Recent Federal & State Decisions Help Shape the Class Certification Analysis, 0314 COBJ, 2014, March, Pg. 37

AuthorTerry R. Millers

43 Colo.Law. 37

Recent Federal and State Decisions Help Shape the Class Certification Analysis

Vol. 43, No. 3 [Page 37]

The Colorado Lawyer

March, 2014

The Civil Litigator

Recent Federal and State Decisions Help Shape the Class Certification Analysis

Terry R. Millers

The Civil Litigator articles address issues of importance and interest to litigators and trial lawyers practicing in Colorado courts. The Civil Litigator is published six times a year.

Coordinating Editor

Timothy Reynolds, Boulder, of Bryan Cave HRO—(303) 417-8510, timothy.reynolds@bryancave.com

About the Author

Terry R. Miller is an associate at Davis Graham & Stubbs LLP, where he is a member of the firm's Trial Department. He represents clients in the natural resource, technology, and insurance industries in complex commercial litigation matters, including class actions and intellectual property disputes-terry. miller@dgslaw. com.

The U.S. and Colorado Supreme Courts have announced a series of decisions over recent years on the framework for class action certification under federal and state rules. These decisions answer important questions on the class certification framework, but also raise unanswered questions. This article discusses the similarities and differences under the federal and state class certification rules.

In the last two years, the U.S. Supreme Court and the Colorado Supreme Court have answered pressing questions regarding the standards and framework used to certify a class action. The U.S. Supreme Court recently addressed key aspects of the "rigorous analysis" that district courts must apply when determining whether to certify a class action under the Federal Rules of Civil Procedure (FRCP or Rules), including the interaction of class certification questions with the merits of underlying claims and the burden of proof applicable at the class certification stage.[1]

Although these federal decisions provide some guidance for class certification under the Colorado Rules of Civil Procedure (CRCP or Rules), recent decisions from the Colorado Supreme Court2 make clear that cases interpreting FRCP 23 will not always serve as authority on class action certification criteria under CRCP 23. Federal and Colorado cases agree that the merits of underlying claims may be considered at the class certification stage to the extent necessary to evaluate the criteria set forth in Rule 23(a) and (b). However, federal and state decisions depart with regard to the burden of proof required to satisfy the criteria for class certification found in Rule 23(a) and (b). Further, the U.S. Supreme Court has not yet provided a definitive answer on the need to determine admissibility of expert testimony at the class certification stage. The Colorado Supreme Court has provided an answer and, in doing so, has departed from a line of federal cases.

Application of the answers that have been provided over the last two years by federal and state courts helps clarify important aspects of the framework for class certification, reveals differences between the federal and Colorado class certification rules, and highlights additional questions left unanswered by the U.S. and Colorado Supreme Courts. This article discusses the framework for class certification under the federal and Colorado versions of Rule 23 and some of the boundaries on the t rial court's discretion at the certification stage.

Background for Class Certification

The class action device was designed as "an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only."3 A class action eliminates the need for repetitious lawsuits involving a large number of persons with common issues of law or fact.4 A class action also increases access to judicial relief by allowing parties to aggregate their potential individual recoveries into a single potential recovery worthy of the time and effort required to pursue relief.5 Additionally, aggregation of claims into a single lawsuit protects defendants from inconsistent obligations.6

Allowing a class representative to advance claims on behalf of individuals absent from the lawsuit poses due process and case management concerns.7Rule 23 is designed to protect procedural fairness and address case management concerns, and functions as the procedural device that allows class representatives to pursue relief on behalf of a class.8 An action may proceed as a class action only after the court enters an order certifying the action as a class action and defining the class.9

As a prerequisite to all types of class actions, FRCP 23(a) and CRCP 23(a) both require the plaintiff to show that: (1) the proposed class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. These prerequisites help to screen out cases from the class action device where absent class members would not be adequately protected, and where the resolution of factual and legal disputes on a class basis would be infeasible.

Where the class action advocate can meet the Rule 23(a) prerequisites, Rule 23(b) poses an additional hurdle, requiring that the action fit into one of three categories. A class action is maintainable if: (1) the prosecution of separate actions would create a risk of inconsistent adjudications or, as a practical matter, affect or impair the rights of members not parties to the action; (2) the class advocate seeks injunctive or declaratory relief based on conduct applicable to the class; or (3) the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and a class action is superior to other available methods for the fair and efficient adjudication of the controversy.[10] Many of the recent federal and state class certification cases involved purported class actions advanced under the third criterion: the predominance and superiority requirement of Rule 23(b)(3).

Interpretations of FRCP 23 and CRCP 23 were generally aligned before 2011, primarily because Colorado courts viewed the two rules as "virtually identical."11 For example, in Farmers Ins. Exchange v. Benzing,12 the Colorado Supreme Court relied heavily on authority from federal courts in applying Rule 23(b)(3). The plaintiff in Benzing claimed that insurers sold coverage using deceptive trade practices, and argued that he could establish the reliance element of his claim on a class-wide basis through the fraud-on-the-market theory, which would create a presumption of reliance on misrepresentations or omissions common to the class.13 The Colorado Supreme Court relied extensively on federal authority to conclude that the theory of presumed reliance advanced by the plaintiff was unavailable under the facts of the case and affirmed the trial court's order decertifying the class.[14] The court left open the issue of whether reliance could be proved on a class-wide basis with circumstantial evidence.[15]

Benzing was the Supreme Court's last word on class certification until October 2011, when the Court announced four cases on the same day. Although the claims and facts of each case differed, the common questions answered by the Colorado Supreme Court concerned the appropriate standard used to analyze each requirement set forth by Rule 23, including the overlap of a claim's underlying merits with class certification criteria, the applicable burden of proof, and the role of expert testimony at the class certification stage. Recent decisions from the U.S. Supreme Court answered some of these questions on the federal level. These decisions help clarify where the federal and state rules align and where they differ.

The Rigorous Analysis Standard for Class Certification Requirements

Federal and state rules require a trial court to conduct a "rigorous analysis" when determining whether a plaintiff may pursue claims on behalf of a class. Recent cases from federal and state courts have developed the contours of a rigorous analysis by explaining when the analysis can include consideration of issues that overlap with the merits of the plaintiff's claims, the plaintiff's burden of proof at the class certification stage, and the role of expert testimony at the class certification staae.

Overlap With Merits

Factual and legal issues may be independently relevant to both a class certification decision and the merits of an underlying claim. The recent federal and Colorado cases agree that trial courts must consider the merits of a class action plaintiff's claim to the extent that the same issue bears on the class action criteria in Rule 23(a) and (b). In Wal-Mart Stores v. Dukes, the U.S. Supreme Court made clear that the rigorous analysis used by district courts to evaluate the criteria in FRCP 23(a) requires courts to consider the merits of a plaintiff's underlying claim if necessary to resolve class certification.[16] It "cannot be helped" that the analysis will entail overlap with the merits, because the class certification question "generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff's cause of action."17 Notwithstanding that the reasons for employment decisions were at the heart of the merits of the underlying employment discrimination claims asserted in Dukes, the Court examined the evidence supporting the plaintiff's claims to look for reasons for employment decisions that were common to all purported class members.18 Finding no employment decisions that were common...

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