United States: Trending In 3rd Circ.: Motions To Strike Class Allegations

Judicial trends can be tough to spot, but more motions to strike class allegations are being filed of late and federal courts do seem more receptive to the motions. To be sure, courts remain cautious about striking class allegations for the same reason that they are cautious about dismissing a complaint under Rule 12(b)(6). However, motions to strike class allegations can provide an early and cost-effective means of avoiding class treatment, and in clear cases, they can be economical for courts as well as for the parties. The increased use of motions to strike arguably is in lock-step with Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541, 2550 (2011) and Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013), which remind us that class actions are "an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only." Id., quoting Califano v. Yamasaki, 442 U.S. 682, 700-701 (1979).

Motions to strike class allegations generally are analyzed under Rule 12(f), which authorizes striking from pleadings any "redundant, immaterial, impertinent, or scandalous matter." While analyzing the class allegations under Rule 12(b)(6) has some appeal, see Bessette v. AVCO Fin. Servs Inc., 279 B.R. 442, 450 (D.R.I. 2002), the analogous motion to strike defenses in an answer is governed by Rule 12(f). Dann v. Lincoln Nat'l Corp., 274 F.R.D. 139, 142-43 (E.D. Pa. 2011). Some courts prefer the vehicle of Rule 12(f), which authorizes the striking of allegations rather than the dismissal of claims and, unlike Rule 12(b)(6), arguably allows for a record beyond the pleadings. See Royal Mile Co. Inc., v. UPMC, No. 10-609, 2014 U.S. Dist. LEXIS 16224, at *60-65 (W.D. Pa. Aug. 21, 2014).

Motions to strike class allegations are viewed through the prism of Rule 23, and Rule 23(c)(1)(A) calls for a certification determination at "an early practicable time after a person sues." An order striking class allegations is equivalent to the denial of a motion for class certification. Royal Mile, 2014 U.S. Dist. LEXIS 116224, *62. Accordingly, most courts concur that the named plaintiff has the burden of showing the propriety of the class allegations on the motion. Semenko v. Wendy's Int'l Inc., No 12-CV-0836, 2013 U.S. Dist. LEXIS 52582 at *6 (W.D. Pa. Apr. 12, 2013); but see In re Paulsboro Derailment Cases, No. 13-784, 2014 U.S. Dist. LEXIS 48209, at *13 (D.N.J. Apr. 8, 2014) (suggesting that defendants have the burden before the close of discovery). Courts will strike class allegations only where no amount of discovery could resolve the class deficiencies, as it is presumed that discovery is needed for the "rigorous analysis" required for class certification. In re Paulsboro Derailment Cases, 2014 U.S. Dist. LEXIS 48209, at *15-16.

The watershed in the Third Circuit was Landsman & Funk PC v. Skinder-Strauss Assoc., 640 F.3d 72 (3d Cir. 2011). Prior to Landsman, district courts routinely — although not exclusively — declined to strike class allegations as premature because of the similarity between motions to strike and class certification issues. Korman v. Walking Co., 503 F. Supp. 2d 755, 762 (E.D. Pa. 2007). Landsman by no means advocated the widespread use of motions to strike class allegations, and criticized as "conclusory" and "premature" a district court's early analysis on a "request for class certification." 640 F.3d at 93. The Third Circuit, however, acknowledged in Landsman that the early striking of class allegations was appropriate in "the rare few [cases] where the complaint itself demonstrates that the requirements for maintaining a class action cannot be met." 640 F.3d at 93 n.30. See also General Telephone Co. v. Falcon, 457 U.S. 147, 160 (1982) (the class issues can be "plain enough" from the pleadings).

After Landsman, district courts in the Third Circuit remain cautious about striking class allegations. See, e.g., P.V. v. School District of Philadelphia, No. 11-CV-04027, 2011 U.S. Dist. LEXIS 125370, at *12 (E.D. Pa. Oct. 31, 2011)(reviewing case law suggesting that motions to strike are premature and noting that "unless the parties have completed discovery and at least one party has moved for class certification, a court very rarely has the information necessary to conduct the 'rigorous analysis' inherent in the class certification decision."); McPeak v. S-L Distribution Co. Inc., No. 12-348, 2014 U.S. Dist. LEXIS 123728 (D.N.J. Sept. 5, 2014); Humphreys v. Budget Rent a Car System Inc., No. 10-CV-1302, 2014 U.S. Dist. LEXIS 55438 (E.D. Pa. Apr. 22, 2014).

