(CN) – The 3rd Circuit reinstated a settlement agreement in a class action against Verizon Wireless, ruling that a lower court overstepped its authority when it dismissed the settlement after new legislation made the allegations moot.
The class sued Verizon Wireless, accusing it of violating the Fair and Accurate Credit Transaction Act, which prohibits a seller from printing a receipt displaying more than the last five digits of a buyer’s credit or debit card.
While the parties were in court-ordered mediation in 2008, Congress was considering an amended bill that would eliminate the class’s cause of action.
The parties arrived at a settlement agreement, and the district court entered a preliminary order approving it. However, just over a month later, the bill passed Congress, Verizon filed a motion to vacate the approval and moved for a judgment, both of which the district court granted.
But the Philadelphia-based appellate panel found that the court “lost sight of” its limited fiduciary role in the review of class-action settlement agreements.
“The requirement that a district court review and approve a class action settlement before it binds all class members does not affect the binding nature of the parties’ underlying
agreement,” wrote Judge Richard Nygaard for the three-judge panel. “A district court is not a party to the settlement, nor may it modify the terms of a voluntary settlement agreement between parties.”
Furthermore, changes in the law after a settlement “do not affect the validity of the agreement and do not provide a legitimate basis for rescinding the settlement,” Nygaard wrote.
To accept Verizon’s and the district court’s view would render the settlement process “meaningless,” he added, as it would allow either party to back out of an agreement at any time.
“Here, the Clarification Act was pending before Congress when the parties negotiated their agreement,” Nygaard wrote. “In negotiating this agreement, Verizon bet on the certainty of settlement instead of gambling on the uncertainties of future legislative action. Verizon lost, and the District Court erred by letting it replay its hand.”