A Primer on Class Certification Under Federal Rule 23
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Class Act: Best Practices for Defending Class Actions A Primer On Class Certification Under Federal Rule 23 Caroline H. Gentry, Esq. Porter Wright Morris & Arthur LLP One South Main Street, Suite 1600 Dayton, OH 45402 Introduction Plaintiffs seeking to certify a class under Federal Rule 23 must plead and prove: (1) an adequate class definition, (2) ascertainability, (3) numerosity, (4) commonality, (5) typicality, (6) adequacy and (7) at least one of the requirements in Rule 23(b), namely: (a) separate adjudications will create a risk of decisions that are inconsistent with or dispositive of other class members’ claims, (b) declaratory or injunctive relief is appropriate based on the defendant’s acts with respect to the class generally, or (c) common questions predominate and a class action is superior to individual actions. Each of these prerequisites is addressed below, along with the burden of proof; the use of subclasses and issue classes; the role of expert testimony; the class certification hearing; the existence of multiple class actions; and the timing, modification and appeal of the certification decision. Burden of Proof The plaintiff bears the burden of proving that the prerequisites to class certification have been met by a preponderance of the evidence.1 Until a few years ago, lower courts struggled to reconcile the Supreme Court’s conflicting statements that they must conduct a “rigorous analysis” of whether the prerequisites to class certification have been met 2 but, at the same time, must not inquire into the merits of the plaintiff’s claims,3 even though the merits “are often highly relevant” to a Rule 23 analysis. 4 Also, while some courts assumed the truth of the plaintiff’s factual and legal allegations, other courts allowed defendants to assert evidence-based challenges. The Supreme Court recently clarified these issues in three decisions. First, in Wal-Mart Stores, Inc. v. Dukes , 564 U.S. __, 131 S. Ct. 2541 (2011), the Court held that “Rule 23 does not set forth a mere pleading standard.” Id . at 2551. Instead, a plaintiff “must affirmatively demonstrate his compliance with the Rule—that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc.” Id . (emphasis in original). Although a court’s rigorous analysis will frequently overlap with an inquiry into the merits, “[t]hat cannot be helped.” Id . The Court reversed a decision certifying a class of employees suing for sex discrimination after concluding that the commonality requirement was not met where evidence of subjective decision- making by low-level employees could not establish discrimination on a classwide basis.5 Next, in Amgen Inc. v. Connecticut Retirement Plans & Trust Funds , 568 U.S. __, 133 S. Ct. 1184 (2013), the Court held that there are limits to a court’s analysis of the merits at the class certification stage. “Rule 23(b) requires a showing that questions common to the class predominate, not that those questions will be answered, on the merits, in favor of the class.” Id . at 1191. “Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage. Merits questions may be considered to the extent—but only to the extent—that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied.” Id . at 1194-95. The Court affirmed a decision certifying a class of investors suing for securities fraud after holding that the plaintiffs need only plead, and need not prove, materiality at the class certification stage. Finally, in Comcast Corp. v. Behrend , 569 U.S. __, 133 S. Ct. 1426 (2013), the Court reiterated that the prerequisites to class certification require evidentiary proof and chided the court of appeals for “refusing to entertain arguments” at the class certification stage merely because they overlap with the merits. Id . at 1432-33. The Court reversed a decision certifying a class of subscribers bringing antitrust claims after concluding that the plaintiffs had failed to prove that there was a method to determine legally-available damages on a classwide basis, and so did not satisfy the predominance requirement. After these decisions, it is now settled that when ruling on class certification the court must resolve any factual or legal disputes that are material to its Rule 23 analysis and find that the plaintiff has met its burden of proof based on evidence, not speculation. 6 1 Messner v. Northshore Univ. HealthSystem , 669 F.3d 802, 811 (7th Cir. 2012). 2 General Tel. Co. of Southwest v. Falcon , 457 U.S. 147, 161, 102 S. Ct. 2364 (1982). 3 Eisen v. Carlisle & Jacquelin , 417 U.S. 156, 177, 94 S. Ct. 2140 (1974). 