Published on:

Class Action Certification Under Rule 23 Part III: Defense of Class Actions

Class Certification Under Rule 23 – Part III

The Categories of Rule 23(b)

In addition to establishing the Rule 23(a) requirements of numerosity, commonality and typicality, and demonstrating that the class members will be adequately represented, a plaintiff must meet also the provisions of Rule 23(b). Green v. Occidental Petroleum Corp., 541 F.2d 1335, 1339 (9th Cir. 1976) (“In order for an action to be maintained as a class action under Fed.R.Civ.P. 23, the four requirements of rule 23(a) must be met, as well as the requirements of at least one of the subdivisions of rule 23(b).”).

Rule 23(b) provides:

An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition:

(1) the prosecution of separate actions by or against individual members of the class would create a risk of

(A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or

(B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or

(2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or

(3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action.

The requirements of Rule 23 are mandatory. Thus, class certification requires that the prospective class representative satisfy the elements set forth in Rule 23(a), and demonstrate also that the provisions of Rule 23(b) are met. General Telephone Co. of Southwest v. Falcon, 457 U.S. 152, 102 S.Ct. 2364 (1982) (reversing class certification for failure to analyze Rule 23 requirements).

Satisfying Rule 23(b)(1)

Rule 23(b)(1) provides that a class action may be maintained if “the prosecution of separate actions by or against individual members of the class would create a risk of (A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or (B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests.”

Newberg notes that “[c]ourts are still struggling to develop guidelines governing the scope of Rule 23(b)(1)(A).” Newberg on Class Actions, “Class Categories and Defendant Classes,” § 4:4, p. 12 (4th ed. 2002). “To date, the major direction for developing guidelines for Rule 23(b)(1)(A) applicability has been to determine what it was not designed to cover.” Id., at 14 (italics added). This article provides but a general outline of the great body of law on Rule 23(b)(1).

It has been held that Rule 23(b)(1)(A) “focuses on the rights of parties opposing the class” while Rule 23(b)(1)(B) “focuses on the rights of unnamed class members.” In re Syncor ERISA Litigation, 227 F.R.D. 338, 346 (C.D. Cal. 2005) (citing McDonnell Douglas Corp. v. U.S. District Court, C.D. of California, 523 F.2d 1083, 1086 (9th Cir.1975)).

Whether a class may be certified under this rule has important ramifications. As the Ninth Circuit explained,

[C]ertification under 23(b)(3) does not render a certifica-tion under 23(b)(1) immaterial and of no consequence. Independent significance attaches to certification under (b)(1). Notice must be given only in the (b)(3) case, and members of a (b)(3) class, but not of a (b)(1) class, may choose to opt out and not be bound by the judgment. In cases where both (b)(1) and (b)(3) apply, (b)(1) is held to govern to avoid the multiplicity of suits. See, e. g., Mungin v. Florida E. Coast Ry., 318 F.Supp. 720, 730 (M.D. Fla. 1970), aff’d per curiam, 441 F.2d 728 (5th Cir. 1971); 7A Wright & Miller, Federal Practice and Procedure, § 1771 at 7-8 and cases cited at Supp. (1976) at 1.

Green v. Occidental Petroleum, 541 F.2d at 1339-40 (footnotes omitted) (italics added).

Perhaps the most universally recognized limitation on the applicability of the rule is when only some of the class members recover damages. See e.g., McDonnell Douglas Corp. v. U.S. District Court, C.D. of California, 523 F.2d 1083 (9th Cir.1975) (holding that possibility of one judgment in favor of plaintiff in a mass tort lawsuit and a judgment against plaintiff in another mass tort suit is not be the type of inconsistency referred to in Rule 23(b)(1)(A)). See also Feinstein v. Firestone Tire & Rubber Co., 535 F. Supp. 595 (S.D. N.Y. 1982) (holding Rule 23(b)(1)(A) inapplicable where only inconsistent decisions would be that some class members recover while others do not).

The Ninth Circuit has enunciated another general rule that this author finds compelling: Rule 23(b)(1)(A) does not apply to actions seeking monetary relief. Green v. Occidental Petroleum, 541 F.2d at 1340 (citing La Mar v. H & B Novelty & Loan Co., 489 F.2d 461 (9th Cir. 1973). As La Mar explained at page 466:

Rule 23(b)(1)(A) authorizes class actions to eliminate the possibility of adjudications in which the defendant will be required to follow inconsistent courses of continuing conduct. This danger exists in those situations in which the defendant by reason of the legal relations involved cannot as a practical matter pursue two different courses of conduct. The Advisory Committee’s Note makes this clear in discussing Rule 23(b)(1)(A) by its reference to actions to declare bond issues invalid, to fix the rights and duties of a riparian owner, and to determine a landowner’s rights and duties respecting a claimed nuisance.

