[00:00:01] Speaker 00:
Case 16-5189, et al.

[00:00:05] Speaker 00:
Marilyn Keep Siegel, et al.

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The Thomas J. Vilsack.

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Donovan Craig Tingle, silent class member, appellant.

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Mr. Sherman for the appellant.

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Mr. Sellers for the athletes.

[00:01:18] Speaker 04:
Good morning, Your Honors.

[00:01:19] Speaker 04:
My name is William Sherman.

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At council table is my colleague, Gabriel Hills, and appellant, Craig Tingle.

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May it please the Court, we represent the class representative, Keith Mandan, who was a class representative in the Keeps Eagle class of Native American farmers and ranchers.

[00:01:42] Speaker 04:
We appeal from the district court's order approving an addendum to the Keep Segal Class Action Settlement Agreement.

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The addendum authorizes the distribution of over $300 million of money taken from the Judgment Fund for the purpose of settling the ECOA discrimination claims.

[00:02:06] Speaker 04:
Instead of having that money pay what we believe are the people who are entitled to it, those Native American ranchers and farmers who were injured by decades of discrimination by the USDA, the addendum approved by the lower court would result in over $300 million from the Judgment Fund going to charities who have no claims against the government.

[00:02:37] Speaker 04:
and who were not injured by the alleged discrimination in the lawsuit.

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This is accomplished through a side prey provision in the settlement agreement.

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Side prey provisions, while they have not been explicitly approved, their use in this circuit, there are cases in which the district courts and the circuit has

[00:03:04] Speaker 04:
allowed the use of side prey to distribute residual or leftover funds from settlement agreements.

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However, I would suggest that in this instance, this is side prey run amok.

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We have a situation where what is represented is the $380 million, which is a majority of the fund.

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which were residual funds that were left as a result of the distribution process that was put in place by the settlement agreement.

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What we believe Judge Sullivan should have done, and we argued that it was an abuse of his discretion in his Rule 23 analysis, he abused his discretion in that

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If you read his opinion, the one that we appeal from, his analysis is very sparse as to whether or not the addendum was fair, reasonable, and adequate.

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And we believe that because Judge Sullivan gave what we see as a cursory once over,

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saying that he believed that the terms of the addendum were fair, reasonable, and adequate, that he missed an opportunity.

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And particularly, he did not apply the analysis and the reasoning that this court set out in Democratic Central Committee.

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In Democratic Central Committee, this court was faced with

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the issue of what to do with a fund, a judgment fund.

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And what the court first did was it considered whether or not it could identify those who were injured.

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The problem with Democratic Central Committee was that those who were injured had ridden buses 25 years ago, and it was certainly hard, if not impossible, to identify them.

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Secondly, the court considered whether or not it was economically viable to, in fact, distribute the funds to the individuals.

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And the court concluded that because there were likely to be so many, the recovery would be of a miniscule amount, and therefore it did not meet

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the economic viability.

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They also concerted whether or not it was logistically feasible, which goes back to whether or not they could identify and notify those people who were entitled to the funds.

[00:05:46] Speaker 01:
But here, we have a different problem, don't we?

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Because we have claimants who are identified, but they've also been compensated.

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That's correct.

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They have been compensated under the settlement agreement.

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There's case law that says that simply because one is compensated to the amount that they agreed in the settlement agreement does not mean that they have in fact been fully compensated.

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And what the sister circuits have done in cases where there are side prey leftovers is that they have considered, I think, what is consistent with the analysis that this court used in Democratic Central Committee.

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analyze whether or not they can readily identify those who are injured and who should be compensated, whether or not it is economically viable and economically feasible to, in fact, distribute the money to them.

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The other consideration is whether or not they have been fully compensated.

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Here,

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While you have people who have been compensated, it is clear that they have not been fully compensated.

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The settlement agreement by its very nature is a compromise of not only the issues, but of the... It's a compromise.

[00:07:03] Speaker 04:
It's also a release.

[00:07:04] Speaker 04:
That's correct.

[00:07:06] Speaker 05:
That's correct.

[00:07:07] Speaker 05:
But how does the district court judge get around the requirements of the settlement?

[00:07:11] Speaker 05:
You're talking as if there are no contractual, so to speak, terms that bind the district court judge.

[00:07:17] Speaker 05:
The district court doesn't have a freewheeling mandate.

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That's correct.

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But to just look at what he or she thinks would be fair.

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So their side pray is part of the agreement and the addendum

[00:07:31] Speaker 05:
uh... requirements of party agreement this court judges have the authorities do as he sees fit that's correct but the district court judge does have broad equitable authority and if you want to know no i'm not sure uh... i mean i hear you

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But I'm not sure where that's coming from.

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Broad, equitable authority to say, no matter what you bring me, I think the right result is this, and this is what I'm going to impose?

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The Court does not necessarily have the ability to change the terms of the contract.

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Right.

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And that is not what we're suggesting here.

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If you look at the contract as a whole, which the Court must do when applying the Rule 23 fair, reasonable, and adequate analysis,

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The court can say, well, the intent of the parties was, first of all, to compensate those who were injured.

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Can't the court also say the intent of the parties was that the agreement couldn't be modified unless all parties agreed to it?

