Opinion ID: 381256
Heading Depth: 3
Heading Rank: 1

Heading: The Law on Post-Judgment Class Certification

Text: 50 Count II of this case was certified as a Rule 23(b)(3) class action i. e., one in which the questions of law or fact common to the members of the class predominate over any questions affecting only individual members . . . . Rule 23(c)(2) states that, in Rule 23(b)(3) class actions, each potential member of the class must be notified that he or she will be excluded from the class upon request by a specific date and that the judgment, whether favorable or not, will include all class members not choosing to be excluded. Pursuant to Rule 23(c)(3), the judgment in a class action shall specify or describe those members who received notice and did not opt for exclusion from the class. 51 Subsections (b)(3) and (c)(3) were added to Rule 23 in 1966, as the Rules Advisory Committee explained, to avoid one-way intervention i. e., allowing members of a Rule 23(b)(3) class the option of joining an action as plaintiffs after a favorable judgment on the merits while avoiding the res judicata effect of an adverse decision by not joining if the named plaintiffs have been unsuccessful. See 39 F.R.D. at 105. 52 The notice provisions of Rule 23 were discussed in Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 176, 94 S.Ct. 2140, 2152, 40 L.Ed.2d 732 (1974). That case involved the question whether the costs of notifying class action plaintiffs could be shifted to the defendant. The Court held that notification costs could not be shifted and found improper the district court's holding of a pre-judgment mini-hearing on the merits of a class action to apportion those costs between the parties. As part of its reasoning, the Court suggested the representative plaintiff is thereby allowed to obtain a determination on the merits of the claims advanced on behalf of the class without any assurance that a class action may be maintained. Id. at 177-78, 94 S.Ct. at 2152. 53 Some courts subsequently construed Eisen and the requirements in Rule 23(c) to prohibit class certification and the sending of notice to a Rule 23(b)(3) class after, or simultaneously with, a decision on the merits of a case. E. g., Horn v. Associated Wholesale Grocers, Inc., 555 F.2d 270, 273-75 (10th Cir. 1977); Peritz v. Liberty Loan Corp., 523 F.2d 349, 352-54 (7th Cir. 1975). Those cases echo the Advisory Committee's 1966 concern about allowing potential class plaintiffs to choose whether to join an action after the merits have been decided, since they can opt to be bound by the judgment if it is favorable to the class, or not to be bound if the plaintiffs have lost. 54 These counts extrapolated from the suggestions in Eisen regarding the potential problems with post-judgment class certification. In fact, however, Eisen indicates that the plaintiffs there could have continued with their class action, despite the impropriety of the district court's mini-hearing, if they had notified the members of the class rather than attempted to shift part of the notification burden to the defendant. 417 U.S. at 179 & n. 16, 94 S.Ct. at 2153 & n.16. Despite its rhetoric, the Eisen Court itself was thus not unduly concerned about class members joining after learning of the trial judge's view of the merits. 55 Other courts have expressly held that a defendant may waive the protections Rule 23(c) offers and elect to have the merits decided before the class certification question and before notice is sent to the class when, as here, the defendant moves for summary judgment before resolution of the certification issue. E. g., Katz v. Carte Blanche Corp., 496 F.2d 747, 757-62 (3d Cir. 1974) (en banc ), cert. denied, 419 U.S. 885, 95 S.Ct. 152, 42 L.Ed.2d 125 (1975); Torosian v. National Capital Bank of Washington, 411 F.Supp. 167, 169-71 (D.D.C.1976); Haas v. Pittsburgh Nat'l Bank, 381 F.Supp. 801 (W.D.Pa.1974), rev'd on other grounds, 526 F.2d 1083 (3d Cir. 1975). 25 56 We find the reasoning of those opinions instructive. The Haas court noted, for example, that the strongest argument for construing Eisen to preclude post-judgment class certification is that pre-judgment certification and notice to the class are necessary to protect the defendant from future suits by potential members of the class. But that rationale disappears when the defendant himself moves for summary judgment before a decision on class certification. In such a situation, the defendants . . . assume the risk that a judgment in their favor will not protect them from subsequent suits by other potential class members, for only the slender reed of stare decisis stands between them and the prospective onrush of litigants. Haas, supra, 381 F.Supp. at 805. 57 More recent Supreme Court decisions have provided for appeal of a Rule 23(b) (3) class certification denial after a decision on the merits of an action. A necessary corollary to those cases is that if the denial of the class certification is reversed and remanded, the class may be certified after the entry of judgment. Those cases therefore demonstrate the Court's tolerance for allowing, in appropriate circumstances, potential class members the option of joining an action after the trial court has passed on the merits of the basic claim. 58 In United Airlines, Inc. v. McDonald, 432 U.S. 385, 97 S.Ct. 2464, 53 L.Ed.2d 423 (1977), for example, the Court held that a member of the putative class could intervene to appeal a class certification denial after a judgment on the merits favorable to the named plaintiffs individually. The McDonald majority expressed no concerns about the possibility of prejudice to the defendant even though Mr. Justice Powell dissented on the ground that the potential class member's delay in seeking intervention was especially costly in this case. Id. at 401 n.4, 97 S.Ct. at 2473 n. 4 (Powell, J., dissenting). 26 The next year in Coopers & Lybrand v. Livesay, 437 U.S. 463, 469, 98 S.Ct. 2454, 2458, 57 L.Ed.2d 351 (1978), a Rule 23(b)(3) case, 27 the Court refused to allow prejudgment appeal of a class certification denial since, under McDonald, an order denying class certification is subject to effective review after final judgment at the behest of the named plaintiff or intervening class members. 59 Just this term in Deposit Guaranty National Bank of Jackson, Miss. v. Roper, 445 U.S. 326, 100 S.Ct. 1166, 63 L.Ed.2d 427 (1980), expressly involving Rule 23(b)(3), the Court extended this toleration even further. Relying upon McDonald and Coopers & Lybrand, the opinion of the Chief Justice for the Roper majority found that the district court's entry of judgment, based on a settlement offer, in favor of the named plaintiffs individually after denying them class action status did not render moot their appeal of the class certification denial. 28 See also United States Parole Commission v. Geraghty, 445 U.S. 388, 100 S.Ct. 1202, 63 L.Ed.2d 479 (1980). 29 60 Thus the present state of the law does not necessarily preclude class certification after a judgment on the merits in Rule 23(b)(3) class actions; it suggests there may be equitable reasons for allowing post-judgment certification in some cases. We believe this is such a case. The class was originally certified before summary judgment was granted to the Postows on Count II (though the members of the class were not correctly identified and notified until after then); Oriental moved for summary judgment after the Postows had agreed to stay discovery on the identity of the potential class members only until a decision on Oriental's motion to dismiss; and the notice to potential class members did not inform them as to the existence of any judgment in their favor, thus reducing substantially the one way street danger of post-judgment certifications. 30 We do not intend to establish an inviolable rule for future cases, but taking the complicated sequence of events in this case into consideration, we do not find that the trial court abused its discretion in managing the case as it did with regard to the timing of class certification.