A study by LawReader Senior Editor Stan Billingsley
 

COMPARISION OF KY. RULES FOR CLASS ACTION PRACTICE WITH FEDERAL RULES –
ISSUES THAT SHOULD BE CONSIDERED FOR INCLUSION IN THE KENTUCKY RULES FOR CLASS ACTION PRACTICE –
JUSTICE LUKOWSKY’S ARGUMENT FOR MAKING RULES CONSISTENT –
 

As a former Circuit Judge who has been required to try portions of several class action cases, I suggest that there is a great need for updating of CR 23, Kentucky’s Rules for Class Action  Practice. 
 

When I was assigned to hear some aspects of a class action, the first thing I did was to look up the Civil Rules regarding Class Action practice.  Those rules are found in CR 23.
 

I quickly found that the rules provided only general guidelines for the allowance or denial of a class action certification motion, provided some requirements for notices, and gave extremely broad discretion to the trial court to approve or deny a settlement. I then went to the Chase Law School library to seek further guidance in how such a case was to be practiced.  I found little guidance or authority that instructed me in the many issues inherent in such cases, which are totally foreign to traditional conduct of traditional civil cases.
 

The general nature of Kentucky’s CR 23 rules provides little guidance to the trial Judge in handling the many issues that come with such cases.  For example CR 23 says a judge must approve a settlement, but provides no guidance on how damages within the class are to be distributed, how attorney fees are to be evaluated and awarded, or what to do with excess funds after the settlement awards.  These matters are left to the trial court to work out for himself.  
 

As recent history has revealed, if the judge working his way through this type of case makes a decision which is “bad� in hindsight, then he can expect the media and the Judicial Conduct Commission to be doing some serious “Monday morning quarterbacking� when they review his decisions.  Judges as well as lawyers can be sanctioned for any decision or act that in hindsight brings the bar or the bench into disrepute.  That standard for review of one’s conduct has no clear definition in the law. It is allowed to mean whatever the party reviewing the conduct of the judge or attorney says it means. 
 

Further the Ky. Rules do not allow the trial judge to appoint a class counsel.  This is permitted under the Federal Rules for Class Action practice FR 23 (c).
 

The trial court is given no apparent authority to review fees paid to trial consultants and expert witnesses.  Consultants and expert witnesses are essential to the successful practice of class action cases. They contract with the party that hires them, and the court should not be put in the position of unduly limiting a party from hiring whom they wish.
 

We would respectfully suggest, that there is a great need for a serious review of CR 23 and consideration should be given to make the CR 23 identical to the wording of the Federal Rules for class action practice found in FR 23.
 

We have provided a chart below that readily shows the differences between the Ky. Rules and the Federal Rules regarding class action practice.
 

We also suggest that additional guidelines should be written to provide assistance to future trial judges who must deal with class action cases.  Justice Lukowsky authored a decision in 1978 which called for making the Ky. Rules of Criminal Procedure consistent with the Federal Rules of Criminal Procedure.  Subsequently his advice was substantially taken and the Ky. Rules were made highly consistent with Federal Rules.
 

The procedure to accomplish such a review of existing class action rules is for the Chief Justice to request the Civil Rules Committee of the Supreme Court to conduct such a review.  The results of their work would then be presented to the members of the Ky. Bar Association for their comments.  The Supreme Court would then approve or not approve the new rules presented.
 

We believe these reforms are needed by the public, by future parties of class action cases, and for the protection of the trial judges who must hear such cases and presently have little or no guidance or precedent to follow.
 

