X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
In the class certification process, there is perhaps nothing more perplexing and misunderstood than the so-called Eisen rule. See Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78 (1974). There also is nothing as predictable as each side’s invocation of Eisen. Thus, parties routinely recite that in assessing class certification, courts may not consider the merits of the underlying claims. At certification hearings, each side argues that the other side impermissibly is violating the Eisen rule. Between 1968 and 2001, the Eisen rule solidified into a boilerplate litany routinely recited in class certification proceedings. This litany began with the premise that, in evaluating certification, courts should not inquire into the merits of the plaintiffs’ underlying claims. See e.g., Caridad v. Metro-North Commuter Railroad, 191 F.3d 283, 291 (2d Cir. 1999). As a corollary, courts were required to construe Rule 23′s requirements liberally, in favor of the plaintiff. Eisen v. Carlisle & Jacquelin, 391 F.2d 555, 563 (2d Cir. 1968). In addition, courts should resolve doubts about whether Rule 23 has been satisfied in favor of certification. See Buford v. H & R Block, 168 F.R.D. 340, 346 (S.D. Ga. 1996); In re Industrial Diamonds Litig., 167 F.R.D. 374, 378 (S.D.N.Y. 1996). For nearly 30 years, plaintiffs’ attorneys exploited this Eisen interpretation to argue that courts were required to accept the plaintiff’s class allegations as true, a proposition that compelled the conclusion that courts could certify class actions on the plaintiff’s pleadings alone. Ruling in ‘Szabo’ calls ‘Eisen’ into question The 7th U.S. Circuit Court of Appeals, in a 2001 decision authored by Judge Frank H. Easterbrook for a panel including judges Richard A. Posner and Ann C. Williams, called into question the prevailing Eisen interpretation. See Szabo v. Bridgeport Machines Inc., 249 F.3d 672 (7th Cir. 2001). One commentator has suggested that “No decision is likely to have more far-reaching consequences than that of Easterbrook in Szabo v. Bridgeport Machines Inc., which requires the district court to consider more than just the allegations of the complaint in determining a class certification motion.” Robert E. Shapiro, Advance Sheet: End of Thermidor?, 29 No. 3 Litigation 57 (Spring 2003). In Szabo, the district court granted class certification by accepting the plaintiff’s substantive allegations as true, and by refusing to consider the defendant’s uncontroverted evidence that the elements for class certification were not met. On appeal, the 7th Circuit reversed class certification and faulted the district judge’s presumptive acceptance of the plaintiff’s allegations. The 7th Circuit identified several contested factual and legal issues relating to class certification. Easterbrook concluded that the judge erred in evaluating class certification under Rule 23 as if it were governed by the same principles for a Rule 12(b)(6) motion to dismiss. Szabo, 249 F.3d at 674-75. The court indicated that the standards for evaluating class certification motions are more similar to Fed. R. Civ. P. 12(b)(1) or 12(b)(2) motions. The court noted that Rule 12(b)(6) motions are “unique in requiring the district judge to accept the plaintiff’s allegations as true,” but there was no reason to extend this approach to Rule 23 certification motions. Rule 23 motions “require the exercise of judgment and the application of sound discretion; they differ in kind from the legal rulings under Rule 12(b)(6).” 249 F.3d at 676. In reaching its conclusions, the 7th Circuit relied on the Eisen decision, the history of the 1966 amendments to Rule 23 and General Telephone Co. of Southwest v. Falcon, 457 U.S. 147 (1982), in which the Supreme Court indicated that a district court must probe beyond the pleadings in order to determine whether the plaintiffs are able to satisfy the Rule 23 certification requirements. In Falcon, the court stated that district courts may not merely assume compliance with those requirements, based on the pleadings (“actual, not presumed, conformance with Rule 23′s requirements is indispensable”). The 7th Circuit also identified policy reasons for its view that courts may not accept the incontestable plaintiff’s allegations as true for the purposes of evaluating class certification. Such an approach unfairly places the class certification decision in the hands of the plaintiff’s attorneys: “Certifying classes on the basis of incontestable allegations in the complaint moves the court’s discretion to the plaintiff’s attorneys who may use it in ways injurious to other class members, as well as ways injurious to defendants. Both the absent class members and defendants are entitled to the protection of independent judicial review of the plaintiff’s allegations.” 