Class Actions — May a Court Certify a Class to Resolve a Specific Issue when the Whole Cause of Action Isn’t Certifiable? Circuit Split
Jacks v. DirectSat USA, LLC, 2015 U.S. Dist. LEXIS 28881 (N.D. Ill. Mar. 10, 2015):
II. Partial Certification
Plaintiffs request, as an alternative to denying DirectSat's motion for decertification, that a class be certified as to liability issues pursuant to Federal Rule of Civil Procedure 23(c)(4). This provision provides: "When appropriate, an action may be maintained as a class action with respect to particular issues." Plaintiffs contend that issues related to DirectSat's policies and practices are appropriate for classwide resolution because common policies and practices caused each class member's individual damages.
Whether the court may certify a class to resolve a specific issue, when the whole cause of action does not meet all of the requirements for class certification under Rule 23, is an issue that has split the circuit courts. Specifically, the circuits differ over the interplay between the predominance requirement, Rule 23(b)(3), and issue certification [*11] pursuant to Rule 23(c)(4). In the Fifth Circuit, every element of a claim must satisfy the predominance requirement, and subprovision (c)(4) merely functions as "a housekeeping rule that allows courts to sever the common issues for a class trial." Castano v. Am. Tobacco Co., 84 F.3d 734, 745 n.21 (5th Cir. 1996); see also Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147, 167 n.12 (2d Cir. 2001) (referring to the Fifth Circuit's approach as a "strict application of the (b)(3) predominance inquiry to the entire pattern or practice claim")).
The Second, Third, and Ninth Circuits disagree. See In re Nassau County Strip Search Cases, 461 F.3d 219, 226 (2d Cir. 2006) ("In re Nassau County"); Hohider v. United Parcel Service, Inc., 574 F.3d 169, 200-02 (3d Cir. 2009);Valentino v. Carter-Wallace, Inc., 97 F.3d 1227, 1234 (9th Cir. 1996). Under the approach in these circuits, "a court may employ subsection (c)(4) to certify a class as to liability regardless of whether the claim as a whole satisfies Rule 23(b)(3)'s predominance requirement." In re Nassau County, 461 F.3d at 227.
To date, the Seventh Circuit has not formally referenced the circuit split or picked a side. See Chi. Teachers Union, Local 1 v. Bd. of Educ. of Chi., 301 F.R.D. 300, 313 (N.D. Ill. 2014) ("Whether the predominance requirement applies to the individual issue or the case as a whole is an open question in the Seventh Circuit . . . .") (Ellis, J.); McDaniel v. Quest Communs. Corp., No. 05-cv-1008, 2006 U.S. Dist. LEXIS 37066, at *51-52 (N.D. Ill. May 23, 2006) ("The Seventh Circuit has yet to weigh in on" whether Rule 23(c)(4) may be harnessed to certify a class to resolve a common issue.) (Pallmeyer, J.).