COMPARISON OF FEDERAL RULES OF PROCEDURE AND KY. RULES RE: CLASS ACTION PRACTICE
Federal Rules Re: Class Action Practice	Ky. Rules Re: Class Action Practice
     Federal Rule 23. Class Actions (a) Prerequisites to a Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.     Fed. & Ky. Rules identical Â	CR 23.01 PREREQUISITES TO CLASS ACTION  Subject to the provisions of Rule 23.02, one or more members of a class may sue or be sued as representative parties on behalf of all only if (a) the class is so numerous that joinder of all members is impracticable, (b) there are questions of law or fact common to the class, (c) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (d) the representative parties will fairly and adequately protect the interests of the class. [Amended eff. 1-1-78; prior amendment eff. 7-1-69; adopted eff. 7-1-53]     Fed. & Ky. Rules identical
(b) Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition: (1) the prosecution of separate actions by or against individual members of the class would create a risk of (A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or (B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or (2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or (3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action. Fed. & Ky. Rules identical	CR 23.02 CLASS ACTIONS MAINTAINABLE     An action may be maintained as a class action if the prerequisites of Rule 23.01 are satisfied, and in addition:      (a) The prosecution of separate actions by or against individual members of the class would create a risk of      (i) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or,     (ii) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or   (b) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or  (c) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (i) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (ii) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (iii) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (iv) the difficulties likely to be encountered in the management of a class action. [Amended eff. 1-1-78; adopted eff. 7-1-69]   Fed. & Ky. Rules identical
(c) Determining by Order Whether to Certify a Class Action; Appointing Class Counsel; Notice and Membership in Class; Judgment; Multiple Classes and Subclasses. (1) (A) When a person sues or is sued as a representative of a class, the court must — at an early practicable time — determine by order whether to certify the action as a class action.. (B) An order certifying a class action must define the class and the class claims, issues, or defenses, and must appoint class counsel under Rule 23(g). (C) An order under Rule 23(c)(1) may be altered or amended before final judgment. (2) (A) For any class certified under Rule 23(b)(1) or (2), the court may direct appropriate notice to the class. (B) For any class certified under Rule 23(b)(3), the court must direct to class members the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. The notice must concisely and clearly state in plain, easily understood language: the nature of the action, the definition of the class certified, the class claims, issues, or defenses, that a class member may enter an appearance through counsel if the member so desires, that the court will exclude from the class any member who requests exclusion, stating when and how members may elect to be excluded, and the binding effect of a class judgment on class members under Rule 23(c)(3). (3) The judgment in an action maintained as a class action under subdivision (b)(1) or (b)(2), whether or not favorable to the class, shall include and describe those whom the court finds to be members of the class.  The judgment in an action maintained as a class action under subdivision (b)(3), whether or not favorable to the class, shall include and specify or describe those to whom the notice provided in subdivision (c)(2) was directed, and who have not requested exclusion, and whom the court finds to be members of the class. (4) When appropriate (A) an action may be brought or maintained as a class action with respect to particular issues, or (B) a class may be divided into subclasses and each subclass treated as a class, and the provisions of this rule shall then be construed and applied accordingly. Provisions underlined are not included in Ky. Rule	CR 23.03 DETERMINATION BY ORDER WHETHER CLASS ACTION TO BE MAINTAINED; NOTICE; JUDGMENT; ACTIONS CONDUCTED PARTIALLY AS CLASS ACTIONS (1) As soon as practicable after the commencement of an action brought as a class action, the court shall determine by order whether it is to be so maintained. An order under this rule may be conditional, and may be altered or amended before the decision on the merits. (2) In any class action maintained under Rule 23.02(c), the court shall direct to the members of the class the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. The notice shall advise each member that (a) the court will exclude him from the class if he so requests by a specified date; (b) the judgment, whether favorable or not, will include all members who do not request exclusion; and (c) any member who does not request exclusion may, if he desires, enter an appearance through his counsel. (3) The judgment in an action maintained as a class action under paragraphs (a) or (b) of Rule 23.02, whether or not favorable to the class, shall include and describe those whom the court finds to be members of the class. The judgment in an action maintained as a class action under Rule 23.02(c), whether or not favorable to the class, shall include and specify or describe those to whom the notice provided in Rule 23.03(b) was directed, and who have not requested exclusion, and whom the court finds to be members of the class. (4) When appropriate (a) an action may be brought or maintained as a class action with respect to particular issues, or (b) a class may be divided into subclasses and each subclass treated as a class, and the provisions of Rule 23 shall then be construed and applied accordingly. [Amended eff. 1-1-78; adopted eff. 7-1-69]   Provision underlined not contained in Fed. Rule               Â