[00:08:29] Speaker 04:
Well, that's what they said here.

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They said that the agreement could not be modified unless all parties agreed to it.

[00:08:35] Speaker 03:
So then why isn't that just as important as any other language?

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Well, we believe that it is.

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And part of our appeal is that Mr. Mandan, our client, did not agree.

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And he is defined as a party under the settlement agreement.

[00:08:50] Speaker 01:
Wouldn't you be changing the terms of the contract, though, if you change the SIPRE provision?

[00:08:56] Speaker 01:
I mean, I think, if I understand your argument, it is that the appropriations clause would not permit payment to non-injured parties.

[00:09:08] Speaker 04:
Well, that's correct, and that's a slightly different argument.

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The first argument is that the side-pray provision is actually a contingency.

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The parties would argue now, which I think is a bit of revisionist history, that, oh, well, we planned that there would be a leftover, and so we put this side-pray provision in there so that any leftover would be used ABCD in this matter.

[00:09:37] Speaker 04:
In fact, side pray is a ministerial tool.

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It's often used for the contingency that there would be residual funds.

[00:09:46] Speaker 03:
But in a class action settlement, there's always leftover money.

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That may and may not be true.

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Because if the ALI principles, which I think are consistent with the analysis that this court made in Democratic Central Committee,

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If that is carried forward, and the court looks at whether or not they can compensate those who are injured.

[00:10:14] Speaker 05:
But you're not really addressing our concerns.

[00:10:16] Speaker 05:
The agreement is, as I pray.

[00:10:20] Speaker 05:
Now, there is an agreement you can amend as a dispute over whether you have to have unanimity or not.

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That's a different question.

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The most, it seems to me, just so you understand, at least I'm concerned with this, this court judge's hands are pretty much tied.

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You could win on what his first thought was.

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It's not binding law of the case.

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But his first thought was you had to have unanimity.

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I suppose we could look at the contract and say his first instinct was probably right, so he couldn't approve it without unanimity.

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But I don't know how you can claim anything more.

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All you'd get was a remand to the parties to say, well, if you want to have an addendum, you'd better all be unanimous.

[00:11:01] Speaker 05:
The district court judge can't frame it.

[00:11:04] Speaker 04:
What I suggest is that if this circuit is going to be consistent with the other circuits, the first circuit in Lupron, the third circuit in NRA Baby Products, the eighth circuit in NRA Bank America, they were not bothered by the fact that there was a side-pray clause in the settlement agreement.

[00:11:28] Speaker 04:
what they looked to were the equities of the situation and in those cases what the court said was the courts had broad equitable authority to look at the equities of the situation.

[00:11:44] Speaker 04:
To ignore the side prey?

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They did not ignore the side prey.

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What they did was they said can we in fact identify those who were injured and distribute the money to them before

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honoring what is a contingent part of the contract that if there is a residual, then the money would be used x, y, and z. And so I think what we have to do is look at what side prey is and where it comes from.

[00:12:13] Speaker 04:
Side prey is a tool that was used in estates and trusts, and it still is.

[00:12:20] Speaker 05:
And when it is used... Did those cases have side prey in the settlement agreement?

[00:12:27] Speaker 05:
I don't recall that.

[00:12:29] Speaker 05:
I understand what you're arguing about, but I'm still faced with a situation where there's a contract that requires side prey and less as an amendment.

[00:12:40] Speaker 05:
And then there's a question as to whether or not the amendment has to be pursuant to a unanimous agreement or a majority.

[00:12:47] Speaker 05:
But I don't read those cases to say what you're saying.

[00:12:50] Speaker 04:
I understand.

[00:12:52] Speaker 04:
The point I'm trying to make is this is exactly why Cypré is disfavored.

[00:12:57] Speaker 05:
And this is why Justice Roberts... I don't see any cases that say that Cypré is unlawful.

[00:13:04] Speaker 05:
So you're asking us to do something that's never been done.

[00:13:06] Speaker 04:
No, no, I'm asking you to do something that's very consistent with what's being done.

[00:13:11] Speaker 05:
But these cases don't have... But Cypre is part of the settlement.

[00:13:14] Speaker 05:
Well, I believe they do.

[00:13:17] Speaker 05:
Well, I mean, I'll go back and look at them.

[00:13:18] Speaker 05:
I did not see the court ignoring the settlement agreement requiring Cypre, and if you're right,

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I'm certainly happy to be informed.

[00:13:27] Speaker 04:
Well, I will say that in NRADE Bank America, what the settlement agreement did was it left to the court's sole discretion.

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Yeah, you don't have that.

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What the distribution was.

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But that would be great for you.

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Then you'd have a terrific argument.

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That's exactly what we don't have here.

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NRADE Baby Products out of the Third Circuit 2012, the settlement agreement did contain a side-pray provision.

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And what the court said

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In that instance, and the reason I go to in-ray baby products is because I think it's very analogous to this case.

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Because in in-ray baby products, there was a side-pray provision.

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And in-ray baby products settled, they had the fairness hearing, and the distribution process was in process, and the judgment was made final.

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At the end of the distribution plan, of the distribution process, there was $3 million left going to the injured parties and $18 million going to Cyprak.