However, in repeated cases, the Seventh Circuit has expressed views consistent with the approach taken by [*12] the Second, Third, and Ninth Circuits and urged district courts to exhaust all means available to them — including the use of issues-only classes — "where it is class treatment or nothing. . . ." See Espenscheid, 705 F.3d at 776 ("Bifurcation would not eliminate variance in damages across class members, but once liability is established damages claims can usually be settled with the aid of a special master, and trials thus avoided. . . ."); Phillips v. Asset Acceptance, LLC, 736 F.3d 1076, 1083 (7th Cir. 2013) (positing that class certification pursuant to Rule 23(c)(4) is one solution to variance in class members' actual damages); Butler v. Sears, Roebuck and Co., 727 F.3d 796, 800 (7th Cir. 2013) ("[A] class action limited to determining liability on a class-wide basis, with separate hearings to determine--if liability is established--the damages of individual class members, or homogenous groups of class members, is permitted by Rule 23(c)(4) and will often be the sensible way to proceed.") (citing advisory committee notes to 1966 amendment of Rule 23(b)(3)); McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 672 F.3d 482, 490-91 (7th Cir. 2012) (endorsing use of Rule 23(c)(4) to determine "on a classwide basis" a "pair of issues" concerning the lawfulness of an employer's practices, even if partial certification would necessitate "hundreds of separate trials . . . to determine which class members were actually adversely affected by one or both of the practices and if so what loss [*13] [was] sustained"); Hartman v. State Farm Mut. Auto. Ins. Co., 634 F.3d 883, 896 (7th Cir. 2011) ("A damages class may be certified under Rule 23(b)(3) and particular issues identified for resolution on a class-wide basis pursuant to Rule 23(c)(4)."); Pella Corp. v. Saltzman, 606 F.3d 391, 394 (7th Cir. 2010) ("A district court has the discretion to split a case by certifying a class for some issues, but not others, or by certifying a class for liability alone where damages or causation may require individualized assessments."); Arreola v. Godinez, 546 F.3d 788, 800-01 (7th Cir. 2008) (observing that "Rule 23(c)(1)(B) specifically recognizes the possibility of certifying not just 'class claims,' but also class 'issues'"); In re Allstate Ins. Co., 400 F.3d 505, 508 (7th Cir. 2005) (suggesting that partial certification of a Rule 23(b)(3) class "to determine whether Allstate had a policy of forcing its employee agents to quit," followed by "individual hearings . . . to determine which of the members of the class were actually affected by the policy," would be "a more efficient procedure than litigating the class-wide issue of Allstate's policy anew in more than a thousand separate lawsuits"); Carnegie v. Household Int'l Inc., 376 F.3d 656, 661-63 (7th Cir. 2004) (the "prospect" of conducting "separate proceedings" to determine individual class members' damages "need not defeat class treatment of the question whether the defendants violated" the law).
Notwithstanding this authority, there is some disagreement among courts in this district over which approach [*14] to adopt. Compare Healey v. Int'l Brotherhood of Electrical Workers, 296 F.R.D. 587, 596 (N.D. Ill. 2013) (surveying case law and concluding that"[t]he Seventh Circuit's treatment of [partial certification pursuant to Rule 23(c)(4)] is consistent with decisions in other cases in which the court has repeatedly opined that the need to determine individual issues or damages does not detract from the efficiency of conducting a class trial on common issues key to resolving the case") (Kennelly, J.) and In re Factor VIII or IX Concentrate Blood Prods. Litig., No. 93-cv-7452, 2005 U.S. Dist.LEXIS 12538, at *8-9 (N.D. Ill. Mar. 1, 2005) (viewing Fifth Circuit's approach "not as an interpretation of Rule 23(c)(4)(A) but [as] a simple rejection of its language" and concurring with the interpretation of the Second, Third, and Ninth Circuits) (Grady, J.) with Hamilton v. O'Connor Chevrolet, Inc., No. 02-cv-1897, 2006 U.S. Dist. LEXIS 4149, at *20-21 (N.D. Ill. June 12, 2006) (relying upon Fifth Circuit's Castano decision for proposition that "a class action movant cannot gerrymander predominance by suggesting that only a single issue be certified for class treatment") (Filip, J.).
This court agrees with Healey and In re Factor VIII or IX Concentrate Blood Prods. Litig. and follows the Second, Third, and Ninth Circuits regarding the use of Rule 23(c)(4). The approach employed in those circuits most closely aligns with the Seventh Circuit's expressed [*15] views on Rule 23. Repeatedly the Seventh Circuit has encouraged "district courts to devise imaginative solutions to problems created by the presence in a class action litigation of individual damages issues." Carnegie, 376 F.3d at 661; see also Espenscheid, 705 F.3d at 776; Phillips, 736 F.3d at 1083; Butler, 727 F.3d at 800; McReynolds, 672 F.3d at 490-91; Hartman, 634 F.3d at 896; Arreola, 546 F.3d at 800-01; Saltzman, 606 F.3d at 394; In re Allstate Ins. Co., 400 F.3d at 508; Carnegie, 376 F.3d at 661-63. Interpreting subprovision (c)(4) to allow certification of issue-specific classes strikes this court as a workable solution to such problems.
