Federal and Florida Courts heighten the requirements for class certification.

• Author: Waller, Edward M., Jr.

Not so long ago, when a class action was filed, counsel anticipated that the court would decide the class certification issues based on the parties' briefs and, perhaps, argument of counsel. Increasingly, however, courts are now requiring substantial evidence supporting the parties' positions. This evidentiary requirement can be traced to the rule set forth years ago in General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147 (1982), that a court must conduct a "rigorous analysis" before deciding whether to certify a class. This article initially discusses the emerging trend among federal courts to apply a "preponderance of the evidence" burden of proof at the class certification stage, as opposed to "some showing" or "some threshold" of evidence. The article then discusses Florida's general requirement that courts conduct evidentiary hearings before ruling on class certification and the standard of proof (or lack thereof) in Florida. Finally, the authors suggest that federal and Florida courts continue the federal trend of applying a "preponderance of the evidence" standard to aid practitioners in developing their cases for or against class certification.

Background: Class Certification Prerequisites

Like any civil case, a class action begins when the plaintiff files a complaint. Filing a complaint, however, does not automatically establish "a class" of plaintiffs who can collectively seek relief from a defendant. The class is merely putative and must be certified by the court in which the suit is pending for the litigation to proceed as an actual class action. (1) Thus, whether a particular case will actually proceed as a class action hinges on the outcome of the named plaintiff's motion for class certification. (2) Class certification in federal court is governed by Fed. R. Civ. P. 23. The Florida counterpart is Fla. R. Civ. P. 1.220. Rule 23(a) lists four prerequisites--commonly referred to as 1) numerosity, 2) commonality, 3) typicality, and 4) adequacy of representation--that must be met for a court to certify a class. A putative class must also meet one of three requirements under Rule 23(b) (or, in Florida courts, Rule 1.220(b)). Although these requirements for class certification are well established, a surprisingly unsettled issue is the standard of proof necessary to satisfy each requirement.

Evidentiary Requirements for Class Certification in Federal Courts

Federal courts have increasingly adopted the "preponderance of the evidence" as the putative class plaintiff's burden of proof. (3) However, neither the 11th Circuit nor district courts sitting in Florida have applied that standard in reported decisions. This leaves attorneys who practice in Florida without any binding precedent as to the standard of proof when they submit their briefs and evidence on class certification.

* A Class May Be Certified Only After the Court Conducts a "Rigorous Analysis." In the seminal General Telephone Co. case, the Supreme Court enunciated the now oft-cited requirement that a class may be certified only after a trial court performs a "rigorous analysis" and finds that the prerequisites of Rule 23(a) are satisfied. (4) The Supreme Court reversed the certification of a class in a Title VII discrimination suit. The district court's error was its "failure to evaluate carefully the legitimacy of the named plaintiff's plea that he is a proper class representative under Rule 23(a)." (5) In other words, the district court failed to conduct a "rigorous analysis." (6) "Sometimes the issues are plain enough from the pleadings to determine whether the interests of the absent parties are fairly encompassed within the named plaintiff's claim, and sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question." (7)

* Federal Courts Require Evidence, and a "Preponderance of the Evidence" Is Emerging as the Putative Class Representative's Burden of Proof. It appears that the "rigorous analysis" requirement has combined with more recent developments, such as the extensive revisions to Rule 23 in 2003, to form the foundation for a heightened standard, that is, "preponderance of the evidence," for those seeking class certification. (8) The "preponderance of the evidence" standard requires the party with the burden of proof to prove that "the evidence more likely than not establishes each fact necessary to meet the requirements of Rule 23." (9) In other words, this burden of proof requires the movant's evidence to outweigh the nonmovant's evidence. (10) The trend can be traced to a well-known Second Circuit opinion and continues to wind its way through courts in the Third, Fourth, Fifth, and 11th circuits. What emerges is a clear picture that the "preponderance of the evidence" standard is here to stay.

