United States: Ninth Circuit Promulgates Standards for Implementing New Federal Rule Permitting

Interlocutory Appeal from a Class Certification Order

On March 31, 2005, a panel of the Ninth Circuit Court of Appeals (consisting of Judges Leavy, McKeown, and Berzon) filed a "By the Court" opinion in Chamberlan v. Ford Motor Co., No. 04-80074, denying Ford’s petition for permission to appeal an order certifying a class action under newly promulgated Federal Rule of Civil Procedure 23(f). The opinion is the Circuit’s first to identify the criteria it will consider in deciding whether to grant a petition for permission to appeal a class certification order.

Rule 23(f) gives a court of appeals the right to entertain, "in its discretion," an interlocutory appeal from an order "granting or denying class certification…." The Rule’s text is silent as to how the courts should exercise their discretion, but the Rule’s Advisory Committee Note suggests that appellate review may be appropriate when the order (1) creates a "death knell" situation for either party independent of the merits—i.e., for the plaintiff, effectively terminates the litigation because an individual action "is worth far less than the cost of litigation," and for the defendant, creates undue pressure for an unwarranted settlement that causes "potentially ruinous liability"—or (2) presents an unsettled and fundamental issue of law related to class actions. Chamberlan adopts the two above criteria and adds a third: that the district court must have committed "manifest error." Applying those criteria to the case before it, the court concluded that Ford’s petition should be denied.

Chamberlan is an action brought under the California Consumers Legal Remedies Act ("CLRA"), Cal. Civ. Code § 1750 et seq., alleging that Ford knowingly manufactured, sold, and distributed automobiles containing defective plastic manifolds that were prone to cracking. The CLRA prohibits unfair or deceptive acts or practices in a transaction that is intended to or does result in the sale or lease of goods or services to consumers. The plaintiff alleges that, although Ford notified a fraction of Ford owners of the problem, it concealed the problem from others. After Ford removed the action to federal court, the district court (N.D. Cal.) certified a class consisting of California residents who own specified Ford vehicles but who did not receive an extended warranty and who did not suffer personal injury.

Ford petitioned the Ninth Circuit for review of the district court’s order, claiming (1) Rule 23’s class certification criteria had not been met, principally because common issues did not predominate over individual ones, (2) the district court neglected to address CLRA’s elements and affirmative defenses, and (3) the order creates "tremendous pressure" to settle even though the order would be reversed after a final judgment.

The Ninth Circuit reviewed other circuit decisions that had articulated criteria for permitting an appeal under Rule 23(f). It noted that Blair v. Equifax Check Servs., Inc., 181 F.3d 832, 834-35 (7th Cir. 1999) had adopted two of the Advisory Committee Note’s criteria—the "death knell" and the "unsettled and fundamental issue of law"—as well a third: when interlocutory review "may facilitate the development" of class action law. Chamberlan noted a fourth factor that some circuits have articulated—manifest error in the order—with some circuits opining that such error alone warrants interlocutory review. E.g., Prado-Steiman ex rel. Prado v. Bush, 221 F.3d 1266, 1273 (11th Cir. 2000).

Chamberlan agreed with the other circuits that hold that Rule 23(f) review should be "granted sparingly," but recognized that "there are rare cases in which interlocutory review is preferable to end-of-the-case review." As noted, it then held that Rule 23(f) review is "most appropriate" when "(1) there is a death-knell situation for either the plaintiff or defendant that is independent of the merits of the underlying claims, coupled with a class certification decision by the district court that is questionable; (2) the certification decision presents an unsettled and fundamental issue of law relating to class actions, important both to the specific litigation and generally, that is likely to evade end-of-the-case review; or (3) the district court’s class certification decision is manifestly erroneous."

This framework, the court noted, "most closely approximates" the standard the District of Columbia Circuit adopted in In re Lorazepam & Clorazepate Antitrust Litig., 289 F.3d 98, 105 (D.C. Cir. 2002). Chamberlan also disagreed with the Seventh Circuit in Blair and the First Circuit in Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 293 (1st Cir. 2000), noting that "manifest error" may warrant interlocutory review "even absent a showing of another factor," and reasoning that there is "no reason for a party to endure the costs of litigation when a certification is erroneous and inevitably will be overturned." But the court cautioned that any error must be "significant" and "easily ascertainable from the petition itself"; moreover, an error of law as opposed to an incorrect application of law to the facts will "most likely…warrant interlocutory review…."

Finally, the court noted that its three criteria are "guidelines," not "exhaustive," and "are not intended to circumscribe the broad discretion" the Rule grants. The court asserted it would avoid "micromanagement" of class actions, particularly given district courts’ right to revise class certification orders.

Applying the above criteria, the court found no merit in Ford’s petition. First, the court rejected Ford’s claim it was being forced into an "all or nothing," unduly expensive class trial. The court said Ford failed to show it lacks the resources to defend itself or that doing so would subject it to "ruinous liability." The court noted that while "the potential recovery here may be ‘unpleasant to a behemoth’ company… it is hardly terminal." The court also found no error in the finding that absent a class trial, the plaintiffs would have no meaningful redress. Second, the court rejected Ford’s claim that the law was unsettled as to whether the district court should conduct a "rigorous" or "cursory" review of the propriety of class certification, noting that the degree of rigor will depend on the nature of the case. It also disagreed that the district court’s failure to adopt a trial plan or to articulate how the class action would be tried constituted error. Finally, the court found the order was not "manifestly erroneous" and "virtually certain to be reversed on appeal" since it did not contain any discernible error of law and was sufficiently expansive and cogent (though "brief") to legitimately distinguish it from circuit decisions involving the denial of certification.

For an overview of Federal Rule of Civil Procedure 23(f), please see Martin, James, and Fleming, Jayne, "Emerging Guidelines For Interlocutory Review of Class Certification Orders Under Rule 23(f)," 4 Class Action Lit. Report, No. 6, p. 223 (BNA, Mar. 28, 2003).

This article is presented for informational purposes only and is not intended to constitute legal advice.