Introduction

Schember et al. v. United States Steel Corporation, 897 F.2d 115 (3d Cir. 1990), is a pivotal case in employment law concerning the approval of a post-trial class action settlement. This case emerged from a class action filed by former salaried employees of United States Steel Corporation's Universal Atlas Cement Division (USX), who sought pension and severance benefits following the company's sale of the division to Lehigh Portland Cement Company in 1980.

The key issues revolved around whether the benefits provided by Lehigh were comparable to those previously offered by USX and whether the proposed settlement adequately addressed the plaintiffs' claims. The parties engaged in negotiations post-trial, resulting in a settlement that required appellate court approval to be finalized.

Summary of the Judgment

The United States Court of Appeals for the Third Circuit addressed a motion to approve a proposed settlement in the class action lawsuit filed by USX employees. Following a bench trial, the district court had denied relief, prompting the class to appeal. Subsequently, a tentative settlement was negotiated and presented to the class members, with 29 out of 281 class members filing objections.

The appellate court applied the "fair, adequate, and reasonable" standard, drawing upon precedents such as Walsh v. Great Atlantic and Pacific Tea Co., Inc. and GIRSH v. JEPSON. After a thorough analysis of the settlement's fairness, the appellate court found the settlement to satisfy established criteria and remanded the case to the district court with directions to approve the settlement.

Analysis

Precedents Cited

The judgment extensively referenced several key precedents to establish the standards for approving class action settlements:

• Walsh v. Great Atlantic and Pacific Tea Co., Inc., 726 F.2d 956 (3d Cir. 1983)
• VAN HORN v. TRICKEY, 840 F.2d 604 (8th Cir. 1988)
• GRANT v. BETHLEHEM STEEL CORP., 823 F.2d 20 (2d Cir. 1987)
• EEOC v. Hiram Walker and Sons, Inc., 768 F.2d 884 (7th Cir. 1985)
• GIRSH v. JEPSON, 521 F.2d 153 (3d Cir. 1975)
• City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974)
• Grasty v. Amalgamated Cloth. Textile Workers Union, 828 F.2d 123 (3d Cir. 1987)
• WETZEL v. LIBERTY MUTUAL INSURANCE CO., 508 F.2d 239 (3d Cir. 1975)
• Firestone Tire and Rubber Company v. Bruch, 109 S.Ct. 948 (1989)

These cases collectively underscore the appellate courts' roles in ensuring that class action settlements meet rigorous standards of fairness, adequacy, and reasonableness, particularly when settlements are proposed post-trial.

Legal Reasoning

The Third Circuit employed the framework established in GIRSH v. JEPSON to evaluate the proposed settlement. The court focused on two primary factors:

1. The response of the class to the settlement
2. The reasonableness of the settlement in light of the potential success of the appeal

In assessing the first factor, the court noted that only a small fraction of the class members objected to the settlement, and their objections were primarily based on disagreements with the distribution of the settlement funds rather than the settlement's fundamental terms.

For the second factor, the court evaluated the strength of the objectors' claims on appeal. It determined that the likelihood of success on appeal was minimal, as the appellate court found the district court had applied the correct standard of review and that the class certification was procedurally sound.

Additionally, the court addressed the arguments related to the Firestone Tire and Rubber Co. v. Bruch case, clarifying that the arbitrary and capricious standard was appropriately applied given the discretionary nature of the plan administrator's decisions.

Impact

This judgment reinforces the stringent standards appellate courts apply when approving class action settlements, especially in post-trial scenarios. By reaffirming the "fair, adequate, and reasonable" standard and detailing the factors for evaluating such settlements, the Third Circuit provides clear guidance for future cases involving class action settlements.

Moreover, the case underscores the appellate courts' willingness to uphold settlements that benefit the majority of class members and mitigate further litigation risks, thereby promoting efficient resolution of class actions.

Complex Concepts Simplified

Class Action Settlement Standards

Post-Trial Settlement

Arbitrary and Capricious Standard

Class Certification under Fed.R.Civ.P. 23(b)(2)

Conclusion

The Third Circuit's decision in Schember et al. v. United States Steel Corporation underscores the critical balance appellate courts must maintain in class action settlements. By meticulously applying established precedents and focusing on both the class's response and the settlement's reasonableness, the court ensures that settlements are not only procedurally sound but also substantively fair to the majority of class members.

This judgment serves as a benchmark for evaluating post-trial settlements in class actions, emphasizing the importance of fairness and adequacy while safeguarding against undue favoritism or inequitable distribution of settlement funds. Future litigants and legal practitioners will find guidance in this case when navigating the complexities of class action settlements, particularly in scenarios where appeals are pending.