UAW v. GMC

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 07a0298p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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No. 06-1475
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INTERNATIONAL UNION, UNITED AUTOMOBILE,
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AEROSPACE, AND AGRICULTURAL IMPLEMENT
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Nos. 06-1475/2064
WORKERS OF AMERICA; EARL L. HENRY, et al.,
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Plaintiffs-Appellees, >
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Movants-Appellants, -
LEROY HENRY MCKNIGHT, et al.,
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v.
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GENERAL MOTORS CORPORATION, -
Defendant-Appellee. -
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No. 06-2064
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INTERNATIONAL UNION, UNITED AUTOMOBILE,
AEROSPACE, AND AGRICULTURAL IMPLEMENT -
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Plaintiffs-Appellees, -
WORKERS OF AMERICA; BOBBY HARDWICK, et al.,
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Consolidated Plaintiffs-Appellants, -
LAWRENCE BRONSON, et al.,
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v.
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Defendant-Appellee. -
FORD MOTOR COMPANY,
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Appeals from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 05-73991—Robert H. Cleland, District Judge.
No. 05-74730—Paul D. Borman, District Judge.
Argued: June 7, 2007
Decided and Filed: August 7, 2007
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Nos. 06-1475/2064 UAW, et al. v. General Motors Corp., et al. Page 2
Before: MARTIN and SUTTON, Circuit Judges; GRAHAM, District Judge.*
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COUNSEL
ARGUED: Mark S. Baumkel, PROVIZER & PHILLIPS, Bingham Farms, Michigan, James R.
Malone, Jr., CHIMICLES & TIKELLIS, Haverford, Pennsylvania, for Appellants. Julia Penny
Clark, BREDHOFF & KAISER, Washington, D.C., William T. Payne, Pittsburgh, Pennsylvania,
Richard C. Godfrey, KIRKLAND & ELLIS, Chicago, Illinois, Jonathan L. Abram, HOGAN &
HARTSON, Washington, D.C., for Appellees. ON BRIEF: Mark S. Baumkel, PROVIZER &
PHILLIPS, Bingham Farms, Michigan, James R. Malone, Jr., Daniel B. Scott, CHIMICLES &
TIKELLIS, Haverford, Pennsylvania, for Appellants. Julia Penny Clark, John M. West,
BREDHOFF & KAISER, Washington, D.C., John E. Stember, Edward J. Feinstein, STEMBER,
FEINSTEIN, DOYLE & PAYNE, Pittsburgh, Pennsylvania, William T. Payne, Pittsburgh,
Pennsylvania, Richard C. Godfrey, John F. Hagan, Jr., Andrew B. Bloomer, Catherine L. Fitzpatrick,
KIRKLAND & ELLIS, Chicago, Illinois, Jonathan L. Abram, HOGAN & HARTSON, Washington,
D.C., for Appellees.
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OPINION
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SUTTON, Circuit Judge. The fortunes of the General Motors Corporation and the Ford
Motor Company, two of the world’s largest auto makers and two of this country’s largest employers,
have risen and fallen many times over the last 50 years. Their most recent economic challenges stem
from a variety of factors, including the emergence of vigorous international competition, the ever-
changing preferences of the American consumer and the fiscal strain of maintaining healthcare
benefits for retirees well in excess of those provided by their foreign competitors.
In 2005, GM and Ford tried to address one of these issues by reducing retiree healthcare
benefits, only to be challenged by the International Union, United Automobile, Aerospace, and
Agricultural Implement Workers of America (the UAW), which represents hourly workers at both
companies and which negotiated these healthcare benefits in the first place. Insisting that the
retirees’ healthcare benefits had vested and could not be modified without the retirees’ consent, the
UAW filed this declaratory-judgment action and eventually proposed a class of retirees from GM
and Ford to defend its position. Through two similar agreements, the companies, the UAW and the
classes proposed to settle their differences. A small percentage of retirees from each company (less
than one half of one percent) objected to the proposed settlements and, when the district courts
rejected their objections after a fairness hearing, appealed to our court. We have consolidated the
appeals and now affirm.
I.
Retiree Healthcare Benefits Provided by the Two Companies. For more than 50 years, the
UAW has been negotiating with GM and Ford over retiree healthcare benefits for hourly retirees.
Starting in 1955, GM gave retirees what now sounds like a quaint option: They could purchase
hospital and medical coverage, but GM would not subsidize the cost of this coverage. Ford followed
suit three years later. In 1961, GM and Ford agreed to pay half the healthcare premiums for retirees
*
The Honorable James L. Graham, United States District Judge for the Southern District of Ohio, sitting by
designation.
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and to extend these benefits to hourly workers who had retired under previous collective bargaining
agreements. At the same time, GM offered coverage to retiree dependents (at full cost), while Ford
assumed half the cost of dependent coverage.
By 1967, GM and Ford had assumed the entire cost of retirees’ healthcare benefits, including
the benefits for dependents. The car companies added other healthcare benefits for retirees over the
next 20 years: prescription-drug coverage in 1970; dental and hearing-aid coverage in 1976; and
comprehensive vision coverage in 1979. GM extended coverage to substance abuse in 1984 and
mental health in 1990. Because each agreement encompassed all hourly retirees, not just those who
had retired after each new collective bargaining agreement was made, GM and Ford now provide
healthcare coverage for all eligible retirees, their spouses and dependents—which is to say 472,000
people in GM’s case and 174,000 people in Ford’s case.
These benefits are not inexpensive. Accounting for active and retired workers and their
families, GM provides healthcare to 1,100,000 people, making it the “single largest private
purchaser of health care in the United States,” with yearly expenditures of $5.4 billion in 2005 and
with the lion’s share (nearly $3.7 billion in 2005) going to retiree benefits. GM JA 614. Ford tells
a similar story. It spent $3.5 billion to cover 590,000 people in 2005, with $2.4 billion going to
retiree benefits. In 2005, these aggregate healthcare expenditures added $1,525 on average to the
cost of every GM vehicle and $1,100 to the cost of every Ford vehicle. But for the legacy
expenses—the retiree benefits—the healthcare costs per vehicle at GM and Ford would be $480 and
$346, respectively. Their Japanese rivals spend an average of $450 per vehicle for all healthcare
costs, in other words for the healthcare benefits of active workers and retirees.
No participant in this case—whether that party agrees with the settlement or not—offers any
reason to believe these healthcare benefits will become cheaper over time, the car companies’
capacity to pay them will become less burdensome in the future or the differential between what
these American car companies pay in healthcare costs per vehicle and what their rivals from Japan
(which has universal healthcare) pay will change any time soon. GM’s accumulated post-retirement
healthcare obligations increased from $42 billion in 2000 to $67.6 billion at the end of 2004; Ford
faced $35 billion in accumulated obligations in 2005, an increase of $14 billion since 2000. By the
end of 2004, GM’s accumulated obligations amounted to almost seven times its market value; by
the end of 2005, Ford’s obligations amounted to almost three times its market value. Making these
obligations increasingly more difficult to meet are a growing ratio of retirees to active employees
(four to one at GM in 2006 and two to one at Ford in 2005) and rapidly increasing healthcare costs.
See, e.g., GM JA 615 (absent the settlement, GM’s accumulated obligations were expected to
increase 22% between 2005 and 2009); Ford JA 851 (retirees accounted for 80% of the increase in
Ford’s healthcare costs between 2000 and 2005).
