Commercial Litigation and Arbitration

Class Actions — Rule 23(c)(1)(B) Requires a Readily Discernible, Clear and Precise (1) Statement of the Parameters Defining the Class and (2) Complete List of Claims, Issues or Defenses

Ross v. RBS Citizens, N.A., 2012 U.S. App. LEXIS 1478 (7th Cir. Jan. 27, 2012):

Charter One appealed the district court's certification order, and this interlocutory appeal is now before us on (1) the very narrow issue of whether the district court judge's certification order complied with Rule 23(c)(1)(B) and (2) whether the two certified classes satisfy the commonality prerequisite post-Dukes.***

A. Defining the Class and the Class Claims, Issues, or Defenses Rule 23(c)(1)(B) was added to the Federal Rules in 2003. The Rule provides, "An order that certifies a class action must define the class and the class claims, issues, or defenses, and must appoint class counsel under Rule 23(g)." Fed. R. Civ. P. 23(c)(1)(B). Although we touched briefly on the importance of properly defining the class, claims, issues, and defenses in Spano v. Boeing Co., 633 F.3d 574 (7th Cir. 2011), the exact contours of Rule 23(c)(1)(B) is an issue of first impression for us. See also Simer v. Rios, 661 F.2d 655, 670 (7th Cir. 1981) (pre-subsection (c)(1)(B) case finding that proper class identification "alerts the court and parties to the burdens that such a process might entail" and "insures that those actually harmed by defendants' wrongful conduct will be the recipients of the relief eventually provided").

Only the Third Circuit has fully addressed the meaning of Rule 23(c)(1)(B). Wachtel ex rel. Jesse v. Guardian Life Ins. Co. of Am., 453 F.3d 179 (3d Cir. 2006). The Wachtel court started its analysis, as it must, with the rule's text. See Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450 (2002). The Third Circuit reasoned:

To "define" a thing or concept is "to state precisely or determinately [its boundaries]; to specify" or "[t]o frame or give a precise description" of a thing. Oxford English Dictionary (2d ed. 1989). According to the Rule, those things to be defined in a certification order include the "class and the class claims, issues, or defenses. . . ." Fed. R. Civ. P. 23(c)(1)(B) (emphasis added). The above elements occur in a conjunctive, undifferentiated list, indicating that the requirement to "define" the "class claims, issues or defenses" is identical to the requirement to define the "class" itself within a given certification order. Id. Furthermore, the use of the definite article "the" before "class claims, issues, or defenses" connotes comprehensiveness and specificity, rather than illustrative or partial treatment, in defining those aspects of class action certification.

Wachtel, 453 F.3d at 185.

Footnote 4. The First Circuit, in dictum, adopted the reasoning in Wachtel. In re Pharm. Indus. Average Wholesale Price Litig., 588 F.3d 24, 38-41 (1st Cir. 2009).

We find this interpretation persuasive, especially when read in conjunction with the history and purpose of the 2003 amendments to Rule 23. Although the Advisory Committee Notes accompanying these amendments do not specifically address subsection (c)(1)(B), the published report of the Standing Committee on Rules of Practice and Procedure introduced the proposed Rule 23 amendments by noting that the Rule 23(c)(1)(B) requirement "facilitates application of the interlocutory-appeal provision of Rule 23(f) by requiring that a court . . . define the class it is certifying and identify the class claims, issues, and defenses." Comm. on Rules of Practice and Procedure, Judicial Conference, Report of the Judicial Conference, 8, 11 (Sept. 2002). Without a precise definition of the class, claims, issues, and defenses, it would be exceedingly difficult for this court to review the propriety of a class certification order.

The Third Circuit's plain reading of the Rule is also supported by the Federal Rule's apparent move towards the creation of voluntary trial plans. In observing courts' increased use of class-action trial plans, the Advisory Committee noted that the "critical need is to determine how the case will be tried." Fed. R. Civ. P. Rule 23 advisory committee's note. The justification for a clear trial plan applies with equal force to subsection (c)(1)(B). In other words, there is a critical need to define the class, claims, issues, and defenses so the parties can adequately prepare for trial. See also Simer, 661 F.2d at 670.

Given the text, history, and purpose of Rule 23 and the importance we ascribed to precise class definitions in Spano and Simer, we agree with the Third Circuit's interpretation of subsection (c)(1)(B). Wachtel, 453 F.3d at 187-88. Therefore, we hold that the appropriate substantive inquiry for Rule 23(c)(1)(B) is "whether the precise parameters defining the class and a complete list of the claims, issues, or defenses to be treated on a class basis are readily discernible from the text either of the certification order itself or of an incorporated memorandum opinion." Id. at 185. This means that an order (or incorporated opinion) must include two elements: "(1) a readily discernible, clear, and precise statement of the parameters defining the class or classes to be certified, and (2) a readily discernible, clear, and complete list of the claims, issues or defenses to be treated on a class basis." Id. at 187-88. The question confronting us now is whether the district judge's certification order meets this standard. Although there might be some room for the district court to have drafted a clearer certification order, we find the trial court did not abuse its discretion in defining the class and the class claims, issues, or defenses for both the Hourly and ABM classes.

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