(d) Orders in Conduct of Actions. In the conduct of actions to which this rule applies, the court may make appropriate orders: (1) determining the course of proceedings or prescribing measures to prevent undue repetition or complication in the presentation of evidence or argument;  (2) requiring, for the protection of the members of the class or otherwise for the fair conduct of the action, that notice be given in such manner as the court may direct to some or all of the members of any step in the action, or of the proposed extent of the judgment, or of the opportunity of members to signify whether they consider the representation fair and adequate, to intervene and present claims or defenses, or otherwise to come into the action; (3) imposing conditions on the representative parties or on intervenors;  (4) requiring that the pleadings be amended to eliminate therefrom allegations as to representation of absent persons, and that the action proceed accordingly;  (5) dealing with similar procedural matters. The orders may be combined with an order under Rule 16, and may be altered or amended as may be desirable from time to time. Fed. & Ky. Rules identical	CR 23.04 ORDERS IN CONDUCT OF ACTIONS    In the conduct of actions to which Rule 23 applies, the court may make appropriate orders: (a) determining the course of proceedings or prescribing measures to prevent undue repetition or complication in the presentation of evidence or argument; (b) requiring, for the protection of the members of the class or otherwise for the fair conduct of the action, that notice be given in such manner as the court may direct to some or all of the members of any step in the action, or of the proposed extent of the judgment, or of the opportunity of members to signify whether they consider the representation fair and adequate, to intervene and present claims or defenses, or otherwise to come into the action; (c) imposing conditions on the representative parties or on intervenors; (d) requiring that the pleadings be amended to eliminate therefrom allegations as to representation of absent persons, and that the action proceed accordingly; (e) dealing with similar procedural matters. The orders may be combined with an order under Rule 16, and may be altered or amended as may be desirable from time to time. [Amended eff. 1-1-78; adopted eff. 7-1-69]     Fed. & Ky. Rules identical Â
(e) Settlement, Voluntary Dismissal, or Compromise. (1) (A) The court must approve any settlement, voluntary dismissal, or compromise of the claims, issues, or defenses of a certified class. (B) The court must direct notice in a reasonable manner to all class members who would be bound by a proposed settlement, voluntary dismissal, or compromise. (C) The court may approve a settlement, voluntary dismissal, or compromise that would bind class members only after a hearing and on finding that the settlement, voluntary dismissal, or compromise is fair, reasonable, and adequate. (2) The parties seeking approval of a settlement, voluntary dismissal, or compromise under Rule 23(e)(1) must file a statement identifying any agreement made in connection with the proposed settlement, voluntary dismissal, or compromise. (3) In an action previously certified as a class action under Rule 23(b)(3), the court may refuse to approve a settlement unless it affords a new opportunity to request exclusion to individual class members who had an earlier opportunity to request exclusion but did not do so. (4) (A) Any class member may object to a proposed settlement, voluntary dismissal, or compromise that requires court approval under Rule 23(e)(1)(A). (B) An objection made under Rule 23(e)(4)(A) may be withdrawn only with the court’s approval Provisions underlined are not in Ky. Rule	CR 23.05 DISMISSAL OR COMPROMISE    A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs. [Adopted eff. 7-1-69]       No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule Â
(f) Appeals. A court of appeals may in its discretion permit an appeal from an order of a district court granting or denying class action certification under this rule if application is made to it within ten days after entry of the order. An appeal does not stay proceedings in the district court unless the district judge or the court of appeals so orders.	      Appeal of Ky. Class action judgment conducted under CR 73 thru 76   INTERLOCUTORY APPEAL FROM TRIAL COURT ORDERS IS RESTRICTED UNDER KY. RULES