Second, the issue-class approach most accurately reflects the plain language of Rule 23(c)(4) — both before and after it was amended in 2007. Before the amendment, Rule 23(c)(4) provided:
When appropriate (A) an action may be brought or maintained as a class action with respect to particular issues, or (B) a class may be divided into subclasses and each subclass treated as a class, and the provisions of this rule shall then be construed and applied accordingly.
As the "plain language and structure establish[ed]," the pre-2007 amendment version of the rule required a court first to "identify the issues potentially appropriate for certification 'and . . . then' [to] apply the other provisions of the rule, i.e., subsection (b)(3) and its predominance analysis." In re Nassau County, 461 F.3d at 226 (emphasis added).
In 2007, subprovision (c)(4) was revised to read as follows: "Particular Issues. When appropriate, [*16] an action may be maintained as a class action with respect to particular issues." The revisions were not intended to change the meaning of the subprovision. To the contrary, the 2007 amendment was meant "to be stylistic only" in order to make the rule "more easily understood. . . ." See Fed. R. Civ. P. 23 advisory committee's note to 2007 amendments. In this court's opinion, the amendment accomplished its objective. The combination of the new title and simplified text leaves no room for confusion that subprovision (c)(4) allows the certification of specific issues for classwide resolution.
Further evidence that the 2007 amendments were intended to be "stylistic only" lies in the Advisory Committee Notes to the 1966 amendments. Years before any rift between the circuit courts emerged, the committee notes confirmed that subdivision (c)(4) "recognizes that an action may be maintained as a class action as to particular issues only." Fed. R. Civ. P. 23 advisory committee's note to 1966 amendments. As an example, the notes explained that a cause of action "in a fraud or similar case . . . may retain its 'class' character only through the adjudication of liability to the class . . . ." Id.
Thereafter, "the members of the class may [ ] be required [*17] to come in individually and prove the amounts of their respective claims." Id. This suggested multi-staged procedure-partly certified, partly on an individual basis-mirrors the text of the post-2007 amendment version of the rule and accords with the Second, Third, and Ninth Circuits' approach. See In re Nassau County, 461 F.3d at 226; Hohider, 574 F.3d at 200-02; Valentino, 97 F.3d at 1234.
In addition to the Advisory Committee Notes, legal commentators agree that sub-provision (c)(4) was drafted to facilitate the certification of issue-specific classes. See 5 MOORE'SFEDERALPRACTICE§ 23.23 (3d ed. 2014) ("[W]e note that the commentators agree that courts may use subsection (c)(4) to single out issues for class treatment when the action as a whole does not satisfy Rule 23(b)(3). Rule 23(c)(4) authorizes the court, when appropriate, to limit class treatment to specific common issues only, and to measure the requirements of Rule 23 accordingly. Under Rule 23(c)(4), a court may fashion a class action limited to trying a particular defense that is common to a large number of putative class members; resolving certain common preliminary issues; or determining liability, with proof of damages left to each class member in a later proceeding."); 7AA Wright & Miller, Federal Practice & Procedure § 1790 (3d ed. 2005) ("[A]lthough Rule 23(c)(4) may be utilized to cure unforeseen problems that [*18] emerge in later stages of the litigation, it best may be used to designate appropriate classes or class issues at the certification stage."); William B. Rubenstein, Alba Conte, and Herbert B. Newberg, 6 Newberg on Class Actions § 18:7 (4th ed. 2002) ("Even cases which might not satisfy the predominance test when the case is viewed as a whole may sometimes be certified as a class limited to selected issues that are common, under the authority of Rule 23(c)(4).").
Having considered all of this authority, this court opts to follow the Second, Third, and Ninth Circuits' approach and holds that a class may be certified as to particular issues concerning liability even if the claim as a whole does not meet the predominance requirement of Rule 23(b)(3).
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