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Posts Tagged ‘conditional certification’

Today, the Supreme Court issued its ruling in Genesis Healthcare Corp. v. Symczyk, No. 11–1059, which addresses the practice of “picking off” a named plaintiff in a FLSA collective action by making a full offer of judgment under Rule 68 for the amount of the named plaintiffs’ claim.  In a 5-4 majority opinion authored by Justice Thomas, the Court held that the relation back doctrine does not apply to save the collective action from mootness simply because the named plaintiff also sought relief on behalf of others.  The majority distinguished the case from other decisions applying the relation back doctrine in the Rule 23 context after class certification had been denied, pointing out that a certified class under Rule 23 has an independent legal existence from the named plaintiff.  However, the reasoning of the majority’s decision in Genesis Healthcare Corp. could potentially be applied to support the conclusion that an unaccepted offer of judgment moots even a Rule 23 class action if the offer is accepted or expires prior to a ruling on a motion for class certification one way or the other.

The majority’s decision comes with a major caveat.  The majority declined to address the issue whether a non-accepted offer of judgment actually moots an individual’s claim, despite recognizing a split in the circuits on that issue.  This prompted the following commentary in Justice Kagan’s dissent:

The decision would turn out to be the most one-off of one-offs, explaining only what (the majority thinks) should happen to a proposed collective FLSA action when something that in fact never happens to an individual FLSA claim is errantly thought to have done so. That is the case here, for reasons I’ll describe. Feel free to relegate the majority’s decision to the furthest reaches of your mind: The situation it addresses should never again arise. . . .  [T]he individual claims in such cases will never become moot, and a court will therefore never need to reach the issue the majority resolves. The majority’s decision is fit for nothing: Aside from getting this case wrong, it serves only to address a make-believe problem. 

Whether Justice Kagan’s cheeky prediction turns out to be prophetic will be up to the lower courts, who are left to decide the underlying question of mootness.  In the short-term, there is little doubt that the Genesis Healthcare decision will prompt a rash of offers of judgment in both FLSA cases and class actions.

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Ever since the U.S. Supreme Court issued its decisions in Smith v. Bayer and Wal-Mart Stores, Inc. v. Dukes, I have wondered aloud whether we would start to see a significant divergence between the standards applicable to class certification in the state and federal courts.  (See the Parting Thoughts Section of this August 31 SCOTUSBlog Post).  My home state of Colorado has been the first to end this speculation, adopting a decidedly more liberal standard for class certification in its decision yesterday in Jackson v. Unocal Corp. than the standards discussed in Dukes and many other lower federal court decisions. 

The main holding of the Colorado Supreme Court’s decision in Jackson can be summarized with the court’s statement that:

A trial court must conduct a rigorous analysis of the evidence and find to its satisfaction that each C.R.C.P. 23 requirement is established.

Jackson, Slip Op. at 18.  At first glance, this statement may not seem out of step with the “rigorous analysis” standard commonly recognized by the federal courts.  However, the majority’s intentional use of the phrase “to its satisfaction” rather than “by a preponderance of the evidence” makes the Colorado standard a potentially far less exacting hurdle.  A large portion of Justice Martinez’s majority opinion is dedicated to explaining why the court chose to make the class certification decision a matter of pure judicial discretion by the trial court rather than a matter of evidentiary proof.  The majority opinion makes reference no less than four times to the state’s “policy of favoring the maintenance of class actions” and juxtaposes this policy against a federal policy that the majority characterizes as “limiting class actions.” 

Also key to the majority’s analysis was the language of Colorado’s rule 23 allowing the court to make a “conditional” class certification order, language that has recently been removed from the federal rule.  Because certification can be tentatively granted and later revoked by the trial court in Colorado, the court reasoned, the applicable evidentiary standard should be more flexible and less definitive than the “preponderance” of the evidence standard applied in most federal courts, where (the Jackson court reasoned) the rule requires a single class certification decision.

The majority addressed two other issues that are closely related to the standard of review.  The first was whether a trial court may resolve factual disputes that overlap with the merits of the case.  On that issue, the majority reached the relatively uncontroversial conclusion that a court may consider disputes about facts that overlap with the merits, but “only to the extent necessary to satisfy itself that the requirements of C.R.C.P. 23 have been met.”  Slip op. at 27.   

The second issue was whether the trial court should resolve expert witness disputes in reaching its determination on class certification.  On this issue, the court’s holding was nuanced.  Although it recognized that the trial court must evaluate the competing experts’ opinions in order to determine whether the evidence at trial can be presented in a way to resolve the class claims through a common set of facts, the majority held that a trial court should not rule on the admissibility of the plaintiffs’ expert’s testimony at the class certification phase.  The majority again recognized that this holding was contrary to the holdings of several federal court decisions, but it reasoned that a different standard was justified under the Colorado rule because a trial court had the power to reconsider a preliminary certification order following a pretrial Shreck (the Colorado equivalent of Daubert, not to be confused with Shrek, the surly but loveable ogre) hearing on the admissibility of a plaintiffs’ expert’s testimony.  See id. at 31-32.

