PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

______

No. 11

- 8079

______

JOHN R ODRIGUEZ; JENNIFER WORTHINGTON; BOBBY CROUTHER; JESUS CONCHAS; ROSE MARIA CONCHAS; LUIS RAMOS;

JOANN RAMOS, on behalf of themselves

and all others similarl y situated,

Petitioners

v.

NATIONAL CITY BANK; NATIONAL CITY CORP.;

THE PNC FINANCIAL SE RVICES GROUP, INC.;

DOES 1

- 10, INCLUSIVE

______

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2

- 08

- cv

- 02059 )

Di strict Judge: Honorable Eduardo C

. Robreno

______

Argued November 13, 2012

Before: SCIRICA, FISHER and JORDAN

, Circuit Judges

.2 ( Opinion Filed: August 12 , 2013 )

______

Edward W. Ciolko Joseph H. Meltzer

Donna S. Moffa Peter A. Muhic (ARGUED)

Amanda R. Trask Kessler, Topaz, Meltzer & Check 280 King of Prussia Road Radnor, PA 19087

Kevin M. Costello Roddy Klein & Ryan 727 Atlantic Avenue, Second Floor Boston, MA 02111

Andrew S. Friedman Wendy J. Harrison Bonnett, Fairbourn, Friedman & Balint

2325 East Camelback Road, Suite 300 Phoenix, AZ 85016

Jeffrey L. Taren Kinoy Taren & Geraghty 224 South Michigan Avenue, #300 Chicago, IL 60604 Counsel for Petitioners3 Sarah R. Breitlander

Hinshaw & Culbertson 222 North LaSalle Street, Suite 300 Chicago, IL 60601

Martin C. Bryce, Jr. Ballard Spahr 1735 Market Street, 51st Floor Philadelphia, PA 19103

Diane M. Kehl

Chad A. Schiefelbein

Vedder Price 222 North LaSalle Street, Suite 2600 Chicago, IL 60601 Counsel for Respondents, National City Bank and

Na tional City Corp.

David H. Pittinsky (ARGUED) Ballard Spahr 1735 Market Street, 51st Floor Philadelphia, PA 19103 Counsel for Respondent s

, National City Bank, National City Corp., and

The PNC Financial Services Group, Inc.

______

OPINION OF THE COU RT

______4 JORDAN

, Circuit Judge

.

In this mortgage loan discrimination ca se, a putative class of minority borrowers seeks permission under Rule 23(f) of the Federal Rules of Civil Procedure to appeal the denial of final approval by the United States Dist rict Court for the Eastern District of Pennsylvania of the parties’ prop osed

settlement and certification of the settlement class. We wi ll grant the petition for permission to appeal and, for the reasons that follow, will affirm the order of the District Court.

I. Background

Named plaintiffs John Rodriguez, Jennifer Worthington, Bobby Crouther, Jesus Conchas, and Rosa Maria Conchas (collectively, “Plaintiffs”) are African

American and Hispanic borrowers who obtained mortgage

loan s from Defendant Nat ional City Bank in 2006 or 2007. On May 1, 2008, they filed a class action complaint against National City Bank and its parent company, National City Corporation (collectively, “National City”), 1

1 On October 24, 2008, The PNC Financial Services Group, Inc. (“PNC”), acquired National City, and Plaintiffs subsequently filed a second amended complaint that added PNC as a defendant, as successor

- in

- interest to National City. alleging that National City had an established pattern or p ractice of racial discrimination in the financing of residential home purchases, in violation of the Fair Housing Act, 42 U.S.C. § 3605, and the Equal Credit Oppo rtunity Act, 15 U.S.C. § 1691. Specifically, Plaintiffs asserted that National City issued th em loans pursuant to a “Discretionary Pricing Policy” that5 allowed individual brokers and loan officers t o add a subjective surcharge of additional points, fees, and credit costs to an otherwise objective, risk

- based financing rate. According to Plai ntiff s, as a result of that policy, minority applicants for home mortgage loans were “charged a disproportionately greater amount in non

- risk

- related charges

than simil arly

- situated Caucasian persons. ” (J.A. at 117.) In

other words, the policy allegedly produ ced a discriminatory disparate impact.

After the Distric t Court denied National City’s motion to dismiss, 2

2 More precisely, the District Court granted National City’s motion to strike from the complaint certain paragraphs that would have “require[d] Defendants to und ertake substantial investigation before filing a responsive pleading” (J.A. at 149), but denied the motion “to the extent that it [sought] to dismiss Plaintiffs’ amended complaint in whole or in part” ( id. at 150). the parties engaged in extensive discovery. National City provided Plaintiffs with data on each of the

more tha n two million loans it issued fro m 2001 to 2008

. That data included, among other things, the annual percentage

rate

, the term of the loan

, the interest rate, the prepayment terms, the origination fee, and the amortization type, as well

as information a bout the borrower, including income, ethnicity, race, and debt

- to

- income ratio. While discovery

was still proceeding, the parties met to explore the possibility of a negotiated settlement. Plaintiffs presented National City with preliminary statistical an alyses of the loan data they had

re ceived . Although those anal yses were shared confidentially and are thus not in the record, the parties agree that they6 included regression analyses of National City’s loan data. 3
Plaintiffs say that those regression analyses revealed that

, overall, “Blac ks and Hispanics paid more for their loans than similarly situated Caucasians (a ‘disparate impact’) that amounted to damages ... of at least $350 and up to $1,100 per

loan

. ” (Petitioners’ Opening Br. at 5.) Plaintiffs further

conten d that, because they co ntrolled for “all objective credit and risk factors impacting loan pricing” ( Id. at 12), those analyses prove that National City’s Discretion ary Pricing Policy produced the disparate impact.