Infrequently, if ever, will this be the case when the action is for money damages. Certainly the defendants in these proceedings can continue the conduct of which the plaintiffs complain even if the plaintiffs are successful, as the plaintiff in LaMar has been, in their individual actions. Their success by its terms does not fix the rights and duties owed by the defendants to others as, for example, would a declaration of the invalidity of the bond issue. We conclude therefore, that Rule 23(b)(1)(A) is inapplicable to class actions which the plaintiffs in these proceedings seek to initiate. (Italics added.)

The Ninth Circuit followed La Mar in Green v. Occidental Petroleum, which involved several lawsuits “alleging violations of federal securities laws due to allegedly misleading financial statements and other reports.” 541 F.2d at 1336. The plaintiffs sought to “recover damages incurred in connection with transactions he entered into in reliance on false or misleading information.” Id., at 1338. The district court certified a class under Rule 23(b)(1) and (b)(3), id., at 1336; the Ninth Circuit granted a writ of mandamus directing the district court to vacate class certification under Rule23(b)(1), id., at 1337, 1341. The Circuit Court explained:

The instant case is an action for damages. In such cases ordinarily there is neither the risk under rule 23(b)(1)(A) of “inconsistent or varying adjudications” which would “establish incompatible standards of conduct for the party opposing the class,” nor of adjudications impairing the rights of class members to protect their interests under (b)(1)(B) of Rule 23. No circumstances exist here that render these principles inapposite. These conclusions are supported by La Mar v. H & B Novelty & Loan Co., 489 F.2d 461 (9th Cir. 1973) as well as McDonnell Douglas Corp. v. United States Dist. Ct., 523 F.2d 1083 (9th Cir. 1975). Certification under Rule 23(b)(1), therefore, was improper. Correction can be achieved through mandamus. Id. Judicial efficiency requires that we order the district court to vacate the (b)(1) certification so that erroneous notice and opt-out procedures are not employed. (Footnotes omitted.)

However, this interpretation of the rule has been moderated when the monetary relief available to class members must come from a limited fund. Collins v. International Dairy Queen, Inc., 168 F.R.D. 668, 675 (M.D. Ga.1996) (“Class certification under Rule 23(b)(1)(A) or (B) is primarily for cases seeking injunctive and declaratory relief or payment from a limited fund.”); Kohl v. Association of Trial Lawyers of America, 183 F.R.D. 475, 486 (D. Md. 1998) (rejecting monetary relief limitation on Rule 23(b)(1)(A) and noting that “cases in which the plaintiffs are seeking recovery from a limited fund readily qualify under Rule 23(b)(1)(B) and commonly qualify also under Rule 23(b)(1)(A)”).

Satisfying Rule 23(b)(2)

Rule 23(b)(2) provides that a class action may be maintained if “the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole.”

In light of the phrase “generally applicable,” the defendant’s alleged misconduct need not be directed against all class members, nor need each class member suffer damage. “Thus, for example, in a constitutional challenge to a sexually segregated public school, the policy is generally applicable to the entire excluded class, thought it may be repugnant to a small part of the class and the vast majority of class members may be opposed to any change in policy.” Newberg, § 4:11, p. 55 (citing Newberg v. Board of Pub. Educ., No. 5822 (Philadelphia County Ct. C. P. Aug. 30, 1983)).

Actions seeking to redress discriminatory practices are particularly well-suited for relief under Rule 23(b)(2). It permits class action treatment and injunctive relief to preclude exclusion of African-Americans from a particular school, regardless of the number of African-Americans interested in attending the school or whether the named plaintiffs have suffered the discrimination they seek to redress. See e.g., N.A.A.C.P. v. City of Thomasville School Dist., 187 F.R.D. 690 (M.D. Ga. 1999). Similarly, a class action on behalf of women for alleged discriminatory practices is permissible even if many or even most of the class members would not avail themselves of the relief obtained for example, a Title IX claim for failure to provide equivalent benefits and reasonable opportunities to women collegiate sports, see Bryant v. Colgate University, 996 F.Supp. 170 (N.D. N.Y. 1998).

