550 F.2d 1173.
Frank I. MARSHALL and Howard S. Myers, Plaintiffs and Cross-Defendants-
HOLIDAY MAGIC, INC., et al., Defendants,
Dora Popa and Perry Marshall, Defendants and Cross-Plaintiffs-Appellants.
United States Court of Appeals,
March 8, 1977.
Before CHAMBERS, CARTER and KENNEDY, Circuit Judges.
JAMES M. CARTER, Circuit Judge:
This is an appeal from a court approved settlement of class actions
against Holiday Magic, Inc., certain of its affiliated corporations,
and individual defendants. The settlement is a final judgment
entered pursuant to Fed.R.Civ.P. 54(b).
Appellants, who were sued as defendants in one case and filed
as cross- plaintiffs, argue that the district court abused its
discretion by approving the settlement. They claim there was
inadequate representation and notice and that the settlement itself
was unreasonable. We disagree and therefore affirm.
Holiday Magic is a cosmetic company which distributes its product
via a "pyramid sales" scheme. Distributorships
are purchased from the corporation and arranged in a hierarchy.
Those at higher levels earn larger profits, thereby encouraging
all participants to enlist other distributors into the plan.
Continued upward mobility in the hierarchy depends on an infinite
supply of distributors.
Approximately 25 actions were filed against Holiday Magic and
various affiliated defendants across the country. Eighteen of
these suits purported to be class actions asserting claims under
the securities and antitrust laws. Most of these actions were
transferred to the Northern District of California (which already
had six of them) and assigned to Judge Burke by the Judicial Panel
on Multidistrict Litigation, pursuant to 28 U.S.C. s 1407. Judge
Burke also presided over an action brought by the Securities and
Exchange Commission against Holiday Magic, SEC v. Holiday Magic,
Inc., et al. (N.D.Cal., No. C-73-1095-LHB).
All of the class action cases except one included as a plaintiff
class all of the distributors, whether or not they profited from
the scheme. In Frank I. Marshall and Howard S. Myers v. Holiday
Magic, Inc., et al., Civil Action No. 72-899, W.D.Pa., 1972,
*1176 however, the distributors who had participated in the
process by earning fees were named as a defendant class, and appellants
were sued as representatives of that class. They filed a cross-claim
against Holiday Magic.
In August 1973, Judge Burke held a pre-trial conference to consider
management of the consolidated cases. Applications were invited
for lead counsel. The court appointed David Gold of San Francisco,
who was plaintiff's counsel in five of the pending actions.
A three-week hearing was held in July 1973 on the SEC's application
for a preliminary injunction. After extensive negotiations, Holiday
Magic agreed to a permanent injunction against certain of its
marketing practices. Lead counsel for plaintiffs assisted the
SEC in this action.
Settlement negotiations in the private suit began shortly thereafter.
These culminated in a Stipulation for Compromise and Judgment
filed in March 1974. The terms of the settlement required the
"settling defendants" (including Holiday Magic and its
affiliates) to transfer property worth $2,600,381 to a trust fund
established for the benefit of the class. They agreed to repay
dollar for dollar all sums paid by class members to Holiday Magic,
supplementing the trust with income from their continuing business
operations if necessary. A claims procedure was established under
the jurisdiction of the district court.
A court approved "Legal Notice and Claim Form" was
sent to over 31,000 class members on April 10, 1974. The notice
advised class members of the pendency of the action, of their
potential inclusion in the class, of the terms of the proposed
settlement, of the hearing on whether the settlement should be
approved, and of their rights to object to the settlement or exclude
themselves from the class. Potential claimants were given until
May 6, 1974, to opt out. Approximately one percent did so. Appellants,
however, did not.
Prior to the hearing, extensive memoranda were filed both in
support of and in opposition to the proposed settlement. More
than 20 attorneys appeared at the hearing and argued before the
court. A representative of the SEC spoke in favor of the settlement.
The court finally approved the settlement on May 16, 1974, and
entered findings of fact and conclusions of law in support of
 Appellees argue that appellants lack standing because they
are neither members of the plaintiff class nor settling defendants.
