Opinion ID: 78615
Heading Depth: 3
Heading Rank: 2

Heading: Case Law in Other Circuits

Text: Like our decision today, and in part because of courts' misunderstanding of Eisen, many of our sister circuits have recently been called upon to clarify the standard that a district court applies when deciding whether to certify a class under Rule 23. Though IPO is the most notable of these decisions, other courts often trace the explanatory effort back to the Seventh Circuit's decision in Szabo v. Bridgeport Machines, Inc., 249 F.3d 672 (7th Cir.2001). In Szabo, the court rejected a nationwide products liability class because the class was generally unsuitable for class-wide resolution because of choice of law problems on the state breach-of-warranty and fraud claims. Id. at 674. The Seventh Circuit also found that the district court below had certified the class without resolving factual and legal disputes that strongly influence the wisdom of class treatment because the district court had stated that the plaintiffs' allegations in the complaint are accepted as true for purposes of the class motion. Id. at 675. Analogizing to the preliminary jurisdictional inquiries that district courts routinely make under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(2), the court explained that, [b]efore deciding whether to allow a case to proceed as a class action, therefore, a judge should make whatever factual and legal inquiries are necessary under Rule 23. Id. at 676. The Second Circuit's decision in IPO agreed with Szabo, providing what is now the leading case on the extent to which a district court must resolve Rule 23 issues that overlap with the merits of the case. IPO held that factual disputes concerning each of the Rule 23 factors must be analyzed and resolved. 471 F.3d at 41. This is a similar holding to our previous explanationdiscussed in more detail below that a district court must make determinations that the prerequisites of Rule 23(a) have been satisfied before it certifies a class, which may require review of the same facts and the same law presented by review of the merits. Falcon, 457 U.S. at 161, 102 S.Ct. 2364; Blackie v. Barrack, 524 F.2d 891, 897(9th Cir.1975). IPO explained that the obligation to make such determinations is not lessened by overlap between a Rule 23 requirement and a merits issue. 471 F.3d at 41. IPO expressly rejected the Second Circuit's approach in Caridad v. Metro-North Commuter Railroad, 191 F.3d 283, 291-93 (2d Cir.1999), and Wal-Mart Stores, Inc. v. Visa U.S.A. Inc. ( In re Visa Check/MasterMoney Antitrust Litigation) (Visa Check), 280 F.3d 124, 135 (2d Cir.2001), which had permitted class certification based on some showing that the Rule 23 factors were met, obviating the need to assess conflicting expert testimony pertinent to the Rule 23 inquiries. IPO, 471 F.3d at 40. Since IPO, a number of other circuits have detailed the issue. The First Circuit has reviewed these appellate cases, noting that [o]ur sister circuits agree that when class criteria and merits overlap, the district court must conduct a searching inquiry regarding the Rule 23 criteria, but how they articulate the necessary degree of inquiry ranges along a spectrum which suggests substantial differences. Brown v. Am. Honda ( In re New Motor Vehicles Canadian Export Antitrust Litig. ), 522 F.3d 6, 24 (1st Cir.2008) ( New Motor Vehicles ). Though, of course, different circuits have used different words in articulating the review necessary, we think New Motor Vehicles overstates the degree of difference among the circuits. The core holding across circuits that have considered the issue is essentially unanimous: district courts must satisfy themselves that the Rule 23 requirements have been met before certifying a class, which will sometimes, though not always, require an inquiry into and preliminary resolution of disputed factual issues, even if those same factual issues are also, independently, relevant to the ultimate merits of the case. See, e.g., 1 Joseph M. McLaughlin, McLaughlin on Class Actions § 3:12 (6th ed. 2009) (Consensus is rapidly emerging among the United States Courts of Appeal. The First, Second, Third, Fourth, Fifth, Seventh, Eighth, Tenth and Eleventh Circuits have expressly adopted certification standards that require rigorous factual review and preliminary factual and legal determinations with respect to the requirements of Rule 23 even if those determinations overlap with the merits.). A closer discussion of the cases the First Circuit has cited demonstrates the truly narrow range in which this spectrum actually exists. Requiring the district court to make specific findings that each Rule 23 criterion is met represents, the First Circuit has claimed, around the more rigorous end of [the] spectrum, and has been embraced by the Second, Fourth, Fifth, Seventhand we would add NinthCircuits. New Motor Vehicles, 522 F.3d at 24 (citing IPO, 471 F.3d at 33, 41; Unger v. Amedisys Inc., 401 F.3d 316, 321-22(5th Cir.2005) (requiring courts to find facts favoring class certification through the use of rigorous, though preliminary, standards of proof); Gariety v. Grant Thornton, LLP, 368 F.3d 356, 366 (4th Cir.2004) (requiring that the factors spelled out in Rule 23 . . . be addressed through findings); Szabo, 249 F.3d at 675-76); see Blackie, 524 F.2d at 897. On the other end of this spectrum, according to the New Motor Vehicles court, are cases in the Third and Eighth Circuits [which] sometimes require an inquiry into and preliminary resolution of disputes, but they do not require findings and do not hold that such inquiry will always be necessary. New Motor Vehicles, 522 F.3d at 24 (citing Blades v. Monsanto Co., 400 F.3d 562, 566-67 (8th Cir. 2005); Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 166 (3d Cir.2001)). In our review of these cases, we find this spectrum of certification standards narrower and more internally consistent than does the First Circuit. To begin with, we respectfully disagree with New Motor Vehicles 's characterization of the Third Circuit's approach. The case New Motor Vehicles cited, Newton, 259 F.3d at 174-77, only discussed a presumption of conformity with Rule 23 in the context of the fraud-on-the-market presumption in a securities class action. The Third Circuit has since provided clarification. It has noted that Newton does not hold that a district court can presume Rule 23 requirements met from contested pleadings outside the fraud-on-the-market context. Vallies v. Sky Bank, 591 F.3d 152, 162-63 (3d Cir.2009). It has also demonstrated its conformity with the other circuits' standard more broadly. In In re Constar International Inc. Securities Litigation, the court explained that we require that each Rule 23 component be satisfied.  