Opinion ID: 177521
Heading Depth: 3
Heading Rank: 2

Heading: Statute-of-Limitations Issues at the Class Certification Stage

Text: Objectors argue that the District Court erred in considering the merits of the defendants' statute-of-limitations defenses to the potential TILA/HOEPA claims in ruling on class certification. As noted, the Court determined that any potential claims possessed by the class under TILA/HOEPA were not viable because they were time-barred; thus the named plaintiffs and class counsel were not inadequate for failing to bring them. Relying on the Supreme Court's decision in Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974), the Objectors contend that the [D]istrict [C]ourt's inquiry into the merits of the TILA/HOEPA claims ... was unnecessary for purposes of a Rule 23 analysis and cannot be sustained as permissible. (Objectors' Br., No. 08-3261, at 73.) In Eisen, the Supreme Court stated that there is nothing in either the language or history of Rule 23 that gives a court any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action. 417 U.S. at 177, 94 S.Ct. 2140. As we explained in Hydrogen Peroxide, this statement in Eisen led to uncertainty as to whether district courts are categorically prohibited from evaluating the merits of a class claim at the certification stage, even where merits questions overlap with a Rule 23 requirement. 552 F.3d at 316. This tensionbetween a district court's obligation to make findings regarding the Rule 23 requirements, and the apparent bar on conduct[ing] a preliminary inquiry into the merits of a class claimis reflected in how courts have confronted statute of limitations at the class certification stage. In general, a statute of limitations is an affirmative defense, and the burden of establishing its applicability to a particular claim rests with the defendant. Bradford-White Corp. v. Ernst & Whinney, 872 F.2d 1153, 1161 (3d Cir.1989) (internal quotation marks and citations omitted); see also Fed.R.Civ.P. 8(c). Thus, many courts have refused to consider statute-of-limitations issues at the class certification stage, reasoning that such an inquiry veers impermissibly into whether the named plaintiffs and the class can prevail on their claims. [13] However, our Court and other circuit courts have since rejected the proposition that Eisen categorically prohibits the evaluation of the merits of class claims at the certification stage. In Hydrogen Peroxide, we interpreted Eisen to mean only that a merits inquiry is precluded at the class certification stage where it is not necessary to determine a Rule 23 requirement. 552 F.3d at 317. Indeed, as the Supreme Court recognized a few years after it decided Eisen, [e]valuation of many of the questions entering into determination of class action questions is intimately involved with the merits of the claims. The typicality of the representative's claims or defenses, the adequacy of the representative, and the presence of common questions of law or fact are obvious examples. Coopers & Lybrand v. Livesay, 437 U.S. 463, 469 n. 12, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978) (internal quotation marks and citation omitted). Thus, [i]n reviewing a motion for class certification, a preliminary inquiry into the merits is sometimes necessary to determine whether the alleged claims can be properly resolved as a class action. Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 168 (3d Cir.2001); accord Hydrogen Peroxide, 552 F.3d at 320 ([B]ecause each requirement of Rule 23 must be met, a district court errs as a matter of law when it fails to resolve a genuine legal or factual dispute relevant to determining the requirements.). Situations abound where statute-of-limitations issues overlap with certain of the Rule 23 requirements. For example, defendants may contend that statute-of-limitations defenses preclude a finding of typicality under Rule 23(a), either because the named plaintiffs' claims are untimely (and thus not typical of the class), see, e.g., Franze v. Equitable Assurance, 296 F.3d 1250, 1254 (11th Cir.2002), or because the proposed class includes numerous class members with untimely claims (rendering the named plaintiffs' timely claims atypical), see, e.g., Doe v. Chao, 306 F.3d 170, 184 (4th Cir.2002). Relatedly, defendants may oppose class certification on the ground that class members with untimely claims must rely on equitable tolling to save their claims, which presents an individual question of law and fact that could predominate over common questions under Rule 23(b)(3), see, e.g., In re Linerboard Antitrust Litig., 305 F.3d 145, 160-62 (3d Cir.2002), or challenge the predominance requirement in light of the presence of idiosyncratic statute-of-limitations issues among the laws of various states in a nationwide class action, see Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 295-96 (1st Cir.2000). Statute-of-limitations issues also touch the adequacy requirement. See, e.g., Goodman v. Lukens Steel Co., 777 F.2d 113, 124 (3d Cir.1985) (named plaintiffs were inadequate representatives in class action challenging discriminatory practices in the initial assignment of newly hired employees, because [a]ll of the named plaintiffs ... were originally hired outside the [statute-of-] limitations period, and therefore, none ha[d] a viable complaint about discrimination in initial assignment). Indeed, the merits of a statute-of-limitations defense to the named plaintiffs' claims may be relevant to evaluating their adequacy as class representatives in the same way any type of defense may be relevant to that inquiry, i.e., named plaintiffs may be inadequate representatives if their claims are extremely weak as compared to the rest of the class. As Judge Posner explained, if when class certification is sought it is already apparent ... that the class representative's claim is extremely weak, this is an independent reason to doubt the adequacy of his representation.... One whose own claim is a loser from the start knows that he has nothing to gain from the victory of the class, and so he has little incentive to assist or cooperate in the litigation; the case is then a pure class action lawyer's suit. Robinson v. Sheriff of Cook County, 167 F.3d 1155, 1157 (7th Cir.1999) (internal citations omitted). Thus, to the extent the claims of the named plaintiffsas compared with the rest of the classare subject to fatal statute-of-limitations defenses, that inquiry may be relevant to whether they can adequately represent absent class members whose claims do not suffer from timeliness problems. Cf. Beck v. Maximus, Inc., 457 F.3d 291, 297 (3d Cir.2006) (the challenge presented by a defense unique to a class representative is that the representative's interest might not be aligned with those of the class, and the representative might devote time and effort to the defense at the expense of issues that are common and controlling for the class). However, the extent to which a district court may consider the merits of claims in ruling on a class-certification motion has limits. When a district court properly considers an issue overlapping the merits in the course of determining whether a Rule 23 requirement is met, it does not do so in order to predict which party will prevail on the merits. Hydrogen Peroxide, 552 F.3d at 317 n. 17; see also Hassine, 846 F.2d at 178 (The ability of a named plaintiff to succeed on his or her individual claims has never been a prerequisite to certification of the class.). Thus, merits inquiry is not permissible when [the] merits issue is unrelated to a Rule 23 requirement. In re Initial Pub. Offerings Sec. Litig., 471 F.3d 24, 41 (2d Cir.2006); see also Vallario v. Vandehey, 554 F.3d 1259, 1266 (10th Cir.2009) (the merits of the class claims may not serve as the focal point of [the] class certification analysis). Stated another way, it remains true that [i]n determining the propriety of a class action, the question is not whether the plaintiff or plaintiffs have stated a cause of action ... but rather whether the requirements of Rule 23 are met. Eisen, 417 U.S. at 178, 94 S.Ct. 2140 (emphasis added) (internal quotation marks and citation omitted). In the context of this precedent, we cannot agree with the Objectors that the District Court was categorically prohibited from evaluating the merits of defendants' statute-of-limitations defenses to potential TILA/HOEPA claims in ruling on class certification. We must determine, however, whether the District Court's analysis of the merits of those defenses was necessary to make findings on Rule 23 requirementsspecifically here the adequacy-of-representation requirements under Rules 23(a)(4) and 23(g).