Defending Class Actions: Certification Under Rule 23 Part II
The Prerequisites of Rule 23(a)
In defending a class action, the single most important motion facing a defendant is the plaintiff’s motion to certify a class. Rule 23(a) requires that the plaintiff demonstrate numerosity, commonality and typicality, and that the class members will be adequately represented, and must additionally demonstrate that the action satisfies Rule23(b).
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), as well as the elements of Rule 23(b) (discussed in a separate article) be 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).
Rule 23(a) of the Federal Rules of Civil Procedure provides:
One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
Satisfying Rule 23(a)
As noted above, Rule 23(a)(1) requires a determination that “the class is so numerous that joinder of all members is impracticable.” However, no bright line or threshold exists at which the numerosity requirement is met. Each circumstance must be examined on a case-by-case basis. General Telephone Co. v. E.E.O.C., 446 U.S. 318, 330, 100 S.Ct. 1698 (1980).
There are, of course, the obvious cases. See e.g., Georgine v. Amchem Products, Inc., 83 F.3d 610, 626 n.11 (3rd Cir. 1996), aff’d, Amchem Products, Inc. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231 (1997) (“This class, which may stretch into the millions, easily satisfies the numerosity requirement.”); In re General Motors Corp. Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F.3d 768, 800 (3rd Cir. 1995), cert. denied, General Motors Corp. v. French, 516 U.S. 824, 116 S.Ct. 88 (1995) (“The numerosity requirement of Rule 23(a) is plainly satisfied in this action encompassing nearly six million truck owners.”); Ballard v. Equifax Check Services, Inc., 186 F.R.D. 589, 594 (E.D. Cal.1999) (class of “approximately 1.4 million California residents” satisfied numerosity).
Newberg, however, correctly observes that the test is not so much one of “numerosity” per se, but of the practicality or, more accurately, impracticality of joining all potential class members in a single lawsuit. Newberg on Class Actions, “Prerequisites for Maintaining a Class Action,” §3:5, p. 246-47 (4th ed. 2002). Newberg opines that forty (40) may be used as a presumptive rough figure:
In light of prevailing precedent, the difficulty inherent in joining as few as 40 class members should raise a presumption that joinder is impracticable, and the plaintiff whose class is that large or larger should meet the test of Rule 23(a)(1) on that fact alone. Joinder of larger classes might sometimes be practicable, or the action might fail to meet the superiority test of Rule 23(b)(3). Joinder of a smaller class may be impracticable because of the circumstances of the particular case.
Id., at 247 (footnote omitted).
It is important to remember that each case must be examined individually: cases exist above and below this 40-class-member threshold. See e.g., Shields v. Local 705, International Brotherhood of Teamsters, 188 F.3d 895, 897 (7th Cir. 1999) (noting that class consisted of class representative “and 35 other[s]”), Andrews v. Bechtel Power Corp., 780 F.2d 124 (1st Cir. 1985), cert. denied, 478 U.S. 1172, 106 S.Ct. 2896 (1986) (affirming denial of class certification where subclass had a maximum of 49 members for failure to satisfy numerosity requirement).
Rule 23(a)(2) requires a determination that “there are questions of law or fact common to the class.” As the Third Circuit noted, “‘commonality’ like ‘numerosity’ evaluates the sufficiency of the class itself, and ‘typicality’ like ‘adequacy of representation’ evaluates the sufficiency of the named plaintiff.” Hassine v. Jeffes, 846 F.2d 169, 176 n.4 (3d Cir.1988).
“Rule 23 does not require that the representative plaintiff have endured precisely the same injuries that have been sustained by the class members, only that the harm complained of be common to the class, and that the named plaintiff demonstrate a personal interest or ‘threat of injury . . . [that] is “real and immediate,” not “conjectural” or “hypothetical.”’” Hassine, at 177 (quoting O’Shea v. Littleton, 414 U.S. 488, 494, 94 S.Ct. 669 (1974). Thus, in Georgine, supra, the Third Circuit held that “commonality” did not exist because “this class is a hodgepodge of factually as well as legally different plaintiffs.” Georgine v. Amchem Products, 83 F.3d at 632.
As the Supreme Court explained,
The commonality and typicality requirements of Rule 23(a) tend to merge. Both serve as guideposts for determining whether under the particular circumstances maintenance of a class action is economical and whether the named plaintiff’s claim and the class claims are so interrelated that the interests of the class members will be fairly and adequately protected in their absence.
General Telephone v. Falcon, 457 U.S. 147 at 157 n.13. With this in mind, we turn to the prerequisite of typicality.