Declining Market Share. Once the world’s largest automotive manufacturer (and still
Michigan’s largest employer with 71,000 residents on its payroll), GM has seen its share of the
North American market decline from 40% to 25.5% over the past 20 years. Ford’s share has
declined from 25% in 1995 to 17% ten years later. Over the last decade, profits at the two
companies have declined and in some years disappeared. In 2005, GM’s automotive division posted
a pre-tax loss of $11.4 billion; Ford’s automotive division lost $3.9 billion.
These problems have not been lost on the financial markets. In early 2005, both companies’
credit ratings declined to non-investment grade status (“junk” status), in part due to GM’s
“burdensome postretirement benefit obligations,” GM JA 606, and Ford’s “massive unfunded retiree
medical liability,” Ford JA 863 (internal quotation marks omitted). GM’s stock, priced at $53.40
at the end of 2003, fell to $19.42 over the next two years; its market capitalization slid from $30
billion to $11 billion. Ford’s stock price decreased from $30 a share in 2001 to $7.72 by the end of
2005; its market capitalization fell from $54 billion to approximately $14 billion during that time.
Nos. 06-1475/2064 UAW, et al. v. General Motors Corp., et al. Page 4
GM’s Recovery Strategy and the Proceedings Below. To address these fiscal challenges, GM
has sought to scale back production and cut costs across the board. In 2005, GM “closed or idled”
assembly plants in Maryland, Michigan and New Jersey to reduce excess capacity. GM JA 600.
In addition, GM announced plans to close twelve assembly plants or facilities, to lay off 7,000
salaried employees and 30,000 hourly workers, to cut the salaries of senior leadership, to place caps
on healthcare expenditures for salaried employees and retirees and to reduce its annual dividend to
shareholders.
A central feature of GM’s recovery strategy included reducing the burden of its accumulated
healthcare obligations to hourly retirees. When the UAW refused to discuss the possibility of
modifying hourly retirees’ healthcare benefits in 2005, GM responded that it would unilaterally
reduce the benefits. Although no retiree filed a lawsuit to block GM’s action, the UAW stepped in
and agreed to negotiate changes to retiree benefits on the condition that the company postpone any
cuts until negotiations had concluded and that it “fully open its books and share its complete
financial data” with the UAW. GM JA 351. An independent financial consultant, Lazard Freres &
Co., LLC, reviewed this data for the UAW and concluded that GM had not embellished its fiscal
woes.
On October 17, 2005, GM and the UAW announced an agreement that would permit the
company to modify its retiree healthcare benefits. Because the two entities had no authority to act
on behalf of the retirees, the UAW approached two hourly retirees (each of whom had been elected
to a local retired workers chapter) about filing a class action against GM. At the UAW’s suggestion,
the retirees retained William T. Payne as lead class counsel. Among other qualifications, Payne had
practiced law for 27 years and had litigated “approximately forty-seven” retiree healthcare class
actions. On October 18, the UAW and the retirees jointly filed a class action lawsuit against GM
under the Employee Retirement Income Security Act of 1974 and the Labor-Management Relations
Act. See 29 U.S.C. §§ 185, 1132. The action sought a declaration “that the retiree health care
benefits set forth in the applicable collective bargaining agreements . . . may not be unilaterally
terminated or modified” by GM. GM JA 102. On October 29, the UAW notified retirees of the
class action, informed them of the potential settlement with GM and explained that retirees would
“have an opportunity to object to any aspect of the proposal.” GM JA 239.
Over the next two months, the class representatives (through class counsel) reviewed all of
the financial data GM had provided to the UAW and hired their own independent consultant to
analyze the data. Although class counsel recognized that “there was a framework for this settlement
already in place the day the complaint was filed,” GM JA 1119, he became involved in negotiations
while the settlement was “still being drafted,” GM JA 256. On December 5, the consultant reported
that “GM is experiencing significant financial strain . . . . Without cost sharing, and other measures,
GM’s ability to continue to provide retiree health benefits in the future could be endangered.” GM
JA 1261. On December 16, GM, the UAW and the class representatives agreed to a settlement.
On December 22, the district court certified a class of:
All persons who, as of November 11, 2005, were (a) GM/UAW hourly employees
who had retired from GM with eligibility to participate in retirement in the GM
Health Care Program for Hourly Employees, or (b) the spouses, surviving spouses
and dependents of GM/UAW hourly employees, who, as of November 11, 2005,
were eligible for post-retirement or surviving spouse health care coverage under the
GM Health Care Program for Hourly Employees as a consequence of a GM/UAW
hourly employee’s retirement from GM or death prior to retirement.
GM JA 340. The court appointed Payne as class counsel and preliminarily approved the settlement.
The court also directed Payne to notify all class members (476,676 people) of the proposed
Nos. 06-1475/2064 UAW, et al. v. General Motors Corp., et al. Page 5
settlement. Class members received a notice explaining their rights, a complete copy of the
settlement agreement and a cover letter from Payne and the UAW.
On March 6, 2006, the district court held a fairness hearing, at which it considered the
objections to the settlement from 1,250 retirees. The court admitted declarations from GM, the
UAW and the class in favor of the proposed settlement and declarations from GM retiree Leroy
McKnight opposing it. McKnight called 23 class members who opposed the settlement as
witnesses. The court certified the class and approved the settlement.
Ford’s Recovery Strategy and the Proceedings Below. Ford has taken a similar route to
“return its North American automotive operations to profitability,” Ford JA 865: The company
plans to close 14 manufacturing facilities by 2012, intends to cut $6 billion a year in material costs
(such as steel) by 2010, has reduced officer ranks by 12%, has eliminated 4,000 salaried positions
and has curtailed the pension and fringe benefits of the company’s salaried employees.
Ford also announced in early 2005 that it intended to cut retiree healthcare benefits. The
UAW started negotiations with Ford, and Ford disclosed its confidential financial projections to the
UAW. After the UAW’s financial consultant concluded that Ford’s prospects were at least as dire
as the company insisted, the UAW presented Ford with a package of proposed “modest cuts to
retiree health benefits”—a package consistent with the framework it had negotiated with GM. Ford
JA 1735–36. After further negotiations, Ford agreed to the framework.
The UAW approached several Ford hourly retirees about filing a class action against Ford,
suggesting that Payne serve as class counsel. On December 13, the UAW and several hourly retirees
filed a class action against Ford, seeking a declaration that the healthcare benefits provided to
retirees under the collective bargaining agreements had vested. After learning of the negotiations
between Ford and the UAW, Ford retiree Lawrence Bronson filed an independent class action on
behalf of Ford hourly retirees on January 24, 2006, using the same law firm that represented
McKnight.
On February 6, Ford, the UAW and the proposed class moved to certify the class and to
appoint Payne as class counsel. One week later, they agreed to a final settlement. As with the GM
litigation, the class representatives hired a financial consultant to review Ford’s financial data and
instructed class counsel to conduct a thorough analysis of relevant law before approving the deal.
On February 24, the district court certified a class consisting of:
All persons who, as of December 22, 2005, were (a) Ford/UAW hourly employees
who had retired from Ford with eligibility to participate in retirement in the Ford
Hospital-Surgical-Medical-Drug-Dental-Vision Program (“Plan”), or (b) the spouses,
surviving spouses and dependents of Ford/UAW hourly employees, who, as of
December 22, 2005, were eligible for post-retirement or surviving spouse health care
coverage under the Plan as a consequence of a Ford/UAW hourly employee’s
retirement from Ford or death prior to retirement.