(g) Class Counsel.                                         (1) Appointing Class Counsel. (A) Unless a statute provides otherwise, a court that certifies a class must appoint class counsel. (B) An attorney appointed to serve as class counsel must fairly and adequately represent the interests of the class. (C) In appointing class counsel, the court (i) must consider:   the work counsel has done in identifying or investigating potential claims in the action,  counsel’s experience in handling class actions, other complex litigation, and claims of the type asserted in the action,  counsel’s knowledge of the applicable law, and   the resources counsel will commit to representing the class; (ii) may consider any other matter pertinent to counsel’s ability to fairly and adequately represent the interests of the class; (iii) may direct potential class counsel to provide information on any subject pertinent to the appointment and to propose terms for attorney fees and nontaxable costs; and (iv) may make further orders in connection with the appointment. (2) Appointment Procedure.                           (A) The court may designate interim counsel to act on behalf of the putative class before determining whether to certify the action as a class action. (B) When there is one applicant for appointment as class counsel, the court may appoint that applicant only if the applicant is adequate under Rule 23(g)(1)(B) and (C). If more than one adequate applicant seeks appointment as class counsel, the court must appoint the applicant best able to represent the interests of the class. (C) The order appointing class counsel may include provisions about the award of attorney fees or nontaxable costs under Rule 23(h).	    No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule     No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule
(h) Attorney Fees Award. In an action certified as a class action, the court may award reasonable attorney fees and nontaxable costs authorized by law or by agreement of the parties as follows: (1) Motion for Award of Attorney Fees.             A claim for an award of attorney fees and nontaxable costs must be made by motion under Rule 54(d)(2), subject to the provisions of this subdivision, at a time set by the court. Notice of the motion must be served on all parties and, for motions by class counsel, directed to class members in a reasonable manner. (2) Objections to Motion.  A class member, or a party from whom payment is sought, may object to the motion. (3) Hearing and Findings.  The court may hold a hearing and must find the facts and state its conclusions of law on the motion under Rule 52(a). (4) Reference to Special Master or Magistrate Judge.  The court may refer issues related to the amount of the award to a special master or to a magistrate judge as provided in Rule 54(d)(2)(D). Â	      No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule No similar provision in KY. Rule   Â
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ISSUES THAT SHOULD BE CONSIDERED FOR INCLUSION IN THE KENTUCKY RULES FOR CLASS ACTION PRACTICE
Class Counsel	Trial Courts would benefit from being able to name the class counsel as is permitted under the Federal Class Action Rules.  This would give the trial court more control over the case.
Attn. Fees	Kentucky has little statutory or case law providing guidelines on award of attorney fees in class actions.  The court and parties, would benefit from attorney fee guidelines. The Ky. Bar Assoc. has jurisdiction to hear fee disputes, but that is remedial. A rule providing guidelines would be preventive.
Excess Settlement Funds	For a number of reasons cases from time to time have excess funds left over.  Federal Courts often prefer a Cy Pres award, which allows these funds to be awarded for public purpose or benefit.
Certification of Class Standards	The basis for the court making a determination allowing or disallowing certification of a class, are extremely general and perhaps leave too much discretion to the trial court.
Disclosure of Settlement Details	The public interest in knowing the details of settlements is great.  Secrecy is currently imposed by defendants and insurers with court approval, sometimes to the detriment of the parties.    Damages are awarded partly to deter future bad conduct by others. If the damages are kept secret this purpose of the justice system is thwarted.   At the very least there should be a disclosure of settlement details to all parties and class members.
No guidance on procedure for awarding class members a fair portion of the settlement based on their actual individual damage.	In many class actions some class members have sustained injuries greatly in excess of what others have sustained and are entitled to be awarded a higher per cent of recovery that those less injured.   The procedures for determining how the differences are determined is left to the trial judges discretion.  This is often done by the appointment of a Master Commissioner to conduct hearings and make awards. This is not an uncommon or improper procedure.   However, any system for determining damages of individual class members after a settlement, should be determined by procedures set out in the rules. Â
Consultants and Experts	Consultants and Expert Witnesses are essential to the conduct of large class actions. The trial court has no discretion over who is hired, and little discretion to determine what they are paid.  Some guidelines should be provided to assist the trial court.
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THE LUKOWSKY SOLUTION
 

