United States: Challenging Limited Issue Class Actions

A class action that aggregates the claims of individual plaintiffs against a common defendant can promote judicial economy and maximize efficiency. However, even the pursuit of class certification can promote abuse. In the words of Judge Henry Friendly, class actions can at times result in "blackmail settlements," where even defendants with meritorious defenses feel compelled to settle based on the enormous threat of liability that a class action can present. See In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1298 (7th Cir. 1995) (quoting Henry J. Friendly, Federal Jurisdiction: A General View 120 (1973)). In part to avoid this abuse, the Federal Rules of Civil Procedure strike a balance that permits certification of damages classes under Rule 23(b)(3) only when, among other things, common issues predominate over individualized issues necessary to resolve the case.

There is, however, a growing trend that impacts this delicate balance and is changing how many class actions are litigated, and the tactics and strategies employed by all parties. Plaintiffs, and some courts, have increasingly pointed to Rule 23(c)(4)1 to certify what are called "limited issue" classes. Rule 23(c)(4) provides that, "when appropriate, an action may be brought or maintained as a class action with respect to particular issues."2 Limited issue certification under this Rule seeks to isolate an issue (or certain issues) for class treatment even if class members' claim for liability or recovery might ultimately be adjudicated individually. The separation of individual issues not capable of class-wide resolution allows a class action to move forward even when it would not survive examination under the mandate of Rule 23(b)(3)'s predominance test3 – which requires common issues in the class action as a whole to predominate over issues that would require individualized adjudication.4

A New Focus On Limited Issue Classes

While the potential for limited issue classes has been around for a while, it gained increased attention in light of the Supreme Court's decision in Wal-Mart v. Dukes, which brought teeth back to Rule 23(a)'s commonality requirement, many commentators viewed the case as a real threat to class certification.5 As the Court held, "[w]hat matters to class certification ... is not the raising of common 'questions' – even in droves – but, rather, the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation."6 Some commentators were concerned that the Dukes decision threatened the very viability of class actions.7

These concerns may have been overstated, but it has caused some commentators to advocate for limited issue class certification under Rule 23(c)(4) as a way to promote the continued viability of class actions. For example, Professor John C. Coffee has said, "the best hope for survival of the class action in money damages cases may lie in the expansion of issue class certification under Rule 23(c)(4)."8 Under Professor Coffee's view, partial certification is a process whereby "the defendant's liability could be established at the class trial."9 Then, "individual issues, such as reliance, proximate causation, or damages could be established in separate proceedings."10 Other commentators stress that this approach goes too far, and is inconsistent with federal law.11

Varying Approaches Of The Circuits

Several courts have interpreted Rule 23(c)(4) to permit the bifurcation of class issues and certain issues that must be resolved on an individual basis in a Rule 23(b)(3) damages class. However, courts have disagreed on the proper scope and interpretation of the Rule.

Until recently, the Fifth Circuit in Castano v. American Tobacco rejected the use of Rule 23(c)(4) to overcome (b)(3)'s predominance requirement: "Severing the defendants' conduct from reliance 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 ... (c)(4) is a housekeeping rule that allows courts to sever the common issues for a class trial."12 Notably, the Fifth Circuit's more recent decision in In re Deepwater Horizon, has been cited as a retreat from Castano and evidence of a more expansive approach, stating that Rule 23(b)(3)'s predominance requirement can still be met if the proceedings are structured to establish "liability on a class-wide basis, with separate hearings to determine—if liability is established—the damages of individual class members."13 Of course, separating the damages inquiry alone for individualized treatment is distinct from having mini-trials on issues of, for example, reliance or causation.

Other circuits have been more supportive of limited issue class certification, although circuits have different approaches to determine when it is appropriate to certify a Rule 23(c)(4) class action that could not be certified under Rule 23(b)(3). The Second Circuit held in In re Nassau County Strip Search Cases that "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."14 The Second Circuit employed a material advancement standard, determining whether issue certification would "reduce the range of issues in dispute and promote judicial economy."15 The Third Circuit applies factors set forth in the American Legal Institute's Principles of the Law of Aggregate Litigation16 to determine whether certification of an issue class is proper. Courts are instructed to consider factors such as "the type of claim and issue in question; the overall complexity of the case; the efficiencies to be gained by granting partial certification; the substantive law underlying the claim,"17 and more. Finally, the Seventh Circuit held that if a proposed class action contains "genuinely common issues, issues identical across all the claimants ... the accuracy of the resolution of which is unlikely to be enhanced by repeated proceedings, then it makes good sense, especially when the class is large, to resolve those issues in one fell swoop while leaving the remaining, claimant-specific issues to individual follow-on proceedings."18

Potential Statutory and Rules Changes Regarding Limited Issue Classes

The liberal interpretation of Rule 23(c)(4) in some circuits has been recognized as a concern by some scholars and congressional leaders alike. On March 9, 2017, the House of Representatives passed the Fairness in Class Action Litigation Act of 2017 ("FCALA").19 Now pending Senate approval, FCALA proposes various amendments to the judicial procedures that apply to federal court actions. Notably, FCALA would preclude courts from certifying particular issue class actions unless the entirety of the cause of action from which the particular issues arise satisfies Rule 23 requirements. An additional provision requiring that "each proposed class member suffer the same type and scope of injury" as the named plaintiff would result in substantially fewer certified issue classes as well.