The Fourth Circuit has held that Rule 23(b)(2) applies only when injunctive relief is sought against a single defendant:

“As is clear from the language of the Rule [23(b)(2)], it is applicable to situations in which a class of plaintiffs seeks injunctive relief against a single defendant-the party opposing the class-who has acted on grounds generally applicable to the plaintiff class. See Judicial Conference Advisory Committee, Notes to Rule 23(b)(2), 39 F.R.D. 69, 102 (1966). To proceed under 23(b)(2) against a class of defendants would constitute the plaintiffs as ‘the party opposing the class,’ and would create the anomalous situation in which the plaintiffs’ own actions or inactions could make injunctive relief against the defendants appropriate. Wright and Miller, Federal Practice and Procedure, Civil, § 1775 at 21-22 (1972), states the proposition:

“It should be noted that the injunctive relief must be sought in favor of the class. As a result, an action to enjoin a class from pursuing or failing to pursue some course of conduct would not fall under Rule 23(b)(2) and would have to qualify under Rule 23(b)(1) or Rule 23(b)(3) in order to be given class action treatment.

“To the same effect is the 1978 pocket part of the text. We do not feel that the presence of a plaintiff class in this action alters our construction of the Rule, for, in addition to the literal language of Rule 23(b)(2), we rely upon the clearly expressed*1204 purpose for which the Rule was adopted:

“Subdivision (b)(2). This subdivision is intended to reach situations where a party has taken action or refused to take action with respect to a class, and final relief of an injunctive nature or of a corresponding declaratory nature, settling the legality of the behavior with respect to the class as a whole, is appropriate. Judicial Conference Advisory Committee, Notes on Rule 23(b)(2), 39 F.R.D. 69, 102 (1966).”

Thompson v. Board of Educ. of Romeo Community Schools, 709 F.2d 1200, 1203-04 (4th Cir. 1983) (quoting Paxman v. Campbell, 612 F.2d 848, 854 (4th Cir.1980) (en banc), cert. denied sub nom., Henrico County School Board v. Paxman, 449 U.S. 1129, 101 S.Ct. 951, 67 L.Ed.2d 117 (1981).

The second requirement of Rule 23(b)(2) is that it be “appropriate” for the court to award “final injunctive relief or corresponding declaratory relief with respect to the class as a whole.” This aspect of the rule may be defeated when the plaintiff seeks monetary as well as injunctive relief. See e.g., Duncan v. Northwest Airlines, Inc., 203 F.R.D. 601 (W.D. Wash. 2001). However, “Monetary relief may be obtained in a Rule 23(b)(2) class action so long as the predominant relief sought is injunctive or declaratory.” Murray v. Auslander, 244 F.3d 807, 812 (11th Cir. 2001) (citing Allison v. Citgo Petroleum Corp., 151 F.3d 402, 411 (5th Cir.1998)). See also, Heffner v. Blue Cross and Blue Shield of Alabama, Inc., 443 F.3d 1330, 1340 (11th Cir. 2006) (citing Murray).

The requirement that declaratory or injunctive relief predominate, of course, echoes the predominance requirement of Rule 23(b)(3), and, albeit indirectly, “serves essentially the same function[].” See Allison v. Citgo Petroleum Corp., 151 F.3d 402, 414-15 (5th Cir. 1998). A class-action claim for monetary relief may present common questions of liability, but, because the goal of the damage phase is to compensate the plaintiffs for their individual injuries, the claim will generally require the court to conduct individual hearings to determine the particular amount of damages to which each plaintiff is entitled. See id. at 413 (“Monetary remedies are more often related directly to the disparate merits of individual claims. As a result, a class seeking substantial monetary remedies will more likely consist of members with divergent interests.” (citations omitted)). Where the requested relief is declaratory or injunctive, by contrast, the goal of the remedy phase is either to make a declaration about or enjoin the defendant’s actions affecting the class as a whole, and individual hearings will not be necessary. See id. (“[T]he underlying premise of the [Rule 23(b)(2)] class [is] that its members suffer from a common injury properly addressed by class-wide relief····”). Rule 23(b)(2)’s categorical exclusion of class actions seeking primarily monetary relief, like Rule 23(b)(3)’s predominance requirement, therefore ensures that the class is sufficiently cohesive that the class-action device is properly employed.