Rule 23(a)(3) requires a determination that “the claims or defenses of the representative parties are typical of the claims or defenses of the class.” Newberg explains,
The first two prerequisites of Rule 23, joinder impractic-ability and common questions, focus on characteristics of the class. Taken as a unit, they form the core of the class-action concept. The second two prerequisites, typicality and adequate representation, focus instead on the desired characteristics of the class representative.
Newberg on Class Actions, “Prerequisites for Maintaining a Class Action,” §3:13, pp.316-17 (footnotes omitted) (italics added).
“The typicality criterion focuses on whether there exists a relationship between the plaintiff’s claims and the claims alleged on behalf of the class.” Id., at 317 (citing General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 102 S.Ct. 2364 (1982)). Newberg also states that “typicality of claims seeks to assure that the interests of the representative are aligned with the common questions affecting the class,” id., at 319 (footnote omitted).
The Supreme Court has explained, “The typicality requirement is said to limit the class claims to those fairly encompassed by the named plaintiffs’ claims.” General Telephone Co. of the Northwest v. Equal Employment Opportunity Commission, 446 U.S. 318, 330, 100 S.Ct. 1698 (1980). The typicality analysis asks
“whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same conduct.”
Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (quoting Schwartz v. Harp, 108 F.R.D. 279, 282 (C.D. Cal. 1985)).
Put another way,
Typicality refers to the nature of the claim or defense of the class representative and not to the specific facts from which it arose or to the relief sought. Factual differences will not render a claim atypical if the claim arises from the same event or practice or course of conduct that gives rise to the claims of the class members, and if it is based on the same legal theory.
Newberg, at 335 (footnote omitted).
The inquiry is admittedly closely connected both to Rule 23(a)(2)’s commonality test, see e.g., Ridgeway v. International Broth. of Elec. Workers, Local No.134, 74 F.R.D. 597, 604 (D.C. Ill. 1977) (“when the allegations raise an across the board challenge to allegedly discriminatory employment practices, both the commonality and typicality requirements are satisfied where the defendant’s practices and policies have resulted in illegal discrimination”), and Rule 23(a)(4)’s adequate representation test, see e.g., Eisenberg v. Gagnon, 766 F.2d 770, 786 (3rd Cir. 1985) (“To a large extent, [typicality] overlaps the requirements that the named representatives adequately represent the class, that there be common questions of law and fact, that such questions predominate, and that the class action be a superior means of resolution.”).
Adequate Protection of Class Interest
Finally, Rule 23(a)(4) requires a determination that “the representative parties will fairly and adequately protect the interests of the class.” This test focuses generally but not exclusively on the adequacy of counsel for the represented class, rather than the adequacy of the plaintiff representatives. In fact, the Eleventh Circuit recently summarized the four elements required for class certification under Rule 23(a) as “numerosity, commonality, typicality, and adequacy of counsel.” Hines v. Widnall, 334 F.3d 1253. 1255-56 (11th Cir. 2003) (italics added).
The Second Circuit opinion in Eisen v. Carlisle & Jacquelin, 391 F.2d 555, 562 (2d Cir. 1968), is widely quoted on adequacy of class representation. Eisen stated that “an essential concomitant of adequate representation is that the party’s attorney be qualified, experienced and generally able to conduct the proposed litigation.” The Second Circuit later explained its reasoning behind this statement:
Since absent class members are conclusively bound by the result of an action prosecuted by a party alleged to represent their interests, the court’s selection of counsel for the absent class should be guided by the best interests of those members, not the entrepreneurial initiative of the named plaintiffs’ counsel. In making a class certification decision, a district court must frequently select as lead counsel for the class the attorney who will best serve the interests of its members. And the court may also find it necessary to appoint additional counsel to protect the interests of subclasses. See 7 Wright & Miller, Federal Practice and Procedure, Civil § 1765 at 617-623 (1972); 1 Moore’s Federal Practice, Part 2, s 1.44 at 50-51 (2d ed. 1977); Amos v. Board of Directors of City of Milwaukee, 408 F.Supp. 765 (E.D.Wis.), aff’d, 539 F.2d 625 (7th Cir. 1976).
Cullen v. New York State Civil Service Commission, 566 F.2d 846, 849 (2nd Cir. 1977).
Properly read, however, Rule 23(a)(4) requires more.