In l978 Justice Lukowsky argued that the Ky. Rules of Criminal Procedure should be made more consistent with the Federal Rules of Criminal Procedure.  We believe some of his comments are just as applicable to the need for the Ky. Class Action Rules and the Federal Class Action Rules to be identical.
 

The application of Federal case rulings and interpretation of the Federal Class Action Rules would provide the courts of Kentucky with a wealth of precedent and guidance.
 

The body of law developed by the Kentucky Appellate Courts interpreting the Ky. Class Action Rules is almost non-existent.  The body of law developed by the Federal Courts regarding the practice of Class Action cases, is rich with precedent.
 

If the Ky. Rules were amended to make them identical to the Federal Rules, a great deal of guidance would be given to the trial court dealing with class action cases.
 

We believe that Justice Lukowsky’s decision in Whorton v.Commonwealth, admirably justifies the argument for revising Ky.’s Class Action Rules and making them more consistent with the Federal Rules.
 

Justice Lukowsky reasoned:
 [31]     Whorton v. Commonwealth of Kentucky, 570 S.W.2d 627 (Ky. 07/25/1978)

The judgment is reversed with directions for a new trial.

[32]         All concur except for CLAYTON and STEPHENSON, JJ., who dissent.

[33]         LUKOWSKY, Justice, concurring.

[34]         I concur with my brothers in the result we reach in this case. However, it seems to me that this case provides a forum in which we should articulate the paradoxical philosophies with which we are besieged and propose a course of action to minimize the problems which they create.

[35]         In the field of criminal procedure we have observed a decisional process by the Supreme Court of the United States which has crushed the status of the several states as “insulated chambers” of legal experimentation. The fuel which has fed this juggernaut is the concept that the due process clause of the Fourteenth Amendment of the Constitution of the United States makes the First, Fourth, Fifth, Sixth and Eighth Amendments of that document binding upon the several states.

[36]         The purpose of this discussion is not to ascertain whether this fuel is historically distilled or artificially synthesized. Rather it is to examine the path made by the steamroller and determine how it may be traveled most smoothly.

[37]         Most of the path in Kentucky was free of obstacles because the federal constitutional rules imposed by these decisions were in force here as matters of state law long prior to their enunciation by the Supreme Court of the United States. However, as the Supreme Court continues its journey it digs deeper in the terrain of state procedure, destroys traditional state prerogatives and causes adjustments to be made which are of uncalculated impact. The court has also chosen to examine but has refrained so far from disturbing other state procedural devices. It is fair to say that this process has nationalized criminal procedure, even though there are those who would dispute this conclusion The course of the Burger court is not significantly different from that of the Warren court, except that it has limited the use of federal habeas corpus as a method of enforcing these newly promulgated constitutional rights.

[38]         State systems of criminal procedure are like delicate Swiss watches. They are designed to equally balance the rights of the parties. When the balance is externally disturbed the shockwave requires a reevaluation and readjustment of the entire system.

[39]         Taylor v. Kentucky, U.S. , 98 S.Ct. 1930, 56 L.Ed.2d 468 (1978), provides a perfect example. The case in effect establishes the principle that the due process clause of the Fourteenth Amendment requires a state trial judge to instruct the jury on the presumption of innocence when requested by a criminal defendant. The system of instructing juries developed in Kentucky prohibits instructions on presumptions and permissible inferences. The theory is that to avoid undue influence by the trial judge on the fact finding process for or against either party the instructions should simply focus the attention of the jury on those ultimate facts which it must decide in order to reach a verdict. Consequently, the instructions are skeletal in form, given prior to closing argument and leave to the lawyers the task of fleshing them out in closing argument insofar as the evidentiary facts of the case, the weight of the evidence and the credibility of the witnesses are concerned.

[40]         This rule was a two-edged sword and cut equally for and against both sides of the case. For example, we recently held that the Commonwealth was not entitled to an instruction on either the presumption of sanity or the presumption of knowledge which arises from the possession of recently stolen goods. Mason v. Commonwealth, Ky., 565 S.W.2d 140 (1978); Wells v. Commonwealth, Ky., 561 S.W.2d 85 (1978). Obviously, Taylor, supra, requires the restoration of balance to the rights of the parties. No thought was given to this aspect of the problem by those who mandated the change because they were neither conversant with the operation of the system, nor responsible for its maintenance.

[41]         A trial is no more than a search for the truth. The method by which that search is conducted is of little import so long as it is rational, fair to all parties and civilized. The concept of a national mode of criminal procedure is not too unpalatable to be swallowed in America a century after the Civil War. The Supreme Court of the United States has made it clear that it will no longer pay homage to “federalism” by permitting the states to experiment with an ever lengthening list of new found “fundamental” rights of defendants in criminal cases.

[42]         We should abandon the obsolete fortresses of local criminal procedure. Their unique character may be matters of pride, but their use does not so improve the search for the truth as to justify the time and energy lost in their defense. The litigation they spawn diffuses our efforts to apply, develop, and interpret substantive law and subordinates the question of guilt or innocence to the justification for the retention of local practices.

[43]         I would end the conflict and equalize the position of the parties now by:

[44]         1. Amending our Rules of Criminal Procedure to conform as closely as possible with the Federal Rules of Criminal Procedure including: ……

 [49]        This approach would insure that if the Supreme Court of the United States should reverse a Kentucky case on procedural grounds it would have to dine on a procedure, which it prepared and we could take comfort in the lament of the homemaker that the dullest food is that which you cook yourself.

-Justice LUKOWSKY  -  July 25, 1978 -

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