Class certification and interlocutory review: rule 23(f) in the courts.

• Author: Bauman, Lori Irish

1. INTRODUCTION

   The law abhors a vacuum, and Federal Rule of Civil Procedure 23(f) created a vacuum in providing a new route for appellate review of decisions granting or denying class action certification. This new section of the Rule, adopted in 1998, gave the courts of appeals carte blanche to develop standards for granting review in such cases. The development of the law in the ensuing years shows that the drafters were ill-advised to leave the courts to their own devices. Building on vague language in the Advisory Committee Notes, the circuits have developed multi-part tests that are hard to understand, hard to apply, and inconsistent with the limited role of the appellate courts. One of those tests, adopted by the Ninth Circuit in Chamberlan v. Ford Motor Co., (1) illustrates these difficulties and signals that it is time to build more workable standards into Rule 23(f).

2. RULE 23(1) GIVES SOLE DISCRETION TO THE COURTS OF APPEALS

   Some twenty years before the adoption of Rule 23(1), the Supreme Court in Coopers & Lybrand v. Livesay (2) had rejected the notion that class action certification orders are appealable final orders under 28 USC [section] 1291. This left parties seeking to challenge class certification orders with few options: pursuing the interlocutory appeal procedure available under 28 USC [section] 1292(b), applying for writs of mandamus, and following other narrowly drawn routes for discretionary appellate review. (3)

   These options had proven unsatisfactory, so Rule 23(f) opened a new path for review of class certification orders by providing that

   [a] court of appeals may in its discretion permit an appeal from an order of a district court granting or denying class certification under this rule if application is made to it within ten days after entry of the order. An appeal does not stay proceedings in the district court unless the district judge or the court of appeals so orders. (4) This new procedure removed some of the barriers to interlocutory review imposed by [section] 1292(b): It eliminates the requirements that (1) the district court certify the ruling for appeal, (2) the district court's order involve a controlling question of law on which there is ground for difference of opinion, and (3) the district court find that an immediate appeal may materially advance the termination of the litigation. (5)

   Is the purpose of Rule 23(f) to encourage more appeals of class certification orders? The Advisory Committee Notes straddle the fence. They say that "many suits with class-action allegations present familiar and almost routine issues that are no more worthy of immediate appeal than many other interlocutory rulings." (6) But they also say--in the next sentence--that various "concerns" associated with class actions "justify expansion of present opportunities to appeal." (7)

   The Notes acknowledge that Rule 23(f) gives the courts of appeals great latitude in accepting or denying petitions to appeal class certification orders. They state that "[a]ppeal from an order granting or denying class certification is permitted in the sole discretion of the court of appeals," and also that "[t]he court of appeals is given unfettered discretion whether to permit the appeal." (8) But at the same time the Notes contemplate the creation of a set of rules within which to exercise that discretion: "The courts of appeals will develop standards for granting review that reflect the changing areas of uncertainty in class litigation." (9)

   Despite this broad grant of discretionary authority, the Notes themselves describe two types of cases that may benefit from interlocutory review. First, where the named plaintiff's individual claim is small, denial of class certification may mean that plaintiff is unlikely to proceed to judgment in order to obtain appellate review of the certification order; in that circumstance, interlocutory appeal may be appropriate. Second, where granting certification may force a defendant to settle rather than incur the costs of defending on the merits to obtain eventual review of the certification order, interlocutory appeal can also be appropriate.

3. THE COURTS OF APPEALS STEP INTO THE VOID

   In 1999, the Seventh Circuit was the first to address standards for accepting review of a class certification order. In Blair v. Equifax Check Services, Inc., (10) citing the reference to the courts' "unfettered discretion" in the Notes, the court declined to

   draw up a list that determines how the power under Rule 23(f) will be exercised. Neither a bright-line approach nor a catalog of factors would serve well--especially at the outset, when courts necessarily must experiment with the new class of appeals. (11) Instead of "inventing standards," Judge Easterbrook's opinion outlined the three types of cases that might appropriately be subject to interlocutory review under Rule 23(f). (12) The first two categories of cases draw on circumstances described in the Notes, but the third does not.

   First is the death-knell case, in which the named plaintiff's individual claim is too small to justify the expense of litigation, and the denial of class status can mean the end of the case. In that circumstance, and if "plaintiff has a solid argument in opposition to the district court's decision," (13) then appellate review may be appropriate.

   Second is what is often called the reverse death-knell situation: a grant of class certification in a big-stakes case that can put undue pressure on a defendant to settle regardless of the merits. According to Blair, review can be appropriate in that circumstance if the district court' s ruling is "questionable." (14)

   Third, allowing an appeal may be appropriate to "facilitate the development of the law." (15) This means that appellate review in a case raising a fundamental question of class action law may be appropriate even if it cannot readily be shown "that the district court's decision is shaky." (16) Judge Easterbrook found that the Blair case fit this third category, raising an "important" issue regarding the treatment of multiple overlapping class actions. He also noted that interlocutory appeal was appropriate because the issue was likely to evade review after judgment. (17)

   While Blair signaled a preference for flexible analysis rather than application of multi-part tests, its articulation of three circumstances in which Rule 23(f) review could be appropriate has since ossified and it is now characterized as setting out three...