The adequacy inquiry under Rule 23(a)(4) serves to uncover conflicts of interest between named parties and the class they seek to represent. See General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 157-158, n.13, 102 S.Ct. 2364, 2370-2371, n.13, 72 L.Ed.2d 740 (1982). “[A] class representative must be part of the class and ‘possess the same interest and suffer the same injury’ as the class members.” East Tex. Motor Freight System, Inc. v. Rodriguez, 431 U.S. 395, 403, 97 S.Ct. 1891, 1896, 52 L.Ed.2d 453 (1977) (quoting Schlesinger v. Reservists Comm. to Stop the War, 418 U.S. 208, 216, 94 S.Ct. 2925, 2930, 41 L.Ed.2d 706 (1974)).
Amchem Products, Inc. v. Windsor, 521 U.S. 591, 625-626, 117 S.Ct. 2231 (1997) (italics added).
Because Rule 23(a)(4) focuses “on the desired characteristics of the class representative,” Newberg on Class Actions, §3:13, pp.316-17, courts will entertain representative-specific objections in determining whether to certify a class. Or as one court explained,
Generally, the adequacy requirement focuses on the competency of class counsel, but it is clear that some inspection of the individual representative is required.
Byes v. Telecheck Recovery Services, Inc., 173 F.R.D. 421, 425-26 (E.D. La. 1997) (citations omitted).
For example, the defendants in Byes challenged the adequacy of Byes as a class representative on three grounds: “her unfamiliarity with the proceedings in this case, her lack of credibility, and her criminal conviction for theft.” 173 F.R.D. at 426.
The first of these issues requires a careful understanding of the difference between ignorance and inattention. “A class representative is not required to understand the meaning of complex legal terms or to direct litigation strategies.” Byes, at 426. Indeed, this was settled by the United States Supreme Court more than 40 years ago, when it reversed a Circuit Court judgment based on the educational level of the proposed class representative:
In fact the opinion of the Court of Appeals indicates in several places that a woman like Mrs. Surowitz, who is uneducated generally and illiterate in economic matters, could never under any circumstances be a plaintiff in a derivative suit brought in the federal courts to protect her stock interests.
* * *
We cannot construe Rule 23 or any other one of the Federal Rules as compelling courts to summarily dismiss, without any answer or argument at all, cases like this where grave charges of fraud are shown by the record to be based on reasonable beliefs growing out of careful investigation. The basic purpose of the Federal Rules is to administer justice through fair trials, not through summary dismissals as necessary as they may be on occasion. These rules were designed in large part to get away from some of the old procedural booby traps which common-law pleaders could set to prevent unsophisticated litigants from ever having their day in court. If rules of procedure work as they should in an honest and fair judicial system, they not only permit, but should as nearly as possible guarantee that bona fide complaints be carried to an adjudication on the merits. Rule 23(b), like the other civil rules, was written to further, not defeat the ends of justice. The serious fraud charged here, which of course has not been proven, is clearly in that class of deceitful conduct which the federal securities laws were largely passed to prohibit and protect against. There is, moreover, not one word or one line of actual evidence in this record indicating that there has been any collusive conduct or trickery by those who filed this suit except through intimations and insinuations without any support from anything any witness has said. The dismissal of this case was error. It has now been practically three years since the complaint was filed and as yet none of the defendants have even been compelled to admit or deny the wrongdoings charged. They should be.
Surowitz v. Hilton Hotels Corp., 383 U.S. 363, 372, 373-74, 86 S.Ct. 845 (1966).
Nonetheless, “Courts have found the proposed representative inadequate in numerous cases due to the plaintiff’s unfamiliarity with the suit,” Byes, at 426 and cases cited, that is, where the plaintiff’s participation in the litigation is “minimal” so that the court determines that responsibility for the litigation has been abdicated to class counsel.
A class representative’s credibility or criminal record similarly presents two different issues. On the one hand, it is well settled that a criminal record alone does not render an individual incapable of serving as a class representative. Even “a felony criminal record is not per se disqualifying as a class representative.” Haywood v. Barnes, 109 F.R.D. 568, 579 (E.D. N.C.1986). Accord Randle v. Spectran, 129 F.R.D. 386, 392 (D. Mass. 1988) (citing Haywood); Byes, at 427 (“A criminal record is not per se disqualifying.”
However, if the criminal record goes to the credibility of the prospective class representative, then the court may refuse to certify the class. See e.g., In re BankAmerica Corp. Securities Litigation, 95 F.Supp.2d 1044, 1050 (E.D. Mo. 2000) (stating that “one proposed class representative was highly inadequate due to his criminal record and history of participation in fraud”); Green v. Carlson, 653 F.2d 1022 (5th Cir.1981), cert. denied, 454 U.S. 944,102 S.Ct. 484 (1981) (affirming refusal to grant class action where proposed representative had engaged in a pattern of abuse of the judicial system).