Thus appellees contend, they have no interest in the judgments.
However, the class as determined by the district court consisted
of all distributors and security holders of Holiday Magic. Appellants
fall into this category and received notice as members of this
plaintiff class. As members of the class, their legal rights
are affected by the settlement and they have standing to sue.
See Ace Heating & Plumbing Co. v. Crane Co., 453 F.2d 30,
32-33 (3 Cir. 1971). See generally 3B W. Moore, Federal Practice
P 23.80(5) (1969).
Maintenance as a Class Action
Appellants argue that there were conflicts of interest among
the plaintiffs such that no single class action could be maintained.
They base this contention on the fact that in at least one case,
participating distributors were sued along with Holiday Magic.
They argue that adequate representation by a single lead counsel
was impossible because of these intra-class conflicts.
 The determination as to whether a class action should be
maintained is committed to the sound discretion of the district
court and will not be disturbed on appeal absent a showing of
abuse of discretion. Clark v. Watchie, 513 F.2d 994, 1000 (9
Cir. 1975); Price v. Lucky Stores, Inc., 501 F.2d 1177, 1179 (9
Cir. 1974). The two general requirements for a class action under
Rule 23 are numerosity and adequate representation. Appellants
challenge only the district court's finding that the class could
be adequately represented in light of the alleged intra-class
*1177  Only that one case involving appellants, out
of the 25 cases brought, named any distributors as defendants.
This suit attempted to define a defendant class as well as a
plaintiff class. The court refused to sanction class action status
for this sole suit (even though it could have done so). We agree
with this decision. This one action involved only individual
claims collateral to the class action itself. Such claims can
be settled by separate actions. See Donson Stores v. American
Bakeries, 58 F.R.D. 485 (S.D.N.Y.1973). There are no conflicts
within the plaintiff class since any actions between class members
may still be pursued outside of the class action.
 All plaintiffs have asserted individual claims against
the settling defendants. That some of the plaintiffs may have
claims against each other does not detract from their identical
legal and factual claim against the settling defendants. See
Vernon J. Rockler & Co. v. Graphic Enterprises, 52 F.R.D.
335, 342 (D.Minn.1971); Mersay v. First Republic Corp. of America,
43 F.R.D. 465, 468 (S.D.N.Y.1968). Substantial conflict going
to the subject matter of the lawsuit is necessary to prevent class
action treatment. Northern Acceptance Trust 1065 v. AMFAC, Inc.,
51 F.R.D. 487 (D.Haw.), rev'd in part on other grounds, 441 F.2d
704 (10 Cir.), cert. denied, 404 U.S. 951, 92 S.Ct. 268, 30 L.Ed.2d
267 (1971). Such conflict does not exist here.
 Each of the cases cited by appellants is distinguishable
because there was substantial intra-class conflict as to the relief
sought. In this case, all plaintiffs have liability claims against
the settling defendants and brought separate actions against them.
There was no conflict as to the relief sought and hence not the
type of class conflict we believe renders maintenance of the action
an abuse of discretion. Cf. Hansberry v. Lee, 311 U.S. 32, 61
S.Ct. 115, 85 L.Ed. 22 (1940).
Moreover, whatever differences may have existed within the class
could have been reduced by certain class members opting out.
Section (c)(2) of Rule 23 grants class members an opportunity
for self-exclusion if the suit is brought, as here, under s (b)(3).
See Fed.R.Civ.P. 23(c)(2)(A). Appellants had the right and opportunity
to opt out in this action. They chose not to. We believe that
they should not now be allowed to play the role of spoilers for
a class of more than 31,000 people when they could have chosen
not to be bound by the settlement. See generally Developments
in the Law Class Actions, 89 Harv.L.Rev. 1318, 1485-89 (1976)
(hereinafter cited as Developments).
