Commentary an analysis of the problem whether an objector to a shareholders’ derivative class action settlement must intervene in order to appeal from a court order approving the settlement. The article focuses on a case pending before the Supreme Court that raises this issue: California Public Employees’ Retirement System v. Felzen. The Felzen appeal raises the technical quandary of clarifying who are the parties to a shareholders’ derivative lawsuit and whether the ability to oppose a settlement confers a right to appeal without requiring the objector to intervene formally in the action. The appeal involves the convergence of three rules of civil and appellate procedure. Rule 23.1 governs shareholder derivative class action suits and vary slightly from other class actions pursued under Rule 23. Under Rule 23.1, if a plaintiff seeks to settle the action, then other shareholders have the right to notice of the settlement and to lodge objections to the settlement. The central issue in Felzen concerns whether these rights confer quasi-party status on shareholder objectors. Hence, while shareholders may object under Rule 23.1, it is uncertain whether they have a right to appeal approval of a settlement unless they formally seek party status under the intervention Rule 24. Federal courts are split over whether objectors in class or derivative litigation may appeal without intervening to gain formal party status. Felzen is further complicated by an arcane technical argument that Federal Rule of Appellate Procedure 3(c) states that a notice of appeal must specify the party or parties taking the appeal, naming each appellant either in the caption or the body of the notice of appeal. The Seventh Circuit has suggested that because objecting shareholders are not parties, an appeal cannot be proper under this appellate rule. The article concludes by discussing the significance of Felzen for class action settlements