Thorn v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 330 (4th Cir. 2006).

The reason for this distinction is founded upon constitutional concerns regarding notice to class members. Unlike Rule 23(b)(3), discussed below,

Rule 23(b)(2) neither requires that absent class members be given notice of class certification nor allows class members the opportunity to opt-out of the class action. See Fed.R.Civ.P. 23(c)(2)(A). By requiring that injunctive or declaratory relief predominate, therefore, Rule 23(b)(2) ensures that the benefits of the class action inure to the class as a whole without running the risk of cutting off the rights of absent class members to recover money damages and class members who want individualized evaluation of their claim for money damages. Whereas Rule 23(b)(3) protects these rights by requiring notice and the opportunity to opt-out, Rule 23(b)(2) protects these interests indirectly by allowing certification only when the relief sought is predominantly injunctive or declaratory. See Allison v. Citgo Petroleum Corp., 151 F.3d 402, 412-15 (5th Cir.1998).

Thorn, at 330 n.25.

Some courts have expressed concerns with the constitutionality of certifying a class action for monetary relief under Rule 23(b)(2) under this procedure. The constitutional concern is that certification under Rule 23(b)(2) is never appropriate because it binds all class members without the safeguards of notice and opportunity to be heard. [Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147, 164 (2nd Cir. 2001]. This concern arises from the Supreme Court cases Ticor v. Brown, 511 U.S. 117, 114 S.Ct. 1359, 128 L.Ed.2d 33 (1994) and Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999). In Ticor, the Supreme Court stated that there is at least a substantial possibility that in actions seeking monetary damages, classes can be certified only under Rule 23(b)(3), which permits opt-out. 511 U.S. at 121, 114 S.Ct. 1359. In Ortiz, the Supreme Court suggested that a mandatory class seeking monetary damages should not be certified under Rule 23(b)(2) because such a class compromises the due process rights of absent class members. See also, [Coleman v. General Motors Acceptance Corp., 296 F.3d 443, 447 (6th Cir. 2002].

Reeb v. Ohio Dep’t of Rehab. & Corr., 435 F.3d 639, 658 (6th Cir. 2006) (Keith, J., dissenting).

The district court must determine whether injunctive or monetary relief is the “predominate” relief sought. See e.g., Feinstein v. Firestone Tire, supra, 535 F. Supp. 595 (Rule 23(b)(2) inapplicable because complaint primarily sought monetary relief); Davenport by Fowlkes v. Gerber Products Co., 125 F.R.D. 116 (E.D. Pa. 1989) (same)..

Satisfying Rule 23(b)(3)

Rule 23(b)(3) provides that a class action may be maintained if

the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action.

Because Rule 23(b)(3) is an amorphous, “catch-all” category, the drafters placed two requirements upon the rule that do not apply to Rule 23(b)(1) or (b)(2) classes: Rule 23(b)(3) requires notice to class members, and an opportunity to opt-out of the class. See Fed.R.Civ.P. Rule 23(c)(2)(B). Newberg thus notes that “certification under Rule 23(b)(3) imposes far greater burdens on the parties and the court in meeting notice and other requirements peculiar to Rule 23(b)(3) class actions.” Newberg, § 4:20, p. 145-46.

Newberg further quotes at length (id., at 146-47) from perhaps the leading case that explicates the unique nature of Rule 23(b)(3) as follows:

The principal distinction between an action maintained as a class action under 23(b)(3) from those maintained under 23(b)(1) or 23(b)(2) is that in (b)(3) members of the class may request to be excluded from the proceeding and thereby avoid being bound by a judgment against the class. No such option exists to members of a class in an action maintained under Rule 23(b)(1) or (2).

We find that these actions meet the requirements of subdivisions (b)(1)(A), (b)(1)(B) and (b)(2) of new Rule 23 and qualify as class actions under each of those three alternative provisions. While the actions also qualify under the less stringent provisions of Rule 23(b)(3), they should not be treated as 23(b) (3) actions, where, to do so, would defeat the very objectives intended to be achieved by Rule 23(b)(1) and (2).

If the actions are classified as Section 23(b)(3) actions, members of the class may elect not to be included and thereby will not be bound by the judgment.