This conclusion is reinforced in this case by the fact that all
class members were given the right to opt out after being apprised
of the terms of the settlement. Appellants were not forced into
a position of having to predict whether their interests would
be adequately represented. They could determine whether there
had been adequate representation of their interests by reviewing
the terms of the settlement. If they were dissatisfied, they
could opt out of the class. This opportunity to opt out after
knowing the terms of a proposed settlement is unusual in the class
action context and serves to protect the interests of class members.
See Ace Heating & Plumbing Co. v. Crane Co., 453 F.2d 30,
33 (3 Cir. 1971). Appellants' rights were fully protected by
this right to opt out. We therefore hold that they were adequately
 Notice in a class suit must present a fair recital of the
subject matter and proposed terms and given an opportunity to
be heard to all class members. Eisen v. Carlisle and Jacquelin,
417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974); Mullane v.
Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652,
94 L.Ed. 865 (1950). Appellants allege that this standard was
 They argue that the notice did not fairly apprise class members
of their positions because it did not specify their potential
recovery. It is obvious, however, that this was a matter of conjecture
since it was *1178 unknown how many class members would
opt out or submit claims. The aggregate amount available to all
claimants was specified and the formula for determining one's
recovery was given. Nothing more specific is needed. See Cannon
v. Texas Gulf Sulfur, 55 F.R.D. 308, 313 n. 2 (S.D.N.Y.1972) (approval
of the TGS settlement).
 Appellants also contend that the notice was biased because
it advised that litigation beyond the settlement would probably
force Holiday Magic into bankruptcy. This is an accurate statement
of the condition of defendant, and thus it only advised class
members of the hazards of continued litigation. The notice also
did not advise individual litigants as to their own potential
future liability, and it should have. But such liability would
be limited to only a few members of the class and the potential
for it was remote (as evidenced by the single case involving participating
distributors). Therefore, it cannot be said that the court abused
its discretion by approval of this notice. Cf. Chicken Delight
v. Harris, 412 F.2d 830, 831 (9 Cir. 1969) (dispensing with individual
issues in the notice).
 Appellants lastly claim that class members were given inadequate
time to intelligently respond to the notice. There were 26 days
between the mailing of the notice and the deadline for opting
out. All of the class members were participants in the Holiday
Magic pyramid scheme and knew the issues involved. Thus,
the month's time seems more than adequate. See Milstein v. Werner,
57 F.R.D. 515, 518 (S.D.N.Y.1972) (approving a 38-day period with
less informed class members).
 A court must find a class action settlement fair and
adequate to all persons before approving it. Norman v. McKee,
431 F.2d 769, 774 (9 Cir. 1970), cert. denied, 401 U.S. 912, 91
S.Ct. 879, 27 L.Ed.2d 811 (1971). This court on appeal will reverse
those findings only upon a clear showing of an abuse of discretion.
Grunin v. International House of Pancakes, 513 F.2d 114, 123
(8 Cir.), cert. denied, 423 U.S. 864, 96 S.Ct. 124, 46 L.Ed.2d
93 (1975); State of West Virginia v. Chas. Pfizer & Co., 440
F.2d 1079, 1085 (2 Cir.), cert. denied, 404 U.S. 871, 92 S.Ct.
81, 30 L.Ed.2d 115 (1971). It is with these legal precepts in
mind that we turn to approval of the settlement.
In Protective Committee v. Anderson, 390 U.S. 414, 88 S.Ct. 1157,
20 L.Ed.2d 1 (1968), the Supreme Court outlined several factors
in considering the acceptability of a settlement. These included
the strength of the plaintiff's case, the expense and likely duration
of further litigation, the amount of the settlement, and the defendant's
ability to pay a judgment larger than that provided by the proposed
settlement. Id. at 424-25, 88 S.Ct. 1157. See also City of Detroit
v. Grinnell Corp., 495 F.2d 448, 455 (2 Cir. 1975) (outlining
 The terms of the settlement here called for all nonoperating
assets of the settling defendants to be transferred to the class
action trust. An arrangement for future additions to this trust
out of operating income was made. The evidence indicates that
Holiday Magic might have been forced into bankruptcy had any larger
amount, by way of settlement or judgment, been exacted. More
important, though, each class member was offered 100% of the amount
he paid to Holiday Magic in any form at any time. Based on the
standard of Protective Committee, supra, this settlement appears
more than fair.