A strongly-worded dissent from Justice Eid, who was joined by Justice Rice, criticized the decision by stating, in summary, that:

the majority’s standardless approach makes class certification in Colorado essentially unreviewable by appellate courts and raises serious procedural due process concerns.

Slip Op. at 1 (Eid, J., dissenting).  Justice Eid’s dissent contains a wealth ammunition for academics, commentators, and the courts of other jurisdictions to question the majority’s reasoning.  But alas, for litigants in Colorado, it does not have the force of law.  So, rather than discuss it in depth, I simply commend it to your reading.

There are a host of questions that arise out of Jackson that will likely be the subject of future litigation in the Colorado courts, and I’ll address a few of them now.  However, I’ll apply the Colorado Supreme Court’s class certification standard to the following remarks by saying that they are preliminary and tentative and subject to later reconsideration as the record develops.

Does the Jackson decision mean that trial courts in Colorado should take a “certify first, ask questions later” approach to the certification question?  

This is a position that any party seeking class certification will likely take in the wake of Jackson.  However, a review of all four companion cases decided by the Colorado Supreme Court on Monday makes clear that this is not a permissible approach.  Jackson vests wide discretion in the trial court to grant or deny certification depending on whether the class certification elements are met to the court’s satisfaction, but it also requires the trial court to consider evidence presented by both sides in analyzing whether class treatment is appropriate.  These conclusions are reflected by the results in State Farm Mutual Automobile Insurance Co. v. Reyher, in which the court applied its new standard and held that a trial court had acted within its discretion in denying class certification after a rigorous analysis, and Garcia v. Medved Chevrolet, Inc., in which it determined that the trial court had erred by granting class certification without taking into consideration the evidence presented by the defendant showing that individual questions would predominate.

Is the “rigorous analysis” standard meaningless in light of the trial court’s vast discretion under Jackson?

 Justice Eid’s dissent argues that the majority’s decision renders the “rigorous analysis” requirement a purely procedural requirement.  In other words, as long as the trial court goes through all the motions, the court still has relatively unfettered discretion to grant or deny certification.  This may be true as an analytical matter, but as a practical matter, performing the “rigorous analysis” requires the trial judge to think critically about how the trial is actually going to be conducted.  It also prevents the trial judge from glossing over what may turn out to be insurmountable practical problems in fairly adjudicating the case through common, class-wide evidence.  Thus, even if a “rigorous analysis” is a purely procedural requirement, that does not mean that it will have no impact on the outcome of class certification motions.

Has the Colorado Supreme Court resurrected the pre-Dukes misinterpretation of Eisen as prohibiting any analysis of the merits of the case?

That the answer to this question is no may not be completely clear from the majority’s opinion in Jackson itself, but it becomes clear when Jackson is read in combination with Justice Martinez’s companion opinion in Reyher.  While, curiously, the majority opinion in Jackson makes no reference to Dukes, the opinion in Reyher cites Dukes approvingly in holding that a trial court cannot simply accept the plaintiff’s allegations as true.  The line that can’t be crossed is that the trial court cannot prejudge the merits, a conclusion that is consistent with the Supreme Court’s recent ruling in Erica P. John Fund, Inc. v. Halliburton Co.

Is class certification now effectively unreviewable in the Colorado appellate courts?

The widely disparate outcomes in the three companion cases decided along with Jackson reflect that appellate review will still have a function after Jackson.  An appellate court may clearly find 1) that the trial court conducted a rigorous analysis of the evidence and acted within its discretion in either granting (Jackson, Patterson) or denying (Reyher) class certification; or 2) that the trial court failed to conduct a rigorous analysis of the evidence and therefore the case must be remanded (Garcia).   What is less clear is whether there ever going to be circumstances in which an appellate court could find that a trial court performed a rigorous analysis but abused its discretion in deciding the outcome of the class certification motion, and whether, if so, the appellate court could dictate the result of the class certification motion rather than remanding that decision to the trial court.

What are the practical implications of Jackson?

There many potential practical implications of the Jackson decision.  First, the standard in Colorado is clearly less stringent than the federal court standard.  This raises the prospect that plaintiffs will view Colorado as a favorable forum for class action litigation, and it will almost certainly raise the stakes in battles over forum selection and federal jurisdiction.  Moreover, given the trial court judge’s broad discretion over the class certification, the particular leanings and predispositions of the trial court judge become pivotal in the likely success or failure of a class action.

Second, the court’s emphasis on the tentative nature of class certification decisions under Colorado Rule 23 means that even once they are certified, class actions in Colorado are likely to be subjected to repeated efforts at decertification as the case progresses.

Third, the emphasis on the “rigorous analysis” standard increases the likelihood that, despite the lack of a clear standard for resolving the issue, class certification will necessitate a mini-trial involving the presentation of live witnesses and a fully-developed record, likely increasing the cost of discovery and the class certification process itself.

On the other hand, none of these potential impacts would be a drastic change from the way that class actions are already being litigated in the Colorado Courts.  Parties already fight over removal and forum selection, courts already conduct evidentiary hearings on class certification motions, and defendants already make repeated efforts at decertifying a class.  Thus, the legacy of  Jackson may ultimately be merely to validate the existing customs and practices for litigating  class actions in Colorado.

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