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chapter 2 Class action notice in a bankruptcy context

Class actions are governed by Fed. R. Civ. P. 23 (“Rule 23”). In 1983 Rule 23 was made applicable to
bankruptcy cases by Bankruptcy Rule 7023. While it is not always clear if a specific bankruptcy court will
class action allow class claims when the defendant entity has filed for bankruptcy protection, it is certain that when

class treatment is allowed, the notice requirements of Rule 23 must be followed. The rules for providing
notice to members of a certified class are dramatically different than those in a traditional bankruptcy
notice in a case; particularly in situations where individual notice will not be a viable option for notifying all potential
class members. According to Rule 23, in a class action case, notice is required when:

• A Rule 23(b)(3) class is certified;
bankruptcy • A settlement or voluntary dismissal that would be binding on the class is filed; and

• Attorney fees are requested. Often, counsel requests certification and attorney fees at the time of filing a
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context settlement so all three components are frequently combined into one notice.

FRCP Rule 23 – Best Notice Practicable Under the Circumstances and
Individual Notice

Rule 23 directs that for any class certified under Postal Service (USPS). This is important since
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Rule 23(b)(3), notice to class members must be the more than 40 million Americans move their place
best notice practicable under the circumstances, of residence and/or business every year. 24
including “individual notice to those who can be
identified with a reasonable effort.” 22 Also, the USPS allows significant discounts on
postage when NCOA is used pre-mailing and
Individual Notice mailings are sorted by zip code. For records
If a postal address is available or can be returned by NCOA as invalid, reasonable efforts
ascertained for a likely class member, notice should be taken to obtain an updated address
should be sent by first class mail (or in some through third-party address search services. The
cases, email). Frequently, the defendant/debtor is same is true for individual notices returned by
able to extract class member names, addresses the USPS as undeliverable. Mailing to potential
and other relevant data from databases they class members based on outdated information
maintain. In some cases, class member data is is expensive, creates a large number of
even obtained from third-party providers. As a undeliverable mail pieces and does not provide
practical matter this portion of Rule 23 is not that actual notice to those class members.
different than Bankruptcy Rule 2002. Known class Email is also often used to provide individual
members are like known creditors. They must be notice in class action cases. But email should
given individual notice. be used with care in cases where a class action

Prior to mailing a notice, all addresses should be is proceeding within a bankruptcy. Email does
updated against the National Change of Address not yet have the address updating and re-mail
(NCOA) database maintained by the United States options available with traditional mail and issues
persist with deliverability.

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