Much Ado about Nothing?
The Quarrel Over Predominance in Issue Certification
Winter 2008
Reprinted with permission from the 2008 issue of Class Actions Today, Section of Litigation, American Bar Association. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
A recent decision by the Second Circuit Court of Appeals has reinvigorated debate over issue, or partial, class actions in federal courts. In In re Nassau County Strip Search Cases,1 the Second Circuit held that certification of particular issues under Federal Rule of Civil Procedure 23(c)(4) does not require a preliminary determination that common issues predominate with respect to the action as a whole. This new holding contradicts the Fifth Circuit's holding in Castano v. American Tobacco Co.2 Decided on the heels of the courts' increasing use of issue certification through the 1980s and early 1990s, Castano was widely credited with stemming the tide of issue class actions. Although the Ninth Circuit intimated its disagreement with the Castano holding,3 until Nassau County, no other federal circuit court of appeals had directly decided the issue.
Commentators have speculated that the Second Circuit's decision in Nassau County will prompt a resurgence of issue-based class actions.4 The suggestion also has been made that the circuit split will lead to forum shopping by plaintiffs hoping to certify issue-based class actions. These questions beg another one: How inconsistent are the holdings in Castano and Nassau County? Though the decisions are irreconcilable, do they actually dictate different results? Probably not.
Under either standard, the courts should be, as they have been, able to exercise their wide discretion under Rule 23 to certify classes in appropriate cases. Perhaps the best approach would be to consider appropriate those cases in which issue certification advances the fundamental goal of Rule 23 itself; that is, when certification advances a fair and judicially efficient disposition of the entire action, even if it does not completely resolve the action. Thus, even if the predominance analysis is nominally limited to a particular issue, the certification determination must take into account much broader issues. Under this view, whether approached as in Castano or as in Nassau County, the issue-certification result likely will be the same.
Everything Old Is New Again
Rule 23(c) (4) dates back to the passage in 1966 of Rule 23 in its current form and allows a class action to be maintained with respect to particular issues "when appropriate."5 After largely overlooking Rule 23(c) (4) through the 15 years following its passage, the courts began to recognize the utility of issue or partial certification in managing large mass tort cases in the 1980s and early 1990s.6 Most of these courts did not explicitly address the relationship between issue certification and the predominance requirement of Rule 23(b)(3).
This did not mean that issue classes were certified without scrutiny. Instead, the courts addressing issue certification properly considered the manageability of trying such issues and the impact of their resolution of the matter as a whole.7 In summarizing the developing jurisprudence, one district court concluded that the predominance requirement of Rule 23(b)(3) was lessened in cases proceeding under Rule 23(c)(4).8 This lessening importance of the predominance requirement, however, was "offset by a corresponding increase in the importance accorded to Rule 23(b)'s requirement of superiority, a requirement that is unaffected by Rule 23(c)(4)(A)."9 Whatever the analysis, the courts denied issue, or partial, certification when it would not "materially advance a disposition of the litigation as a whole."10 Courts also denied issue certification when "common issues [were] inextricably entangled with the individual issues.11
Then, in 1996, the Fifth Circuit decided Castano. There, the district court had certified for the resolution of particular issues, including "core liability," a nationwide class of nicotine-addicted smokers. The Fifth Circuit reversed the certification order, holding that the district court erred in its determination that common issues predominated and in its conclusion that the class action device was the superior method of resolving the claims. Specifically, the Fifth Circuit held that the district court "failed to consider how variations in state law affect predominance and superiority" and that its "predominance inquiry did not include consideration of how a trial on the merits would be conducted" According to the Fifth Circuit, the district court in Castano did very little to determine whether or how it could manage the trial of what could have been the "largest class action ever attempted in federal court." Nor did the district court determine whether the certification and trial of particular issues would advance the litigation.12 The following passage came to be regarded as a death knell for issue-based class actions:
Severing the defendants' conduct under rule 23(c)(4) does not save the class action. A 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 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. Reading (c) (4) as allowing a court to sever issues until the remaining common issue predominates over the remaining individual issues would eviscerate the predominance requirement of rule 23(b)(3); the result would be automatic certification in every case where there is a common issue, a result that could not have been intended.13
The response to Castano outside the Fifth Circuit was mixed. A number of courts adopted its holding.14 At least one court explicitly rejected it.15 Many other courts simply did not address it at all.16 Other federal circuits continued to encourage the use of Rule 23(c)(4) in appropriate circumstances.17 Whether or not they adopted the Castano analysis, courts continued to deny issue certification when certification would not promote judicial economies.18 All that said, for nearly a decade, no federal circuit took on the Fifth Circuit's evaluation of predominance in relation to issue certification.
