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This Week's Feature
Sorry, Party’s Over: Defeating the Class After Certification
By Neal Walters and Mariah Murphy
Ballard Spahr LLP, Voorhees, New Jersey
The grant of class certification is frequently considered the death knell of cases involving allegations of substantial exposure but which are predicated upon obscure theories. Defendants too often have experienced the frustration of settling a class action after it has been certified based merely upon the high number of claims, regardless of the merits.
Settlement however, is not the only option in response to class certification. Courts increasingly have recognized the fundamental premise that the grant of class certification is preliminary and is subject to amendment or decertification at any point in the proceedings. A “favorable class determination by the court is not cast in stone.” Eggleston v. Chicago Journeymen Plumbers’ Local Union No. 130, U.A., 657 F.2d 890, 896 (7th Cir. 1981). A district court’s class certification is inherently tentative prior to a final judgment on the merits of the legal claims presented. Officers for Justice v. Civil Serv. Comm’n., 688 F.2d 615, 633 (9th Cir. 1982), cert. denied, 459 U.S. 1217 (1983).
It is important to understand the reasons underlying decertification in order to effectively manage adverse class certification decisions. Challenging the legal grounds for class certification decisions on appeal through Rule 23(f) is not always an attractive option and consideration should be given to whether a defendant can change the trial court’s certification decision upon a more complete factual record.
Rule 23 affords courts the authority to decertify a class by amending a certification order: “[a]n order that grants or denies class certification may be altered or amended before final judgment.” Fed. R. Civ. P. 23(c)(1)(C). Courts have interpreted Rule 23(c) to impose a duty to monitor and revisit certification as the case develops. See, e.g., Boucher v. Syracuse Univ., 164 F.3d 113, 118 (2d Cir. 1999)(finding district courts are required to reassess class certification rulings as cases proceed and to redefine a class or decertify as needed); Barnes v. American Tobacco Co., 161 F. 3d 127 (3d Cir. 1998)(affirming district court’s decertification of class at summary judgment stage and finding court was required to reassess class ruling as case developed); Petrovic v. AMOCO Oil Co., 200 F. 3d 1140 (8th Cir. 1999)(a court has a duty to ensure that a certified class continues to be certifiable); Richardson v. Byrd, 709 F.2d 1016 (5th Cir. 1983)(a court has a duty to monitor its class decisions in light of progression of case, and must define, redefine, subclass or decertify as appropriate).
The decision to decertify a class lies within a court’s discretion. See, e.g., Central Wesleyan College v. W.R. Grace & Co., 6 F.3d 177, 189 (4th Cir. 1993)(district court has discretion to decertify class). The standard used in reviewing decertification is the same standard for evaluating certification, satisfaction of the requirements of Rule 23. A party moving for decertification bears the burden of establishing that class certification was not properly granted pursuant to Rule 23. Whether addressing certification or decertification, courts are required to conduct a “rigorous analysis” into whether the prerequisites of Rule 23 are met. In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 309 (3d Cir. 2008); see also, Valentino v. Carter – Wallace, Inc., 97 F. 3d 1227, 1233 (9th Cir. 1996).
Notwithstanding the recent trend of courts applying a rigorous analysis of the requirements of Rule 23 at the certification stage, courts addressing the initial grant of class certification at the earliest practicable time in the litigation may be inclined to afford greater latitude to plaintiff’s speculative and hypothetical theories. At this preliminary stage, it is difficult to fully appreciate the complexity of deciding the proofs required at trial. For example, in decertifying the class at the summary judgment stage, a district court recognized that, at the time it granted certification, it “accepted Plaintiffs’ arguments in support of certification . . . because Plaintiff insisted that the liability determination could be made on a class-wide basis without inquiry into the particulars of every individual transaction.” Chesner v. Stewart Title Guaranty, No. 06-0476, 2009 U.S. Dist. LEXIS 22453 at *37-38 (N.D. Ohio Jan. 9, 2009). In granting the defendant’s decertification motion, the court found that was “not the case”, and that “[l]iability turn[ed] on questions that [could] only be answered by examining the specific facts of every individual claim.” Id. at *38.
Indeed, developing a more complete factual record through continued merits discovery and expert challenges may serve to expose plaintiffs’ theories and amplify the individual factual issues precluding class treatment. A “district court is obliged to take cognizance of a changed factual situation and may alter an earlier order accordingly. [T]he Committee Notes on Rule 23 envision modification of a class certification if, upon fuller development of the facts, the original determination appears unsound.” Zenith Laboratories, Inc. v. Cater – Wallace, Inc., 530 F. 2d 508, 512 (3d Cir. 1976).