In stark contrast to the approach advocated by supporters of FCALA, the Rule 23 Subcommittee to the Advisory Committee on Civil Rules recently considered amendments that would make it far easier to certify a limited issue class. Perhaps recognizing the apparent conflict between the predominance requirement and limited issue certification, the Rule 23 Subcommittee contemplated an amendment that would eliminate the predominance requirement to obtain issue class certification under Rule 23(c)(4), making it easier to certify issue classes. The Subcommittee ultimately removed issue classes from consideration for rule changes, citing an evolving consensus in various circuits for Rule 23(c)(4) treatment "when appropriate."20 However, the proposed amendment by the Subcommittee parallels proposals by some practitioners and academics in support of a more expansive use of issue certification.21

Moving Forward

Passage of FCALA would certainly change the landscape for issue class certification and provide clarity, shifting the focus back to the commonality and predominance of common issues in class actions over individual issues. Even if legislation does not pass, there may be changes in how courts interpret Rule 23 to permit limited issue certification and in how defendants approach class actions in this new era.

First, as noted above, some commentators have argued against broadening limited issue certifications. Based on the Constitution, Rules Enabling Act, and historical practice, Professor Mark A. Perry has advocated an approach that would permit limited issue certification solely for liability and remedies since "Rule 23(c)(4) does not authorize certification or exclusion of more discrete claim elements or defenses."22 Under this approach, Professor Coffee's proposed expansion to encompass claim elements (such as causation or reliance) and defenses (such as knowledge and consent) would be precluded by the courts.23 Defendants may want to follow this approach in challenging the use of limited issue certification in their cases.

Second, regardless of what is permitted to be included in a limited issue certification, defendants may change tactics and strategies to counter plaintiffs' counsel's evolving positions. There was a time (recognized by Judge Friendly) that even the threat of class certification could cause a defendant with a meritorious claim to settle rather than risk overwhelming liability. However, defendants may find that, even if a class is certified, if issues such as reliance, causation, or injury, are left for individualized adjudication, they may have reason to battle well beyond class certification. For example, perhaps a limited issue class will be certified, but a defendant may have strong arguments on the underlying merits, or plaintiffs may have serious problems with proving that a significant portions of the class relied on a representation. In those circumstances, it may be worth pushing plaintiffs to really prove their case for each class member. At a minimum, in those circumstances, plaintiffs' counsel will still have a significant amount of work to do to truly "prevail" in any meaningful way, which can impact case strategy and settlement.

As the Senate debates FCALA, and the courts continue to consider how best to utilize limited issue certifications, we will keep you updated on interesting developments.

Footnotes

1 Fed. R. Civ. P. 23(c)(4) ("When appropriate, an action may be brought or maintained as a class action with respect to particular issues.").
2 Fed. R. Civ. P. 23(c)(4).
3 Laura J. Hines, Codifying the Issue Class Action, 16 Nev. L.J. 625 (2016).
4 Fed. R. Civ. P. 23(b)(3).
5 Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350, 131 S. Ct. 2541, 2551 (2011) (citing Richard A. Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L.Rev. 97, 132 (2009)).
6 Id.
7 See, e.g., John C. Coffee, Bureau Natl'l Affairs, The New Class Action Landscape: Trends and Developments of Class Certification and Related Topics 2005-2011, at S-51 (2011).
8 Coffee, supra note 5, at 158-160.
9 Id. at 159.
10 Id.
11 See, e.g., Mark A. Perry, Issue Certification Under Rule 23(c)(4): A Reappraisal, 62 DePaul L. Rev. 733 (2013).
12 Castano v. American Tobacco, 84 F.3d 734, 745 n.21 (5th Cir. 1996).
13 In re Deepwater Horizon, 739 F.3d 790, 795 (5th Cir. 2014).
14 In re Nassau Cty. Strip Search Cases, 461 F.3d 219, 226-27, (2d Cir 2006).
15 McLaughlin v. American Tobacco Co., 522 F.3d 215, 234 (2d Cir. 2008).
16 Am. Legal Inst., Principles of the Law of Aggregate Litigation § 2.02 (2010).
17 Gates v. Rohm and Haas Co., 655 F.3d 255, 273 (3d Cir. 2011).
18 McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 672 F.3d 482, 491 (7th Cir. 2012) (citing Medjdrech v. Met-Coil Systems Corp., 319 F.3d 910, 911 (7th Cir. 2003)).
19 H.R. 985, 115th Cong. § 1720 (2017).
20 Advisory Comm. on Civil Rules, Rule 23 Subcommittee Report (Nov. 5-6, 2015), http://www.uscourts.gov/rules-policies/archives/agenda-books/advisory-committee-rules-civil-procedure-november-2015.
21 Mark A. Perry, Issue Certification under Rule 23(c)(4): A Reappraisal, 62 DePaul L. Rev. 733 (2013).
22 Id.
23 Id.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.