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And what the judge said was, and consistent with this case, is that the district court

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in applying the Rule 23E analysis as to whether or not the settlement agreement and the distribution plan was fair, reasonable, and adequate lacked the requisite facts to make such a decision.

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Here, this court also lacked the requisite facts because the judgment was final before the distribution process even began.

[00:15:06] Speaker 04:
And once the distribution process began, you have a result where more than half of the settlement fund is left over and is not being distributed to the people who are injured.

[00:15:19] Speaker 01:
Do you think it makes a difference here that the defendant here is a governmental entity?

[00:15:26] Speaker 01:
I thought that was the point of the appropriations clause argument.

[00:15:30] Speaker 01:
Yes.

[00:15:31] Speaker 04:
It does make a difference.

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What makes a difference is that the money originates out of the judgment.

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And the Judgment Fund limits what the money can be used for and who can actually receive the money.

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And who can receive money under the Judgment Fund are those who have claims against the government.

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And it's axiomatic that the government cannot accomplish indirectly what it cannot achieve directly.

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And what it is attempting to achieve indirectly here is the distribution of a huge sum of money to charities who don't have a claim against the government and could never qualify for money out of the judgment box.

[00:16:10] Speaker 03:
There's lots of problems with your argument, but the two most prominent ones are you didn't make it to the district court, and you agreed to this procedure in the first place.

[00:16:21] Speaker 04:
To address whether or not we addressed it in the district court, we did object to the settlement agreement.

[00:16:33] Speaker 04:
I'm sorry, we did object to the addendum to the settlement agreement.

[00:16:36] Speaker 04:
It is clear in Mr. Mandan's objection that we prepared for him.

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that what we opposed was the fact that this court could not use monies from the judge.

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We did not mention judgment money, but we said that it was clear that the monies could not be used to pay individuals who did not have claims against the government.

[00:16:59] Speaker 04:
And as far as notice of that argument is concerned, Judge Sullivan stated precisely the same thing.

[00:17:07] Speaker 04:
in his July 2015 opinion, he said that the courts would be well to look at whether or not monies from the judgment fund could be used for this purpose, which means to give it to charities, so that the court and all the parties, I think, were on notice that this was an issue that was raised, and we believe that we sufficiently preserved it for argument here.

[00:17:38] Speaker 04:
I am out of time, unless there are more questions, but I would like to respond if the court has any questions.

[00:17:45] Speaker 03:
But the Judgment Fund wasn't a problem at the settlement.

[00:17:47] Speaker 03:
It's only a problem if there's too much money going out.

[00:17:51] Speaker 04:
Well, and I don't think it really is based on the amount of money, although the amount of money does get one's attention under this circumstance.

[00:18:01] Speaker 04:
But the Judgment Fund is a novel argument.

[00:18:05] Speaker 04:
I don't think that it's ever been raised.

[00:18:07] Speaker 04:
And so from a practical matter, at the time of the settlement agreement, who would raise objections to the Judgment Fund?

[00:18:17] Speaker 04:
It would be those parties who were involved in the settlement agreement in the first place.

[00:18:22] Speaker 05:
The problem is, the reason it's not raised, there's so many complications with it.

[00:18:25] Speaker 05:
And you can turn it, I can turn it on your head by saying,

[00:18:29] Speaker 05:
If you apply your argument all the way through, the argument can be made that those who have already received what the court and the parties determined they were due pursuant to this litigation cannot claim they're entitled to more and therefore to give them more to violate the judgment clause.

[00:18:47] Speaker 05:
I just don't think the argument plays out.

[00:18:50] Speaker 05:
They got what they were entitled to get.

[00:18:53] Speaker 05:
And an argument, using your argument, you could say, just like the charities that you're opposing, you could say the individual is not entitled to any more either, because that individual got what we determined that individual was entitled to get.

[00:19:07] Speaker 05:
I mean, apart from the fact you never raised it, I think there are good reasons why not to raise it, because it's just never been applied this way.

[00:19:15] Speaker 05:
And no one so far as I can tell, including the Third Circuit, has said that Cypre is an impermissible disposition of funds.

[00:19:25] Speaker 05:
I can look at that Third Circuit case.

[00:19:26] Speaker 05:
I'm looking at it now.

[00:19:27] Speaker 05:
It's not saying what you're suggesting.

[00:19:29] Speaker 04:
Our argument is not that Cypre is an impermissible distribution of funds.

[00:19:35] Speaker 04:
But we're saying that it is when those funds originate from the judgment fund.

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Because in order for funds to originate from the Judgment Fund, which is an appropriation, it has to be specific.

[00:19:49] Speaker 04:
An appropriation has to have a purpose.

[00:19:53] Speaker 05:
To an aggrieved party who's within the bounds of the claim, right?

[00:19:57] Speaker 05:
See, that cuts against you.

[00:19:59] Speaker 05:
If you follow through in your argument on the Judgment Fund, I just don't think it works for you.

[00:20:03] Speaker 05:
Well, you're saying you can't take any of this money except to give it to an aggrieved party to the limits of that agreement.

[00:20:12] Speaker 05:
Well, all these parties have already been given their disposition.

[00:20:18] Speaker 04:
I would suggest that the court take a look at the cases that we cited from Sister Circuits, which have judgment fund.