Ford JA 475. The court also appointed Payne as counsel for the class, preliminarily approved the
settlement agreement and ordered the parties to notify the class of the settlement agreement.
The Ford litigation suffered several fits and starts on its way to a fairness hearing. On
March 22, the district court judge who had presided over the case up to that point recused himself,
as did the next judge assigned to the case. After the action landed on the desk of a third judge,
Bronson moved the court to revisit a number of issues, claiming that the class representation was
inadequate, that the settlement was unfair, that certain declarants needed to attend the fairness
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hearing, that the notice of settlement provided to class members was inadequate and that the
objection period should be extended. The court rejected each contention.
On May 31, the district court held the fairness hearing, allowing all parties to submit
declarations, testimony and other evidence, as well as briefs and oral argument. It also reviewed the
objections of 800 class members to the settlement. The district court certified the class and approved
the settlement agreement.
The Settlement Agreements. The two settlement agreements share a similar framework.
They replace the current premium-free and deductible-free plan offered to retirees with two options:
(1) a modified plan comprised of modest monthly premiums and substantial benefits or (2) a
“catastrophic” plan with no monthly premiums but “higher deductibles, higher emergency room co-
payments, and higher prescription drug payments.” GM JA 275; Ford JA 303–04. In the long run,
GM expects to reduce its annual healthcare expenditures by $3 billion and shed some $15 billion
of its accumulated retiree healthcare obligations; Ford expects to shave more than $5 billion from
its accumulated retiree healthcare obligations.
The modified plans impose several specific (and new) costs on retirees: a monthly premium
of $50 for individuals, $105 for families; a yearly deductible of $300 for individuals, $600 for
families; and a 10% co-insurance obligation for in-network healthcare services. Retirees also must
assume part of the cost of prescription drugs: co-paying $5 for generics and $10 for brand-name
drugs when purchased at retail. All of these costs, according to the plans, may not be raised by more
than 3% per year for the life of the agreement.
Not all retirees must assume these new costs. Retirees entitled to an annual pension of less
than $8,000—about 73,000 GM retirees and about 32,000 Ford retirees—retain substantially the
same benefits they had before the settlement agreement.
And the retirees who must pay these new costs will not be required to pay all of them. Under
the agreements, a substantial percentage of these costs will be paid for through a trust set up for that
purpose—what the parties call a defined contribution “Voluntary Employees’ Beneficiary
Association trust,” a DC-VEBA trust for short (if not for elegance). GM JA 267. GM will
contribute $3 billion in cash to its DC-VEBA trust through 2011, along with at least $30 million a
year in profit-sharing payments from 2006 through 2012 and additional payments based on increases
in GM’s stock price. Ford has promised $108 million in cash to its DC-VEBA trust through 2011,
along with additional payments triggered by the appreciation of Ford’s stock. The UAW also has
agreed to fund the trusts by deferring negotiated wage and cost-of-living adjustments and
contributing those negotiated increases to each company’s respective trust—in all about $2,000 a
year in contributions from each active employee. In GM’s case, these foregone wages should add
$4 billion to the trust over the next 20 years.
An independent committee administers the two trusts, using the funds generated by the trusts
to reduce participant expenses. The trust funds will reduce monthly premiums to $10 for individuals
and $21 for families, and out-of pocket maximums will be limited to $250 for individuals and $500
for families for in-network health services. As a result, individual retirees can expect to pay a
maximum of $370 and families a maximum of $752 a year for complete healthcare coverage during
the first year of the plan. The trusts also will pay for retiree dental coverage. Although the modified
plan does not guarantee any future level of cost reduction, estimates suggest that both trusts will be
able to continue these reductions for at least 20 years.
The modified plan also attempts to reduce the overall cost of retiree healthcare benefits for
the companies. The plan imposes a $50 co-payment on visits to the emergency room unless the
retiree is admitted to the hospital. It requires higher co-insurance and out-of-pocket maximums for
Nos. 06-1475/2064 UAW, et al. v. General Motors Corp., et al. Page 7
the use of out-of-network healthcare services. It requires retirees who voluntarily choose an out-of-
network provider to pay any charges above those deemed “reasonable and customary” in the
industry. GM JA 309; Ford JA 342–43. And it coordinates benefits with Medicare, attempting to
take advantage of the government coverage without reducing the benefits offered to retirees.
Although the settlement agreement contains no formal end date, the companies and the UAW
have the right to terminate each agreement at any time after September 14, 2011. Should GM or
Ford terminate its respective agreement after that date, each has agreed that “the Case Law as of the
Effective Date [of the settlement] shall be treated as the applicable body of judicial decisional law
for [subsequent] litigation” regarding the vesting of retiree healthcare benefits—though this
provision does not apply to “legislative, regulatory, or administrative developments after the
Effective Date.” GM JA 296; Ford JA 325.
II.
The arguments of the objectors, be they retirees of Ford or GM, fall into four general
categories: (1) that the class representation was not “fair[] and adequate[],” Fed. R. Civ. P. 23(a)(4);
(2) that the notice of the class settlement was not “reasonable,” Fed. R. Civ. P. 23(e)(1)(B); (3) that
the settlement agreements are not “fair, reasonable, and adequate,” Fed. R. Civ. P. 23(e)(1)(C); and
(4) that the objectors should have been given additional discovery. Each of these decisions by the
district court receives abuse-of-discretion review. See Olden v. LaFarge Corp., 383 F.3d 495, 507
(6th Cir. 2004) (class certification); Franks v. Kroger Co., 649 F.2d 1216, 1222–23 (6th Cir. 1981)
(settlement class notice); Clark Equip. Co. v. Int’l Union, Allied Indus. Workers of Am., AFL-CIO,
803 F.2d 878, 880 (6th Cir. 1986) (settlement approval); Bowling v. Pfizer, Inc., 102 F.3d 777, 780
(6th Cir. 1996) (discovery).
A.
Before a court may certify a class, it must ensure that the class satisfies each of Rule 23(a)’s
requirements and that it falls within one of three categories permitted by Rule 23(b). See Sprague
v. Gen. Motors Corp., 133 F.3d 388, 397 (6th Cir. 1998) (en banc). Because Rule 23 is “designed
to protect absentees by blocking unwarranted or overbroad class definitions,” a district court must
give “undiluted, even heightened, attention” to its protections before certifying a settlement-only
class—one formed just for the purpose of settlement, not for litigation. Amchem Prods., Inc. v.
Windsor, 521 U.S. 591, 620 (1997).
Many of Rule 23’s demands require little discussion here. As to GM: the class, consisting
of 476,676 retirees and dependents, is undoubtedly “so numerous that joinder of all members is
impracticable,” Fed. R. Civ. P. 23(a)(1); because the claims of all retirees stem from the collective
bargaining agreements negotiated between GM and the UAW, they share “common” “questions of
law or fact,” Fed. R. Civ. P. 23(a)(2); the claims of the class representatives—that the retirees’
healthcare benefits are vested under ERISA and the LMRA—generally are “typical” of the claims
of every other member of the class, Fed. R. Civ. P. 23(a)(3); and GM has threatened to modify all
retiree healthcare benefits unilaterally, “thereby making appropriate final injunctive relief or
corresponding declaratory relief with respect to the class as a whole,” Fed. R. Civ. P. 23(b)(2).
