Labor & Employment Law Daily Black JPMorgan financial advisors who opted out of settlement’s Rule 23(b)(3) relief not aggrieved by lower court decisions
Tuesday, October 1, 2019

Black JPMorgan financial advisors who opted out of settlement’s Rule 23(b)(3) relief not aggrieved by lower court decisions

By Kathleen Kapusta, J.D.

The opt-outs, said the appeals court, “have not seriously tried to explain how they are hurt by the district court’s decisions or how they could be helped by anything this court could do.”

Dismissing an appeal by eight African-American financial advisors who opted out of the Rule 23(b)(3) relief approved by the district court, which had certified a class of wealth management advisors who alleged the bank treated them less favorably than non-African-American advisors, the Seventh Circuit found they were “not aggrieved by the decisions of which they complain.” The parties had filed a settlement together with the complaint that included $19.5 million for the benefit of class members who did not opt out, plus a fund of about $4.5 million to cover the costs of changes in the bank’s operations. Although the bank and class representatives argued that they did not have standing to appeal, the court found their problem was not standing “but the nature of the arguments they present” (Senegal v. JPMorgan Chase Bank, N.A., September 6, 2019, Easterbrook, F.).

The district court had certified a class of around 250 African-American financial advisors who had worked at the bank between 2013 and 2018. The settlement agreement that was filed with the complaint was a product of 16 months of pre-suit negotiations. The order certifying the class relied on Rule 23(b)(2) with respect to the operational changes and Rule 23(b)(3) with respect to the proposed payments to class members.

Notice. The notice to class members explained that they could opt out of the Rule 23(b)(3) relief and pursue their claims individually but could not opt out of the Rule 23(b)(2) relief because it was indivisible. The notice also explained that anyone who opted out of the (b)(3) relief would still receive the benefit of the changes implemented under (b)(2) while retaining their right to sue the bank individually.

Opt-outs. Eleven people opted out. They asked the district court to create a subclass limited to them, but the court refused because they voluntarily left the class. Nor did the court invite any objections the opt-outs had to the (b)(2) relief. The notice had explained that in order to object, a member had to remain in the class for all purposes. The district court approved the settlement and eight of the opt outs appealed.

Standing. While the bank and class representatives argued that the opt-outs lacked standing to appeal, the Seventh Circuit noted that they were members of the (b)(2) class and those provisions of the consent decree would affect them at work even if they were free to seek damages individually. “They assert that they have been injured—and failure to prove injury, like failure to establish one’s legal position, does not retroactively deprive the litigant of standing,” the court explained.

Required findings. For their part, the opt-outs argued that the district court did not make the findings required by Rule 23 for a settlement class and because they could not opt out of the (b)(2) classes, the court should have listened to their objections despite what the notice said. But, observed the appeals court, they didn’t explain how a remand with instructions to make those findings would assist them. If the court on remand were to make the findings, the opt-outs would be in the same position as they are now, the appeals court pointed out. And if it were to conclude that the required findings could not be made, they would be worse off because they would lose the benefit of the (b)(2) relief.

Allocation of money. As to the opt-outs’ contention that too much money was allocated to support the prospective relief and not enough was allocated to the financial advisors, the court explained that if it were to order the district court to move $2 million from the (b)(2) portion of the remedy to the (b)(3) portion, they would lose the benefit of those funds without getting anything in exchange as the transferred money would be paid to the advisors who stayed in the (b)(3) class rather than the opt-outs, who did not. “They can’t complain about this or any other element of the (b)(3) aspect of this class, because they have opted out,” the court wrote.

Content of notice. And while they argued that the notice should not have said that people who opt out of the (b)(3) relief cannot complain about the (b)(2) relief, the court pointed out that they did not distinctly object in the lower court. Further, said the appeals court, “We have listened to every objection they care to make about the (b)(2) relief, and they have not articulated any contention that, if accepted, would make them better off. They did not lose anything when the district judge implemented the statements in the notice.”

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