[00:20:30] Speaker 04:
I'm sorry, they don't have judgment, but they do have

[00:20:33] Speaker 04:
side prey situations in them in which the plaintiffs have been compensated according to what they agreed to in the settlement agreement.

[00:20:47] Speaker 03:
Let me ask you this question.

[00:20:50] Speaker 03:
Do the plaintiffs have a claim against the United States?

[00:20:57] Speaker 04:
Currently?

[00:20:58] Speaker 03:
Yeah, right now, today, as of this moment.

[00:21:01] Speaker 04:
which is part of what I'm trying to raise.

[00:21:03] Speaker 04:
There's a lawsuit filed right now that claims that the government violated the Administrative Procedures Act by using the Judgment Fund precisely in this way.

[00:21:21] Speaker 04:
Because the Judgment Fund, by our interpretation, and this is a novel argument, is not designed... I'm talking about these plaintiffs in this case.

[00:21:31] Speaker 05:
nobody they do not be split because they release their claim state they release their court then as judge edwards saying you're chasing your tail here you're just going around the circles your argument kills your point your judgment for argument if it's right means you lose these people have no claims well your argument is it would be it would violate the judgment fund to give them any more money they've released their claims are done

[00:22:00] Speaker 04:
It would not be in violation of the judgment fund to give them the money that they deserve for the claims which they alleged in the original lawsuit.

[00:22:13] Speaker 03:
That's a tough one.

[00:22:14] Speaker 05:
That is a very tough argument.

[00:22:16] Speaker 05:
I hear you.

[00:22:18] Speaker 05:
Thank you, Your Honor, if there are no more questions.

[00:22:26] Speaker 02:
Good morning.

[00:22:27] Speaker 02:
May it please the court, I'm Joseph Sullers, represent the plaintiff class.

[00:22:31] Speaker 02:
With me at council table is counsel for Mrs. Keith Siegel.

[00:22:35] Speaker 02:
We believe that this court is faced with, and the district court was faced with, a very narrow choice.

[00:22:42] Speaker 02:
either to live with and approve, leave in place a CyPRE provision that nobody liked anymore because they thought the circumstance had changed and it was no longer going to serve the best interest of the class, or approve the addendum that was proposed and ultimately adopted by the court.

[00:23:02] Speaker 02:
Those are the two choices that were before the district court.

[00:23:05] Speaker 02:
We think those are the two choices that are here.

[00:23:08] Speaker 02:
My colleague raises an argument in which they would like a third choice, which is to have this court direct the district court to rewrite the agreement

[00:23:19] Speaker 02:
And we believe that this court's precedent, and by the way I can go through these other cases, they support the position that we take here.

[00:23:27] Speaker 02:
They do not authorize district courts to rewrite the agreement.

[00:23:33] Speaker 03:
But the agreement itself has a provision on how it can be modified.

[00:23:40] Speaker 02:
Yes.

[00:23:41] Speaker 03:
in that provision doesn't seem to have been complied with.

[00:23:44] Speaker 02:
Yeah, with all respect, I disagree.

[00:23:47] Speaker 02:
Let me go through it with you.

[00:23:49] Speaker 02:
The agreement says that it requires the approval of the parties.

[00:23:54] Speaker 02:
The question is, who qualifies as the plaintiffs?

[00:23:57] Speaker 02:
There's a provision that says the plaintiffs are the individual plaintiffs named, the members of the class, and the class representatives.

[00:24:05] Speaker 02:
Now that provision was drafted with the purpose in mind

[00:24:09] Speaker 02:
of ensuring that those people's claims would be extinguished as part of the release in the case.

[00:24:17] Speaker 03:
And so it defined... But you didn't define parties to mean one thing on one circumstance and a different thing in another circumstance.

[00:24:26] Speaker 03:
There's just one definition of parties and plaintiffs.

[00:24:29] Speaker 02:
Right.

[00:24:29] Speaker 02:
We do not have a separate definition of plaintiffs.

[00:24:31] Speaker 03:
So how can you use one definition at one point in time when you're analyzing the settlement agreement and a different definition that is made up out of whole cloth at a separate time?

[00:24:46] Speaker 02:
because we believe that the purpose of the agreement ultimately has to be read through the prism of the entire scope of Rule 23.

[00:24:59] Speaker 03:
Well, why isn't the purpose of the agreement to make it really, really hard to change the settlement agreement?

[00:25:06] Speaker 03:
That everybody has to agree

[00:25:09] Speaker 03:
before there can be a modification?

[00:25:10] Speaker 02:
Well, first of all, the actual membership of the class is not known.

[00:25:15] Speaker 02:
So if that were the reading given to it and Judge Sullivan rejected that reading, that would in effect mean there is no, it would define, it would mean that modification is impossible.

[00:25:27] Speaker 03:
uh... and that clearly was not the intention of the parties cool couldn't parties put in the settlement agreement disagreement can't be modified under any circumstances by the party but it certainly could but that's not what the supreme said i mean you're saying that it would be absurd for that result too to be the case here that provision is an absurd

[00:25:56] Speaker 03:
Right?

[00:25:57] Speaker 02:
I'm sorry, what's the provision?

[00:25:58] Speaker 03:
It would result in the exact same outcome.

