Commercial Litigation and Arbitration

Standard and Method of Review of Class Certification Decisions

From Yokoyama v. Midland Nat’l Life Ins. Co., 594 F.3d 1087 (9th Cir. 2010):

[W]hen a district court's class action certification is on appeal, we say that the overall standard of review is for abuse of discretion. *** In addition, when any particular underlying Rule 23 determination involving a discretionary determination is appealed, our standard of review must be for abuse of discretion.

While our review of discretionary class certification decisions is deferential, it is also true that we accord the decisions of district courts no deference when reviewing their determinations of questions of law. Further, this court has oft repeated that an error of law is an abuse of discretion. *** Indeed, since Salve Regina Coll. v. Russell, 499 U.S. 225, 231, 111 S. Ct. 1217, 113 L.Ed.2d 190 (1991), no federal court has ever held that a district court's error as to a matter of law is not an abuse of discretion, in the class action context, or in any other.

Thus, when an appellant raises the argument that the district court premised a class certification determination on an error of law, our first task is to evaluate whether such legal error occurred. See, e.g., Zinser v. Accufix Research Inst., 253 F.3d 1180, 1186-88 (9th Cir. 2001) (reviewing a district court's choice of law determination de novo, and its factual findings for clear error); Knight v. Kenai Peninsula Borough Sch. Dist., 131 F.3d 807, 811-812 (9th Cir. 1997) (finding an issue of law, regarding a mootness determination, is reviewed without deference to the district court and that an error of law is a per se abuse of discretion).

As Zinser and Knight illustrate, once we have determined the threshold question of whether an error of law has occurred, we review the class certification determination for abuse of discretion. If the district court's determination was premised on a legal error, we will find a per se abuse of discretion. *** If no legal error occurred, we will proceed to review the district court's class certification decision for abuse of discretion as we always have done.

The Supreme Court has addressed this same dichotomy in the sanctions context of Rule 11 of the Federal Rules of Civil Procedure. The Court resolved it by holding that when a district court errs as a matter of law in imposing sanctions, the legal error automatically becomes an abuse of discretion. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990) ("A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law . . . .").

Our court's method in Zinser and Knight is also consistent with the practices of other circuits. For example, in Miles v. Merrill Lynch & Co., the Second Circuit held that the standard for appellate review of the Rule 23 requirements "is whether discretion has been exceeded (or abused). . . . Of course, this leeway, with all matters of discretion, is not boundless. To the extent that the ruling on a Rule 23 requirement . . . involves an issue of law, review is de novo." 471 F.3d 24, 40-41 (2d Cir. 2006). See also Andrews v. Chevy Chase Bank, 545 F.3d 570, 573 (7th Cir. 2008) ("We generally review a grant of class certification for abuse of discretion, but 'purely legal' determinations made in support of that decision are reviewed de novo."); In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 312 (3d Cir. 2009) ("We review a class certification order for abuse of discretion . . . . . Whether an incorrect legal standard has been used in an issue of law to be reviewed de novo.") (internal quotations omitted).

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