United States: North Carolina Enacts Class Certification Appeals Law

Last Updated: May 24 2017
Article by Adam Doerr

On April 26, 2016, the North Carolina General Assembly overrode Governor Roy Cooper's veto of a bill reducing the number of judges on the state Court of Appeals and providing for interlocutory appeals directly to the state Supreme Court from decisions regarding class action certification. The bill was controversial, but the public debate focused on the republican-controlled legislature's efforts to prevent the democratic governor from appointing new judges to replace three republican judges nearing mandatory retirement age. Although the class action provision was mostly overlooked, its passage represents a major change to class action practice in North Carolina state courts.

Prior to the passage of this law, North Carolina took a somewhat unique approach. North Carolina provides a litigant the right to take an interlocutory appeal of any order that "affects a substantial right."  An order denying class certification was immediately appealable because the courts have held that it affects a substantial right. An order granting class certification, by contrast, was generally not immediately appealable. Although the appellate courts permitted such appeals on a case-by-case basis, they carefully avoided a broader ruling that orders granting class certification were immediately appealable.

Defendants in prior cases have advocated, without success, for a ruling allowing for an immediate appeal from an order granting class certification. The basis for their arguments is that an order granting class certification often effectively ends the case because defendants face enormous pressure to settle. Indeed, there does not appear to have been a single post-judgment appeal of an order granting class certification against a private party since North Carolina's enactment of Rule 23 in 1967. 

North Carolina law now states that "[a]ppeals of right lie directly to the Supreme Court ... [from] [a]ny trial court's decision regarding class action certification under G.S. 1A-1, Rule 23."

This law goes further than the federal approach, and further than the law in many other states, in three important ways.

First, appeals under the new statute are not discretionary, in contrast to Federal Rule of Civil Procedure 23(f), which provides that a "court of appeals may permit an appeal from an order granting or denying class-action certification." To obtain review in federal court, the party seeking to appeal must ask the appellate court for permission. Such petitions are infrequently granted. Under North Carolina's new law, all orders regarding class certification are now appealable, regardless of whether the appellate court believes that interlocutory review is appropriate.

Second, appeals under the new law go directly to the North Carolina Supreme Court, bypassing the Court of Appeals. Prior to the passage of this bill, only two kinds of appeals went directly to the Supreme Court: death penalty convictions and decisions from the North Carolina Business Court. This change will increase the Supreme Court's caseload, and it does not permit the intermediate appellate court to refine the issues for review or issue decisions in cases where Supreme Court review may not be necessary. 

Third, the law permits an appeal of "[a]ny trial court's decision regarding class action certification." Note the contrast with federal Rule 23(f), which permits appeal from an "order granting or denying class-action certification." A "decision regarding" class action certification could be significantly broader. For example, is an order denying a motion for decertification a "decision regarding class action certification" that would allow an interlocutory appeal? How about a motion to strike class allegations? Even in federal court, with Rule 23(f)'s more limited language and the appellate court's discretion as a check, there is litigation over the scope of the right to appeal. Here, given the breadth of the language and the Supreme Court's apparent lack of discretion to reject an appeal, there could be extensive litigation over the scope of the right to appeal, or even repetitive appeals and gamesmanship.  This could prove to be a recipe for substantial delay, because North Carolina law generally prohibits the trial court from taking any action while an appeal is pending.

Beyond these significant changes, the new law also raises questions regarding how it applies to pending cases. Similar legislative changes have generally informed practitioners and courts that they apply to "appeals filed on or after" a specific date. This legislation has no such language for appeals of class certification decisions. Although there is a 2019 effective date for decisions involving parental rights – another new category of direct appeals to the Supreme Court – the bill states that the "remainder of this act is effective when it becomes law."

This leaves unclear how the law will apply to any pending appeals of class certification decisions. The most straightforward approach would be that, after April 26, a class certification appeal must be filed with the Supreme Court, but cases currently pending in the Court of Appeals would stay there. A party could ask the Supreme Court to take the case directly, but otherwise the Court of Appeals would keep the case. Given the ambiguity in the statute, however, it's also possible the appellate courts could read the new law as requiring transfer of pending class action appeals to the North Carolina Supreme Court, or even as raising issues regarding the jurisdiction of the Court of Appeals in a pending case.

The answers to these issues may be some time in coming. It could take much longer for the Supreme Court to address more substantive questions such as what qualifies as a "decision regarding class action certification." For now, it is clear that North Carolina has enacted a significant reform to state class action practice by permitting defendants to appeal class certification decisions while the case is still pending, as only plaintiffs were previously permitted to do. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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