On September 24, 2021, the Third Circuit held that a Pennsylvania district court abused its discretion when it certified an “issue” class under Rule 23(c)(4). The Third Circuit adopted the “broad” view taken by a majority of courts that the claim to which a Rule 23(c)(4) issue relates does not have to satisfy Rule 23(b) predominance as a whole for the class to be certified. Even under that more forgiving standard, however, the Third Circuit determined that the district court failed to determine whether the proposed issues satisfied any subsection of Rule 23(b) and failed to analyze adequately the factors enumerated in the Third Circuit’s 2011 decision in Gates v. Rohm & Haas Co., 655 F.3d 255 (3d Cir. 2011).

• The case was brought by a putative class of hospital patients who received medical treatment by a doctor who was practicing under a false identity. The Education Commission for Foreign Medical Graduates (the “Commission”), which is responsible for certifying graduates of foreign medical schools for placement in U.S. medical residency programs, certified a doctor who had submitted applications using fraudulent identities and was ultimately charged with misuse of a social security number to fraudulently obtain a medical license.
• The Plaintiffs brought claims for negligent infliction of emotional distress arising out of the Commission’s certification of the foreign doctor.
• The district court certified a class of all patients examined or treated in any manner by the doctor as an “issue class” pursuant to Rule 23(c)(4) with respect to issues relating to the duty and breach elements of Plaintiffs’ claim, leaving a number of issues, including causation and damages, for individualized proceedings. The Commission brought a successful Rule 23(f) petition for leave to appeal the district court’s decision to certify the class.
• Vacating the district court’s decision, Judge L. Felipe Restrepo, writing for the Third Circuit panel, applied a three-step test for certifying an issue class. First, the class must satisfy the four prerequisites of Rule 23(a) (numerosity, commonality, typicality, and adequacy of representation). Second, the class must be one of three different “types” under Rule 23(b). Third, the court must ask if it is “appropriate” to certify the class as an issue class under Rule 23(c).
• A court considering whether to certify an issue class must first ensure that the class satisfies Rule 23’s requirements—this step determines whether the proposed issues can be certified for class treatment. Then, the court must be guided by the nine factors enumerated in Gates to determine whether the proposed issues should be certified for class treatment. Those factors include:
  • (1) the type of claim(s) and issue(s) in question;
  • (2) the overall complexity of the case;
  • (3) the efficiencies to be gained by granting partial certification in light of realistic procedural alternatives;
  • (4) the substantive law underlying the claim(s), including any choice-of-law questions it may present and whether the substantive law separates the issue(s) sought to be certified from other issues concerning liability or remedy;
  • (5) the impact partial certification will have on the constitutional and statutory rights of both the class members and the defendant(s);
  • (6) the potential preclusive effect or lack thereof that resolution of the proposed issue class will have;
  • (7) the repercussions certification of an issue(s) class will have on the effectiveness and fairness of resolution of remaining issues;
  • (8) the impact individual proceedings may have upon one another, including whether remedies are indivisible such that granting or not granting relief to any claimant as a practical matter determines the claims of others; and
  • (9) the kind of evidence presented on the issue(s) certified and potentially presented on the remaining issues, including the risk subsequent triers of fact will need to reexamine evidence submitted and findings made on resolution of the common issue(s).
• The Third Circuit found that the district court misapplied Gates in two key ways. First, the district court did not consider whether the duty and breach issues satisfied Rule 23(b). While Gates does not require purported issue-class plaintiffs to prove that their cause of action satisfies Rule 23(b) as a whole, Rule 23(c)(4) does require that the issues sought to be certified satisfy one of Rule 23(b)’s subsections. Second, the district court failed to “rigorously consider” several Gates factors, including the effectiveness and fairness of resolution of the certified issues or the efficiencies to be gained by resolution of those issues.
• The Third Circuit disagreed, however, with the Commission’s arguments in favor of the “narrow” view of Rule 23(c)(4) issue class certification. Under that approach, adopted by the Fifth Circuit in Castano v. American Tobacco Company, 84 F.3d 734 (5th Cir. 1996), and largely endorsed by the Eleventh Circuit, a district court “cannot manufacture predominance through the nimble use of subdivision (c)(4),” which is merely “a housekeeping rule that allows courts to sever the common issues for a class trial.” Instead, the Third Circuit adopted the “broad” approach favored by the Second, Fourth, Sixth, Seventh, and Ninth Circuits, noting that “a majority of the courts of appeals have concluded that in appropriate cases Rule 23(c)(4) can be used even though full Rule 23(b)(3) certification is not possible due to the predominance infirmities.”
• The Third Circuit remanded the case to the district court to apply the correct standard for issue class certification in accordance with the order. The court’s opinion further demonstrates that, even under the “broad” (and less exacting) approach, issue class certification cannot serve as a convenient end-run around Rule 23 requirements when individualized inquiries overwhelm the common questions even within each Rule 23(c)(4) issue.
• Read the court’s opinion here.