249 F.3d at 677. The Szabo rule has been largely adopted and followed in more than 30 decisions in the 7th Circuit. See e.g., Livingston v. Associates Finance Inc., 339 F.3d 553, 558-59 (7th Cir. 2003); Isaacs v. Sprint Corp., 261 F.3d 679, 682 (7th Cir. 2001); Ellis v. Elgin Riverboat Resort, 2003 WL 22006249, 8 (N.D. Ill. Aug. 22, 2003); Daniel v. North American Indemnity N.V., 2003 WL 260704, 1 (S.D. Ind. Jan. 27, 2003); Hill v. Shell Oil Co., 2002 WL 663583, 2 (N.D. Il.. March 28, 2002); Bromine Antitrust Litig., 203 F.R.D. 403, 407 (S.D. Ind. 2001). The 3d Circuit and the United States Court of Claims also have adopted the 7th Circuit’s Szabo standards. See Johnston v. HBO Film Management Inc., 265 F.3d 178 (3d Cir. 2001) (discussing Falcon); Newton v. Merrill Lynch, Pierce, Fenner & Smith Inc., 259 F.3d 154, 166-69 (3d Cir. 2001 (extensive discussion of the Eisen rule); and Christopher Village L.P. v. U.S., 50 Fed. Cl. 635, 642 (Fed. Cl. 2001). Moreover, federal district courts in California, Georgia, New York, Rhode Island and Wisconsin have adopted and followed the Szabo standards. See Stevens v. Harper, 213 F.R.D. 358, 378 (E.D. Calif. 2002); Rhodes v. Cracker Barrel Old Country Store Inc., 2002 WL 32058462, 53 (N.D. Ga. Dec. 31, 2002); and Mason v. American Tobacco Co., 212 F. Supp. 2d 88, 90 (E.D.N.Y. 2002). The Szabo standards have trickled down to a few state courts, and have been cited with approval in Alabama and Florida. See Alfa Life Ins. Corp. v. Hughes, 2003 WL 1949824, 9 (Ala. April 25, 2003) (not yet released for publication); Hoyte v. Stauffer Chemical Co., 2002 WL 31892830, 39 (Fla. Cir. Ct. Nov. 6, 2002); Cheatwood v. Barry University Inc., 2001 WL 1769914, n.25 (Fla. Cir. Ct. Dec. 26, 2001). Although at least one federal district court in the 2d Circuit has followed Szabo, see supra, the 2d Circuit itself specifically has not adopted Easterbrook’s decision. See Bolanos v. Norwegian Cruise Lines Ltd., 212 F.R.D. 144, 155 n.9 (2d Cir. 2002); In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 135 (2d Cir. 2001). In addition, the D.C. Circuit has not yet adopted the Szabo standards. See In re Vitamins Antitrust Litig., 209 F.R.D. 251, 257 n.9 (D.D.C. 2002) (concluding that under Eisen it is improper to assess merits at class certification). While many courts have adopted the Szabo standards outright, other courts have qualified or interpreted Easterbrook’s decision in idiosyncratic ways, lending further confusion to the proper understanding of the Eisen rule. Within the Northern District of Illinois, for example, a judge granted class certification where the parties presented no contradictory evidence on the numerosity requirement. The court indicated that Szabo merely stated that the court should not accept the plaintiff’s claims as true if contrary evidence is provided; however, if the defendant presents no contrary evidence, the court may rely on evidence submitted solely in the plaintiff’s reply brief. See Parker v. Risk Management Alternatives Inc., 206 F.R.D. 211, 213 (N.D. Ill. 2002). Similarly, where a magistrate judge investigates for “actual conformance” prior to providing a class certification recommendation, this inquiry meets the Szabo standard. Ploog v. Homeside Lending Inc., 2001 WL 1155288, 4 (N.D. Ill. 2001). Tension detected between ‘Eisen’ and ‘Szabo’ A federal district judge in the Eastern District of Virginia has perceived a continuing tension between Eisen’s injunction not to make a preliminary inquiry into the merits, and Szabo’s injunction not to accept the plaintiff’s allegations in the class complaint as true. Hence, “In light of the conflicting precedent, the Court will inquire no further into the merits than is necessary to determine the likely contours of this action should it proceed on a representative basis.” Fisher v. Virginia Electric and Power Co., 2003 WL 21982231, 9 (E.D. Va. Aug. 13, 2003). Similarly, the district court for Maryland reaffirmed that the class certification stage is not the time for a court to rule dispositively on the merits of the claims. “Rather, it should ‘examine evidence as to how the class proponents intend to prevail at trial, not whether the facts adduced by the class proponents are susceptible to challenges by class opponents.’ ” In re Microsoft Corp. Antitrust Litig., 214 F.R.D. 317, 378 (D. Md. 2003). The district court in Massachusetts would have its Szabo cake, but eat it favorably for plaintiffs, anyway. Thus, while citing the Szabo rule requiring “actual, not presumed” compliance with Rule 23 requirements, the court went on to note that: “However, when analyzing motions to certify, district courts in this circuit have frequently recognized that ‘Rule 23(a) should be liberally construed in order not to undermine the policies underlying the class action rule.’ ” McAdams v. Massachusetts Mutual Life Ins. Co., 2002 WL 1067449, 2 (D. Mass May 15, 2002). See also Melnick v. Microsoft Corp., 2001 WL 1012261, 5 (Maine Super. Ct. Aug. 24, 2001) (citing an old presumption that “the benefit of the doubt regarding certification must favor certification,” while referencing Szabo as contrary authority). Finally the district court in New Hampshire has articulated an interesting Eisen-Szabo amalgam. Accordingly, courts are not to consider the merits of the plaintiffs’ case when considering a motion for class certification (citing Eisen). “Instead, for the purposes of class certification, the court accepts the substantive claims as alleged in the complaint.” However, “In contrast, disputed issues pertaining to class certification require factual support.” (citing Szabo). See Skinner v. O’Mara, 2001 WL 821535, 1 (D.N.H. 2001). Linda S. Mullenix holds the Morris and Rita Atlas chair in advocacy at the University of Texas School of Law and is the author of State Class Action: Practice and Procedure.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.