A fter participating in two days of mediation , the parties ar rived at a proposed settlement agreement. Under its

terms , the class would include “[a]ll African

- American and Hispanic persons who obtained a Mortgage Loan” from National City, its affiliates, or its successor

- in

- interest , PNC,

from January 1, 2004 , thro ugh the date of the settlement’s preliminary approval. (J.A. at 250.) National City did not concede any wrongdoing, but it agreed to pay $7,000,000 for the benefit of the settlement class in exchange for a release of claims. Specifically, the agreement provided a service award of $7,500 to each of the named p laintiffs, $2 00 to each class

payee, $75,000 to two organizations that would provide counseling and other services to the settlement class, and $2,100,000 in attorneys’ fees. The agreement also i ncl uded a provision barring either party from attempt ing to void the agreement, except in the event of an appeal.

3 Plaintiffs describe a regression anal ysis as “a statistical tool which determines the relationship between a variable to be studied and one or more potentially explanatory variables.” (Petitioners’ Opening Br. at 4 n.3.)7 On July 21, 2010, the District Court granted preliminary approval of the settlement and preliminarily certified the proposed class under Fe deral Rule of Civil

Procedure 23(b)(3). N otice was then sent to the more than 153,000 members of the putative class. In response to that notice, six people objected to the proposed agreement, 66 opted out of the settlement, and 24,631 sought to take part in it by submitting claim forms. On December 9, 2010,

Plaintiffs file d an unopposed motion requesting final approval of the settlement agreement, final certification of the settlement class, and attorneys’ fees. In January 2011, after holding an initial fairness hearing, the District Court ordered additional briefing regarding certain aspects of the settlement agreement. Before the Court reached a final determination in light of that briefing, the Supreme Court issued its now well

known opinion in Wal

- M art Stores, Inc. v. Dukes , 131 S. Ct. 2541 (2011). The District Court ordered another round of supplemental briefing, this time asking the parties to discuss the impact of Dukes on class certif ication. In that briefing, both parties continued to support class certification , as they had promised in their settlement agreement.

The District Court , however, read Dukes as preventing certification, and, o n Septe mber 8, 2011, it issued an order to
that effect

, denying at the same time Plaintiffs’ motion fo r final settlement approval . In its memorandum opinion, the

Court held that the settlement class failed to meet Rule8 23(a)’s commonality and typicality requirement s

. 4

4 As more fully described herein, infra Part III.B, “commonality” dem ands that the members of a prospective class share at least one question of fact or law common to

their claims. Baby Neal v. Casey , 43 F.3d 48, 56 (3d Cir. 1994). The “typicality” requirement instructs courts “to assess whether the class representatives themselves present [the] common issues of law and fact that justify class

treatment ... .” Eisenberg v. Gagnon , 766 F.2d 770, 786 (3d Cir. 1985). As the District Court rightly noted, see Rodriguez , 277 F.R.D. at 154 n.5, we have said that the commonality a nd typicality requirements “tend to merge,” such that if commonality is not satisfied, typicality is likely

not satisfied for the same reason. In re Cmty. Bank of N. Va.

, 418 F.3d 277, 300 (3d Cir. 2005) (quoting Baby Neal , 43 F.3d at 56) (internal quotat ion marks omitted). It explained that Dukes had clarified the standard for establishing commonality, and th at

, under that standard, “Plaintiffs would likely have to show the disparate impact and analysis for each loan officer or at a minimum each group of loan officers working for a specific supervisor” in order to demonstrate commonality

. Rodriguez v. Nat’ l C ity Bank , 277 F.R.D. 148, 155 (E.D. Pa. 2011)

. T he reg ression analyses’

demonstration of an overall race

- based disparity was inadequate

, the Court said, because

, even if the analyses “remove[d] all credit rel ated reasoning, there may be non

credit related reasoning that individual loan officers contemplated that is not based on race.” Id. Accordingly, the

Court decided that Plaintiffs had “fail[ed] to show that the class could be certified,” and it denied their motion

. Id. This timely appeal followed.9 II. Jurisdiction and Standard of Review

The District Court had jurisdiction under 28 U.S.C. § 1331. The matter is before us on Plaintiffs ’ petition for

leave to appeal

, filed in accordance with Rule 23(f) of the

Fed eral Rules of Civil Procedure, which allows us to “permit an appeal from an order granting or denying class

- actio n certification ... if a petition for permission to appeal is filed

with the circuit clerk within 14 d ays after the order is

entered.”

We have “very broad discretion in decidin g whether to grant permission to pursue a Rule 23(f) appeal.” Gutierrez v.

Johnson & Johnson , 523 F.3d 187, 192 (3d Cir. 2008) ; see also Fed. R. Civ. P. 23(f) advisory committee’s note (“Appeal from an order granting or denying class certification is

perm itted in the sole discretion of the court of appeals.”). In Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc. , 259

F.3d 154 (3d Cir. 2001), we identified several circumstances

in which appellate review is a ppropriate

, including : (1) “when

denial of ce rtification effectively terminates the litigation because the value of each plaintiff’s claim is outweighed by

the costs of stand

- alone litigation”; (2) when class certification risks placing “inordinate ... pressure on defendants to settle”; (3) “when an ap peal implicates novel or unsettled questions of law”; (4) when the district court’s class certification determination was erroneous; and (5) when the appeal might “facilitate development of the law on class

certification.” Id. at 164

- 65. By contrast, rev iew is discouraged when the natural course of litigation will provide the moving party with an adequate remedy, or when the certification decision was routine and easily resolved. Id.10 P ermitting this appeal facilitates the development of

the law on cl ass certification by allowing us to consider the nature of the commonality inquiry in light of the Supreme Court’s important instruction in Dukes

. We therefore will

grant Pla intiffs’ petition and exercise our jurisdiction pursuant to Rule 23(f) and 28 U.S .C. § 1292(e).