* The Second Circuit Rejects "Some Showing" in Favor of the "Preponderance of the Evidence" Standard. The starting point for the standard of proof analysis is a landmark Second Circuit decision, In re Initial Public Offerings Sec. Litig. v. Merrill Lynch & Co. (IPO), 471 F.3d 24, 26 (2d Cir. 2006), in which the appellate court acknowledged that the issue of which standard of proof governs class certification decisions was "surprisingly unsettled." There, investors filed class actions against underwriters alleging they engaged in a scheme to defraud the investors in connection with a series of initial public offerings. In ruling upon the plaintiffs' motions for class certification, the district court noted that "the Supreme Court has been silent on the question of what showing plaintiffs must make in support of their motion for class certification." (11) The district court granted the motions in part and decided, based on Second Circuit precedent, that "plaintiffs--who have the burden of proof at class certification--must make 'some showing.' That showing may take the form of, for example, expert opinions, evidence (by document, affidavit, live testimony, or otherwise), or the uncontested allegations of the complaint." (12)

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The Second Circuit found that the trial court's use of a "some showing" standard was error but acknowledged that it had been "less than clear as to the applicable standards for class certification .... " (13) The court went on to find that "the requirements of Rule 23 must be met, not just supported by some evidence," and must be "fully established." (14)

Even though IPO set forth guidance to the district courts, the Second Circuit "did not use the words 'preponderance of the evidence' in [IPO] to describe the standard of proof applicable to Rule 23 issues.... " (15) However, in Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d 196 (2d Cir. 2008), the Second Circuit expressly held that "[t]oday, we dispel any remaining confusion and hold that the preponderance of the evidence standard applies to evidence proffered to establish Rule 23's requirements." (16)

There, the Teamsters had initiated a class action, contending that the defendants violated securities laws in connection with mobile home loans sold as securities. (17) The Teamsters relied on a fraud on the market theory and introduced expert testimony to attempt to show that the reliance element of their claims could be proven class-wide. The district court applied the preponderance of the evidence standard to resolve factual disputes related to the Rule 23 requirements. (18) The district court found that the Teamsters failed to demonstrate fraud on the market by a preponderance of the evidence, and, accordingly, the class members would be required to prove reliance individually. (19) Therefore, the Teamsters could not satisfy the predominance requirement for certification in Rule 23(b)(3). The Second Circuit agreed with the district court and affirmed the decision denying class certification. Although IPO, Teamsters, and many of the Second Circuit's opinions that have applied the "preponderance of the evidence" standard have been federal securities fraud cases, other opinions demonstrate that the standard applies to all class certification orders in the Second Circuit. (20)

* The Third Circuit Rejects a "Threshold Showing" in Favor of the "Preponderance of the Evidence" Standard. The Third Circuit has followed the Second Circuit by requiring Rule 23 findings to be supported by a preponderance of the evidence. (21) In In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305 (3d Cir. 2009), the plaintiffs claimed that manufacturers of hydrogen peroxide and related products conspired about the prices they would charge from 1994 to 2005. Upon the plaintiffs' motion to certify a class of purchasers of hydrogen peroxide and related chemical products, both parties presented expert testimony addressing whether the plaintiffs' antitrust claims could be proven class-wide. Defendants challenged the plaintiffs' expert under Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993). Nevertheless, the district court certified a class pursuant to Rule 23(b)(3) stating that the

plaintiffs made a "threshold showing" that their claims could be proven class-wide.

The Third Circuit reversed the certification order, finding, inter alia, that "invoking the phrase 'threshold showing' risks misapplying Rule 23." (22) Acknowledging that the issue was a "novel or unsettled question of law," (23) the court explained:

[a] "threshold showing" could signify, incorrectly, that the burden on the party seeking certification is a lenient one (such as a prima facie showing or a burden of production) or that the party seeking certification receives deference or a presumption in its favor. So defined, "threshold showing" is an inadequate and improper standard. (24)

The Third Circuit concluded that the district court failed to weigh the conflicting expert testimony and resolve factual disputes in the evidence. (25) The court held that "a district court exercising proper...