In a case of first impression in the Third Circuit, the Court of Appeals held that unnamed, putative class members are not required to establish standing under Article III of the U.S. Constitution. Rather, the Court held that so long as any named representative has standing, a valid case or controversy exists, and the requirements of Article III standing are satisfied. The court previously reached that same conclusion with respect to settlement classes, but it now has clarified that the rule applies to litigated class actions as well. The court also rejected the argument that class certification requires a showing that all class members have suffered an injury.
The decision in Neale v. Volvo Cars of North America arose from a putative class action filed in the District of New Jersey by plaintiffs from six states, alleging that certain Volvo vehicles suffer from a design defect that allows water to seep inside the vehicle’s passenger compartment. The district court certified six statewide classes, rejecting Volvo’s argument, among others, that unnamed, putative class members had suffered no injury and, therefore, lacked standing as required by Article III.
Noting that the U.S. Supreme Court has not squarely addressed the issue—although it is poised to do so next term—the Third Circuit turned for guidance, in part, to its prior decision in In re Prudential Insurance Co., which concerned Article III standing in the context of a settlement class. In that appeal, the Third Circuit held that if the named parties had standing under Article III, no further constitutional inquiry was necessary and that absent class members were not required to show standing.
In Neale, the court relied on the historical development of representative class actions and the treatment of the issue by other circuits, to clarify that the holding of In re Prudential was not limited to settlement classes. To the contrary, the “‘cases or controversies’ requirement [of Article III standing] is satisfied so long as a class representative has standing, whether in the context of a settlement or litigation class.” Holding otherwise, the court held, would be “inconsistent with the nature” of class action litigation.
Despite that holding, the court revoked certification of the six statewide classes and remanded the matter because the district court failed to specifically identify the claims certified. It ordered the district court, on remand, to “provide a complete list of class claims, defenses and issues for each of the six statewide classes.”
Neale furthers an existing circuit split on the issue of absent class member standing. That split is likely to be resolved next year. The Supreme Court has granted certiorari in in an Eighth Circuit case, Tyson Foods, Inc. v. Bouaphakeo, in which one question presented is “whether a class action may be certified or maintained under Rule 23(b)(3)... when the class contains hundreds of members who were not injured and have no legal right to any damages.”
Finally, the Third Circuit addressed the Supreme Court’s 2013 opinion in Comcast v. Behrend, in which the Supreme Court had held that an antitrust class should not have been certified because the plaintiffs’ damages model did not demonstrate the theory of antitrust impact that the district court had accepted for class treatment. Volvo relied on Comcast to argue that plaintiffs in Neale were required to show that damages were susceptible of measurement across the entire class. The Third Circuit rejected Volvo’s argument, concluding that Comcast’s analysis was specific to the antitrust claim at issue in that case, and it did not impose a broad-based rule applicable to all class actions under Rule 23(b)(3). Indeed, relying in part on the dissent in Comcast, the Third Circuit stated that had the district court denied certification based on the need for individual damages calculations, it would have constituted an abuse of discretion.
