Class action defendants frequently oppose class certification by arguing that a class action may not be certified when damages cannot be calculated on a classwide basis, citing recent U.S. Supreme Court decisions in Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011), and Comcast v. Behrend, 133 S. Ct. 1426 (2013). Recent decisions suggest that one response to such arguments may be to seek the certification of "issues" classes under Federal Rule of Civil Procedure 23(c)(4).
What is an "issues" class? Lawyers typically think of class certification as encompassing an entire case. For example, a case seeking equitable or declaratory relief might be certified under Rule 23(b)(2), or a case for damages might be certified under Rule 23(b)(3). Such certifications often are understood to encompass everything: all causes of action, and all parts of the case, from proof of liability through the award of relief.
But Rule 23, as it was conceived by the Civil Rules Advisory Committee in 1966 and has been implemented thereafter, also allows for the certification of something less than the entire case. Rule 23(c)(4) provides that "[w]hen appropriate, an action may be brought or maintained as a class action with respect to particular issues." Thus, a particular cause of action might be certified for class treatment, or a particular part of the case — such as liability. This is known as an "issues" class. The remainder of the case does not receive class treatment, but may proceed individually or subject to other case-management tools.
The circuits are split as to whether an issues class certified under Rule 23(c)(4) also must meet the requirements of one of the subsections of Rule 23(b). The U.S. Court of Appeals for the Fifth Circuit has held that it must, reasoning that "allowing a court to sever issues until the remaining common issue predominates over the remaining individual issues would eviscerate the predominance requirement of Rule 23(b)(3)." Castano v. American Tobacco Co., 84 F.3d 734, 745 n.21 (5th Cir. 1996). But at least the Second, Seventh and Ninth circuits have rejected that viewpoint, holding instead that even if common questions do not predominate over individual questions so that the entire action could be certified, an issues class may be certified to isolate core common issues for class treatment. See, e.g., In re Nassau County Strip Search Cases, 461 F.3d 219, 226 (2d Cir. 2006). And the First, Third and Fourth circuits have suggested that they may agree with this approach.
For example, in Gates v. Rohm & Haas Co., 655 F.3d 255, 272-73 (3d Cir. 2011), the Third Circuit held that courts considering whether to certify an issues class should consider the long list of factors set forth in sections 2.02 through 2.05 of the American Law Institute's Principles of the Law of Aggregate Litigation (2010), which basically allow for the certification of issues classes when the issues are core issues that will materially advance the resolution of the litigation. The Third Circuit instructed that courts "should clearly enumerate the issue(s) to be tried as a class" and "should also explain how resolution of the issue(s) will fairly and efficiently advance the resolution of class members' claims, including resolution of remaining issues." 655 F.3d at 273.
ISSUES CLASSES CONTINUE
Defendants have argued that Dukes and Comcast mean classes cannot be certified when the issue of damages requires individualized proof. Recent decisions, however, have not been kind to these arguments. For example, in In re Motor Fuel Temperature Sales Practices Litig., 2013 WL 1397125 (D. Kan. April 5, 2013), plaintiffs alleged that the defendant engaged in consumer fraud by selling gasoline in California without adjusting for the expansion and contraction of the fuel at different temperatures or advising customers that a warmer gallon of fuel contains less energy than a cooler gallon of the same fuel. They asserted four causes of action: breach of the duty of good faith and fair dealing, unjust enrichment, and violations of California's Unfair Competition Law and its Consumer Legal Remedies Act.
The court certified a class for the liability portion of each of these causes of action. In doing so, it listed the substantive elements of each cause of action, including causation and injury, that were subject to its certification order, but noted that certification would not include "questions of remedy," such as damages.
The defendant, citing Dukes, argued that the Supreme Court's focus on the text, structure and framers' intent of Rule 23 strongly suggested that it would disfavor an expansive interpretation of Rule 23(c)(4). 2013 WL 1397125, at *9.
The court disagreed, noting that " '[c]ertifying a class to determine the defendant's liability, while leaving the class members to pursue their individual damages claims, is a common example of partial [class] certification.' " Id. Moreover, it repeatedly noted that the fact that the underlying state statutes used an objective "reasonable consumer" standard made the issue of liability susceptible to classwide proof. Id. at *10-*12. And the court observed that even as far back as 1966, the Advisory Committee on Civil Rules made it clear that a consumer fraud action could be certified " 'despite the need, if liability is found, for separate determination of damages suffered by individuals within the class.' " Id. at *18 (citation omitted); see also In re Motor Fuel Temperature Sales Practices Litig., 279 F.R.D. 598 (D. Kan. 2012) (certifying a similar issues class for sales of gasoline in Kansas).
Another district court similarly rejected arguments about individualized damages in Wallace v. Powell, 2013 WL 2042369 (M.D. Pa. May 14, 2013). There a class of people who had been detained as juveniles sued various defendants for a conspiracy to deprive them of their constitutional rights to an impartial tribunal, counsel and a knowing and voluntary guilty plea. The defendants argued that the high court's recent decision in Comcast precluded certification of an issues class for liability. The district court disagreed. First, it noted that Comcast involved a unique and distinguishable situation: It was an antitrust case in which no party had contested the trial court's conclusion that Rule 23(b)(3)'s predominance requirement meant that the plaintiffs must show that the damages for their antitrust injury were measurable on a classwide basis using common methodology. Second, it noted that Comcast involved certification of the entire class under Rule 23(b)(3), not a liability-only issues class under Rule 23(c)(4). Third, the district court pointed out what justices Ruth Bader Ginsburg and Stephen Breyer had observed in their Comcast dissent: that it was "well nigh universal" in both case law and commentaries that Rule 23(b)(3)'s predominance requirement could be satisfied even though the amount of damages in a case would have to be calculated individually. The majority in Comcast had made no pretense of changing what Ginsburg and Breyer had called "this 'black letter rule' " (id. at *18; citation omitted), even for cases in which the entire case was certified, rather than just an issue.
The district court also easily distinguished Dukes. The Dukes opinion focused on the differences among class members' claims to determine only whether there was a single common issue at all. When — as in the case before it — there were many, the question then turned to whether resolution of the core issues would materially advance the litigation. Moreover, the court noted, the Dukes opinion had said that there could have been a predominating common issue if the class there had been limited to a single supervisor. The primary problem in Dukes was that the defendant's conduct had differed supervisor by supervisor, but in Wallace the same key players were alleged to have engaged in identical conduct. Thus, Dukes had no bearing on the issues class the Wallace court ultimately certified.
Other courts, too, have found Dukes i napposite to the questions raised by issues-class certification. For example, in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, 672 F.3d 482, 490-91 (7th Cir. 2012), Judge Richard Posner, after analyzing Dukes, held that a district court had erred in deciding not to certify an issues class in an employment discrimination case. See also Easterling v. Connecticut Dep't of Correction, 278 F.R.D. 41, 46 (D. Conn. 2011) (rejecting a Dukes challenge to certification of an issues class, and citing the Second Circuit's admonition to " 'take full advantage [of Rule 23(c)(4)] to reduce the range of disputed issues in complex litigation and achieve judicial efficiencies' ") (citation omitted).
As defendants continue to challenge a court's ability to certify classes that require individualized proof of damages, one can expect plaintiffs to increasingly seek — at least in the alternative — certification of issues classes involving a single cause of action or the issue of liability using Rule 23(c)(4).
J. Russell Jackson represents plaintiffs in class actions at Jackson Advocates LLC in New York and St. Louis.