McKnight does not challenge any of these findings on behalf of the GM’s objectors, and we see no
reasonable basis upon which he could have done so. The same is true of the Ford class.
Both objectors instead start by targeting two related issues—the class representatives’ ability
to “fairly and adequately protect the interests of the class,” Fed. R. Civ. P. 23(a)(4), and the
adequacy of class counsel, Fed. R. Civ. P. 23(g)(1)(B)–(C). Class representatives are adequate when
it “appear[s] that [they] will vigorously prosecute the interests of the class through qualified
counsel,” Senter v. Gen. Motors Corp., 532 F.2d 511, 525 (6th Cir. 1976), which usually will be the
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case if the representatives are “part of the class and possess the same interest and suffer the same
injury as the class members,” E. Tex. Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 403
(1977) (internal quotation marks omitted). Because named class members must act through class
counsel, adequacy of representation turns in part on “the competency of class counsel” and in part
on the absence of “conflicts of interest.” Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157 n.13
(1982); see Fed. R. Civ. P. 23(g)(1)(C).
Even after accounting for the “undiluted, . . . heightened” attention that Rule 23(a)’s
procedural safeguards receive in the context of settlement-only classes, Amchem Prods., 521 U.S.
at 620, the district courts did not abuse their discretion in certifying these classes and in determining
that absent class members would be adequately represented. The named representatives are “part”
of each class, and because all class members share a common claim—that the retirees’ healthcare
benefits have vested under the collective bargaining agreements—their legal interests parallel the
named representatives’ interests. See E. Tex. Motor Freight Sys., 431 U.S. at 403. The GM and
Ford retirees had another reason to trust these representatives: The retirees previously elected all
but one of the named class members to represent them in another work-related capacity.
William Payne was competent to represent each class and did not have a conflict of interest.
Payne has practiced labor law for almost 24 years, has litigated almost 50 retiree healthcare class
actions at the trial and appellate levels, has authored numerous articles on the law of retirement
benefits, has contributed to BNA’s treatise on employee benefits and heads the American Bar
Association’s Subcommittee for Benefit Claims and Individual Rights. In view of Payne’s
background, both classes would have been hard pressed to find someone with greater “experience
in handling class actions . . . and claims of the type asserted in the action” or an attorney with more
“knowledge of the applicable law.” Fed. R. Civ. P. 23(g)(1)(C)(i). Not only was Payne qualified,
he also was prepared, if need be, to prosecute these cases: He had six attorneys plus substantial
support staff ready to assist him; he retrieved and reviewed “boxes of materials” from GM and Ford,
including all of the financial information the two companies shared with the UAW, GM JA 256;
Ford JA 274; he hired an independent financial consultant to analyze the fiscal health of the
companies; and by all appearances he thoroughly investigated the potential claims of both classes
under ERISA and the LMRA. Payne, in brief, was willing to, and indeed did, commit substantial
“resources . . . to representing the class[es].” Fed. R. Civ. P. 23(g)(1)(C)(i).
More, Payne’s involvement in the negotiations was an essential check on the process,
safeguarding the rights of absent class members. Unaffiliated with the UAW or the companies, both
professionally and financially, Payne had every incentive to press the classes’ claims and, if
appropriate, to reject the settlement framework proposed by GM, Ford and the UAW. Payne
remained free to recommend the proposed framework to the classes and free to negotiate the terms
of the final settlement, which was “still being drafted,” GM JA 256, on behalf of the classes. And
Payne did both of these things—negotiating in a few discrete instances with GM and the UAW and
ultimately recommending a settlement to the GM retirees because, in Payne’s considered judgment,
“the burdens and expense of litigation, . . . the risks and uncertainties associated with protracted
trials and appeals, [and] the risks and uncertainties of recovering from a potentially insolvent entity”
outweighed “the relatively small burden which the Class would absorb by the acceptance of cost-
sharing.” GM JA 441. Payne had similar discretion in the Ford litigation and made the same
considered recommendation to the Ford retirees.
The objectors counter that the representation was inadequate because, during the
negotiations, the UAW “lack[ed] the authority to take measures that would impair the retirees’ rights
without their consent.” McKnight Br. at 22; Bronson Br. at 22. But the UAW’s lack of authority
to diminish retirees’ benefits without their consent, see Cleveland Elec. Illuminating Co. v. Utility
Workers Union of Am., 440 F.3d 809, 817 (6th Cir. 2006), does not speak to the adequacy of class
counsel’s representation. While the UAW no doubt insisted that the car companies respect the rights
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of the retirees during the initial negotiations, it did not purport to bind the retirees in the
negotiations. That was Payne’s job. He evaluated the options of retirees on their behalf, and the
decision to accept or reject the settlement was left to the named class representatives.
The objectors’ suggestion that the UAW compromised the vested benefits of the retirees
suffers from the same flaw. The UAW had no such authority and never purported to exercise it. In
the final analysis, the named class members—not the UAW—represented the retirees of each
company, removing the risk of any conflict between the interests of the UAW and the retirees.
The objectors next contend that the UAW exercised undue influence in selecting the named
class members and class counsel, undermining the “structural assurance of fair and adequate
representation.” Amchem Prods., 521 U.S. at 627; see also Reynolds v. Beneficial Nat’l Bank, 288
F.3d 277, 282 (7th Cir. 2002) (warning that, if given free reign, the opposing party will choose “the
most ineffectual class lawyers to negotiate a settlement”). But the UAW’s involvement—referring
several potential class representatives to Payne, see GM JA 435; Ford JA 719—does not suffice to
condemn the class. For one, the UAW had little choice but to get involved. When GM (and later
Ford) announced that it would unilaterally reduce retiree healthcare benefits, no retiree filed suit.
When the UAW blocked that action and negotiated with the car companies for the next six months,
no retiree filed suit. And when the UAW and the companies were ready to negotiate with the
retirees, no one retiree had authority to negotiate on behalf of the other retirees. At that point, the
UAW and the companies had no choice but to seek potential class representatives—and they limited
their involvement to referring already trusted members of the class to an experienced and
independent counsel. If this limited and necessary involvement constituted undue influence, what
would not? Cf. Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180, 1189 (10th Cir. 2002)
(rejecting collusion argument that “would lead to the conclusion that no settlement could ever occur
in the circumstances of parallel or multiple class actions”) (internal quotation marks omitted).
For another, courts customarily demand evidence of improper incentives for the class
representatives or class counsel—such as a promise of excessive attorney fees in return for a low-
cost, expedited settlement—before abandoning the presumption that the class representatives and
counsel handled their responsibilities with the independent vigor that the adversarial process
demands. See, e.g., In re Cmty. Bank of N. Va., 418 F.3d 277, 308 (3d Cir. 2005) (noting the
“special danger of collusiveness when the attorney fees . . . were negotiated simultaneously with the
settlement”); Reynolds, 288 F.3d at 282–84; Weinberger v. Great N. Nekoosa Corp., 925 F.2d 518,
524 (1st Cir. 1991). No such problem exists here, as the settlement does not determine Payne’s fees;
ERISA does, and it says that a district court may “in its discretion . . . allow a reasonable attorney’s
fee.” 29 U.S.C. § 1132(g)(1). Without more, we must afford Payne and the class representatives
the normal presumption—that they handled their responsibilities independently and zealously.
The objectors add that, even if Payne tried to represent the class vigorously, he lacked the
power to do so because he “had no practical ability to request changes to the proposed settlement.”