[00:26:03] Speaker 02:
I'm sorry.

[00:26:03] Speaker 03:
The provision that said this settlement agreement can't be modified.

[00:26:06] Speaker 02:
Oh, certainly if the agreement said the terms of the agreement are not subject to modification, that's a perfectly permissible provision.

[00:26:15] Speaker 02:
And if the parties had put that in here, there would be no opportunity to revise it.

[00:26:20] Speaker 03:
But I think the... And that provision isn't inherently absurd, right?

[00:26:24] Speaker 02:
That provision's not inherently absurd.

[00:26:26] Speaker 02:
I'm sorry, I didn't mean to suggest any provision was inherently absurd, but the interpretation of this provision as necessarily requiring the consent of every class member

[00:26:38] Speaker 02:
uh... is inconsistent with the provision that later that says that there's an opportunity to modify it because the membership of the class is unknown so we would be it would depending on members of the class who are not that can't be ascertained in order to determine whether uh... in order to approve a settlement modification of the settlement what's the majority is opposed to you know it's that we're talking about

[00:27:03] Speaker 02:
i'm sorry majority is the majority we're talking about you need majority consent you need some kind of unique consent from some yes so how are you count we're not we're not counting what we have proposed and what the district court approach the way approached it is that this term has to be read through the from the perspective

[00:27:21] Speaker 02:
of what Rule 23 contemplates, what this Court's decision in Thomas v. Albright contemplates, what the Advisory Committee rules, Rule 23 contemplate, which is that the Court consider the views of the recommendations of counsel for the class, along with the name plaintiffs, and any other members of the absolute members of the class who wish to be heard.

[00:27:43] Speaker 02:
And the Court held a full day hearing.

[00:27:46] Speaker 02:
And gave all class representatives an opportunity to submit comments and to submit their positions.

[00:27:55] Speaker 05:
So your argument is simply that the contract does not say, and I think you're adding it would be absurd to say it, the contract does not say there cannot be an amendment unless every affected party agrees.

[00:28:08] Speaker 02:
In this context, I think that's an unreasonable reading of this agreement.

[00:28:13] Speaker 02:
uh... i do i recognize judge wilkins position agree that had the agreement said under no circumstances made the terms of this agreement be modified that would be a permissible term of the agreement and i understand that that's not really my sorry my question trying to understand what what you mean to me to say it out how

[00:28:36] Speaker 05:
A proposed amendment can be effectuated.

[00:28:39] Speaker 05:
Who can object?

[00:28:40] Speaker 05:
How many does it take?

[00:28:42] Speaker 05:
The district court initially thought

[00:28:44] Speaker 05:
unanimity was required.

[00:28:45] Speaker 05:
Unanimity among whom?

[00:28:47] Speaker 02:
Yeah, well the district court did its own interpretation the first time around and said it recognized that to require the consent of all the class members is impossible and therefore it read that out of the provision and instead said but I do think it requires the consent of all the named plaintiffs which was not there available at the time and rejected on that basis.

[00:29:11] Speaker 03:
Why isn't the

[00:29:14] Speaker 03:
just as reasonable to say all the known class members.

[00:29:21] Speaker 03:
Well, I mean, if they're unknown, they're unknown.

[00:29:24] Speaker 03:
But to the extent that you know who they are, then you send a notice to them and see if any of them object.

[00:29:31] Speaker 02:
Well, first of all, they were all informed.

[00:29:34] Speaker 02:
of the proposed settlement.

[00:29:37] Speaker 02:
There was a full day hearing.

[00:29:39] Speaker 02:
Some came in and expressed their support of it.

[00:29:42] Speaker 02:
Some expressed their opposition to it.

[00:29:44] Speaker 02:
But what they said, no one, I should add, came in and defended the original Tsai Pre provision.

[00:29:52] Speaker 02:
Nobody proposed to keep that in place.

[00:29:55] Speaker 02:
Those who objected wanted the money for themselves.

[00:29:58] Speaker 02:
They were successful claimants, and they wanted what Mr. Mandin is asking for.

[00:30:03] Speaker 02:
That is not, nobody came in and said, oh, we really like the process.

[00:30:09] Speaker 03:
I understand that, but the motion that was on the table was this particular addendum.

[00:30:17] Speaker 03:
Correct.

[00:30:17] Speaker 03:
And if all of the plaintiffs who were known were notified of it,

[00:30:24] Speaker 03:
And one comes forward and says, I object to this addendum.

[00:30:28] Speaker 03:
Why isn't that just a reasonable way to decide that then the addendum can't be approved?

[00:30:36] Speaker 03:
Perhaps a motion under Rule 60 could be made.

[00:30:39] Speaker 03:
But we can't proceed under this fashion.

[00:30:42] Speaker 02:
Well first, I'm sorry, Rule 60 motion was made and rejected, I think ultimately properly so, and nobody's appealing from that portion of the decision as I understand it.

[00:30:54] Speaker 02:
But what Judge Sullivan did I think properly in his second opinion is he looked at this consent provision through the prism of the representational nature of class actions.

[00:31:06] Speaker 02:
and concluded that it would be improper and the rules and both the rule twenty three and this court's jurisprudence in this area do not authorize a single individual to hold up what the court may otherwise conclude is in the best interests of the class which the court ultimately found.