We review a district court’s decision to approve or reject a class action settlement agreement for abuse of

discretion. Newton , 259 F.3d at 165; see also In re Hydrogen Peroxide Antitrust Litig. , 552 F.3d 305, 310 (3d Cir. 2008) (“The trial court, well

- positioned to decide which facts and legal arguments are most important to each Rule 23 requirement, possesses broad discretion to control proceedings and frame issues for consideration under Rule 23.”) A district court abuses its discr etion if its decision “rests upon a clearly erroneous finding of fact, an errant conclusion of law or an improper application of law to fact.” Marcus v. BMW of N. Am., LLC , 687 F.3d 583, 590 (3d Cir. 2012) (internal quotation marks omitted)

. “Whether an incorrect legal standard has been used is an issue of law to be

reviewed de novo .” Id. (internal quotation marks omitted).

III. Discussion

Plaintiffs argue that the District Court abu sed its discretion in two ways: it contravened the “limited role” a

c ourt should occupy when deciding whether to certify a

settlement class , and it based its commonality determination on an erroneous application of Dukes

. National City, now free under the terms of the settlement agreement to object to11 class certification, 5 contends that the Court occupied its prescribed role and reached the correct result under Dukes

. We address those competing arguments in turn and conclude that the scope of the District Court’s in quiry was fully

consistent with Dukes

, as well as with our own precedent and

Rule 23 , and that the Court rightly concluded that the putative

class lacks commonality

.

A. Certification of a Settlement Class

Federal Rule of Civil Procedure 23(a) r equires that the

members of a proposed class share a common question of law

or fact. F ed. R. Civ. P. 23(a)(2). That commonality requirement is , along with numerosity, typicality, and adequacy of representation, one of Rule 23(a)’s four

“thres hold requirement s ” for class certification

, Amchem Prods., Inc. v. Winds or , 521 U.S. 591, 613 (1997), which are intended to “limit the class claims to those fairly encompassed by the named plaintiff’s claims, ” Dukes , 131 S. Ct. at 2550 (quoting Gen. Tel. Co. of Sw. v. Falcon , 457 U.S. 147, 156 (1982)) (internal quotation marks omitted). 6

5 The settlement agreement provides that, “[i]n the event any court disapproves or sets aside this Settlement Agreement” and the “Parties do not agree jointly to appeal such ruling,” the parties are released from their obligations

und er the agreement. (J.A. at 265.)

6 Specifically, Rule 23(a) provides that:

[o]ne or more members of a class may sue or be sued as representative parties on behalf of all members only if:12 Although they apply to all puta tive classes, those requirements are of “vital importance” in the settlement

context because they protect absent class members “ by blocking unwarranted or overbroad class definitions. ”

Amchem , 521 U.S. at 620

. For that reason, the Supreme

Court held in Amchem that, although certain Rule 23 considerations, such as “whether the case, if tried, would present intractable management problems,” are not applicable in the settlement class context, the Rule’s other requi rements “demand undiluted, even heightened, attention” when class action representatives are seeking certification for the purpose

of settlement. Id. at 620

. Thus , in addition to determining whether a proposed settlement is “fair, reasonable, and adequat e,” Fed. R. Civ. P. 23(e), district courts must ensure that each of Rule 23(a)’s requirements, including commonality, is satisfied before certifying a class and

(1) the class is so numerous that joinder of all members is impract icable; (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 int erests of the class.

Fed. R. Civ. P. 23(a).13 approving a class settlement agreement. 7 See Sullivan v. DB

Invs

. , Inc. , 667 F.3d 273, 296 (3d Cir. 2011) (en banc) ( “[B]efore approving a class settlement agreement, a district court first must determine that the requirements for class

certification und er Rule 23(a) and (b) are met.” (internal quotation marks omitted) ); In re Cmty. Bank of N. V a

. , 418 F.3d 277, 300 (3d Cir. 2005) (“[R]egardless of whether a district court certifies a class for trial or for settlement, it must first find that the class satisfies all the requirements of Rule 23.”).

Plaintiffs agree that the requirement s of Rule 23 (a)

remain intact in the settlement context, but they maintain that, “when a settlement class ... is presented for consideration,”

those requirements “operate in tandem with a strong presumption in favor of voluntary sett lement agreements.” (Petitioners ’ Op ening Br. at 25

- 26.) They say the District

7 Parties seeking certification must also show that “the action is maintainable under Rule 23(b)(1), (2), or (3).” In re Warfarin Sodium Antitrust Litig. , 391 F.3d 516, 527 (3d Cir. 2004). Plaintiffs here broug ht their case under both Rule 23(b)(2) and Rule 23(b)(3), and the District Court preliminarily certified the class pursuant to Rule 23(b)(3). Rule 23(b)(3) imposes two additional requirements: (1) common questions must “predominate over any questions

affe cting only individual members” and (2) class resolution must be “superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). Because of its Rule 23(a) determination, the

District Court in its fi nal review of the proposed settlement did not reach the issue of whether those Rule 23(b) requirements were satisfied.14 Court disregarded that presumption and “undermin[ed] the

well

- established policy interest in promoting settlements” ( id. at 28), by “delving into the merits of Class Members’ claims” ( id. at 24) and “speculat[ing ] regarding evidence not on the record” ( id. at 28). They argue that the Court should have occupied a more “limited” role in conducting its Rule 23 inquiry

– one that respected the bargain the parties had struck in reaching a negotiated settlement.

