Third Circuit Affirms Denial Of Final Approval Of Proposed Settlement And Certification Of Settlement Class Based On Lack Of Commonality In Rodriguez v. National City Bank


The Third Circuit rejected plaintiffs’ arguments that the district court abused its discretion by overstepping its authority in declining to certify a settlement class and in misapplying Wal-Mart Stores, Inc. v. Dukes, in Rodriguez v. National City Bank, 726 F.3d 372 (3d Cir. 2013).  In the process, the court reaffirmed the necessity of meeting Rule 23(a)’s requirements, even for a settlement class, and it emphasized the evidentiary burden that must be met to establish commonality.

Plaintiffs filed a class action complaint alleging that, through a “Discretionary Pricing Policy,” defendants charged minority applicants for home mortgage loans a “disproportionately greater amount in non-risk-related charges than similarly-situated Caucasian persons.”  After mediation, the parties reached a settlement, but the district court concluded that Dukes prevented certification, and it denied plaintiffs’ motion for final settlement approval.

On appeal, plaintiffs argued the district court should have assumed a limited role in its Rule 23 inquiry so as not to upset the parties’ negotiated settlement.  The Third Circuit rejected this argument and characterized the Rule 23 inquiry as “more than a rubber stamp.”  It explained that, although a court should not “intrude upon the parties’ bargain,” “a denial of class certification does not constitute such an intrusion.”

Turning to the Rule 23 analysis, the Third Circuit again affirmed the district court’s analysis.  It explained that the plaintiffs did not meet their evidentiary burden of establishing commonality because they neither identified a “common and unlawful mode” by which defendants’ loan officers exercised their discretion, nor demonstrated that such common discriminatory mode “affected all class members in all regions and bank branches in a common way.”  Because plaintiffs did not provide the necessary factual foundation to establish commonality, the district court was correct to deny certification.

Rodriguez serves as a reminder to class action practitioners that the Rule 23 analysis is exacting, even for settlement classes.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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