In its recent decision in Russell et al. v. Educational Commission for Foreign Medical Graduates, the U.S. Court of Appeals for the Third Circuit examined the crucial subject of issue-class certification under Rule 23(c)(4). The Rule states, "When appropriate, an action may be brought or maintained as a class action with respect to particular issues." How courts apply this Rule is important to both plaintiffs and defendants in class action litigation because it may provide an avenue for class treatment of particular elements of claims without the burden of showing that the entire claim meets the requirements of Rule 23(a) and (b).
In Russell, the Third Circuit considered how to apply Rule 23(c)(4) when a district court is asked to certify a particular part of a claim for class treatment, rather than certifying the entire claim for class treatment. In vacating the District Court's decision, the Third Circuit took the "broad" view of Rule 23(c)(4), finding that issues do not have to be dispositive of liability to be certified. The Third Circuit presented a two-question framework for district courts to follow going forward when they are determining whether to certify an issue class. Courts should ask: (1) can the issues be certified, and (2) should they be certified?
The case before the Third Circuit involved claims against the Educational Commission for Foreign Medical Graduates ("Commission"). The Commission's main function is to certify graduates of foreign medical schools for placement in U.S. residency programs, using a variety of criteria including testing. The named Plaintiffs received medical treatment from a doctor certified by the Commission who was later charged with using a fake identity to obtain his medical license. They sued the Commission on behalf of themselves and others similarly situated. The Plaintiffs alleged negligent infliction of emotional distress arising out of the Commission's certification of the doctor.
The District Court certified only the duty and breach elements of Plaintiffs' claims under Rule 23(c)(4), rather than certifying their full claims for class treatment under Rule 23(b)(3).1 The Commission filed a Rule 26(f) petition for review by the Third Circuit, seeking to overturn the District Court's decision to certify the issue class.
THIRD CIRCUIT DECISION
The Third Circuit vacated the District Court's issue-class certification and remanded the case for further proceedings. The Third Circuit applied a two-step inquiry and held that district courts may certify issues that do not ultimately resolve all elements of a defendant's alleged liability. First, district courts must ask whether the issues can be addressed on a class basis. To answer this question district courts must analyze whether the requirements of Rule 23(a) and Rule 23(b) are satisfied. That is, courts must consider whether the particular issue meets the same test that applies to certifying an entire claim, including Rule 23(b)(3)'s predominance test. The Third Circuit emphasized that for issue-class certification, the claim as a whole does not have to satisfy Rule 23(b)(3). The Court reasoned that the text of the Rule itself supports this interpretation – "The Rule permits an action to be brought or maintained as a class action 'with respect to particular issues,' not just those that decide liability."
Second, district courts must ask whether the issues should be certified. In considering whether issue certification will have a benefit for advancing the resolution of the claims in the case, the court must consider a number of factors.2 The Third Circuit found in Russell that the District Court failed to rigorously consider whether the issue class would effectively and fairly resolve the remaining issues, and what efficiencies would be gained by resolution of the certified issues.
The Third Circuit's decision is significant for both plaintiffs and defendants in class action cases. Both sides will need to be aware of the ability to use Rule 23(c)(4) to obtain class certification of specific, key issues even though the overall claim might not be certified under Rule 23(b)(3) because elements of the claim arguably are too individual. It is possible, for example, that parts of a fraud claim can be certified in the Third Circuit for issue-class treatment whereas previously the element of individual reliance would stand in the way.
In arguing for or against issue certification, both sides must be cognizant of the two-step test in Russell that requires parties to present evidence and argument on both whether the issue can be certified and, if it can be, whether it should be certified. In this way, the Russell decision may have a significant impact by opening the door for more frequent consideration of issue classes within the Third Circuit.
The Russell decision places the Third Circuit in line with other federal appellate courts, including the Seventh Circuit.
1. Rule 23(b)(3) states, "A class action may be maintained if Rule 23(a) is satisfied and if . . . the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. The matters pertinent to these findings include: (A) the class members' interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action."
2. The nine factors were identified in the Court's earlier decision, Gates v. Rohm & Haas, 655 F.3d 255 (3d Cir. 2011).
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