Arguing Class Actions is a monthly column by Adam J. Levitt for the National Law Journal.
Reprinted with permission from the September 11, 2023 edition of the National Law Journal. © 2023 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
At its core, the modern class action device was created to both increase efficiency and allow greater access to justice, while, at the same time, binding absent class members to promote finality. Class actions benefit plaintiffs by allowing them to share the burden and often enormous expenses of litigating complex cases against corporate defendants accused of widespread misconduct. Correspondingly, class actions benefit defendants by increasing efficiency, allowing them to litigate cases in a single forum against a small group of representative plaintiffs, while also providing the ability to resolve nearly all individual claims by binding absent class members. And it benefits the public by enhancing judicial economy and providing a mechanism for a “private attorney general” to deter widescale corporate misconduct where one may not otherwise exist.
The pivotal moment in class litigation is the class certification motion practice. It is at that stage of the litigation that the judge must determine whether the proposed class satisfies Rule 23 of the Federal Rules of Civil Procedure such that it can proceed as a class. This procedural overlay, however, has been increasingly transformed by the defense bar into a costly war of attrition, as an alternative means to escape liability for wrongful conduct without having to defend the merits. In doing so, corporate defendants have advocated for more stringent standards to govern class certification, arguing that certification forces them into a Hobson’s choice of either settling frivolous claims or rolling the dice in a jury trial and risking financial ruin. But this faulty premise is built entirely on the notion that class actions always assert frivolous claims, when history is replete with cases of confirmed corporate misconduct where an arm’s-length settlement is reached in exchange for the release of nearly all individual claims. And, in those potential cases where class action lawsuits are truly frivolous, defendants can benefit from class certification by binding an adverse summary judgment ruling on absent class members.
In actuality, by arguing for more stringent class certification standards, the defense bar is attempting to create a Hobson’s choice for plaintiffs: either forgo their right to compensation for legitimate harms altogether or pursue cost-prohibitive individual litigation that will result in little or no net recovery. The standard governing the burden of proof for class certification has, therefore, become an increasingly important battleground in class action litigation.
Neither Rule 23 nor U.S. Supreme Court precedent specifies a particular burden of proof that the moving party must meet to show that the requirements of Rule 23 are met. Most recently, in Wal-Mart Stores v. Dukes, 564 U.S. 338 (2011), the Supreme Court did not articulate a specific burden of proof, stating only that the plaintiff must offer “significant proof” of facts critical to class certification. In the face of the Supreme Court’s silence, courts have developed divergent approaches on the standard required by Rule 23. The primary debate among courts has been whether the plaintiff must prove each of Rule 23’s requirements by a preponderance of the evidence, or whether some lesser standard is sufficient.
The debate has its roots in the political climate surrounding tort reform, an era that saw the 2003 amendments to Rule 23 and the passage of the Class Action Fairness Act of 2005 (CAFA). In the wake of Rule 23’s amendments and CAFA’s passage, the U.S. Court of Appeals for the Second and Third circuits determined that “some showing” that the moving party can meet Rule 23’s requirements will no longer suffice and that the plaintiff needs to do more than simply submit an expert report in support of certification that is not “fatally flawed.” These courts reasoned that two changes arguably combine to permit a more extensive inquiry into whether Rule 23 requirements are met than was previously required. First, the 2003 amendment eliminated conditional class certification, preventing courts from entering a preliminary certification order pending further evidentiary support. Second, the amendment replaced the provision of prior Rule 23(c)(1)(A) that a class certification decision be made “as soon as practicable” with a provision requiring that the class certification decision be made “at an early practicable time.”h The courts that have adopted the preponderance standard also surmise that too easily granting class certification may place undue pressure on the defendant to settle so as to avoid the costs of defending an action on the merits and that the preponderance standard is appropriate since it is the same measure of proof that is applicable to the underlying claims as well as nonmerits disputes such as personal and subject-matter jurisdiction.
While the trend in recent cases has been to move from a lower standard that required “some showing” that each Rule 23 requirement is met toward adoption of a preponderance of the evidence standard for critical facts necessary to establish Rule 23’s requirements, some circuits have yet to specify a particular burden of proof and others have explicitly articulated a standard lower than the preponderance standard. Specifically, the First, Second, Third, Fifth, Seventh and Ninth circuits have expressly adopted the preponderance of the evidence standard for class certification. In addition to the First Circuit, the Fourth, Sixth, Eighth and Tenth circuits have yet to explicitly specify a particular burden of proof. And courts within the Eleventh Circuit have explicitly articulated a standard lower than the preponderance standard.
Adding to the confusion, in the wake of the Supreme Court’s decision in Comcast v. Behrend, 529 U.S. 27, 33 (2013), where the Supreme Court stressed the need to show Rule 23’s requirements with evidentiary proof, but did not directly address whether the proffered evidence must be admissible, the circuits are split as to whether evidence must be admissible to be considered at class certification. And the circuits even take differing approaches for fact and expert evidence. With respect to fact evidence, the prevailing approach, expressly adopted by the Sixth, Eighth and Ninth circuits as well as district courts within other circuits, is that a district court may consider inadmissible fact evidence at class certification. Yet, when it comes to expert evidence, the majority position, adopted by the Third, Fifth, Seventh, Ninth and Eleventh circuits, is that a district court must conduct a full Daubegrt analysis and, therefore, consider only admissible expert evidence.
Ironically, rather than decreasing the costs of litigating class actions for corporate defendants, the practical effect of requiring more stringent proof for class certification in many cases is to increase litigation costs for both sides, requiring the parties to retain costly experts and conduct full-blown Daubegrt challenges earlier on in the litigation before even reaching the merits (and then often requiring additional cost-prohibitive expert discovery during the merits stage). Not to mention the considerable resources that must be expended by courts to preside over protracted class certification fights, which often end in time-consuming Rule 23(f) appeals that further delay the timely adjudication of cases.
Requiring overly stringent standards of proof to invoke a purely procedural mechanism, such as Rule 23, is inconsistent with its historical purpose because it has the potential to deny access to justice, decrease efficiency and judicial economy, and undermine finality of adjudication. This approach diverts from the fundamental rationale for class actions, which is to enable individuals whose claims feature predominantly common questions to seek redress collectively, thereby promoting both fairness and efficiency in the legal system. Striking the right balance between requiring a reasonable showing under Rule 23 and providing fair access to the class action device is essential for ensuring that meritorious claims are efficiently tried and not needlessly hindered.
Thank you to DiCello Levitt senior counsel Dan Schwartz and partner Justin Hawal for contributing to this column.
Adam J. Levitt is a founding partner of DiCello Levitt, where he heads the firm’s class action and public client practice groups. He can be reached at alevitt@dicellolevitt.com.