On the other hand, a number of courts in the Third Circuit have viewed favorably motions to strike class allegations. By way of example, in Semenko v. Wendy's In'l Inc., No. 12-CV-0836, 2013 U.S. Dist. LEXIS 52582, at *7 (W.D. Pa. Apr. 12, 2013), the court stated that class treatment should be determined as soon as practicable under Rule 23(c)(1). It relied on Bearden v. Honeywell Int'l Inc., 720 F. Supp. 2d 932, 942 (M.D. Tenn. 2010) to treat the motion to strike as if it were a motion to deny class certification. The Semenko court analyzed the requirements of Rules 23(a) and 23(b)(2),(3) and concluded that the broad putative class of all employees with disabilities denied accommodation under the Americans with Disabilities Act facially was inappropriate for class treatment because of the individual issues of whether the class members were qualified, whether they reasonably could be accommodated, as well as individualized defenses. See also Trunzo v. Citi Mortgage, No. 11-CV-01124, 2014 U.S. Dist. LEXIS 43056 (E.D. Pa. Mar. 31, 2014)(striking class allegations as to defendant Citi Mortgage for Pennsylvania Unfair Trade Practices and Consumer Protection Law claim); Berk v. JPMorgan Chase Bank, N.A., No. 11-2715, 2011 U.S. Dist. LEXIS 109626 (E.D. Pa. Sept. 23, 2011); Royal Mile, U.S. Dist. LEXIS 116224 (noting the inability to assert certain class claims but allowing amendment of the complaint). See also Smith v. Merial Ltd., No. 10-439, U.S. Dist. LEXIS 78220 at *15 (D.N.J. June 5, 2012)(allowing additional briefing, but voicing "serious concerns that plaintiffs can ever meet the certification requirements of R. 23(b)".).

A successful motion to strike class allegations can avoid the expense attendant with class actions, including costly discovery. Even when unsuccessful, however, addressing perceived class deficiencies (and the responses to the perceived deficiencies) educates both the court and the parties early in the litigation. This can prevent wasteful blind alleys. Rather than simply pronouncing the motion to strike to be premature, a court can provide guidance on issues that need factual development and problems that are unlikely to resolve. The non-movant can be asked to delineate the specific discovery needed for class certification, as with a Rule 56(f) affidavit, to streamline and focus the issues.

The Paulsboro Derailment cases show how motions to strike can inform a class proceeding. The litigation arose out of a train derailment on a bridge over the Mantua River, resulting in the alleged release of vinyl chloride and an evacuation order. The defendant established a community assistance center to reimburse expenses for area residents. In addition to other litigation, a class action was promptly commenced. At issue in the motion to strike was the second amended complaint, which defined the plaintiff class into subclasses living and/or having a business in Gloucester County, New Jersey with unreimbursed nonmedical, income or business losses. In In re Paulsboro Derailment Cases, No. 13-CV-784, 2014 U.S. Dist. LEXIS 48209 (D.N.J. Apr. 8, 2014), the court declined to strike class allegations based on ascertainability because the alleged residence and shelter in place zones, and residence and business boundaries, in Gloucester County could be established through discovery. The court predicted that the income and business losses required minimal actual fact finding. It also declined the challenge to numerosity, ruling that separate suits or joinder may be unwarranted if the putative class members' losses were minimal.

By the time of the class certification motion, the subclasses had shrunk significantly. While originally defined to include damaged residents and businesses in "Gloucester County" (total pop. 290,265), by the time of class certification, the subclasses had been whittled down to damaged residents and businesses in the town of Paulsboro (total pop. 6,023). In re Paulsboro Derailment Cases, No. 13-784, 2014 U.S. Dist. LEXIS 115542 (D.N.J. Aug. 20, 2014). The developed factual record presented for class certification did not change the court's conclusion that the smaller subclasses of residents with unreimbursed nonmedical expenses and income loss were ascertainable, but it found that the business loss subclass was not ascertainable. The court's numerosity decision, however, was affected by the discovery and the reduced size of the subclasses. Although 680 Paulsboro residents were implicated, defendants had settled with 486 evacuees and 45 had commenced their own individual lawsuits. The plaintiff had not provided evidence of the size of the balance of the subclasses. The court also found a lack of commonality in the business loss subclass. Ultimately class certification was denied.

Early motions to strike class allegations seem to be filed with greater frequency, and district courts seem willing to address such motions in appropriate cases. Handled properly, a motion to strike can help the litigants navigate through discovery and the merits, even if the motion itself is unsuccessful.

Previously published in Law360, New York (December 22, 2014, 11:24 AM ET)

Charlotte Thomas is a partner with Duane Morris in Philadelphia specializing in complex business litigation.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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