48 F.4th 110
2d Cir.2022Background
- Plaintiffs (public‑service borrowers) sued Navient alleging it gave incorrect or misleading information about Public Service Loan Forgiveness (PSLF), steering borrowers into forbearance and non‑qualifying plans.
- The District Court dismissed most claims, leaving a New York GBL § 349 claim, and expressed skepticism about certifying an adjudicative class under Rule 23(b)(3).
- Parties negotiated a settlement creating a mandatory nationwide Rule 23(b)(2) settlement class (members retain individual monetary claims), with Navient agreeing to operational reforms and a cy pres contribution (raised to $2.25 million) to create a nonprofit (Public Service Promise) to provide PSLF counseling.
- The District Court preliminarily and then finally approved the settlement, certified the Rule 23(b)(2) class, approved $15,000 service awards for named plaintiffs, denied requested attorney fees tied to union reimbursement, and overruled objectors.
- Objectors (Yeatman and Carson) appealed, arguing lack of standing/class certification under (b)(2), unfair settlement/cy pres misuse, First Amendment compelled speech, conflicts from union involvement, and that incentive awards are barred by 19th‑century precedents.
- The Second Circuit affirmed, holding the district court did not abuse its discretion on standing, certification, settlement approval (Grinnell factors), cy pres, First Amendment, union involvement, or incentive awards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing / Rule 23(b)(2) certification | Class lacks standing for injunctive relief because many members no longer use Navient | At least one named plaintiff retained a Navient relationship; that suffices for class standing and (b)(2) certification based on uniform conduct | Affirmed: standing satisfied (some named plaintiffs remain exposed); (b)(2) proper because injunctive/equitable reforms (and cy pres) benefit class generally |
| Appropriateness of Rule 23(b)(2) vs (b)(3) | Class should be (b)(3); settlement mainly provides monetary relief and releases monetary claims | Relief is primarily injunctive/equitable (operational reforms and a cy pres nonprofit); monetary claims preserved individually | Affirmed: (b)(2) certification appropriate; relief benefits class and different members may benefit differently |
| Fairness of settlement & cy pres award | Cy pres gives no direct relief to class; funds could be distributable; conflicts/insufficient notice concerning union role | Settlement reasonable under Grinnell factors; fund was a negotiated equitable contribution to an organization directly related to PSLF; union support aided prosecution | Affirmed: district court properly applied Grinnell factors; cy pres permissible where directly related and settlement did not strip monetary claims; union involvement not shown to compromise adequacy |
| First Amendment and incentive awards (Greenough challenge) | Cy pres recipient coerces speech; service awards barred by Greenough and Pettus | Settlement is private conduct; court approval is Rule 23(e) oversight (not state action); Melito permits reasonable incentive awards for representatives | Affirmed: no state‑action First Amendment violation; incentive awards upheld as within district court discretion and not categorically forbidden by Greenough/Pettus (Melito controls) |
Key Cases Cited
- Berni v. Barilla S.p.A., 964 F.3d 141 (2d Cir. 2020) (limits Rule 23(b)(2) certification when injunctive relief cannot redress class members' injuries)
- City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974) (set of factors for approving class‑action settlements)
- Melito v. Experian Mktg. Sols., Inc., 923 F.3d 85 (2d Cir. 2019) (upholding incentive awards and rejecting Greenough/Pettus as categorical bar)
- Wal‑Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (Rule 23(b)(2) requires that injunctive relief be appropriate for the class as a whole)
- Frank v. Gaos, 139 S. Ct. 1041 (2019) (standing requirement in class action settlements: at least one named plaintiff must have Article III standing)
- Trustees v. Greenough, 105 U.S. 527 (1882) (historic rule on reimbursements to litigants from common funds)
- In re Google Inc. Cookie Placement Consumer Priv. Litig., 934 F.3d 316 (3d Cir. 2019) (cy pres permissible where award has direct nexus to class interests)