McKnight Br. at 27; see Bronson Br. at 27. To the extent the objectors mean to suggest that Payne
was legally precluded from litigating the case—“disarmed” from pressing for a “better offer” in the
words of Amchem Products, 521 U.S. at 621—that is wrong because Payne appeared to represent
a coherent class that could have proceeded to trial but did not, unlike the “sprawling” class action
in Amchem Products that never could have proceeded to trial in the first place, id. at 624.
To the extent the objectors mean to complain that, as a practical matter, Payne had little hope
of altering the proposed settlement agreements by the time he entered the picture, that also does not
show the inadequacy of his representation. The question is whether Payne had authority to reject
the settlement on behalf of the class or insist on modifications, not whether Payne was likely to
succeed if he took that course.
Nos. 06-1475/2064 UAW, et al. v. General Motors Corp., et al. Page 10
The record, moreover, confirms that Payne exercised this authority in a reasonable way. In
his considered view, the benefits of the proposed framework outweighed the value of any remedy
that litigation might produce. Notably, the companies and the UAW—not known historically as
congenial negotiating allies—came to the same view about the same risks: Would the retirees or
the car companies win the vesting argument? And even if the retirees won the vesting argument,
would the car companies be able to make good on these benefits obligations without entering
bankruptcy? And if the car companies sought Chapter 11 relief, what kinds of benefits would
retirees receive in the end? The settlements also offered something that the retirees could never have
obtained on their own—substantial contributions to the DC-VEBA trusts from existing employees
and a modification to the collective bargaining agreements that the UAW alone could negotiate, both
of which helped to address the problem of ensuring a future funding stream for these benefits.
Yes, the car companies and the UAW told the retirees (and Payne) that the settlement
agreements were being offered on a take-it-or-leave-it basis. But there is no way of knowing
whether they meant it. Surely this would not have been the first time that a party insisted that it
would never consent to additional changes to a proposed bargain—and then consented. The
question is whether each class had the right to reject that offer: Each did. And the question is
whether Payne acted reasonably as class counsel in recommending that class members approve the
settlement as is: He did— particularly since the UAW at that point already had convinced active
employees to make substantial contributions to the DC-VEBA trust and since any additional changes
to the settlement would have required a new ratification by active workers, the same workers who
barely approved the settlement the first time around—at least in Ford’s case. See GM JA 444 (Ford
Memorandum of Understanding passed by 51% to 49% margin).
The objectors maintain that the terms of the settlement created improper intraclass
conflicts—and that the district court as a result should have divided the class into subclasses based
on age and income. See McKnight Br. at 33–36; Bronson Br. at 32–35; accord Fed. R. Civ. P.
23(c)(4)(B). In support, they point out that a class representative with a pension “significantly”
above the threshold would have “little incentive to ensure that the financial burdens of the settlement
are fair to those retirees receiving pensions just above the threshold.” McKnight Reply Br. at 18;
see Bronson Reply Br. at 17. No doubt, the district courts could have drawn additional class lines,
but they did not abuse their discretion in choosing not to do so. Other, equally tenable lines could
have been drawn with equal force: between retirees living alone and those with dependents;
between retirees needing brand-name drugs, those using generics and those who rarely (if ever) use
pharmaceuticals; between retirees whose preferred physician is in the network and those who
frequent out-of-network doctors; between those with significant dental costs and those with none;
and so on. Yet if every distinction drawn (or not drawn) by a settlement required a new subclass,
class counsel would need to confine settlement terms to the simplest imaginable or risk fragmenting
the class beyond repair. See In re Cendant Corp. Sec. Litig., 404 F.3d 173, 202 (3d Cir. 2005) (“[I]f
subclassing is required for each material legal or economic difference that distinguishes class
members, the Balkanization of the class action is threatened.”) (internal quotation marks omitted);
Clark Equip., 803 F.2d at 880 (“Subclassing . . . is appropriate only when the court believes it will
materially improve the litigation” and is not always necessary because “subclassing often leads to
more complex and protracted litigation.”). Neither the Federal Rules of Civil Procedure nor the
Supreme Court requires that settlements offer a pro rata distribution to class members; instead the
settlement need only be “fair, reasonable, and adequate.” Fed. R. Civ. P. 23(e)(1)(C); see Ortiz v.
Fibreboard Corp., 527 U.S. 815, 855 (1999) (Although “[f]air treatment in the older cases was
characteristically assured by straightforward pro rata distribution” of proceeds of the litigation
amongst the class, “equity in such a simple sense” may be “unattainable” in complex cases.).
Nos. 06-1475/2064 UAW, et al. v. General Motors Corp., et al. Page 11
B.
Before ratifying a proposed settlement agreement, a district court also must “direct notice
in a reasonable manner to all class members who would be bound” by the settlement. Fed. R. Civ.
P. 23(e)(1)(B). The notice should be “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.” Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950); see also In re
Gen. Tire & Rubber Co. Sec. Litig., 726 F.2d 1075, 1086 (6th Cir. 1984) (upholding notice that
“described the terms of the settlement, the reasons for [class representatives’ decision to settle], the
legal effect of the settlement and the rights of the [class members] to voice their objections”).
The district courts did not abuse their discretion in approving either class notice. The notice
in the GM case clearly explained its purpose, discussed the nature of the pending suit and proposed
class and accurately summarized the 76-page settlement agreement and incorporated exhibits in a
little over four pages. Also enclosed with the notice was a copy of the settlement agreement,
ensuring that retirees would have full access to the very document the district court would examine
at the fairness hearing. The Ford class notice was equally satisfactory.
The objectors insist that the notice was misleading because it did not say that retirees could
challenge the proposed class certification as well as the settlement. But the applicable rule contains
no such requirement. While an opt-out class action under Rule 23(b)(3) must meet stringent notice
requirements, see Fed. R. Civ. P. 23(c)(2)(B), a district court need not provide any notice before
certifying a mandatory class action under Rule 23(b)(2), see Fed. R. Civ. P. 23(c)(2)(A) (“For any
class certified under Rule 23(b)(1) or (2), the court may direct appropriate notice to the class.”)
(emphasis added). No less importantly, Rule 23(e) grants members the right to “object to a proposed
settlement,” Fed. R. Civ. P. 23(e)(4)(A), not the right to object to certification. And while we have
inferred that class members might object to the settlement because the class should not have been
certified in the first place, see In re Telectronics Pacing Sys., Inc., 221 F.3d 870, 876 (6th Cir. 2000);
accord Fed. R. Civ. P. 23(c)(1)(C), there is no textual warrant for requiring a notice to lay out every
reason a class member might object to the settlement. See Fed. R. Civ. P. 23(e)(1)(B) (requiring the
court only to “direct notice in a reasonable manner”).
Also unavailing is the objectors’ suggestion that the notice was “misleading because it
repeatedly implied that the proposed settlement was the product of arm’s length negotiations” and
“failed to inform class members” that the UAW “had a serious conflict of interest.” McKnight Br.
at 46–47; see Bronson Br. at 48. Again, Rule 23(e) does not require the notice to set forth every
ground on which class members might object to the settlement—nor even every reason that
McKnight or Bronson do object. All that the notice must do is “fairly apprise the prospective
members of the class of the terms of the proposed settlement” so that class members may come to
their own conclusions about whether the settlement serves their interests. Grunin v. Int’l House of
Pancakes, 513 F.2d 114, 122 (8th Cir. 1975) (internal quotation marks omitted).