This would permit the institution of separate litigation, thus unduly burdening the judicial system and directly contravening both the stated purpose of Rule 23(b)(1)(A) in protecting defendants against “inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class” and the stated purpose of Rule 23(b)(1)(B) in protecting plaintiffs against “adjudications with respect to individual members of the class which as a practical matter would be dispositive of the interest of other members *** or substantially impair or impede their ability to protect their interests.”

It seems apparent that virtually every class action that meets the requirements of 23(b)(1) or 23(b)(2) will also meet the less severe requirements of 23(b)(3). However, where the stricter requirements of 23(b)(1) and 23(b)(2) are squarely presented by the plaintiffs’ claims Rule 23(b)(3) is not applicable. The Advisory Committee recognized that Rule 23(b)(3) is designed for situations where class action treatment is not so clearly called for as in subdivisions (b)(1) and (b)(2) of Rule 23:

“Subdivision (b)(3). In the situation to which this subdivision relates, class-action treatment is not as clearly called for as in those described above, but it may nevertheless be convenient and desirable depending upon the particular facts.” 39 F.R.D. at 102. (Emphasis supplied.)

In the present case all of the elements of 23(b)(1) and 23(b)(2) are met. To apply 23(b)(3) would run the serious risk of negating the very purpose for which those rules were promulgated. We hold that these actions must be maintained as a class action under Rule 23(b)(1) and (2), and not under Rule 23(b)(3).

Van Gemert v. Boeing Co., 259 F. Supp. 125, 130-31 (D.C. N.Y. 1966).

The notice requirement is not optional. The United States Supreme Court has held, “[I]ndividual notice to identifiable class members is not a discretionary consideration to be waived in a particular case. It is, rather, an unambiguous requirement of Rule 23.” Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 176, 94 S.Ct. 2140, 2152 (1974). Moreover, the cost of providing such notice must be borne by the plaintiff, even if the district court believes that the plaintiff will prevail in the litigation. Id., at 177.

One might well ask, what benefit does Rule 23(b)(3) serve? Judge Kaplan, a former Reporter for the Rules Advisory Committee, had this explanation:

The object of the functional tests of Rule 23(b)(3) is to get at the cases where a class action promises important advantages of economy of effort and uniformity of result without undue dilution of procedural safeguards for members of the class or for the opposing party.

Kaplan, Continuing Work of the Civil Committee: 1966 Amendments of the Federal Rules of Civil Procedure (I), 81 Harv. L. Rev. 356, 389-90 (1967). At bottom, then, the Rule 23(b)(3) inquiry is reduced to whether a class action is the most judicially efficient means of resolving the dispute, weighing the rights of the plaintiff(s), the class members and the defendant(s) in the process.

There is admittedly substantial overlap between the “common questions” inquiry required by Rule 23(a)(2), and the district court’s analysis of whether “the questions of law or fact common to the members of the class predominate over any questions affecting only individual members” required by Rule 23(b)(3). There is no bright line test for making this determination, and the district court’s conclusion is reviewed for abuse of discretion. See, Cooper v. Southern Co., 390 F.3d 695, 722-23 (11th Cir. 2004) (holding district court did not abuse discretion in determining that common questions did not predominate); Olden v. LaFarge Corp., 383 F.3d 495, 510 (6th Cir. 2004) (holding district court did not abuse discretion in determining that common questions did predominate).

One generalization may be stated: The rule does not require an “identity” of interests between the class representatives and the members of the class: “an action can be brought under subdivision (b)(3) even though there is not a complete identity of facts relating to all class members, as long as a ‘common nucleus of operative facts’ is present, a test very similar to that used to determine the application of the doctrine of pendent jurisdiction,” 7A Wright, Miller, & Kane, Fed. Practice & Proc., § 1778 (2d ed. 1986). See also Rosmer v. Pfizer Inc., 272 F.3d 243, 246 (4th Cir. 2001) (citing Wright & Miller with approval). Wright & Miller also explain,

[I]f the main issues in a case require the separate adjudication of each class member’s individual claim or defense, a Rule 23(b)(3) action would be inappropriate. . . . Moreover, when individual rather than common issues predominate, the economy and efficiency of class action treatment are lost and the need for judicial supervision and the risk of confusion are magnified.

Zinser v. Accufix Research Institute, Inc., 253 F.3d 1180, 1189 (9th Cir. 2001), amended and superseded on denial of rehearing by Zinser v. Accufix Research Institute, Inc., 273 F.3d 1266 (9th Cir.2001) (quoting 7A Wright, Miller, & Kane, Fed. Practice & Proc., §1778 at 535-539 (2d ed. 1986)).