[00:31:23] Speaker 02:
What did it take to approve the original settlement?

[00:31:29] Speaker 02:
I think simply for the court to find it was fair and reasonable.

[00:31:33] Speaker 05:
No, no, I mean who reached it?

[00:31:35] Speaker 02:
i'm sorry there was a unanimity no no no the negotiation was done with class council and the u.s.t.a.

[00:31:41] Speaker 03:
and it's governed by the standards in rule twenty three right

[00:31:44] Speaker 02:
Correct.

[00:31:46] Speaker 02:
It was done with the input of the class representatives.

[00:31:49] Speaker 02:
We gave very full notice to everyone before the fairness hearing.

[00:31:53] Speaker 02:
But there was no unanimity requirement.

[00:31:55] Speaker 02:
No unanimity requirement.

[00:31:56] Speaker 02:
So there was no polling done of that would ascertain that.

[00:31:59] Speaker 03:
So the question is, does Rule 23 govern what the district court can do at this point, or does the instrument?

[00:32:07] Speaker 03:
govern what the district court can do at this point.

[00:32:11] Speaker 03:
Is that really what this points down to?

[00:32:13] Speaker 02:
Well, not entirely, because I think that we're dealing with an agreement that was the subject of an approval by the court back in 2011.

[00:32:23] Speaker 02:
In order for the court to approve it, it must have approved it within the confines of what was required of Rule 23.

[00:32:30] Speaker 02:
Otherwise, it would have acted outside the scope of its authority.

[00:32:34] Speaker 02:
AMCAM certainly makes clear that courts cannot, on their own, adopt rules that are inconsistent with Rule 23.

[00:32:40] Speaker 02:
We argued, and the Court ultimately agreed, that the interpretation of this definition of parties and the plaintiffs has to be read from the perspective of what Rule 23 permits.

[00:32:53] Speaker 02:
Rule 23 does not permit a single individual to hold up an entire agreement

[00:33:00] Speaker 02:
if the court otherwise finds it fair and reasonable to class as a whole.

[00:33:05] Speaker 02:
That is what we think the logic of the rule is.

[00:33:09] Speaker 03:
So it would be unlawful or ultra-vigorous or in violation of the federal rules of civil procedure for the settlement agreement to have said

[00:33:22] Speaker 03:
If any class member who is known lodges an objection to a modification to the settlement agreement, then that modification cannot be approved.

[00:33:37] Speaker 02:
I think that would be at odds with the logic and probably this Court's general jurisprudence in Rule 23.

[00:33:45] Speaker 03:
So if that were in the settlement agreement and it came up to us on review, we would have to strike that down as in violation?

[00:33:52] Speaker 02:
I'm sorry.

[00:33:53] Speaker 02:
I think what I would argue is that

[00:33:56] Speaker 02:
The court could not interpret that literally.

[00:33:58] Speaker 02:
What I would suggest is the court do, which is what the district court below did, is to interpret it in the context of Rule 23.

[00:34:06] Speaker 05:
In fact, you see, it doesn't follow because you're talking about a different situation now that Judge Wilkins is racing with you.

[00:34:13] Speaker 05:
You have a default.

[00:34:15] Speaker 05:
if the parties agree and the agreement is accepted yet have every single person that's their agreement that this of course responsibility would say you can't produce every single person you lose we go back to the default on the force in the agreement that has already been approved that's not troublesome yeah i'm sorry you're you're actually right if the if the agreement is actually clear that's it requires an identifiable group of people like uh... and the consent of each one of them

[00:34:45] Speaker 02:
uh... well i think that would be jake inconsistent with the spirit world twenty three it's probably permissible it's approved right if it's approved then obviously we're bound by it now on board right but my point is that this this this agreement record treats treats the uh... and interpretation of it what does all the originally unit well just sold about the hybrid because he recognized as he had to do that the agreement could be read literally

[00:35:14] Speaker 02:
this particular term couldn't be read literally because the membership of the class is unknown.

[00:35:21] Speaker 02:
So he discarded that term, said that's impractical, chose to treat the rest of this about the named plaintiffs as required, and found the unanimity of the named plaintiffs lacking.

[00:35:34] Speaker 02:
This issue was raised during the hearing with no prior notice, so we had an opportunity afterwards to renegotiate the agreement, which resulted in the addendum that's before this Court now, and to brief the District Court on the representational, reminded of the representational nature of class cases and why, if it already concluded that the definition of plaintiffs was impractical because it already chose to treat one portion of that definition as

[00:36:04] Speaker 02:
not something that should be honored in this agreement.

[00:36:09] Speaker 02:
Therefore, the entire provision, we think, has to be viewed through the representational nature of class actions.

[00:36:18] Speaker 02:
and that no single individual can come forward and say i'm holding up the entire deal if the court finds after taking into account those individuals including mister mandins views and so how is that consistent with pickford and what we've said before about district judges not having free ranging authority to just modify consent well i i i certainly agree with you i would have to say that under the circumstances here just sold only treated this provision is ambiguous

[00:36:47] Speaker 02:
and that therefore he had to interpret it because it's the terms by the way that the literal interpretation of them is an impossibility and it is inconsistent with clearly the party's intention to allow for a circumstance where the agreement can be modified.