Laying particular emphasis on Sullivan v. DB
Investments, Inc.

, 667 F.3d 273 (3d Cir. 2011) (en banc), and

Ehrheart v. Verizon Wireless , 609 F.3d 590 (3d Cir. 2010),

Plaintiffs correct ly assert that we have

, on several occasions

, articulated a policy pref erence favoring voluntary settlement

in class actions. Sullivan instructed that assessing whether

individual class member s have viable claim s is inappropriate in the context of reviewing a proposed settlement class because such an inquiry would “seriously undermine” our strong preference for settlement agreements. 667 F.3d at 311;

see id. at 305 (explaining that “[a]n analysis into the legal viability of asserted claims is properly considered through a motion to dismiss ... or summary judgment ... , not as pa rt of a Rule 23 certification process”). I n Ehrheart , we refused to vacate a settlement despite an intervening change in the law that eliminated the plaintiffs’ underlying cause of action. 609

F.3d at 595

- 96. We concluded that the settlement agreement

w as a binding contract, and that permitting a party to “back out of an agreement at any time before court approval” would render the settlement process “meaningless.” Id. at 594. Thus, we held the parties to their bargain, upholding our “strong judicial p olicy in favor of class action settlement.”

Id. at 595.15 But while that policy is ind eed strong , it cannot alter

the strictures of Rule 23. T he Supreme Court explained in

Amchem that courts must be “mindful that the Rule as now composed sets the requi rements they are bound to enforce,”

as the Federal Rules o f Civil Procedure may be amended only through the “extensive deliberative process” Congress prescribed. 521 U.S. at 620. Rule 23 has been amended to provide for settlement classes, but solely to a dd the additional hurdle of Rule 23(e), which mandates that the reviewing court find the settlement to be “fair, reasonable, and adequate.”

Fed. R. C iv. P. 23(e)(2). That amendment “was designed to function as an additional requirement, not a superseding direction” respecting the class

- qualifying criteria of Rule 23(a) and (b). Amchem , 521 U.S. at 621. The “domin ant
concern” of Rule 23

– that “a proposed class has suffic ient unity so that absent members can fairly be bound by decisions of class represen tatives”

– “persists when settlement, rather than trial, is proposed.” Id. Therefore, whether class action representatives are seeking certification for the purpose of settlement or with the intent to litigate, the members of the proposed class must mee t the threshold requirements of Rule 23(a) , and our policy preference for voluntary settlement

cannot and does not alter that demand

.

In Sullivan and Ehrheart

, we recognized the constant applicability of Rule 23

. We said in Sullivan that, although

set tlement is clearly favored, “global settlements may nevertheless be rejected for failing to meet the requirements

of Rule 23.” 667 F.3d at 311 n.40. In Ehrheart too we acknowledged that district courts have a responsibility to

review settlements, and we reversed the district co urt not for any Rule 23 determination but for granting judgment on the pleadings after the parties had entered into a binding contract.16 609 F.3d at 593 (describing the district court’s role and explaining that the court in that cas e “never considered whether to approve the settlement”). In neither case did we excuse a failure to establish commonality, nor did we bar the district court from exercising its ind ependent judgment in deciding whether the Rule 23 requirements were met

. S ee In re Cmty. Bank of N. Va. , 418 F.3d at 301 (requiring that a district court “exercise[] independent judgment” in the Rule

23 determination ).

Furthermore, neither case lessened the burden required to demonstrate that p utative class members share a comm on question of law or fact

. As we have repeatedly stated, the Rule 23(a) requirements are “not mere pleading rules.”

Marcus , 687 F.3d at 591 (quoting In re Hydrogen Peroxide

, 552 F.3d at 316) (internal quotation marks omitted). Rather, at the threshold, “[t]he party seeking certification bears the burden of establishing each element of Rule 23 by a preponderance of the evidence,” which requires demonstrating “actual, not presumed, conformance” with the

Rule. Id. ( alterations and internal quotation marks om itted).

The district court “must conduct a ‘rigorous analysis’ of the evidence and arguments put forth,” id. (quoting In re Hydrogen Peroxide , 552 F.3d at 316), a task that sometimes involves “a preliminary inquiry into the merits” of the plaintiffs’ c laims to ensure they can be “properly resolved as a class action,” Newton , 259 F.3d at 168; see also Dukes , 131 S. Ct. at 2551 (“Frequently that rigorous analysis will entail some overlap with the merits of the plaintiff’s underlying claim.” (internal quot ation marks omitted)).