585 F.3d 774, 780 (3d Cir. 2009) (emphasis added) (citing In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 310 (3d Cir.2009) ( Hydrogen Peroxide )). Recognizing the importance of the class certification decision, the court emphasized that district courts, where appropriate, [are] to `delve beyond the pleadings to determine whether the requirements for class certification are satisfied.' Id. (quoting Hydrogen Peroxide, 552 F.3d at 316; Newton, 259 F.3d at 167). It further elucidated, [a]n overlap between a class certification requirement and the merits of a claim is no reason to decline to resolve relevant disputes when necessary to determine whether a class certification requirement is met. Id. (internal quotation marks omitted). The Third Circuit thus requires a district court determination that the requirements of Rule 23 have been satisfied. Id. While we readily recognize the benefit of the additional cases available to us in conducting our review, we respectfully disagree with the First Circuit's conclusion that the Third Circuit allows a more lax standard of review than do other circuits. New Motor Vehicles is on firmer ground describing the Eighth Circuit's decision in Blades, though we find the language in that case more nuanced than New Motor Vehicles describes, and we disagree that Blades suggests substantial differences from other circuits. New Motor Vehicles, 522 F.3d at 24. The Blades court cited Falcon in describing the standard as follows: To determine whether common questions predominate, a court must conduct a limited preliminary inquiry, looking behind the pleadings. In conducting this preliminary inquiry, however, the court must look only so far as to determine whether, given the factual setting of the case, if the plaintiffs [sic] general allegations are true, common evidence could suffice to make out a prima facie showing for the class. . . . The preliminary inquiry at the class certification stage may require the court to resolve disputes going to the factual setting of the case, and such disputes may overlap with the merits of the case. See Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 676-77 (7th Cir.2001). Nonetheless, such disputes may be resolved only insofar as resolution is necessary to determine the nature of the evidence that would be sufficient, if the plaintiff's general allegations were true, to make out a prima facie case for the class. Blades, 400 F.3d at 566-67 (some citations omitted) (emphasis added). While this language is not as definitive as that used by the Second Circuit in IPO, for example, it sets up essentially the same standard. Under Blades, district courts in the Eighth Circuit must resolve factual disputes going to the setting of the case, which we understand to mean the factual circumstances dictating whether the plaintiffs have met the Rule 23 requirements. Id. at 567. Supporting this understanding is Blades 's later statement explaining that [t]o certify a class action under Rule 23(b)(3), the Court must find that: 1) common questions predominate . . . and 2) class resolution is superior to other available methods for the fair and efficient adjudication of the controversy. Id. at 569 (emphasis added). Finally, like IPO, Blades understands Eisen as prohibiting the district court from making preliminary findings on merits issues not related to the Rule 23 resolution. See id. at 566-67; see also Richard A. Nagareda, Class Actions in the Administrative State: Kalven and Rosenfield Revisited, 75 U.Chi. L.Rev. 603, 616 (2008) (Nagareda, Class Actions ). Not surprisingly, then, IPO cited Blades as a key case supporting its conclusion to require district court determinations that each of the Rule 23 requirements is met. IPO, 471 F.3d at 38. We thus view whether an appellate court requires district courts to resolve, id.; find, Unger, 401 F.3d at 319-20; or determine, IPO, 471 F.3d at 40-41, that Rule 23 requirements have been met, as essentially, even if not precisely, the same standard. [6] To characterize such usage as embodying substantial differences seems to create a distinction where none exists. See New Motor Vehicles, 522 F.3d at 24; see also Richard A. Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L.Rev. 97, 113-14 (2009) (Nagareda, Aggregate Proof ) (describing federal courts as moving toward an essentially uniform standard that is now-settled law). Under any of these articulations, the charge to the district court follows the analysis the IPO court explained, and we agree, that Falcon and Eisen require. IPO, 471 F.3d at 41. The district court must analyze underlying facts and legal issues going to the certification questions regardless of any overlap with the merits. However, this does not mean a district court should put the actual resolution of the merits cart before the motion to dismiss, summary judgment, and trial horses by reaching out to decide issues unnecessary to the Rule 23 requirements. Having discussed our sister circuits' treatment of this issue, we now turn to the standard in our circuit as established by our previous cases.