[00:37:05] Speaker 05:
Do we review that de novo?

[00:37:07] Speaker 05:
The interpretation of the agreement?

[00:37:10] Speaker 02:
I think you do.

[00:37:11] Speaker 02:
No, the interpretation of the agreement

[00:37:13] Speaker 02:
well that's what we're talking about i don't understand i'm just thinking about it it's a bit to the extent of state if it's i would think it's probably a mixed the question of mixed fact in law that is it's an application of a legal principle to this factual circumstances here

[00:37:28] Speaker 01:
uh... but i don't know which uh... but but thank you i said i'm trying to say i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i

[00:37:55] Speaker 01:
parties have, in fact, been compensated.

[00:37:58] Speaker 01:
And so there is no longer any claim.

[00:38:01] Speaker 01:
They could not get more from this SICRE award.

[00:38:05] Speaker 01:
If, in fact, the existence of a claim is what's pivotal here, why then do the non-injured parties who would be beneficiaries of the SICRE award

[00:38:21] Speaker 01:
have the right to this money.

[00:38:25] Speaker 02:
Right.

[00:38:25] Speaker 02:
So first of all, let me speak to that in several respects.

[00:38:28] Speaker 02:
As you know, the Department of Justice filed a brief, and I assume you've read it, but I want to defer to their interpretation of the Judgment Fund Act.

[00:38:37] Speaker 02:
Let me make clear my understanding and our understanding of the Judgment Fund Act because I think it's been misinterpreted by counsel.

[00:38:45] Speaker 02:
It requires that funds be used to satisfy claims as to which the United States may have liability and for which no other statute authorizes funding.

[00:39:00] Speaker 02:
It does not limit, very importantly, does not limit the use of those funds.

[00:39:05] Speaker 02:
It addresses what claims me to be satisfied, not how the funds are used.

[00:39:12] Speaker 02:
But that said, I want to add something here, which is that the funds that are being used here under the trust that's been proposed,

[00:39:22] Speaker 02:
would fund a trust that would be used to fund nonprofit groups for the purpose, for the benefit of Native American farmers and ranchers.

[00:39:30] Speaker 02:
That is, this is not as though we're giving the money to some organization and they're going to hold a wild party and say this was a great deal.

[00:39:38] Speaker 02:
They're going to be using it to serve the very community whose members are members of this class.

[00:39:44] Speaker 01:
I understand that that is the goal of what's happening here, but the difficulty that I'm having is how then do you distinguish that from a special appropriation?

[00:39:57] Speaker 01:
In other words, you're carrying out policy essentially that you think is to the benefit of this class, but the settlement

[00:40:10] Speaker 01:
is set up, presumably, to pay claims.

[00:40:15] Speaker 01:
And these are not claims in that sense.

[00:40:19] Speaker 02:
I'm sorry.

[00:40:20] Speaker 02:
I didn't interrupt you.

[00:40:22] Speaker 02:
First of all, let me make a point that's been made before, which is that the original settlement agreement, which was approved by the court and from which there was no appeal, had the side credit provision that expressly said, if their money's left over, they will be used to fund

[00:40:40] Speaker 02:
nonprofits that have served Native American farmers and ranchers.

[00:40:43] Speaker 02:
So that issue was before the district court.

[00:40:47] Speaker 02:
It was approved.

[00:40:48] Speaker 02:
There was no appeal.

[00:40:49] Speaker 01:
I know that it was.

[00:40:51] Speaker 02:
Okay, I'm not, forgive me, I just wanted to make that point.

[00:40:54] Speaker 01:
I'm not taking issue with that.

[00:40:55] Speaker 01:
All right.

[00:40:55] Speaker 01:
I think there's a different question here though.

[00:40:57] Speaker 01:
I understand.

[00:40:58] Speaker 01:
Which is whether a district court could at any time approve something which actually violates a statute or the Constitution.

[00:41:10] Speaker 02:
In other words, wouldn't it be... I would hope not.

[00:41:14] Speaker 01:
the way you frame it i would certainly hope that a district court would not be empowered to do that but i don't think the district court did that here okay because you don't agree the analysis of how the appropriations fund and the judgment the appropriations clause and the judgment fund works

[00:41:30] Speaker 02:
Well, I'm not an expert on the appropriations process or the Judgment Fund, but I've looked at the statute, the Judgment Fund statute and the regulations and implemented, and they make no mention whatsoever of any limitation on the use of the funds that are paid to satisfy a claim.

[00:41:49] Speaker 02:
They're very particular about the nature of the claim that can be satisfied

[00:41:54] Speaker 02:
And the representations have to be made to assure that the liability of the United States is imminent, and that it's a settlement, and it's binding, and it's final, and those kinds of things.

[00:42:03] Speaker 01:
So the way that you read this is if the government agrees to a settlement fund, say it's $700,000, and they set up a claims process, and then as a result of that claims process,

[00:42:24] Speaker 01:
One percent of that $700,000 goes to the claimants.

[00:42:29] Speaker 01:
The other 99 percent then is available just to be provided for whatever kinds of programs the class council or whoever is left in charge by that settlement agreement wants to give the money to.