Relying on Sullivan

, Plaintiffs imply that a “rigorous analysis” is inappropriate in the context of a class action17 settlement . T hey note that Sullivan instructed courts not to delve into the underlying m erits to determine if ind ividual

claims are viable

. See Sullivan , 667 F.3d at 306 (“[T]he merits inquiry is particularly unwarranted in the settlement context ... .”). Ehrheart made similar statements, emphasizing the “restricted, tightly focused role that Rule 23 prescribes for d istrict courts,” 609 F.3d at 593, and holding that the district court abused its discretion by rescinding the parties’ settlement agreement due to a change in the law that

m ade plaintiffs’ claims non viable, id. at 595

- 96. But while

both decisions advised courts not to assess whether plaintiffs’ claims would be capable of succeeding if the case were to go

to trial , neither limited the ability of district courts to consider

the merits of a case when necessary for a Rule 23

determination. In fact, Sullivan s pecifically explained that

“an examination of th e elements of plaintiffs’ claim is sometimes necessary, not in order to determine whether each class member states a valid claim, but instead to determine

wheth er the requirements of Rule 23 ... are met.” 667 F.3d at

306

. Put more simply, our policy in favor of voluntary

settlement does not alter the “rigorous analysis” needed to

ensure that the Rule 23 requirements are satisfied

. Dukes

, 131 S. Ct. at 2551; see also Sullivan , 667 F.3d at 335 (“The same analyt ical rigor is required for litigation and settlement certification ... .”) (Scirica, J., concurring).

Plaintiffs’ other ar guments regarding the proper role of

the district c ourt in settlement certification are similarly unavailing. They take par ticular issue with the District

Court’s alleged “conjecture” regarding evidence not in the

record. (Petitioners ’ Opening Br. at 34.) Noting that “the parties in this case agreed to a settlement before the record was as developed as it would have been in a fully contested18 motion on class certification” ( id. at 29), t hey argue that the

District Court should not have “ quibble[d] with and concentrate[d] on the quantity of evidence at settlement” because “[s]uch considerations do not apply in a settlement

clas s ” ( id. at 30). They contend that by “speculat[ing]” about nondiscriminatory explanations for individual loan officers’

decisions ( id. at 28), the District Court improperly elevated the evidentiary showing needed for certification of a

settlement class.

T hat argument misunderstands the burden of proof required for class certification. It is not enough that the parties agreed to settle and believed that “ a more fully

d eveloped record would show that there were questions of

law and fact common to all Cla ss Members .” ( Id. at 29

- 30.) One cannot say, in effect, “we could show commonality, if

we ha d to.” The short answer is, “you do have to.” See

Marcus , 687 F.3d at 591 (holding that the party seeking class certification must demonstrate the putative clas s’s conformance with Rule 23) . T hat burden is not onerous . I t
does , however, require an affirmative showing that the class

members share a common question of law or fact. Sullivan

, 667 F.3d at 306. The mere possibility that evidence of commonality coul d have been produced does not satisfy that

burden. Therefore, the District Court d id not err by requiring

actual evidence that the putative class satisfies the requirements of Rule 23(a).

Plaintiffs further contend that the District Court erre d by “fail[ing] to fulfill its fidu ciary role” to protect the

interests of the unnamed me mbers of the class. (Petitioners ’ Opening Br. at 26.) The y argue that that role defines the scope of a district court’s responsibilities in certifying a19 settlement c las s, and they imply that the District Court here acted beyond the scope of those responsibilities by denying

class certification

. Both contentions are incorrect

. Although we have indeed highlighted the district court’s role as a protector of absent memb ers of the plaintiff class

, see Sullivan

, 667 F.3d at 319 (“[A] district court acts as a fiduciary for absent class members[.]” (internal quotation marks omitted)), our emphasis on that role has never been

meant as a substitute for the requirements of Rule 23. Rule 23(a) explicitly require s that a putative class possess commonality , and courts are bound to enforce that requirement regardless of whether it benefits plaintiffs or

defendants. In any event, there is no indication that the

District Court’s dec ision to decert ify the class here failed to

protect the interests of absent class members. When a class of plaintiffs does not share a common question of law or fact, it may well include individuals who did not actually experience the harm allegedly cause d by the defendants. If that class is certified, those individuals will nonetheless partake in the recovery, which diminishes the relief for class

members who a ctually were harmed. The Supreme Court

stated in Amchem that the Rule 23(a) requirements are o f “vital importance” in the settlement context precisely because they are “designed to protect absentees by blocking unwarranted or overbroad class definitions .” 521 U.S. at 620 (emphasis added) . Thus, denial of certification to a class that

lack s common ality falls squarely within the district court’s prescribed role in considering the propriety of a settlemen t
class

.

Finally, Plaintiffs argue that the parties entered into their agreement knowing that Dukes might alter the legal landscape, and the Dist rict Court should have respected their20 decision “ to settle and achieve certainty ” rather than gamble on what the Supreme Court would decide. (Petitioners’ Opening Br. at 33.) They again cite Ehrheart and Sullivan

, this time for the proposition that the “ choice to settle implicitly ackn owledges calculated risks and, in the end,

reflects deliberate d ecisions of both parties to opt for certainty in terminating their litigation .” ( Id. (quoting Ehrheart , 609 F.3d at 594) (internal quotation marks omitted).) See also

Sullivan

, 667 F.3d at 312 (“[A] district court’s certification of a settlement simply recognizes the parties’ deliberate decision to bind themselves according to mutually agreed

- upon terms ... .”). According to Plaintiffs, “[t]he District Court’s

d ecision does ... injustice to the Parties’ bargain” by “render[ing] [the] settlement void, seemingly because the Parties had agreed to put a halt to this litigation before class, expert, factual and merits issues were fully litigated, an eventuality tha t the Parties consciously chose to avoid ... .” 8

8 To the extent that Plaintiffs are arguing that the District Court was wrong to even consider Dukes in its Rule

23 review because it is a “change[] in the law after settlement,” see Ehrheart , 609 F.3d at 595, that argument lacks merit. Although the Supreme Court’s decision in Dukes is an intervening and pointedly clear explication of the law, it did not announce any change in the test fo r determining commonality. It relied on existing precedent to emphasize the necessity of meeting the commonality standard under Rule 23(a). Dukes , 131 S. Ct. at 2556