Then came the Second Circuit's decision in Nassau County. In that case, the district court declined to certify on liability issues a class of individuals challenging the county's blanket policy of strip-searching arrestees. The Second Circuit found this reversible error. In so holding, the court rejected the Fifth Circuit's "strict application of Rule 23(c)(3)'s predominance requirement," explaining that such a strict application had the effect of rendering Rule 23(c) (4) "virtually null." Based on the structure of Rule 23 and its advisory notes, the Second Circuit concluded that predominance could be found on particular issues even in the absence of predominance as to the cause of action as a whole.19
Applying its holding to the facts of the case, the Second Circuit held that the district court erred in finding that individual issues predominated with respect to liability issues. Having determined that the issues-based class implicated two broad common liability issues - whether the blanket policy existed and whether the defendants were liable for its implementation - the court found issue certification appropriate. The only countervailing issue was whether, with respect to individual class members, there existed particularized suspicion sufficient to justify each strip search, which issue the district court had characterized as de minimis. In these circumstances, the Second Circuit found issue certification under Rule 23(c)(4) appropriate and remanded the case for further consideration of full certification of the claims.
A Distinction Without a Difference?
So, what is the import of the Castano-Nassau County split? The cases certainly raise an interesting issue of statutory construction. Proponents of the Castano holding emphasize that the language discussing issue certification is housed not within section (b) of the rule (Class Actions Maintainable) but within section (c), which deals generally with procedural aspects of class actions, rather than their permissibility.20 The Nassau County decision and its backers argue that the plain language of the rule anticipates application of the predominance standard after particular issues are isolated. And both sides argue that the other's interpretation eviscerates portions of Rule 23.21 At the end of the day, however, this dispute may be no more than academic because neither camp points to egregious results from applying one analysis over the other.
Arguably, in fact, the results in Castano and Nassau County would have been the same regardless of which analysis was applied. The district court in Castano did little to determine how individual issues would be tried and whether it would be worthwhile to do so, as had other courts certifying individual issues. Thus, even absent the Fifth Circuit's landmark holding, the issues identified by the Castano court may have been inappropriate for certification under Rule 23(c)(4). And in Nassau County, the Second Circuit determined that the common liability issues were "pervasive" and that their resolution would advance the litigation.22 Especially given the flexibility of the predominance inquiry, a particular issue that "materially advances the disposition of the litigation" may also be predominant under Rule 23(b)(3).23
Back to Basics: Fairness and Efficiency
The ultimate answer to the issue-certification quarrel might be found in the rule itself. Though scarcely discussed by the courts, Rule 23(c)(4) limits issue-based class actions to appropriate cases. Both before and after Castano, the courts certified issue, or partial, class actions only after concluding that it was both manageable and beneficial to the entire action to do so. The decision in Nassau County should not change this result. Rather, the courts should continue to assess critically whether class treatment - of particular issues or entire claims - is appropriate; that is, whether certification advances a fair and judicially efficient disposition of the action as a whole. And the predominance inquiry - whether conducted before or after application of Rule 23(c)(4) - together with the superiority requirement, should assist the courts in distinguishing those claims or issues appropriate for certification from those that are not within the context of the action as a whole.
ENDNOTES
1. 461 F.3d 219 (2d Cir. 2006).
2. 84 F.3d 734 (5th Cir. 1996).
3. See Valentino v. Carter-Wallace, 97 F.3d 1227, 1234 (9th Cir. 1996) (explaining that "[e]ven if the common questions do not predominate over the individual questions so that class certification of the entire action is warranted, Rule 23 authorizes the district court in appropriate cases to isolate the common issues under Rule 23(c)(4)(A) and proceed with class treatment of these particular issues").