[00:42:48] Speaker 02:
Well, Your Honor, I would say that's an improper use of site prey.

[00:42:51] Speaker 02:
I would not characterize that as something that's at odds with the letter or the regulations of the judgment fund.

[00:42:58] Speaker 02:
The site prey doctrine, and I think it was properly used here, is intended to permit the distribution of the funds to interests that are as close as possible to the interests of those who brought the case.

[00:43:12] Speaker 01:
So I think if I understand your... Okay, let's say that they did that.

[00:43:17] Speaker 01:
That they provided it to interests as close as possible to those who brought the case.

[00:43:21] Speaker 01:
But in fact, we have claimants who only use 1% of that fund and the other 99% then is available to those other interests.

[00:43:34] Speaker 02:
And I think the important thing here is that the funds that are paid, including the 99% and the 1%,

[00:43:40] Speaker 02:
were all paid to satisfy

[00:43:43] Speaker 02:
actual claims of the class.

[00:43:45] Speaker 02:
They were paid in order to extinguish those claims against the United States.

[00:43:50] Speaker 05:
Well, the statute says, judgments, rewards, and compromise settlements.

[00:43:54] Speaker 02:
Yes.

[00:43:55] Speaker 02:
So exactly.

[00:43:56] Speaker 02:
So that the statute recognizes, as we all know, most cases end in settlements, that a judgment fund can be used to pay to satisfy claims in which the resolution is a settlement

[00:44:11] Speaker 02:
The key is that the claim be one for which the United States could actually be liable, and the settlement is binding and final.

[00:44:21] Speaker 02:
And I don't read the statute, and Judge Edwards, you're looking at it now, but I don't read the statute or the regulation as speaking at all about the particular use

[00:44:32] Speaker 02:
Having said that, Judge Brown, your example would trouble me greatly if it was simply a matter of distributing the money to whatever I thought was a good idea or whatever the court even thought was a good idea.

[00:44:44] Speaker 02:
The goal here is to serve the community that are members of the class by another means.

[00:44:49] Speaker 02:
And in this instance, let's say that 99% in your example, I presume the reason the funds were paid for that 99% group

[00:44:58] Speaker 02:
was because the Justice Department would have concluded that there was actual liability exposure for those claims and therefore justified payments for those dissatisfied claims.

[00:45:11] Speaker 02:
The fact that the claimants never claimed the money

[00:45:16] Speaker 02:
does not change the fact that the money was properly expended from the judgment fund.

[00:45:21] Speaker 02:
The key then is up to the district court to ensure that the funds are distributed appropriately to serve the same interests as the class had.

[00:45:31] Speaker 02:
Unless you have further questions, I realize my time has long expired and I apologize.

[00:45:37] Speaker 02:
Thank you.

[00:45:50] Speaker 01:
Okay, I understand that you used up all your time.

[00:45:53] Speaker 01:
I am out of time and I knew I was out of time.

[00:45:56] Speaker 01:
Thank you, Your Honor.

[00:46:01] Speaker 04:
Just in closing, in-rate baby products is a case.

[00:46:08] Speaker 04:
It has a side-period provision and the court applied what is commonly known as the ALI principles or analysis.

[00:46:18] Speaker 04:
In terms of the judgment on

[00:46:20] Speaker 04:
We do disagree on the interpretation thereof in that the purpose of the Judgment Fund historically was to allow the government to swiftly pay claims and settlements.

[00:46:38] Speaker 04:
Here what you have is what in fact the Judgment Fund was set up not to allow.

[00:46:46] Speaker 04:
Historically, when claimants had to wait for Congress to make an appropriation, congressmen, senators would pork barrel settlements.

[00:46:59] Speaker 04:
Instead of doing that, the Judgment Fund was set for the specific purpose of settling claims that could result in imminent litigation.

[00:47:07] Speaker 04:
And that is where we see this now.

[00:47:10] Speaker 03:
So is it your position that a proper interpretation of the judgment fund would be that in a class action settlement, instead of a side prey provision, there has to be a provision that says that if there is any money left over after the claims time period has completed and all appeals, et cetera,

[00:47:32] Speaker 03:
have been addressed and adjudicated, that money has to go back to the Treasury.

[00:47:39] Speaker 03:
But that's the way that settlement agreements would have to be written.

[00:47:42] Speaker 04:
Not necessarily.

[00:47:44] Speaker 04:
I think settlement agreements are written all the time.

[00:47:47] Speaker 04:
It says if there's money left over, then there can be an additional distribution to those who were injured if they were not fully compensated.

[00:47:54] Speaker 03:
So it's either that or it goes back to the Treasury.

[00:47:57] Speaker 04:
I also believe that if the settlement agreement could be written to say that if there is a side prey left over, then the government and the parties need to get approval from Congress.

[00:48:12] Speaker 04:
It is an additional appropriation.

[00:48:14] Speaker 04:
And in fact, the Department of Justice has done just that.

[00:48:18] Speaker 04:
I think in cases like Cobell, where they were authorized to pay a third party,

[00:48:25] Speaker 04:
They got the appropriation from Congress, and I think that's the proper use of the judgment fund, and this government knows how to do that.

[00:48:36] Speaker 01:
Thank you.