- 57; id. at 2554 (applying existing precedent to reach its conclusion). That

standard

– both before and after Dukes

– requires that a putative class of plaintiffs share a common question of law or

fact. Compare Baby Neal , 43 F.3d at 56 (“The commonality (Petitioners ’ Opening Br. at 35

- 36.)21 Y et again, that argument fails because , as much as they might like to, parties cannot choose to avoid the judicial scrutiny demanded by Rule 23

. B efore approving the

settleme nt of a class action, a district court must certify that the settlement comports with Rule 23 and is “fair, reasonable, and adequate.” Fed. R. Civ. P. 23(e). Nothing less will

suffice. It is true that we have advised courts not to “intrude upon the part ies’ bargain” after a settlement agreement is reached, Ehrheart

, 609 F.3d at 593, but a deni al of class

certification does not constitute such an intrusion, as it is the

result of a required inquiry that both parties had to have contemplated from the outse t of their agreement . T he parties

in this case may well have considered in their bargaining that the Supreme Court had grant ed certiorari in Dukes , but that

consideration does not insulate them from the District Court’s responsibilities under Rule 23.

At base, Plaintiffs ’ argument regarding the proper role

of the District Court seems to be that the Court was required

requirement will be satisfied if the named plaintiffs share at least one question of fact or law with the grievances of the prospective class.”), with Sullivan , 667 F.3d at 297 (“[A] proposed class must share a common question of law or fact ... .”). Indeed, Dukes specifically stated that “for purposes of Rule 23(a)(2) even a single common ques tion will do,” 131 S. Ct. at 2556 (alterations omitted) (internal quotation marks omitted), making clear that it did not alter the standard for assessing commonality. Ehrheart ’s admonition that “changes in the law after settlement ... do not provide a legit imate basis for rescinding [a] settlement,” 609 F.3d at 595, therefore has no bearing on this case.22 t o conduct its commonality review in a manner that did not upset the parties’ settlement agree ment. S uch a review

, though, is no review at all. The Rule 23 inquiry is certainly not meant to discourage settlement, b ut it is more than a rubber stamp, and thus it will sometimes result i n the undoing

of a settlement. The fact that it did so in this instance is

therefore not in itself a b asis for reversing the denial of class

certif ic ation. T he District Court stayed f ully within its prescribed role and conducted the inquiry required of it by our precedent, by the Supreme Court, and by the Federal

Rules of Civil Procedure.

B. The Com monality Determination

Because we conclude that the District Court properly

ful filled its prescribed role in conducting a Rule 23 review

,

we turn to the question of whether the Court rightly concluded that commonality is lacking in the class proposed

in t his case. A putative class satisfies Rule 23(a)’s commonality requirement if “the named plaintiffs share at least one question of fact or law with the grievances of the prospective class.” Baby Neal v. Casey

, 43 F.3d 48, 56 (3d Cir. 1994)

. Again , t hat b ar is not a high one. We have acknowledged commonality to be present even when not all plaintiffs suffered an actual injury, id. , when plaintiffs did not bring identical claims, In re Prudential

, 148 F.3d at 3 11, and, most dramatically, when some plaintif fs’ claims may not have

been legally viable, Sullivan , 667 F.3d at 305

- 07. In reac hing those conclusions, we explained that the focus of the commonality inquiry is not on the strength of each plaintiff’s claim, but instead is “on whether the defendant’s c onduct was

common as to all of the class members.” Id. at 299; see also In re Warfarin Sodium Antitrust Litig. , 391 F.3d 516, 528 (3d23 Cir. 2004) (focusing the commonality inquiry on the defendant’s conduct, not “on the conduct of individual class

members” ); Newton , 259 F.3d at 183 (identifying common questions regarding the defendant’s conduct); Baby Neal , 43 F.3d at 57 (considering whether the defendant “engag[ed] in a common course of conduct toward” the class members). In other words, there may be many legal and factual differences among the members o f a class, as long as all were subjected to the same harmful conduct by the defendant. Baby Neal , 43

F.3d at 56.

In Dukes , the Supreme Court explained how the commonality standard applies when the compla ined

- of conduct is a discretionary cor porate policy that allegedly has a discriminatory effect . The putative class in that case consisted of “all women employed at any Wal

- Mart domestic retail store at any time since December 26, 1998, who have

been or ma y be subjected to Wal

- Mart’s challenged pay and management track promotions policies and practices.” 131 S.

Ct. at 2549 (alteration and internal quotation marks omitted)

. That enormous class of about 1.5 million women alleged that

Wal

- Mart’s policy “allo wing discretion by local supervisors over employment matters” produced a disparate discriminatory impact, evidenced by a statistical analysis of24 the company’s employment information. 9 Id. at 2547, 2554 (emphasis omitted) . The Supreme Court concluded that that evidence was insufficient to establish commonality. While acknowledging that “giving discretion to lower

- level

supe rvisors can,” in some circumstances , “be the basis of Title VII liability under a disparate impact theory,” id. at 2554, the Court quo ted Watson v. Fort Worth Bank & Trust

, 487 U.S. 977, 994 (1988)

, to emphasize that such claims must do more than “merely prov[e] that the discretionary system has produc ed a racial or sexual disparity ”

– t hey must also identify “the specific employment pra ctice that is challenged,” id. at 2555 (internal quotation marks omitted)

. 10

9 The plaintiffs in Dukes also brought a disparate treatment claim, which alleged that Wal

- Mart had a corporate culture of bias against women. Duke s , 131 S. Ct. at 2548. They attempted to demonstrate that culture of bias through a sociologist’s analysis, affidavits recounting individual plaintiffs’ experiences, and a regression analysis purporting to show gender

- based disparities that “can be explai ned only by gender discrimination.” Id. at 2555 (internal quotation marks omitted). Plaintiffs here bring only a disparate impact claim, and they do not allege any intentional discrimination or “culture of bias” on the part of National City. ( See

Petiti oners’ Opening Br. at 50 (“[T]his is a disparate impact case and not a disparate treatment case ... .”).)