The objectors add that other communications between class representatives and class
members tarnished the original notice. A letter sent to retirees of both car companies, however,
merely spelled out the reasons why the class representatives and the UAW thought the settlement
was appropriate, see GM JA 658–59; Ford JA 996–97, but it did not purport to come from the
district court and thus did not alter the neutrality of the class notice. While some retirees may not
have objected to the settlement out of respect for the UAW’s judgment (which seems to be the
objectors’ primary concern), this letter could not have been the underlying source of that concern.
The class notice itself informed class members that the UAW supported the settlement.
Nos. 06-1475/2064 UAW, et al. v. General Motors Corp., et al. Page 12
C.
Before approving a settlement, a district court must conclude that it is “fair, reasonable, and
adequate.” Fed. R. Civ. P. 23(e)(1)(C); see Fed. R. Civ. P. 23(e)(1)(A). Several factors guide the
inquiry: (1) the risk of fraud or collusion; (2) the complexity, expense and likely duration of the
litigation; (3) the amount of discovery engaged in by the parties; (4) the likelihood of success on the
merits; (5) the opinions of class counsel and class representatives; (6) the reaction of absent class
members; and (7) the public interest. See Granada Invs., Inc. v. DWG Corp., 962 F.2d 1203, 1205
(6th Cir. 1992); Williams v. Vukovich, 720 F.2d 909, 922–23 (6th Cir. 1983).
The fairness of each settlement turns in large part on the bona fides of the parties’ legal
dispute. Although this inquiry understandably does not require us to “decide the merits of the case
or resolve unsettled legal questions,” we cannot “judge the fairness of a proposed compromise”
without “weighing the plaintiff’s likelihood of success on the merits against the amount and form
of the relief offered in the settlement.” Carson v. Am. Brands, Inc., 450 U.S. 79, 88 n.14 (1981); see
In re Gen. Tire & Rubber, 726 F.2d at 1086. The retirees’ claims rest on one question: Do the
collective-bargaining agreements vest former union workers with their healthcare benefits upon
retirement? As the parties see it, two lines of Sixth Circuit cases offer competing answers.
The retirees and the UAW point to the Yard-Man line of cases as support for their position
that the retirees’ healthcare benefits vested upon retirement. See Int’l Union, United Auto.,
Aerospace & Agric. Implement Workers of Am. v. Yard-Man, Inc., 716 F.2d 1476, 1482 (6th Cir.
1983) (holding that there was “sufficient evidence” of intent to vest retirees with benefits “in the
language of [the] agreement itself”); see also Int’l Union, United Auto., Aerospace & Agric.
Implement Workers of Am. v. BVR Liquidating, Inc., 190 F.3d 768, 773–74 (6th Cir. 1999); Smith
v. ABS Indus., Inc., 890 F.2d 841, 846 (6th Cir. 1989). Consistent with these cases, they argue, both
collective bargaining agreements contain the requisite vesting language: “The health care coverages
an employee has at the time of retirement . . . shall be continued.” GM JA 785; see also Ford JA
1033 (“The continued coverage to which eligible retired employees are entitled will be the hospital-
surgical-medical-drug-dental-vision-hearing aid coverages as described . . . above.”).
GM and Ford invoke the Sprague line of cases—to the effect that “an employer’s
commitment to vest” must be stated “in clear and express language” in the plan documents. Sprague
v. Gen. Motors Corp., 133 F.3d 388, 400 (6th Cir. 1998) (en banc) (internal quotation marks
omitted). Consistent with these cases, they argue, a reservation of rights to modify retiree healthcare
benefits is inconsistent with the claim that those benefits have irreversibly vested, see Maurer v. Joy
Techs., Inc., 212 F.3d 907, 919 (6th Cir. 2000); BVR Liquidating, 190 F.3d at 773, and note that the
two companies’ retiree healthcare plans contain such a reservation, see GM JA 550 (“Any rate of
payment by the enrollee and any other terms and conditions of the Program may be changed at any
time by the Corporation.”); Ford JA 1030 (“It is understood that the provisions herein . . . are
agreements between the Company and the Union and, although they set forth intended arrangements
involving third parties, they shall not be relied upon by any such third party as establishing any right
for it against the Company or the Union.”); Ford JA 1041 (From the summary plan description:
“The Company reserves the right to end, suspend or amend these plans, subject to the applicable
Collective Bargaining Agreement. . . . If changes are made, you will be notified.”).
Our task is not to decide whether one side is right or even whether one side has the better of
these arguments. Otherwise, we would be compelled to defeat the purpose of a settlement in order
to approve a settlement. The question rather is whether the parties are using settlement to resolve
a legitimate legal and factual disagreement. A brief review of the above language from the
collective bargaining agreements and these cases proves that is the case.
Nos. 06-1475/2064 UAW, et al. v. General Motors Corp., et al. Page 13
What makes these settlements particularly sensible, moreover, is that, even if this merits
question favored one party over the other, the retirees still would have had ample reason to control
the resolution of this dispute through negotiation today rather than litigation tomorrow. If we
decided for the sake of argument that the retirees were likely to lose the Yard-Man/Sprague debate,
little would stand in the way of the car companies’ reducing or even eliminating the retirees’
healthcare benefits in the future. If we decided for the sake of argument that the retirees were likely
to win the debate, any such victory would run the risk of being a Pyrrhic one because the cost of
insisting on irreversible healthcare benefits might well be—and indeed almost certainly would
be—the continuing downward spiral of the companies’ financial position. If GM’s automotive
divisions lost $11.4 billion in 2005 while spending $3.7 billion to pay retiree healthcare benefits
(and Ford’s division lost $3.9 billion while spending $2.4 billion on retirees), it takes little
imagination to picture the future financial toll this burden would place on the two companies. While
we need not embellish the point by raising the prospect of bankruptcy, it is well to remember that
the Federal Government’s Pension Benefit Guaranty Corporation, which provides pension
guarantees for the employees and retirees of financially distressed companies, has no sister agency
that provides the same guarantees for retiree healthcare benefits.
In view of the risks the retirees faced from losing and winning the Yard-Man/Sprague
debate, it is no wonder that Payne recommended settlement to the class representatives; no wonder
that the named representatives consented to each settlement; no wonder that less than one half of one
percent of class members objected to either settlement, see GM JA 154; Ford JA 183; and no wonder
that both district courts thought that the settlement was a fair way of handling the risks of litigation,
see GM JA 140 (“[C]ost increases entailed by the settlement are modest . . . [and] [t]he potential loss
of all benefits, due to either GM’s financial collapse or GM’s prevailing on the merits, would be far
more harsh for Class Members.”); Ford JA 174–75 (approving the settlement in light of “the realities
of Ford’s financial position and the potential for catastrophic consequences to the class of a loss, no
matter how small the risk”). And in view of the other factors we must consider—the federal policy
favoring settlement of class actions, In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 535 (3d
Cir. 2004), the signal importance of GM and Ford to the economies of Michigan and the country,
see GM JA 155–56; Ford JA 182, and the extensive information-sharing between the companies,
the UAW, the class representatives and even McKnight and Bronson that preceded the settlements,
see GM JA 359—it is no wonder that both district courts approved the final settlements as “fair,
reasonable, and adequate” under Rule 23(e)(1)(C). See GM JA 175; Ford JA 210. We see it the
same way.