4 Ellis v. Costco Wholesale Corp. , 657 F.3d 970, 981 (9th Cir. 2011). 5 Dukes does not bar class certification where high-level managers exercise subjective decision- making in a common way. Scott v. Family Dollar Stores, Inc. , 733 F.3d 105 (4th Cir. 2013); McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc. , 672 F.3d 482 (7th Cir. 2012). 6 Phillips v. Asset Acceptance, LLC , Case No. 13-2251, 2013 U.S. App. LEXIS 23984, *8-10 (7th Cir. Dec. 2, 2013); Messner , 669 F.3d at 811; Ellis , 657 F.3d at 983. 2 Implicit Prerequisite: An Adequate Class Definition The requirement of an adequate class definition includes several concepts. First, the class definition must be precise and unambiguous.7 Second, it “must be sufficiently definite so that it is administratively feasible for the court to determine whether a particular individual is a member of the proposed class.” 8 Finally, it must not be “defined so broadly as to include a great number of members who for some reason could not have been harmed by the defendant’s allegedly unlawful conduct.” 9 Although the lack of an adequate class definition can lead to a denial of class certification, the court may instead choose to remedy its problematic aspects and propose an amended definition. 10 A type of class definition that is frequently challenged is a “fail-safe class,” i.e., one that is defined to include only those individuals who have a valid claim—which is of course a merits question that will not be decided until the end of the case (if at all). Although the Fifth Circuit does not prohibit fail-safe classes, 11 other courts have rejected them on the grounds that they do not allow class members to be identified 12 and also are unfair to defendants because “a class member either wins or, by virtue of losing, is defined out of the class and is therefore not bound by the judgment.” 13 Implicit Prerequisite: An Ascertainable Class Although a plaintiff need not identify individual class members prior to class certification, he must show that there is an available method to identify class members based on objective criteria. 14 This method must be “reliable and administratively feasible, and permit[] a defendant to challenge the evidence used to prove class membership.”15 It should not require mini-trials or “extensive and individualized fact finding.” 16 The ascertainability requirement “eliminates serious administrative burdens that are incongruous with the efficiencies expected in a class action.” It protects absent class members by making it more likely that they will receive notice. And it helps ensure that defendants know who is in the class and bound by the judgment. 17 One court cautions that “the size of a potential class and the need to review individual files to identify its members are not reasons to deny class certification.” 18 However, a court may deny class certification if a defendant’s records are simply insufficient to identify class members.19 The need to rely solely on affidavits from class members to prove class membership raises due process concerns and may be insufficient to establish ascertainability.20 Rule 23(a)(1): Numerosity 7 Marcus v. BMW of N. Am., LLC , 687 F.3d 583, 591-92 (3rd Cir. 2012). 8 Young v. Nationwide Mut. Ins. Co. , 693 F.3d 532, 537-38 (6th Cir. 2012). 9 Messner , 669 F.3d at 824-25. 10 Id. at 824-26 & n.15. 11 In re Rodriguez , 695 F.3d 360, 370 (5th Cir. 2012). 12 Jamie S. v. Milwaukee Public Schools , 668 F.3d 481, 495-97 (7th Cir. 2012). 13 Young , 693 F.3d at 538. 14 Marcus , 687 F.3d at 592-93. 15 Carrera v. Bayer Corp. , 727 F.3d 300, 307 (3rd Cir. 2013). 16 Hayes v. Wal-Mart Stores, Inc. , 725 F.3d 349, 356 (3rd Cir. 2013). 17 Marcus , 687 F.3d at 593. 18 Young , 693 F.3d at 539. 19 Carrera , 727 F.3d at 308-09; Hayes , 725 F.3d at 355-56; Marcus , 687 F.3d at 593. 20 Carrera , 727 F.3d at 309-12; Marcus , 687 F.3d at 594. 3 Rule 23(a)(1) requires the plaintiff to show that “the class is so numerous that joinder of all members is impracticable.” A finding of numerosity must be based on direct or circumstantial evidence and not on speculation, even if it is “tempting to assume” that there must be a large number of class members.21 Numerosity should be shown for each proposed class and subclass. 22 Some courts find that numerosity is typically established when there are at least 40 class members. 23 Other courts have held that no fixed number of class members is sufficient, and that the court must consider not only the number of putative class members but also their geographical dispersion, the ease with which they can be identified, the size of their claims and the nature of the action.