If discovery reveals that certification is no longer appropriate or should not have been granted, a party should move for decertification. See, e.g., Culpepper v. Irwin Mortg. Corp., 491 F.3d 1260, 1276 (11th Cir. 2007)(courts have flexibility to review certification orders “in light of subsequent developments in the case”); see also, Fed. R. Civ. P. 23, advisory committee note of 2003 (commenting that decertification may be warranted in light of further proceedings); Kuehner v. Heckler, 778 F.2d 152 (3d Cir. 1885)(recognizing that discovery may uncover facts relevant to certification).
Development of the factual record may demonstrate that common issues do not exist. See, e.g., Danvers Motor Co. v. Ford Motor Co., 543 F.3d 141, 150 (3d Cir. 2008)(remanding for decertification of class of car dealers with diverse interests where subsequent depositions established that “proposed class members will likely need to pursue different, and possibly conflicting legal theories to succeed”); Ilhardt v. A.O. Smith Corp., 168 F.R.D. 613, 619 (S.D. Ohio 1996)(holding decertification was required where discovery later revealed that “no one set of operative facts establishes liability, no single proximate cause equally applies to each potential class member and individual issues outnumber common issues”).
Decertification, or redefining the class, can also occur post-trial before an appeal. Although rare, and involving substantial risk, a trial represents an opportunity to challenge class certification because it involves the fullest development of the record. The evidence presented at trial, and, particularly a jury’s specific findings in Verdict Interrogatories, may eliminate allegedly common liability and damages theories that previously supported class treatment, providing the court with a new opportunity to revisit its certification decision. See e.g., Forehand v. Florida State Hosp., 89 F.3d 1562 (11th Cir. 1996)(affirming decertification post trial and ten years after complaint was filed where evidence at trial showed plaintiffs failed to satisfy a required element of their claims, the receipt of right to sue letters); see, also, Watson v. Forth Worth Bank & Trust, 798 F.2d 791, 797 (5th Cir. 1986), vacated and remanded on other grounds, 487 U.S. 977 (1988)(court affirmed decertification where the “actual proof at trial demonstrated the hiring and promotion claims could have been tried separately”); see also, Penk v. Oregon State Bd. Of Higher Education, 816 F. 2d 458, 467 (9th Cir. 1987)(affirming district court’s redefinition of class after six months of trial in gender discrimination action).
Decertification can be complete or partial, since a trial court has the discretion to decertify with respect to specific issues. Amendment of a certification order can include decertification, redefining the class and/or eliminating specific legal theories. See, e.g., Society for Individual Rights, Inc. v. Hampton, 528 F. 2d 905, 906 (9th Cir. 1975)(a court has the discretion to limit issues in a class action to those “which lend themselves to convenient use of the class action motif”); see also, Burdick v. Union Security Ins. Co., No. 07-4028, 2009 U.S. Dist. LEXIS 35611 at * 51 (C.D. Cal. April 2, 2009)(after summary judgment finding it appropriate to analyze certification as to each claim and “finding class treatment of breach of contract claim inappropriate” where only a handful of class members presented a viable breach of contract claim).
Decertification is not limited to factual developments. Changes in legal precedent may also warrant decertification. See, In re Grand Theft Auto Video Game Consumer Litig., 251 F.R.D. 139, (S.D.N.Y. 2008)(decertifying class based upon relevant Second Circuit decision); see also, Doe v. Karadzic, 192 F.R.D. 133, 137 (S.D.N.Y. 2000)(revisiting class certification order based on recent Supreme Court ruling deciding relevant legal principles on class fund recovery).
Defense counsel faced with adverse class certification decisions should be mindful of the court’s continuing obligation to consider supplements to the factual record and changes in the law that might justify class decertification in whole or in part. This may involve taking a focused group of depositions shortly after the grant of class certification to amplify the factual issues; or it may require a more dedicated effort to expose the lack of a common class-wide basis for plaintiffs’ expert opinions. In any event, decertification is a meaningful alternative to considerations of settlement upon the initial, preliminary grant of class certification.
Neal Walters
Mariah Murphy
Ballard Spahr LLP
Voorhees, New Jersey
waltersn@ballardspahr.com
murphym@ballardspahr.com
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