The objectors resist this conclusion on the ground that the settlements were sullied by
collusion—as shown by the UAW’s alleged conflict of interest, the fact that the parties settled soon
after the litigation began and the similarity of the settlements. The UAW’s alleged conflict of
interest does not affect the fairness of either settlement because the named class members, not the
UAW, legally represented the class and made the final decision to accept each proffered settlement.
The timing of a settlement by itself does not establish collusion. As our court has
recognized, a “tentative settlement can precede or be concurrent with class certification,” Clark
Equip., 803 F.2d at 881; something more is required to indicate collusion, see, e.g., Newby v. Enron
Corp., 394 F.3d 296, 306–07 & n.18 (5th Cir. 2004) (noting that while “[o]bjectors . . . smell[ed]
a fix because of the timing of the preliminary settlement,” they did not offer “the slightest factual
substantiation” of collusion); see also, e.g., Mars Steel Corp. v. Cont’l Ill. Nat’l Bank & Trust Co.
of Chicago, 834 F.2d 677, 684 (7th Cir. 1987) (noting that “[n]othing in the terms or timing”
suggests collusion when class action settled within a year of being filed). The timing of these
settlements, at any rate, has a far-from-nefarious explanation. Because the UAW, GM and Ford had
resolved most of their differences by the time each class was formed and because they had resolved
those differences on a time-is-of-the-essence basis (in view of the companies’ urgent fiscal needs),
each company had ample reasons for offering the retirees a settlement at the start of the litigation.
Nos. 06-1475/2064 UAW, et al. v. General Motors Corp., et al. Page 14
The parallels between the frameworks of the two settlements also do not undermine their
validity. As Bronson correctly acknowledges, GM and Ford “were bound by similar” pre-existing
collective bargaining agreements. Bronson Reply Br. at 20. The UAW negotiated both collective
bargaining agreements and faced the prospect of obtaining the consent from the active workers of
both car companies in approving the settlements. Under these circumstances, it made considerable
sense for the UAW to insist that each company’s set of workers embraced a similar settlement
framework.
The objectors also point to the unfairness of three features of the settlements: the lack of a
guarantee for the DC-VEBA trusts; the provision that requires retirees to pay any costs above those
deemed “reasonable and customary” when they use an out-of-network provider, see GM JA 309;
Ford JA 342–43; and the provision allowing the companies and the UAW to terminate the settlement
in 2011, see GM JA 294; Ford JA 323. The absence of a guarantee is understandable because the
underlying legal debate turns in part on whether a guarantee is required, and this feature of the
settlement poses little near-term risk because actuarial experts estimate that the mandatory
contributions by the car companies and active employees will keep the DC-VEBA trusts solvent for
at least 20 years. See GM JA 1300; Ford JA 1718. The out-of-network provider provision is a
sensible way of reducing overall healthcare costs without imposing additional costs on retirees or
active workers. And the termination provision allows the two sets of parties funding the DC-VEBA
trusts—the UAW and the car companies—to end the agreement if it becomes unworkable and, even
then, merely returns the retiree objectors to the position they wish to occupy today—of litigating the
high-stakes vesting question.
The objectors also say that the settlements violate the Age Discrimination in Employment
Act because they coordinate the provision of retiree healthcare benefits with the provision of
Medicare benefits—in the sense that the plans will not reimburse Medicare-eligible retirees for
expenses that Medicare would otherwise pick up itself. See 29 U.S.C. § 623(a)(1). Nothing about
this “wrap-around” program, and the sensible savings stemming from it, indicates that the
settlements are motivated by age animus or that they otherwise discriminate on the basis of age. See
Hazen Paper Co. v. Biggins, 507 U.S. 604, 611 (1993) (“When the employer’s decision is wholly
motivated by factors other than age, the problem of inaccurate and stigmatizing stereotypes
disappears. This is true even if the motivating factor is correlated with age . . . .”). The settlements
do not determine eligibility on the basis of age—or even Medicare eligibility—but merely ask all
employees to take advantage of a healthcare subsidy provided by the Federal Government before
taking advantage of a healthcare subsidy provided by the companies. “An employer does not violate
the Act by permitting” the government (rather than the employer itself) to provide “certain
benefits . . . even though the availability of such benefits may be based on age.” 29 C.F.R.
§ 1625.10(e); accord Erie County Retirees Ass’n v. County of Erie, Pa., 220 F.3d 193, 216 (3d Cir.
2000); accord also Age Discrimination in Employment Act; Retiree Health Benefits, 68 Fed. Reg.
41,542, 41,549 (proposed July 14, 2003) (to be codified at 29 C.F.R. § 1625.32(b)) (EEOC
regulation that would “exempt from all prohibitions of the Act such coordination of retiree health
benefits with Medicare or a comparable State health benefit plan”); Am. Ass’n of Retired Persons
v. EEOC, 489 F.3d 558, 568 (3d Cir. 2007) (holding that the proposed regulation “is within the
EEOC’s authority under the ADEA and valid” under the Administrative Procedures Act).
Our biggest concern about the settlements arises from a provision that no one
challenges—the term that purports to freeze in time the “case law,” though not the legislation or
regulations, that will govern any future dispute about the vesting of these retiree healthcare benefits.
See GM JA 296 (“[I]t is the express intention and agreement of GM, the UAW and Class Members
to apply the Case Law as it exists as of the Effective Date [of the settlement] to any litigation . . .
over . . . whether [retiree healthcare] benefits are vested should this Settlement Agreement be
terminated by GM . . . subject to any and all changes in the applicable law from subsequent
legislative, regulatory, or administrative developments . . . .”); Ford JA 325 (same as to Ford). This
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is not an everyday settlement term. While the right to negotiate risk represents a premise of all
settlements, we are not aware of any precedent for dealing with risk in this way: of permitting
litigants to require courts to resolve their disputes on the basis of case law from one era over
another—on the basis of Warren Court precedents over, say, Rehnquist Court precedents. At oral
argument, the parties could not point to any precedent for such a provision or indeed to any other
collective bargaining agreement that contained anything like it. And we have serious doubts about
the authority of private parties to dictate what judicial precedents a court may consider in resolving
a case or controversy brought before it.
Yet we need not resolve today whether Article III or state or federal law permits the parties
to include this term in the settlement agreement or would allow a court to enforce it. The provision
may never be invoked because it comes into play only when one of the parties terminates the
agreement. At the earliest, the provision could be invoked in 2011 when the parties have authority
to back out of the agreement. Not only does it make sense to await resolution of this novel question
if and when it springs into an enforceable existence, but the contours of the question remain unclear.
To avoid this serious constitutional question, a court might well construe the provision to avoid or
ameliorate it. Cf. Jones v. United States, 529 U.S. 848, 858 (2000) (“[W]here a statute is susceptible
of two constructions, by one of which grave and doubtful constitutional questions arise and by the
other of which such questions are avoided, our duty is to adopt the latter.”) (internal quotation marks
omitted); Edward J. DeBartolo Corp. v. Fla. Gulf Coast Bldg. & Constr. Trades Council, 485 U.S.
568, 575 (1988); Califano v. Yamaski, 442 U.S. 682, 693 (1979). A court’s responsibility to assess
the “fairness” of a settlement does not require it to ascertain every potential interpretation of the
agreement before there is even a dispute about its meaning.
