I attended the ABA’s National Institute on Class Actions last week in Chicago, and one theme was clear. Plaintiffs’ lawyers are increasingly fond of asking courts to certify cases so-called “issue classes,” invoking Rule 23(c)(4). They believe that they can pressure companies to settle cases by defining a relatively narrow, yet critical, issue for certification and pushing for trial on that “class issue.” This article takes a closer look at issue classes and potential arguments consumer products companies can use to fend them off.
Before we begin, let me put in a plug for the ABA’s National Institute on Class Actions. This is an outstanding program, with numerous federal judges attending, as well as the entire Advisory Committee on Rule 23. The program was in Chicago this year, but New Orleans looks to be the location for 2015. It’s usually in October, so mark your calendars and plan to attend.
Background on Issue Classes
– When appropriate, an action may be brought or maintained as a class action with respect to particular issues. Fed. R. Civ. Proc. 23(c)(4).
The text of Rule 23(c)(4) raises more questions than it answers. The subsection appears in the part of the Rule entitled “Certification Order; Notice to Class Members; Judgment; Issues Classes; Subclasses,” and is separate from subsections (a) and (b), which delineate the “Prerequisites” of class certification and the “Types of Class Actions” that can be maintained. The Rule does not explain what “when appropriate” means. Nor does it explain what “with respect to particular issues” means.
The Varying Interpretations of Rule 23(c)(4)
Academics have traced the history and intent of Rule 23(c)(4), providing a persuasive case that the provision was intended to be narrow and almost “unnecessary.” Laura J. Hines, The Unruly Class Action, 82 GEO. WASH. L. REV. 718, 717 (2014). Under this view, Rule 23(c)(4) merely “functions as a class action version of Rule 42(b), which authorizes severance of issues within an action for separate pre-trial or trial proceedings.” Id. at 740.
Others have argued for an expansive interpretation, which would allow a court to “carve out” virtually any common issue that is material to the case and certify it as an “issue class.” Patricia Bronte et. al., “Carving at the Joint”: The Precise Function of Rule 23(c)(4), 62 DEPAUL L. REV. 745, 757 (2013). Under this view, a plaintiff can side step the predominance and superiority requirements of Rule 23(b)(3) by limiting the issue on which certification is sought to a common question. By doing this, the plaintiff effectively avoids any arguments regarding predominance because the only issue on which certification is sought is common to all members of the putative class.
Courts Disagree Over Scope of Rule 23(c)(4)
Courts have struggled to apply Rule 23(c)(4). Justice Ginsburg recently commented that, “[w]e recognize there is a controversy over the proper use of issue classes, especially when the result is to isolate a particular issue that would otherwise derogate from the predominance of common issues in a 23(b)(3) class action.” In re Johnson, 760 F.3d 66, 75 (D.C. Cir. 2014) (Ginsburg, J.)
The Third Circuit recently noted the split of authority on Rule 23(c)(4). Gates v. Rohm and Haas Co., 655 F.3d 255, 273 (3d Cir. 2011). “Some appellate courts have viewed Rule 23(c)(4) as a ‘housekeeping rule’ allowing common issues to be certified only when the cause of action taken as a whole, meets the predominance requirement.” Id. at 272. “Others have allowed certification of issue classes even if common questions do not predominate for the cause of action as a whole.” Id. The Third Circuit looked to the ALI’s Principles of Aggregate Litigation, emphasizing that district courts must conduct a “rigorous analysis” of multiple factors relevant to analyzing the effect that partial certification would have on the class action going forward. Id. at 273-74.
Thoughts for Defending Against Issue Certification
If faced with issue certification, consumer products companies will want to consider several arguments, including the following:
- Issue certification circumvents the predominance and superiority requirements of Rule 23(b)(3) by focusing only on one issue, rather than the litigation as a whole. Castano v. Am. Tobacco Co., 84 F.3d 734, 745 (5th Cir. 1996) (the “district court cannot manufacture predominance through the nimble use of subdivision (c)(4). The proper interpretation of the interaction between subdivisions (b)(3) and (c)(4) is that a cause of action, as a whole, must satisfy the predominance requirement of (b)(3) and that (c)(4) is a housekeeping rule that allows courts to sever the common issues for a class trial.”)
- Given that a single outcome could be dispositive of the common issue for all putative class members, issue certification unjustifiably increases the importance of that issue and places undue pressure on a defendant to resolve a case. Allison v. Citgo Petroleum Corp., 151 F.3d 402, 422 (5th Cir. 1998) (“The plaintiffs have emphasized that class certification will “facilitate” settlement. We are not sure of such a result. In any event, we should not condone a certification-at-all-costs approach to this case for the simple purpose of forcing a settlement. Settlements should reflect the relative merits of the parties’ claims, not a surrender to the vagaries of an utterly unpredictable and burdensome litigation procedure.”); Matter of Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1298 (7th Cir. 1995) (“Judge Friendly, who was not given to hyperbole, called settlements induced by a small probability of an immense judgment in a class action ‘blackmail settlements.’”)
- Issue certification creates challenges under the Seventh Amendment, with the findings of a jury deciding common issues often having to be reexamined by subsequent juries. Matter of Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1303 (7th Cir. 1995) (“The plan of the district judge in this case is inconsistent with the principle that the findings of one jury are not to be reexamined by a second, or third, or nth jury.”); 1 McLaughlin on Class Actions § 4:43 (10th ed.) (explaining that “courts have denied issue certification when individual issues are enmeshed with common issues and thus require resubmission of the same facts before a second jury, in contravention of the Seventh Amendment.”)
- Issue certification often offers no real benefits because it will not result in any judgment or finality. To recover, putative class members will still need to prove their cases, clogging the courts with hundreds or thousands of mini-trials on individualized issues. Gates v. Rohm and Haas Co., 655 F.3d 255, 273 (3d Cir. 2011).
One thing is for sure. Consumer products companies are likely to see an increasing number of motions to certify “issue classes.” An increasing number of courts seem willing to endorse issue classes, and plaintiff’s lawyers clearly see this as a tool to try to force settlement. When defending these cases, consumer product companies will want to focus on showing that “issue certification” will not materially advance the litigation as a whole, resulting in no real efficiency or benefit to the court or the parties.