10 The plaintiffs in Dukes failed to do that, the Supreme Court said, because “Wal

- Mart’s ‘policy’ of allowing discretion by local supervisors .... is ju st the opposite of a uniform employment practice that would provide the commonality needed for a class action.” Id. at

2554.25 Moreover, to bring a case a s a class action

, the named plaintiffs must show that each class member was subjected to

the specific challenged pra ctice in roughly the same manner

. D ukes , 131 S. Ct. at 2555

- 56. T he Dukes plaintiffs were all subjected to the discretion of their supervisors, but they had not demonstrated “a common mode of exercising discretion that pervades the entire company,” id. at 2554

- 55, such that the policy coul d be considered a “ uniform employment practice ” that all member s of the putative class had experienced

, i d. at 2554

. Rather, the Dukes plaintiffs encountered different managers making different types of employment decisions for different reasons, many of them

likel y nondiscriminatory in nature. T hey therefore had not been subje cted to a common harm, and the proposed class lacked commonality. Id. at 2555.

This case bears a striking resemblance to Dukes . Here,

the class proposed by the Plaintiffs consis ts of “[a]ll African

American and Hispanic persons who obtained a Mortgage

Loan” from National City between January 1, 2004 and the date the class was preliminarily certified. (J.A. at 250

. ) On behalf of those 153,000 class members, the named plaintiffs allege that National City’s “Discretionary Pricing Policy” had the effect of charging African

- American and Hispanic borrowers “a disproportionately greater amount in non

- ri sk

related charges than similarly

- situated Caucasian persons.” (J.A. at 102, 117.) More s pecifically, Plaintiffs argue that National City granted brokers and loan officers the discretion to increase or decrease loan prices after an objective determination of loan eligibility, which discretion produced an overall disparate discriminatory impact. Therefor e, in order to demonstrate that they have suffered a common harm, the putative class here must show that National City’s grant26 of discretion to individual loan officers c onstitutes a “specific practice” that affected all the class members in the same general fashion . In other words, Plaintiffs must identify some

“common mode” in which those brokers exercised their

discretion. 131 S. Ct. at 2554.

Plaintiffs claim they have done so. They conducted regression analyses of National City’s loan data, which they say demonstrate the Discretionary Pricing Policy’s disparate impact even after controlling for legitimate factors affecting the price of loans. 11 From what Plaintiffs characterize as “ the objective nature of a lo an pricing decision,” they argue that, by “eliminat[ing] all objective credit and risk factors impacting loan pricing,” they have shown that the only function the discretionary policy served was to produce a discriminatory effect. (Petitioners’ Opening Br. a t 12.)

Therefore

, they say, the regression analyses show that the loan officers’ “common mode of exercising discretion,”

Dukes , 131 S. Ct. at 2554, was discriminatory.

But that conclusion is simply unsupported by th e evidence. Even if Plaintiffs had succeeded in controlling for

every objective credi t

- related variable

– something no court

could have reviewed because the analyses are not of record

– the regression analyses do not even purport to control for individual, subjective considerations. A loan officer may

have set an individual borrower’s interest rate and fees based on any number of non

- discriminatory reasons, such as whether the mortgage loans were intended to benefit other

11 Notably, those analyses were not included in the record before the District Court, although they were presented to National City during settlement negotiations.27 family members who were not borrowers, whether borrowers misrepresented their inco me or assets, whether borrowers

were seeking or had previously been given favorable loan

- to

v alue terms not warranted by their credit status, whether the loans were part of a beneficial debt consolidation, or even

concerns the loan officer may have had at the time for the

financial instituti on irrespective of the borrower

. 12 While

tho se po ssibilities do not necessarily rebut the argument that the Discretionary Pricing Policy opened the door to biases

that individual loan officers could have harbored

, they do

undermine the assertion that there w as a common and unlawful mode by which the officers exercis ed their

discretion.

Even assuming, however, that Plaintiffs had succeeded in identifying a specific employment policy that could be sufficiently distingu ished from the discretionary policy in

Dukes , they still have not shown that it affected all class

12 Plaintiffs argue that contemplating such subjective

yet

- not

- discriminatory reasons for individual loan pricing decisions involves impermissible “speculation and conjecture.” (Petitioners’ Opening Br. at 2.) Far more speculative, we believe, are the Plaintiffs’ unsupported presumptions that a loan pricing determination is a purely objective matter and that an average racial disparity indicates that each minority borrower experienced National City’s policy in a discrim inatory way. More to the point, though,

the burden is on the Plaintiffs to establish the threshold Rule 23(a) requirements. Marcus , 687 F.3d at 591; see also supra

, Section III.A. If the District Court engaged in speculation, it

is because the Plaintiff s failed to provide enough evidence to demonstrate commonality.28 members in all regions and bank branches in a common way. Another significant problem with the proposed class in Dukes was that the statistical disparity wa s based on an average of national data that was not necessarily representative of regional or store disparities. The Court explained that “a regional pay disparity ... may be attributable to only a small

set of Wal

- Mart stores, and cannot by itself establis h the uniform, store

- by

- store disparity upon which plaintiffs’ theory of commonality depends.” Id. at 2555.

