United States District Court, N.D. Illinois, Eastern Division
October 19, 2004.
JOHN DANIELS, et al., Plaintiffs,
WAYNE BURSEY, et al., Defendants.
The opinion of the court was delivered by: MATTHEW KENNELLY, District Judge
MEMORANDUM OPINION AND ORDER
The plaintiffs in this case, attorneys at a Chicago law firm
and the law firm itself, sued the defendants for claims arising
from the marketing to the plaintiffs of a STEP plan, a particular
type of employee benefit plan, and the later administration of
the plan. They also sought to represent a class of persons and/or
entities that had adopted similar plans, whether marketed or
administered by those involved with the plaintiffs' plan or by
Earlier this year, the plaintiffs filed a motion for class
certification, and the defendants responded. The plaintiffs, who
are represented by Chicago counsel and John Koresko, an attorney
from Bridgeport, Pennsylvania, engaged in settlement negotiations
with the defendants, and as a result they sought to delay the
filing of their reply brief on the motion for class
certification. The Court granted this request.
Magistrate Judge Sidney Schenkier then conducted a series of
settlement conferences that resulted in an agreement to settle
the named plaintiffs' individual claims and withdraw their class
claims. This was followed by a motion to amend the complaint to
withdraw the class allegations. Attorney Koresko has objected to the motion. For the
reasons stated below, the motion to amend is granted.
Mr. Koresko purports to speak on behalf of the absent members
of the putative class who, he claims, will be left high and dry
by the settlement and amendment of the complaint. The Court
assumes for purposes of discussion that Mr. Koresko has standing
to object to the motion for leave to amend.*fn1
Mr. Koresko's objection is premised on his contention that when
a case is filed as a putative class action, it may not be settled
on an individual basis without court approval under Federal Rule
of Civil Procedure 23(e), even if a class has not yet been
certified. This contention is without merit. Rule 23(e)(1)(A), as
amended in 2003, makes it clear that the Rule's requirement of
court approval applies only to settlements "of the claims,
issues, or defenses of a certified class." Fed.R. Civ. P.
23(e)(1)(A) (emphasis added). See, e.g., 5 J. Moore, Moore's
Federal Practice ¶ 23.160 at p. 23-486 (2004). Even though this
provision of the amended Rule did not take effect until after the
present case was filed, a new procedural rule applies to cases
that were pending at the time the rule takes effect. See
Richardson Electronics, Ltd. v. Panache Broadcasting of
Pennsylvania, Inc., 202 F.3d 957, 958 (7th Cir. 2000).
The settlement in this case that was negotiated under
Magistrate Judge Schenkier's supervision disposes only of the
individual claims of the named plaintiffs. The class claims are not being dismissed, rather they are being withdrawn by
amendment. Thus the "two dismissal rule" of Federal Rule of Civil
Procedure 41(a)(1), cited by Mr. Koresko, does not apply and
cannot operate to affect the claims of the absent class members.
Each of the defendants concedes that the settlement of the
named plaintiffs' individual claims and their withdrawal of their
class allegations will have no preclusive effect on the claims of
any absent class members. Any of the absent class members will be
perfectly free to file his or her own lawsuit, unimpaired in any
way by the settlement of the individual claims of the named
plaintiffs or the withdrawal of their class claims. Moreover,
because the statute of limitations is tolled for absent class
members while a case is pending, see Elmore v. Henderson,
227 F.3d 1009, 1012 (7th Cir. 2000), the claims of the absent class
members will not be impaired in any way by the settlement or by
the passage of time between the filing of the case and its
Mr. Koresko appears to argue that even if Rule 23(e) does not
require court approval, the Court should nonetheless intervene.
The short answer to this is that apart from approving amendment
of the complaint, the law does not entitle the Court to prevent
the settlement of the individual claims that the parties have
negotiated. The Court is required to approve the proposed
amendment of the complaint, but on that score the Rules provide
that leave "shall be freely given when justice so requires,"
Fed.R. Civ. P. 15(a), and the Court, applying that standard, finds
that the amendment requested by the plaintiffs should be
permitted. The cases cited by Mr. Koresko in which amendment was
refused involved situations where another party in the case would
be unfairly prejudiced in some way. Such is not the case here.
Though the Court might balk at approving the proposed withdrawal
of the class allegations if we believed the putative members of uncertified class would be prejudiced, Mr. Koresko's
contentions that they will be harmed are unconvincing.
Finally, this case is nothing like Weiss v. Regal
Connections, ___ F.3d ___, 2004 WL 2175011 (3d Cir. Sept. 29,
2004), in which the Third Circuit recently barred a defendant
from using the device of a Rule 68 offer of judgment to
strong-arm the elimination of a putative class' claims. The
settlement in the present case, by contrast, was negotiated among
all the named parties under the supervision of a magistrate
judge. There is no basis to "exercise" non-existent authority to
disapprove it under the guise of denying leave to amend.
The Court has considered all of Mr. Koresko's remaining
arguments and has found them lacking in merit.
For the reasons stated above, the plaintiffs' motion for leave
to amend their second amended complaint to withdraw their class
allegations is granted [docket # 339-1]. Defendants' motion for
joinder in the plaintiffs' motion is granted [docket # 335-1].
Plaintiffs are granted leave to file instanter their proposed
third amended complaint. Plaintiffs' motion for class
certification [docket # 207-1] is terminated as moot. The case
remains set for a status hearing on October 21, 2004 at 9:30 a.m.