 This conclusion is supported by the fact that the SEC participated
in and approved of the settlement. The participation of a government
agency serves to protect the interests of the class members, particularly
absentees, and approval by the agency is an important factor for
the court's consideration. See Developments, supra, at 1563,
1571. The small number of class members indicating their disapproval
of the settlement, here only one percent, also indicates its acceptability.
Cf. id. at 1567-68.
 Of course, the district court must provide a record which
adequately reveals the basis for its decision. This court has
*1179 stated that when objections are made, the trial court
must set forth on the record a reasoned response thereto. Mandujano
v. Basic Vegetable Products, Inc., 541 F.2d 832, 836 (9 Cir. 1976).
The findings of fact and conclusions of law set forth by the
district court provide an adequate basis for this court to determine
that the settlement was indeed fair. However, these findings
did not provide a "reasoned response" to appellants'
objections as required by Mandujano.
But we do not think that such specificity was required here.
Appellants object to this settlement not on behalf of the class
but because of their potential liability as defendants and their
inability under the settlement to sue for indemnity or contribution
from Holiday Magic. This is an understandable concern, but one
which would have been solved by opting out of the class. They
then would have preserved any separate cause of action against
Holiday Magic, including one for indemnification or contribution.
Appellants now are playing spoilers. The court in Mandujano
recognized that specific responses to objections in such an instance
were unnecessary. Id. at 836. We believe that the failure of
the district court to give detailed responses to appellants' objections
does not call for throwing out a settlement in a complicated lawsuit
for a class of more than 31,000 people.
The judgment of the district court is AFFIRMED.
KENNEDY, Circuit Judge, concurring:
In every class action, the attorney for the class owes the duty
of fair representation to each class member. I do not believe
that a provision for opting out of the class provides an entirely
satisfactory answer to the claim that a lead attorney failed to
discharge that duty of representation. Particularly where the
settlement could be easily modified to resolve the class conflicts,
the dissident members should not be required to take the settlement
or leave it. Cf. Developments Class Actions, 89 Harv.L.Rev. 1318,
My view of the implications of our decision in Mandujano v. Basic
Vegetable Products, 541 F.2d 832 (9th Cir. 1976), moreover, may
differ somewhat from that suggested by the majority. It is not
clear that Mandujano, which sets forth precise procedures for
district courts to follow in class actions brought under Fed.R.Civ.P.
23(b)(2), is applicable to a class action like the one here, brought
under rule 23(b)(3). Nevertheless, it is unnecessary for us to
decide the scope of the Mandujano decision, for the district court,
acting prior to the formulation of the rules in Mandujano, in
essence provided the procedural protections required by that case.
The record indicates that the court below considered the objections
now raised on appeal and allowed the objections to be argued in
open court. The district court concluded that the class of individuals
of appellants' status, i.e., those persons who earned fees as
distributors, could not properly be certified as a subclass, since
each claim against those persons would have to be tried individually.
The court further stated that if the appellant or any other distributor
claimed indemnity or contribution from the settling defendants,
such claims also would require individual determinations. Given
the absence of an appropriately certifiable subclass, the district
court expressed serious doubts whether it could, under rule 23,
require each class member to release his claims against all other
members of the plaintiff class. The issue was argued extensively
and preserved in the transcript of proceedings below. Consequently,
the district court afforded to the appellants what amounts to
a reasoned response after a hearing on the objections. These
are essentially the safeguards that Mandujano requires.
The record is wholly adequate to enable proper appellate review
of the questions whether appellants were denied adequate legal
representation and whether intraclass conflicts made the settlement
unfair. A review of the record indicates that the representation
was fair and adequate as to *1180 appellants and all other
members of the plaintiff class. The trial court correctly rejected
the objections of appellants and acted within its discretion in
approving the settlement. I therefore concur in the judgment
of the court.