The underlying class action arose from claims by two former tenants against Lincoln Property Company and related entities over alleged violations of Massachusetts security deposit laws. The plaintiffs claimed the defendants charged unlawful rental application fees and excessive lock change fees at a residential apartment complex, seeking relief for a statewide class of tenants and prospective tenants under state consumer protection laws.
Writing for the full court, Justice Georges held that the Massachusetts IOLTA Committee has standing to challenge procedural violations of Rule 23(e)(3) but cannot attack the overall fairness of settlements. As Georges explained, 'Rule 23 (e) (3) authorizes the committee to be heard only for the 'limited purpose' of whether 'it ought to be a recipient of any or all residual funds.' It does not transform the committee into a surrogate for absent class members.'
The court delivered a sharp rebuke to the committee's broader challenge, writing that the rule 'does not authorize the committee to challenge, on behalf of those absent class members, the settlement's terms directly or claim that they are unfair, unreasonable, or inadequate.' The justices emphasized that 'the committee's function is therefore advisory rather than supervisory.'
The case reached the high court after Superior Court Judge John T. Lu approved the settlement in July 2021 without notifying the IOLTA Committee, which has statutory rights to receive unclaimed class action funds for legal aid programs. The settlement created an $800,000 initial fund with additional contributions up to $4.16 million as needed. After about 220 class members submitted claims totaling roughly $51,000, approximately $500,000 was set to revert to the defendants and about $249,000 would go to housing charities as 'cy pres' recipients.
The IOLTA Committee objected when it finally received notice in December 2023 — more than two years after final approval — arguing the late notice violated Rule 23(e)(3). Superior Court Judge Janice W. Howe acknowledged the rule violation but declined to 'unwind' the extensively supervised settlement. The committee appealed, seeking to vacate the judgment and force renewed proceedings over the residual funds.
The Supreme Judicial Court rejected the committee's challenge, finding no meaningful prejudice from the delayed notice. 'The committee identifies no argument that it was prevented from making because of the timing of the notice, nor does it point to any basis in the record to conclude that earlier notice would have altered the court's approval,' Georges wrote. The court noted that Judge Lu had already scrutinized and required revisions to the settlement's treatment of unclaimed funds before approval.
Despite affirming the settlement, the court issued a stern warning about future compliance, emphasizing that 'compliance with rule 23 (e) (3) is mandatory.' Georges instructed 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.'