What are the Requirements for Class Certification Under Federal Rule of Civil Procedure 23
April 5, 2019
In a class action lawsuit, an attorney representing certain named class members litigates on behalf of other class members, who may become bound by the outcome of the litigation process.
An antitrust class action usually alleges some form conduct that is a “per se” antitrust violation, such as a price-fixing conspiracy or market-allocation agreement, in which the damages are small for each class member, but often large in the aggregate. Thus, if the court denies plaintiffs’ motion to certify a class, each individual plaintiff must sue (read here about appealing a class certification decision). And since each member usually only has damages of a few dollars or less, litigation just doesn’t make sense. That, in fact, is the point of Rule 23 of the Federal Rules of Civil Procedure and class actions generally—to allow relief when the aggregate harm is great but the individual harm is miniscule.
Important Note: In class-action litigation, Bona Law represents only defendants and certain opt-out plaintiffs. We do not represent plaintiff classes.
Rule 23(a): Numerosity, commonality, typicality and adequacy
Federal Rule of Civil Procedure, Rule 23(a) provides that an action requires four conditions to qualify for class treatment: (i) the class must be so numerous that joinder of all members is impracticable, (ii) there must be questions or law or fact common to the class, (iii) the claims of the representative parties must be typical of the claims of the class, and (iv) the representative parties will fairly and adequately protect the interests of the class.
First, some courts have held that numerosity is usually established when there are at least 40 class members. Others have concluded that no fixed number of class members is sufficient, and that the court must consider other factors such as geographical dispersion or the nature of the action.
Second, after the U.S. Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 131 S. Ct. 2541 (2011), merely reciting a list of common questions is not enough to show commonality. Instead, a court deciding the commonality of factual issues must rigorously analyze the plaintiffs’ contention that these issues can be proven on a class wide basis: “[w]hat matters ... [is] the capacity of a class wide proceeding to generate common answers apt to drive the resolution of the litigation.”
Third, to determine typicality the courts consider to what extent plaintiffs’ claims are markedly different or are generally the same (for instance arising from the same event or pattern) as those of other class members with respect to the relevant legal theory and factual circumstances of the case.
Lastly, the adequacy requirement determines whether the interests and incentives among the plaintiffs and the rest of the class are aligned, or if, by contrast, the class action is not in the interests of all class members. Courts also analyze the adequacy of counsel.
Rule 23(b)(3): Predominance and Superiority
Once an action complies with all four conditions under Rule 23(a), a class action must also satisfy at least one of the three requirements of Rule 23(b). The most common one is Rule 23(b)(3)—classes seeking monetary damages.
This Rule is often called the “predominance rule” and requires that: (i) questions of law or fact common to class members predominate over any questions affecting individual members, and (ii) that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.
Rule 23(b)(3) requires the court to find that “questions of law or fact common to class members predominate over any questions affecting only individual members.” In other words, the court analyzes whether questions of law or fact common to the members of the class will predominate over any questions affecting only individual members, making class treatment an efficient way to resolve the common questions for all members of the class in a single adjudication.
Today, the “rigorous standard” is applicable to review class action certification and determine to what extent Courts should consider the merits of plaintiffs’ claims to decide whether Rule 23’s requirements are met. In Wal-Mart Stores, Inc v Dukes, the Supreme Court held that such a rigorous analysis will frequently entail some overlap with the merits of the plaintiffs’ underlying claim.
This standard makes “common impact” a decisive factor for certification of antitrust cases. Common impact requires plaintiffs to show–with evidence common to the proposed class– that the proposed class was impacted by an alleged antitrust violation. The Third Circuit in Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305 (3rd Cir. 2008), rejected the presumption of predominance in antitrust cases and held that all requirements of Rule 23 had to be supported by a preponderance of the evidence after a rigorous analysis, rather than in a cursory overview.
This “rigorous standard” does not, however, require plaintiffs—at the class certification stage—to actually prove antitrust impact. Rather, as explained by the court in Comcast Corp. v. Behrend, 569 U.S.133 S. Ct. 1426 (2013), the rigorous standard just requires that plaintiffs can establish class-wide antitrust impact through common evidence. In order to do that, a court will only inquire into the merits of the case insofar as it is necessary to determine whether a class certification requirement is met.
In other words, 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 at the class certification stage. And a court will always have to resolve any factual or legal disputes that are material to its Rule 23 analysis, which means that certain class certification issues will overlap with the merits of the case.
Rule 23(b)(3) further requires the that “a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.”
Before certifying a class under Rule 23(b)(3), the court must determine the proportionality of the potential damages to the actual harm, and analyze whether the proposed class action is superior to other available methods.
Rule 23(c)(1)(A) provides that “[a]t an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action.”
The Federal Rules of Civil Procedure changed in 2003 from requiring class motions to be brought “as soon as practicable”, to be brought “at an early practicable time.” This might look as a minor change at first but has already had some important implications.
The U.S. Courts of Appeal for the Ninth Circuit, for example, recently struck class certification in ABS Entm’t, Inc. v. CBS Corp. 908 F.3d 405 (9th Cir. 2018). Under the local rules, Rule 23-3 requires plaintiffs to file a motion for class certification within 90 days of filing a complaint. The Ninth Circuit reversed the district court’s ruling by stating that Local Rule 23-3 is incompatible with Federal Rule of Civil Procedure 23, because a rigorous analysis under class certification may require discovery and denying such discovery would be an abuse of discretion.
Rule 23(f) provides that “[a] court of appeals may permit an appeal from an order granting or denying class-action certification under this rule if a petition for permission to appeal is filed with the circuit clerk within 14 days after the order is entered.”
Review of a certification order under Fed. R. Civ. P. 23(f) is appropriate where: (1) the class certification order is a “death-knell situation” for either plaintiffs or defendants, and class certification is questionable; (2) the certification decision presents unsettled and fundamental issues of law related to class actions; or (3) the district court’s certification order is manifestly erroneous. Chamberlan v. Ford Motor Co., 402 F.3d 952, 957 (9th Cir. 2005).
Rule 23(f) also provides that “[a]n appeal does not stay proceedings in the district court unless the district judge or the court of appeals so orders.” This means that the court may, but is not obliged to, issue a stay. This is an important factor to consider when preparing a 23(f) petition.