should be granted and second, whether putative class members should be notified.
The standards which have emerged in determining whether a settlement should be approved or notice given "focus primarily on the possibility that the pre-certification compromise is the product of collusion." Magana v. Platzer Shipyard, Inc., 74 F.R.D. 61, 67 (S.D.Tex.1977). In addition consideration must be given to the possibility of prejudice to absent putative class members. See Larkin Gen. Hosp., Ltd. v. American Tel. & Tel. Co., 93 F.R.D. 497, 501-502 (E.D.Pa.1982). Finally, the reliance interest of putative class members, which will vary according to the facts of each case, must be taken into account. Id.
Applying these criteria, I find that on its face the settlement does not appear collusive. Both parties apparently had substantial claims against each other which they have agreed to withdraw. The only person receiving direct monetary payment is plaintiff's counsel. The pendency of this class action has tolled the applicable statute of limitations and preserved the rights of all putative class members as they existed on the day of the filing of the complaint. American Pipe & Construction Co. v. Utah, 414 U.S. 538, 554, 94 S. Ct. 756, 766, 38 L. Ed. 2d 713 (1974). The settlement itself will not prejudice absent class members since a "precertification dismissal does not legally bind absent class members." Magana v. Platzer Shipyard, Inc., supra at 69.
The question of notice is not, however, so easily resolved. We must determine, under the circumstances, whether notice should be given, and if so, to whom it should be given. As to the first inquiry, the Court notes that it is in agreement with those authorities which hold that notice to putative class members of a pre-certification dismissal or compromise is not mandated by Rule 23(e). See Shelton v. Pargo, 582 F.2d 1298 (4th Cir.1978); Magana v. Platzer Shipyard, Inc., supra; Milonas v. Amerada Hess Corp., 25 Fed. R. Serv. 2d 738 (S.D.N.Y.1977), cited with approval in Larkin Gen. Hosp. Ltd. v. American Tel. & Tel. Co., 93 F.R.D. at 503. However, none of these cases hold that the Rule 23(e) notice provisions never apply at the precertification stage. Rather, "courts have adopted a more enlightened approach, which avoids judicial time expenditure and relieves the parties of the expense of notice when it is inappropriate, without circumventing the policies of 23(e). H. Newberg, Class Actions § 2620 at 240 (1977)."
A determination of whether notice is required rests upon the policies underlying Rule 23(e), namely, deterring collusion on the part of parties to the litigation, helping to guarantee an adequate consideration of the class interest and enabling potential class members to protect their own interests by allowing them to object to the application, to take over representation of the class action or to file their own suit elsewhere. Magana v. Platzer Shipyard, Inc., supra at 68. Hence, the " presumption should be that the spectre of abuse in an individual settlement and class dismissal at the precertification stage is sufficient to warrant notice to absent class members before court approval of any such arrangement." Id. at 69 (emphasis added).
Assuming that notice is required, it remains to determine to whom notice should be given. Counsel argues that case authority in this Circuit precludes a former franchisee from representing a class consisting of both former and present franchisees. See Southern Snack Foods v. J & J Snack Foods, 79 F.R.D. 678 (D.N.J.1978); Aamco Automatic Transmissions, Inc. v. Tayloe, 67 F.R.D. 440 (E.D.Pa.1975); Seligson v. Plum Tree, Inc., 61 F.R.D. 343 (E.D.Pa.1973). The rationale for this rule is that former franchisees may be motivated by the recovery of maximum damages without regard to any adverse impact on the continued economic viability and public good will of the present franchise network. Southern Snack Foods v. J & J Snack Foods, supra at 680. Thus, it appears that had a class been certified in this action, it would have consisted of no more than approximately 27 former franchisees of Penn Jersey.
Applying the foregoing to the facts of the present case, I conclude that notice to the former Penn Jersey franchisees is required. Under the circumstances it is quite possible that members of the class are aware of the pendency of the class action suit. The litigation was publicized in both the Philadelphia Business Journal and Automotive News shortly after the suit was filed. Millaway Aff. para. 8. At least one other franchisee wrote to inquire about the suit expressing a desire to join in the action. Millaway Aff. Exhibit A. Given the limited geographic range of the franchise network it is entirely possible that information concerning the suit has spread by word of mouth. Finally, because there are a relatively small number of putative class members, providing notice will not be burdensome or expensive. Cf. Larkin Gen. Hosp., Ltd. v. American Tel. & Tel. Co., supra (no notice required to putative class of thirty thousand members).