Shedding Light on the Vexing Problem of Issue Certification

by Pierce Atwood LLP

This week I attended the annual Class Actions Seminar sponsored by DRI (the Defense Research Institute).  It was an excellent program, covering many recent trends in class action practice of interest to corporate counsel and defense attorneys. 

One of the highlights for me was a presentation on the first day by Professor Laura Hines of the University of Kansas Law School.  Professor Hines made the case, through several approaches to rule interpretation, that courts that use Rule 23(c)(4) to support Rule 23(b)(3) class certification, by slicing and dicing the issues in a case and certifying only those in which common issues predominate, are misapplying the Rule.  Examining the language, structure and history of Rule 23 generally and (c)(4) in particular, Professor Hines explains that (c)(4) was never meant as a tool to facilitate certification decisions.  Rather, it was intended merely to clarify what was already true when Rule 23 was amended in 1966, which is that once a class action is found to be appropriate, the court can, in its discretion, choose to limit class adjudication to particular issues, allowing other issues to be litigated individually.  In other words, issue certification in (b)(3) cases presupposes that the court has already conducted the predominance analysis and concluded that common issues predominate over individual issues.  It was never meant as a device to manufacture predominance, and should not be resorted to as part of the predominance analysis.  Only after the court has determined to certify a class based on application of Rule 23(a) and (b) may it turn to (c)(4) as a tool to help it manage the certified case.  Under this analysis, then, issue certification in a damages class action occurs only if the court has first concluded that the case in its entirety involves predominantly common issues. 

This is not just a matter for academic debate.  The misapplication of Rule 23(c)(4) has led to troubling outcomes, as the post-Comcast washing machine decisions (Whirlpool and Butler) have poignantly demonstrated.  Under Professor Hines' more considered approach, which I believe is the correct one (see our post of October 28th), courts cannot ignore individualized damages issues in deciding whether to certify a 23(b)(3) case, but must weigh them in the predominance analysis.  Only if the court, after doing so, concludes that resolution of class members' claims for damages will not overwhelm the common issues in the case may it certify the class.  It is no answer to turn to Rule 23(c)(4), certify a liability-only class, and assume that, if liability is established, defendants will settle the claims of all class members or waive their rights to have the issue of damages resolved through individual jury trials, as too many courts have done.  Such a result, while supposedly efficient, is unfair to defendants and, as Professor Hines argues, miscomprehends the Rule's design.

I expect the problem of issue certification to receive close scrutiny as the Rules committee considers possible amendments to Rule 23 late this year and next, and it will certainly remain a central issue in many class certification battles unless and until the Rule is amended or the Supreme Court weighs in.  For those of us on the battlefield, I highly recommend Professor Hines' article in the current issue of the George Washington Law Review (which, by the way, is entirely devoted to class actions).


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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