The agreements, it is true, say that the disapproval of any one term of the agreement requires
the invalidation of the entire agreement. See GM JA 293; Ford JA 322. But the agreement does not
say that it may be enforced only after a court affirmatively blesses every one of its provisions. At
oral argument, we asked counsel for the parties and the objectors if they opposed this
solution—which is to say, waiting until a party seeks to enforce the freezing-case-law-in-time
provision before construing it and ascertaining its validity. No one objected to this approach or said
that it otherwise slighted the intent of the settling parties. We therefore wait for another day, a day
that may never come, to decide how or whether a party may enforce this provision.
D.
A fairness hearing contains several procedural safeguards: Parties to the settlement must
proffer sufficient evidence to allow the district court to review the terms and legitimacy of the
settlement, In re Gen. Tire & Rubber, 726 F.2d at 1084 n.6; class members “may object to [the]
proposed settlement” on the record, Fed. R. Civ. P. 23(e)(4)(A); and class members have a right to
participate in the hearing, Local No. 93, Int’l Ass’n of Firefighters, AFL-CIO C.L.C. v. City of
Cleveland, 478 U.S. 501, 529 (1986); Williams, 720 F.2d at 921. In satisfying these requirements,
a district court has wide latitude. It “may limit the fairness hearing to whatever is necessary to aid
it in reaching an informed, just and reasoned decision” and need not endow objecting class members
with “the entire panoply of protections afforded by a full-blown trial on the merits.” Tenn. Ass’n
of Health Maint. Orgs. v. Grier, 262 F.3d 559, 567 (6th Cir. 2001) (internal quotation marks
omitted). Objecting class members also do not have a vested “entitle[ment] to discovery.” In re
Gen. Tire & Rubber, 726 F.2d at 1084 n.6. A district court, moreover, need grant objectors
discovery only if they can make a colorable claim that the settlement should not be approved. See
Geier v. Alexander, 801 F.2d 799, 809 (6th Cir. 1986) (“To allow the objectors to disrupt the
settlement on the basis of nothing more than their unsupported suppositions would completely
thwart the settlement process. . . . [U]nless the objectors have made a clear and specific showing that
vital material was ignored by the District Court[,] [t]here is no need for the District Court to hold
Nos. 06-1475/2064 UAW, et al. v. General Motors Corp., et al. Page 16
an additional evidentiary hearing on the propriety of the settlement.”) (internal quotation marks
omitted).
GM, Ford, the UAW and the classes presented ample evidence to aid the district courts in
evaluating the propriety of these settlements. That evidence included a history of retiree healthcare
benefits at GM and Ford; financial records showing the fiscal burden that retiree healthcare imposes
on each company; financial data underscoring each company’s recent difficulties and estimates of
each company’s expected growth and earnings; analyses of that data by two sets of independent
financial experts, one hired by the UAW, one by the class; a procedural history of each case,
including how each class was formed; the arguments of Payne and the UAW, on the one hand, and
GM and Ford, on the other, regarding the underlying legal claims; the Memorandums of
Understanding ratified by the active workers of each company; the final settlement itself along with
estimates as to how the DC-VEBA trusts would operate to mitigate the costs imposed on retirees;
numerous affidavits regarding the public interest in the continued viability of the two companies;
and Payne’s own explanation for why he supported the settlements. The district courts also
considered the objections offered by absent class members, along with the live testimony presented
by McKnight and Bronson at each of the fairness hearings. On this record, the district courts plainly
had sufficient evidence and legal arguments before them to assess the propriety of each settlement.
No matter, the objectors respond, because it all came to nothing “beyond a few hearsay
declarations.” McKnight Br. at 42; Bronson Br. at 41. But no court of appeals, to our knowledge,
has demanded that district courts invariably conduct a full evidentiary hearing with live testimony
and cross-examination before approving a settlement. Our court, and several others, have instead
deferred to the district court’s traditionally broad discretion over the evidence it considers when
reviewing a proposed class action settlement. See Tenn. Ass’n of Health Maint. Orgs., 262 F.3d at
567 (approving of the district court’s “discretion to limit the fairness hearing . . . so long as [it is]
consistent with the ultimate goal of determining whether the proposed settlement is fair, adequate
and reasonable”); see also Petrovic v. Amoco Oil Co., 200 F.3d 1140, 1149 (8th Cir. 1999) (rejecting
argument that district court should have required an evidentiary hearing prior to ruling on settlement
when proponents “submitted voluminous supporting memoranda with citations to affidavits and
deposition testimony”); Edwards v. City of Houston, 37 F.3d 1097, 1119 (5th Cir. 1994) (“Neither
intervenors nor objectors are entitled to hold consent decrees hostage and require a full-blown trial
in lieu of a fairness hearing.”); Mars Steel, 834 F.2d at 684 (“The temptation to convert a settlement
hearing into a full trial on the merits must be resisted.”); cf. Rutter & Wilbanks, 314 F.3d at 1189.
Nor, at all events, have the objectors shown how the absence of a full trial harmed them. See Fed.
R. Civ. P. 61.
Also deficient is the objection that the reports submitted by the parties’ independent financial
experts did not satisfy Evidence Rule 702 or Daubert v. Merrell Dow Pharmaceuticals, Inc., 509
U.S. 579 (1993). The Rule 702 argument, again, overlooks the differences between a full trial and
a fairness hearing. In a trial, the judge must strictly screen expert opinions for “evidentiary
relevance and reliability” because a jury often has difficulty assessing such evidence. Id. at 594–95.
In a fairness hearing, the judge does not resolve the parties’ factual disputes but merely ensures that
the disputes are real and that the settlement fairly and reasonably resolves the parties’ differences.
The Daubert objection suffers from the same problem, and, what is more, this screening requirement
remains “a flexible one,” id. at 594, and the objectors simply have not shown how the district courts
abused their discretion in considering these financial reports. See GM JA 184 (“[T]he methodology
underpinning the declarations at issue appear[s] to meet the standard established in Daubert.”); Ford
JA 204 (“[I]t is clear that the expert opinions . . . would be admissible because they are relevant and
reliable . . . . The qualifications and experience of [the experts] . . . attest to their ability to conduct
financial and actuarial analysis.”); see also Gen. Elec. Co. v. Joiner, 522 U.S. 136, 141 (1997).
Nos. 06-1475/2064 UAW, et al. v. General Motors Corp., et al. Page 17
The objectors next argue that they could not fully participate in the fairness hearing because
they were denied discovery about the settlement negotiations. But objecting class members “are not
automatically entitled to discovery.” In re Gen. Tire & Rubber, 726 F.2d at 1084 n.6. A district
court need grant discovery only if the objectors make a colorable claim that the settlement should
not be approved, see Geier, 801 F.2d at 809, and neither McKnight nor Bronson has made any such
showing here.
Bronson fires two parting shots, both wide of the mark. He claims that the district court
should have reviewed the preliminary certification of the Ford class after the first district judge
recused himself from the case. See Bronson Br. at 37–38. But the new judge did that very thing.
See Ford JA 166–70. He then claims that the district court erred in denying his motion for relief
from judgment based on Ford’s “announcement that it is offering buyouts to 75,500 hourly
workers.” Bronson Br. at 42. Because Bronson has not appealed this September 19, 2006 order,
we have no jurisdiction over it. See Ford JA 213 (appealing order entered by court “on the 13th day
of July, 2006”).
III.
For these reasons, we affirm, though for the reasons stated in the opinion we defer
considering the precise meaning and validity of the provision that purports to freeze in time the
“case law” that will govern any future dispute over the vesting of the retirees’ healthcare benefits.