Another generalization is that mass tort claims often are found to be inappropriate for certification under Rule 23(b)(3). See e.g., Castano v. American Tobacco Co., 84 F.3d 734 (5th Cir. 1996) (decertifying class in lawsuit against tobacco companies on behalf of people addicted to nicotine); Georgine v. Amchem Products, Inc., 83 F.3d 610 (3d Cir. 1996) (decertifying class against asbestos products manufacturers).

Rule 23(b)(3) also requires that the district court affirmatively find “that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.” As Newberg observes, “It is not enough that an action present common questions of law and fact that predominate over individual questions.” Newberg, § 4:27, p. 245. Under this aspect of the rule, the test is whether there is a “better” way to resolve the dispute, short of a class action.

In Robinson v. Texas Auto. Dealers Ass’n, 387 F.3d 416 (5th Cir. 2004), the district court conditionally certified a class without adequately examining the issue of superiority. In Fifth Circuit held that “[a] court must consider ‘how a trial on the alleged causes of action would be tried.’” Id., at 425 (quoting Castano v. American Tobacco Co., 84 F.3d 734). Because it did not do this, the Circuit Court held that “[t]he district court abused its discretion by finding that ‘this class action is the superior method for adjudicating this controversy’ and by not conducting any kind of analysis or discussion regarding how it would administer the trial.” Id., at 425.

In Mace v. Van Ru Credit Corp., 109 F.3d 338 (7th Cir. 1997), the district court refused to certify a class because it believed a damage cap would severely limit recovery for class members: “The de minimis nature of the recovery, in turn, indicated that the class action mechanism was ‘not a superior method of adjudication.’” Id., at 342. The Seventh Circuit vacated the district court order, holding that “the district court’s concerns about a de minimis recovery are currently moot.” Id., at 344. However, in dicta the Seventh Circuit opined that de minimis recoveries may not render class actions unavailable. The court explained at page 344:

But even if a nation-wide class were appropriate, we believe that a de minimis recovery (in monetary terms) should not automatically bar a class action. The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone’s (usually an attorney’s) labor.

Finally, we note that Rule 23(b)(3) requires that the district court consider “the difficulties likely to be encountered in the management of a class action.” The United States Supreme Court explains,

Commonly referred to as “manageability,” this consideration encompasses the whole range of practical problems that may render the class action format inappropriate for a particular suit. With reference to this litigation, the Court of Appeals noted that the difficulties of distributing any ultimate recovery to the class members would be formidable, though not necessarily insuperable, and commented that it was “reluctant to permit actions to proceed where they are not likely to benefit anyone but the lawyers who bring them.”

Eisen v. Carlisle & Jacquelin, 417 U.S. 156 at 164 (citation omitted).

Nonetheless, in the Second Circuit, “denying class certification under Rule 23(b)(3) on the basis that it would be unmanageable ‘is disfavored and “should be the exception rather than the rule.”’” De la Fuente v. DCI Telecommunications, Inc., 206 F.R.D. 369, 391 (S.D. N.Y. 2002) (quoting In re Visa Check/MasterMoney Antitrust Litigation, 280 F.3d 124, 140 (2d Cir. 2001).

We also note that the Circuit Courts are divided on the issue of whether district courts may consider “manageability” of the litigation outside of the Rule 23(b)(3) context. Compare Lowery v. Circuit City Stores, Inc., 158 F.3d 742, 759 n.5 (4th Cir. 1998) (because “efficiency is one of the primary purposes of class action procedure, . . . in appropriate circumstances a district court may exercise its discretion to deny certification if the resulting class action would be unmanageable or cumbersome”) and Shook v. El Paso County 386 F.3d 963, 973 (10th Cir. 2004) (following Lowry), with Forbush v. J.C. Penney Co., Inc., 994 F.2d 1101, 1105 (5th Cir.1993) (“questions of manageability and judicial economy are . . . irrelevant to 23(b)(2) class actions”) and Elliott v. Weinberger, 564 F.2d 1219, 1229 (9th Cir.1977) (“[B]y its terms, Rule 23 makes manageability an issue important only in determining the propriety of certifying an action as a (b)(3), not a (b)(2), class action.”), aff’d in pertinent part sub nom., Califano v. Yamasaki, 442 U.S. 682, 99 S.Ct. 2545, 61 L.Ed.2d 176 (1979).