The underlying class action arose from claims by two former tenants against Lincoln Property Company and other entities that owned and managed a residential apartment complex. The plaintiffs alleged violations of the security deposit statute and unfair or deceptive practices, claiming the defendants charged unlawful rental application fees and excessive fees for changing apartment locks.
Writing for a unanimous seven-justice panel, Justice Georges affirmed the settlement despite the failure to notify the Massachusetts IOLTA Committee before settlement approval. The court held that the committee "ultimately received the process that rule 23 (e) (3) guarantees" and "suffered no prejudice."
After class certification and contentious discovery that resulted in sanctions against the defendants, the parties reached the settlement on the eve of trial. The settlement provided for approximately $51,000 in payments to about 220 class members, with $500,000 reverting to defendants and about $249,000 going to charity recipients.
The committee first learned of the settlement in December 2023—more than two years after final approval—when the parties moved for final distribution of unclaimed funds. The committee argued that the failure to provide notice violated rule 23(e)(3), which requires notice to the IOLTA Committee "for the limited purpose of allowing the committee to be heard on whether it ought to be a recipient of any or all residual funds."
The court held that while the Massachusetts IOLTA Committee has standing to challenge procedural violations under Mass. R. Civ. P. 23(e)(3), it cannot contest "the settlement's over-all fairness, reasonableness, or adequacy, or otherwise attack the validity of its terms." The court explained that the committee's function is "advisory rather than supervisory: to present reasons why it should receive residual funds so that the settlement judge may incorporate that perspective into his or her own determination of whether to approve the settlement."
Despite affirming the settlement, the court emphasized that compliance with rule 23(e)(3) remains mandatory and warned that trial courts "must ensure that the committee receives timely notice whenever residual funds may remain" and should "address rule 23 (e) (3) expressly at the settlement-approval stage, confirming compliance with that rule before approving a settlement or entering judgment."