The proposed class in this case is also national, with 153,000 plaintiffs who obtained loans at more than 1,400

bank branches. As in Dukes , th e application of the Discretionary Pricing Policy may have resulted in a disparity in some regions or branches but not at all in others. Accordingly, a very significant disparity in one branch or region could skew the average, producing results that indic ate a national disparity, when the problem may be more localized. If the national disparity is not reflective of regional or even individual branch data, the putative class cannot show the policy affected each individual plaintiff in the same general fash ion.

Plaintiffs contend that they controlled for regional differences in their regression analyses, but they must show that the putative class meets the commonality requirement by a preponderance of the evidence. In re Hydrogen Peroxide

, 552 F.3d at 3 20 . They did not introduce their data, regression analyses, or any other evidence to support a finding of commonality. Although Plaintiffs moved for class certification before the Supreme Court issued the Dukes opinion, the District Court requested the p arties to submit

briefs on cla ss certification in light of the guidance given in29 that decision , and still Plaintiffs did not give the District Court a factual foundation for a commonality finding in their

favor

. 13

Whether an appropriate foundation could b e laid in a case like this is a question we leave for anoth er day. 14

13 Had the District Court found commonality to be present, it might have been guilty of simply accepting the parties’ assertions at face value, which we have explicitly stated is improper in a final Rule 23 determination. In re Cmty. Bank of N. Va. , 418 F.3d at 300 (reversing the district court because it simply adopted “a party’s proposed findings” without exercising its own independent judgment). We note, however, that, when faulting the Dukes plaintiffs for failing to account for regional differences that could undermine their claim of commonality, the Supreme Court

went on to sa y: “There is another, more fundamental, respect in which respondents’ statistical proof fails. Even if it established (as it does not) a pay or promotion pattern that differs from the nationwide figures or the regional figures in

all of Wal

- Mart’ s 3,400 stores, that would still not demonstrate that commonality of issue exists.” Dukes , 131 S. Ct. at 2555. The Court then explained why, emphasizing that, as we have already noted, Watson requires that “the plaintiff must begin by indent ifying the specific employment practice

14 We likewise do not attempt to sort out her e how the

issues discussed in Dukes may play out differently, if at all, in a disparate treatment case as opposed to a disparate impact case. As previously noted, see supra note 9, we are dealing here solely with the claim as the plaintiffs have chosen to

frame it.30 that is challenged.” Id. (quoting Watson, 487 U.S. at 994) (internal quotatio n marks and alteration omitted) . “Other than the bare existence of delegated discretion,” the Court observed, “ respondents have identified no ‘specific employment practice’

– much less one that ties all their 1.5 million claims tog ether. Merely showing that Wal

- Mart’ s policy of discretion has produced an overall sex

- based disparity does not suffic e.” Id. at 2555

- 56.

Here, as in Dukes

, the exercise of broad discretion by an untold number of unique decision

- makers in the making of thousands upon thousands of individual decisions undermines

the attempt to claim, on the basis of statistics alone, tha t the decisions are bound together b y a common discriminatory

mode

. 15

15 That is not to say that statistics could never be a viable element of proof of commonality in a disparate impact

case. Indeed, several post

- Dukes cases have relied on

statis tical analyses in their commonality determinations. See, e.g.

, Floyd v. City of New York , 283 F.R.D. 153, 166

- 68 (S.D.N.Y. 2012) (relying in part on statistic al evidence that

demonstra ted racial disparities in the implementation of New York’s “stop and frisk” policy); Morrow v. Washington , 277 F.R.D. 172, 193 (E.D. Tex. 20 11) (concluding that “statistical

evidence that th e number of racial and ethnic minorities stopped in and around [the city] increased dramatically when the [challenged program] was implemented” helped demonstrate that the city’s program “operates as a ‘ gen eral policy of discrimination’”). Plaintiffs therefore have not met their burden of demonstrating that the “defendant’s conduct was common as to all of the class members,” Sullivan , 667 F.3d at 299, and31 thus the District Court was correct to conclude that they do not share a common question of law or fact. 16

IV. Conclusion

Because the putative class lacks commonality, the District Court did not abuse its discretion by denying the

Plaintiffs’ motion for final a pproval of the settlement and

certification of the settlement class. Accordingly, we will

affirm the Court’s order

.

16 That conclusion is not, as Plaintiffs imply, the death knell for all disparate impact class actions. When a challenged policy affects class members in roughly the same manner, that class can likely establish commona lity. In fact, Mt. Holly Garden’s Citizens in Action, Inc. v. Township of Mt. Holly , a case that Plaintiffs claim is effectively overruled by the District Court’s reading of Dukes , provides an example

of a disparate impact case that could survive the comm onality inquiry. 658 F.3d 375 (3d Cir. 2011). In that case, African

American and Hispanic residents of a low

- income neig hborhood brought a lawsuit contending that the city’s proposed redevelopment plan had produced a disparate discriminatory impact. Id. at 377

- 81. The contested policy in that case is readily apparent, and it was applied to each

resident in a common manner. Id. The Mt. Holly plaintiffs

therefore shared a common question, and , although they chose not to bring their claims as a class act ion, Dukes would fully support a finding of commonality in case s like theirs

.