881 F.3d 1111
9th Cir.2018Background
- Trump University sold seminars and mentorship programs promising mentoring and real-estate guidance; many purchasers, including Sherri Simpson, later alleged fraud and sued.
- Two federal class actions (Low and Cohen) were certified under Rule 23(b)(3); class notices (mailed short-form + long-form on a website) informed members they must opt out by November 16, 2015 if they wished to sue separately.
- Simpson received the notice, did not opt out by the deadline, purchased the Gold Elite program (~$17,500), later submitted a settlement claim and then objected, asserting she had been promised or was entitled to a second, settlement-stage opt-out opportunity.
- The parties reached a settlement (≈$21M to class members; $4M to NY AG), which expressly barred late opt-outs; the district court approved the settlement and denied Simpson’s request to opt out.
- Simpson appealed, arguing (1) the class notice promised a second opt-out opportunity (or due process required one), and (2) the district court abused its discretion in approving the settlement without allowing a settlement-stage opt-out.
Issues
| Issue | Plaintiff's Argument (Simpson) | Defendant's Argument (Plaintiffs/Settling Parties) | Held |
|---|---|---|---|
| 1. Standing | Simpson has a concrete interest in being excluded at settlement and thus standing to challenge denial of a second opt-out. | Settlement bars late opt-outs; Simpson’s claimed injury is not redressable. | Simpson has Article III standing to raise the claim. |
| 2. Did the class notice promise a second, settlement-stage opt-out? | The long-form notice’s phrase “how to ask to be excluded from any settlement” promised a second opt-out when a settlement occurs. | The notices, read as a whole, gave a single opt-out opportunity (deadline Nov. 16, 2015); the parenthetical only refers to exclusion from settlement benefits, not class membership. | The notice did not promise a second opt-out; a reasonable reader would understand only one opt-out opportunity. |
| 3. Does due process require a second opt-out at settlement? | Even if notice didn’t promise a second opt-out, due process compels one to protect absent class members. | Due process requires notice and a single opt-out; no precedent requires a second opt-out and requiring one would impede settlements. | Due process does not require a second, settlement-stage opt-out; Officers for Justice controls. |
| 4. Did the district court abuse its discretion approving the settlement without allowing a second opt-out? | Denying a settlement-stage opt-out here was an abuse because Simpson would be forced into a large settlement that she would have rejected. | The district court reasonably weighed risks, complexity, and high recovery (80–90%); settlement approval was within discretion. | No abuse of discretion; district court’s approval was logical and supported by the record. |
Key Cases Cited
- Officers for Justice v. Civil Serv. Comm’n of S.F., 688 F.2d 615 (9th Cir. 1982) (due process does not require a second opt-out at settlement; single opt-out at certification suffices)
- Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) (due process requires notice and an opportunity to opt out for absent class members)
- Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (absence of notice and opt-out in a damages class violates due process)
- Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950) (notice must be reasonably calculated to inform absent parties; reasonableness standard governs sufficiency)
- Devlin v. Scardelletti, 536 U.S. 1 (2002) (class members’ interests in settlement approval can create a case or controversy for Article III purposes)
- Makaeff v. Trump Univ., LLC, 715 F.3d 254 (9th Cir. 2013) (background precedent regarding Trump University’s practices)