each individual member of the class even when negotiating a settlement. 4
It is true, of course, that settlements by their very nature will require compromise. In addition, it must be recognized that the class attorney may be tempted to sacrifice the interests of certain members of a Rule 23(b)(2) class in an effort to achieve the "greatest good for the greatest number." We are not prepared to say that the potential, or even actual, existence of this temptation is sufficient to require denial of Rule 23(b)(2) certification in Title VII cases. It is imperative, however, to assure that before settlements receive judicial approval the court be well-informed of the views of those who feel that they are being called upon to make the sacrifices. Only by being so informed can the court be certain that the settlement does not compromise the legal rights of class members without their consent. Such a compromise is a violation of due process. Mullane v. Central Hanover Bank & Trust, 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950). Being so informed is also necessary to permit the court to determine whether the expressed dissatisfactions with the proposed settlement agreement deprive it of the fundamental fairness which it must possess to merit approval.
To provide the protection to which dissident Rule 23(b)(2) class members are entitled and to assist the courts in reviewing proposed settlements we believe certain procedural safeguards are necessary. The first of these pertains to notice. Rule 23(e), Fed.R.Civ.P., requires that notice of a " proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs." To comply with the spirit of this rule, it is necessary that the notice be given in a form and manner that does not systematically leave an identifiable group without notice. 5
A proper notice must indicate that a member of the class can object to the proposed settlement as well as to the manner in which the class is defined. Each objection so made must become a part of the record of the case. The trial court before approving a proposed settlement must review carefully these objections. Those determined to be substantial cannot be rejected without an opportunity being afforded the objector to be heard. To assure an adequate hearing the trial court should not hesitate to permit an attorney of the objector's choosing to appear at the hearing and to represent the objector. 6 The creation of subclasses to aid in the evaluation of the settlement is not improper.
The hearing which an objection of substance makes necessary must be sufficient to enable the trial court to set forth on the record a reasoned response thereto. Such findings of fact and conclusions of law as may be necessary to support the response must also appear on the record. 7 Objections found to be without substance and frivolous require no hearing, but the trial court should set forth on the record its reasons for so considering the objection. Objections of substance which after a proper hearing are found by the trial court to require modification of the proposed settlement prior to judicial approval undoubtedly will bring about additional negotiations in which the class attorney and the dissenters and their attorneys, if any, will participate. Out of these negotiations may come a new settlement offer more responsive to the interests of all class members. If not, the class action will proceed in a normal fashion.
Observance of these procedures will impose a burden on trial courts required by Rule 23(e) to approve dismissals or compromises of class actions intended to vindicate Title VII rights. This added burden, however, is necessary to assure that valid objections are voiced, to inform the trial court, and to create a reviewable record. See Price v. Lucky Stores, Inc., 501 F.2d 1177 (9th Cir.1974). The interests Title VII is designed to secure are sufficiently important to warrant procedures which minimize the risk of those interests being prejudiced by the normal pressures to settle complex litigation affecting a substantial part of the work force of an employer. The employer, the attorneys of the class, the class members with the most to gain from the proposed settlement, and, as in this case, sometimes the EEOC will support the compromise. Against this array may stand, again as in this case, a few dissenters. They deserve the consideration we suggest. If they are not spoilers, the record should reflect that fact. Only then can it be said with assurance that the settlement is just.
The fact that the procedures outlined above could not have been followed literally by the trial court, acting prior to their formulation, does not require reversal of that court's approval of the settlement if the procedure in fact employed provided the essence of the protection we believe appropriate. The matter is not free from doubt; but after careful scrutiny of the record we believe such protection was not afforded.
This conclusion rests on the fact that the record reveals no reasoned response to numerous objections to the settlement. There exists, for example, no such response to allegations that the class attorney failed to turn over to the court certain objections to the settlement, to allegations regarding the inadequacy of the notice given the terms of the proposed settlement, 8 and to allegations of widespread ignorance of the terms of the settlement among a large number of the class members. Also objections to the class attorney and assertions by dissidents that they were given inadequate time to obtain another attorney were not responded to by the trial court in a manner that permits a proper appellate review. Finally, certain objections to the settlement terms, such as that minorities as well as women should be entitled to incentive pay and that the percentage of minorities projected for training programs is too small, apparently were not considered by the trial court. In any event, no record of explicit...
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...this litigation. 494 F.2d at 233-34 and n.53. accord great weight to the views of the class leadership. See Mandujano v. Basic Vegetable Products, Inc., 541 F.2d 832 (9th Cir. 1976) (Fact that five of nine named plaintiffs opposed the settlement given great significance in holding that sett......
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...the legal rights of class members without their consent. Such a compromise is a violation of due process." Mandujano v. Basic Vegetable Products, 541 F.2d 832, 835 (9th Cir.1976). See also Simer, 661 F.2d at 664. Movants quote language from Mandujano suggesting that it violates Rule 23(e) a......
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...keep in mind the policy favoring settlement. Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir. 1977); Mandujano v. Basic Vegetable Products, Inc., 541 F.2d 832, 835-36 (9th Cir. 1976). 18 The appropriate balance between the public policies involved in these civil rights actions and the policy......
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