Class actions: fundamentals of certification analysis.

AuthorLeventhal, Markham R.

In recent years a growing explosion of consumer class actions has swept the nation, exposing an increasing number of courts, legal practitioners, and business executives to class action issues. Legislative restrictions on federal security class actions have shifted the focus of many plaintiff class action specialists to alternative industries, including the insurance, banking, retail, and consumer finance industries. Today, virtually any consumer product or service can become the subject of scrutiny for class action claims. The class mechanism often is heralded by plaintiffs' counsel as the only means to vindicate clients with small monetary damages. Critics of the class action device describe it as a means of corporate blackmail, plagued by improper class certifications, inequitable settlements, and unjustifiable fee awards.

From any perspective, class action litigation presents a unique and procedurally complex legal arena fraught with special risks and challenges. Plaintiffs' counsel must demonstrate the prerequisites for class treatment, as well as adequacy of the putative class representatives and their own competence as class counsel. For defense counsel, class actions require the immediate development of short term and long term litigation strategies, as well as a comprehensive analysis of certification issues, discovery issues, liability risk, and settlement options. With the dramatic increase in potential exposure that often accompanies the certification of a class, it is imperative for counsel to be well versed in the law governing class actions. This article will review the fundamental principles of class action litigation with special emphasis on recent developments in 11th Circuit and Florida law.

Historical Perspective

A class action is, in simple terms, a procedural device designed to promote the efficient and orderly adjudication of substantive rights affecting an entire class of persons, without the necessity of joining all such persons as formal parties. The contemporary form of class action was created with the revision in 1966 of Fed. R. Civ. P. 23.[1] The most dramatic philosophical change during that revision was to make the final judgment in a certified class action binding on all members of the class, excepting only those who affirmatively opt out of the action.[2] Virtually every state class action rule, including Fla. R. Civ. P. 1.220 (which was enacted in its present form by the Florida Supreme Court in 1980), has been modeled after federal Rule 23.[3] For that reason, even in state court litigation, federal case law precedent under Rule 23 assumes a uniquely persuasive role.

Standards for Class Certification

Procedurally, a civil action does not become a "class" action simply because the complaint bears the legend "class action complaint" or, as required by Fla. R. Civ. P. 1.220, "class representation."[4] The plaintiff seeking to represent a class bears the burden of pleading and proving each and every element required by Rule 23 or 1.220.[5] In fact, Fla. R. Civ. P. 1.220 contains specific pleading requirements which, if not complied with, can result in the dismissal of class allegations.[6] Where the rule requires specific "facts and circumstances," the mere recitation of legal conclusions is not sufficient.[7] Unlike federal practice, motions to dismiss class allegations are, therefore, common in Florida state courts.

The standards for maintaining a class action must be applied carefully in light of the serious due process concerns raised by certification. By aggregating and magnifying claims, certification "makes it more likely that a defendant will be found liable and results in significantly higher damage awards."[8] Courts have also recognized that "[c]ertification of a large class may so increase the defendant's potential damages liability and litigation costs that he may find it economically prudent to settle and to abandon a meritorious defense."[9] For this reason, "class actions create the opportunity for a kind of legalized blackmail."[10]

Thus, the stakes in class certification are extremely high, particularly for defendants. Accordingly, the U. S. Supreme Court has made it clear that no class should be certified until the trial court has satisfied itself "after a rigorous analysis" that all of the requirements of Rule 23 have been met.[11] In order to meet these requirements, a case must satisfy all of the requirements of subsection (a) and at least one of the requirements of subsection (b).

Subsection 23(a)

The four elements of Rule 23(a) are commonly referred to as numerosity, commonality, typicality, and adequacy.

* Numerosity. Subsection (a) requires first that the members of the class be "so numerous that joinder of all members is impracticable."[12] A complaint in Florida state court must plead the approximate number of class members.[13] This requirement of numerosity is rarely difficult to satisfy, and classes have been certified with as little as 25 members.[14]

* Commonality. Class certification also requires that there be questions of law or fact common to the class.[15] Common questions of law or fact are not difficult to frame, and courts have noted that the "threshold of commonality is not high."[16] The test for commonality has been characterized as "qualitative rather than quantitative" and "there need be only a single issue common to all members of the class."[17] Nevertheless, commonality must be genuine and not superficial. Common questions such as, "Did the defendant defraud each member of the class?" can be manufactured in almost any case and are of little analytical value. Such broad, general allegations of commonality will not satisfy the requirements of Rule 23 when the actual facts of the case reflect that legal and evidentiary issues are not constant, but vary among class members.[18]

* Typicality. In order to be certifiable, the claims or defenses of the representative parties must be "typical of the claims or defenses of the class."[19] This requirement, which addresses the relationship between the claims of the proposed class representative and those of the class, is often misunderstood and poorly applied. A proper analysis of typicality examines 1) the elements of the named plaintiff's claims and those of the proposed class; 2) the nature of the injury suffered by the representative and that of class members; 3) the relief that would satisfy the named plaintiffs claims compared to those of the class; and 4) the defenses applicable to the proposed representative and those applicable to class members. The wrong suffered by the putative class representative must be the same wrong suffered by the class,[20] and "the interest of the plaintiff must be coextensive with the interest of the other members of the class."[21]

Typicality also is closely tied to the adequacy of the class representative.[22] At a minimum, typicality requires that the proposed class representative possess a valid claim; if the representative is "unable to state a claim for relief, any question as to class certification will be moot."[23] If the merits of the proposed representative's claims are speculative or seriously questionable, or if "individualized defenses" apply to the proposed class representative (e.g., statute of limitations, counterclaims, or equitable defenses), the representative's claims likely will not be typical of the proposed class.[24] If serious legal questions exist as to the viability of the named plaintiff's claims, it may not be "practicable"[25] to address certification until after the plaintiff's claim has been tested by summary judgment proceedings.[26] Conversely, even if the representative plaintiff possesses a valid claim, typicality will not exist if the claims of a large portion of the proposed class...

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