4. See Jason R. Bent, 2d Circuit Breaches Barrier to Class Certification; Its Ruling Undermines a 5th Circuit Precedent Covering "Issue Classes," NAT'L L.J. (Oct. 30, 2006).
5. FED. R. CIV. P. 23(c)(4)(A).
6. See, e.g., Central Wesleyan College v. W.R. Grace & Co., 6 F.3d 177, 185 (4th Cir. 1993); In re Agent Orange Prod. Liab. Litig., 818 F.2d 145, 169 (2d Cir. 1987); In re Sch. Asbestos Litig., 789 F.2d 996 (3d Cir. 1986); Jenkins v. Raymark Indus., Inc., 782 F.2d 468, 473 (5th Cir. 1986); In re Copley Pharm., 158 F.R.D. 485, 491 (D.Wyo. 1994).
7. See, e.g., In re Sch. Asbestos Litig., 789 F.2d at 1008-9 (reasoning that even if individual damages suits are required, the "result nevertheless works an improvement over the situation in which the same separate suits require adjudication on liability using the same evidence over and over again").
8. See In re Tetracycline Cases, 107 F.R.D. 719, 727 (W.D. Mo. 1985).
9. Id.; see also Jon Romberg, Half a Loaf Is Predominant and Superior to None: Class Certification of Particular Issues under Rule 23(c)(4)(A), 2002 UTAH L. REV. 249, 298 (positing that "superiority analysis becomes central to determining whether a case should be certified as to common issues").
10. In re Tetracycline Cases, 107 F.R.D. at 727; see also Harding v. Tambrands Inc., 165 F.R.D. 623, 632 (D. Kan. 1996).
11. Emig v. Am. Tobacco Co., 184 F.R.D. 379, 395 (D. Kan. 1998).
12. Castano v. Am. Tobacco Co., 84 F.3d 734, 737, 740, 744-45 (5th Cir. 1996).
13. Id. at 745 n.21.
14. See, e.g., Arch v. Am. Tobacco Co., 175 F.R.D. 469, 496 (E.D. Pa. 1997).
15. See Simon v. Philip Morris, Inc., 200 F.R.D. 21 (E.D.N.Y. 2001).
16. E.g., Emig, 184 F.R.D. at 395.
17. See Chiang v. Veneman, 385 F.3d 256, 267 (3d Cir. 2004) (affirming certification under Rule 23(c)(4) adjudication of first two elements of prima facie case under Equal Credit Opportunity Act, even though remaining elements may require individual adjudication); Robinson v. Metro-North Commuter R.R., 267 F.3d 147, 167 (2d Cir. 2001) ("District courts should take full advantage of [23(c)(4)(A)] to certify separate issues in order to reduce the range of disputed issues in complex litigation and achieve judicial efficiencies.").
18. See, e.g., In re Paxil Litig., 218 F.R.D. 242, 250 (C.D. Cal. 2003).
19. In re Nassau County Strip Search Cases, 461 F.3d 219, 222, 225-27 (2d Cir. 2006).
20. See Joel S. Feldman et al., Attempting to Manufacture Predominance: Practical and Legal Concerns with Issue Certification under Rule 23(c)(4), in CLASS ACTION LITIGATION 2007: PROSECUTION & DEFENSE STRATEGIES 55, 64 (PLI Litig. & Admin. Practice Course, Handbook Series No. 11372, 2007).
21. Compare Feldman et al., supra note 20, at 65, with Nassau County, 461 F.3d at 219.
22. See Feldman et al., supra note 20, at 76 (suggesting that facts in Nassau County may have supported finding of predominance for claim as a whole).
23. See, e.g., In re Sch. Asbestos Litig., 789 F.2d 996, 1010 (3d Cir. 1986) ("There may be cases in which class resolution of one issue or small group of them will so advance the litigation that they may fairly be said to predominate."); see also Romberg, supra note 9, at 285-89 (characterizing predominance inquiry as "slippery concept").
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