Challenging Class Certification at the Pleading Stage: What Rule Should Govern And What Standard Should Apply?

In his article, Timothy A. Daniels, Esq. (“Daniels”), discusses the approaches taken by courts  regarding how to resolve a class certification challenge at the pleadings stage.  See 56 S. Tex. L. Rev. 241.

It is increasingly common in class actions for defendants to challenge the class certification at the pleading stage based on failure to comply with Federal Rules of Civil Procedure (“FRCP”) 23.  Daniels discusses a series of cases that dealt with class certification challenges.  First, Daniels mentions the United States Supreme Court’s (the “Supreme Court”) rulings in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) and Comcast v. Behrend, 133 S.Ct. 1426 (2013), which have established heightened standards in the federal courts for class certification.  Second, Daniels mentions the Class Action Fairness Act (“CAFA”), and how it has liberalized the requirements for federal court diversity jurisdiction over class actions, and correspondingly the requirements for the removal of such cases to federal courts.

Given the lack of clear direction, defendants have opted to bring motions to dispose of class allegations at the pleading stage under a variety of procedural rules, and courts have applied varying standards to address these challenges.  Daniels mentions a review of the reported decisions shows defendants have utilized one or combination of the following procedures: (1) motions to strike pursuant to FRCP 12(f); (2) motions to dismiss pursuant to FRCP 12(b)(6); (3) motions to strike pursuant to FRCP 23(d)(1)(D); and (4) motions to deny class certification pursuant to FRCP 23(c)(1)(A).  Daniels’ law review article details how each Federal Court circuit approaches class certification challenges at the pleadings stage

The First Circuit held if the pleadings requirements established under FRCP 23 could not be met, the district courts may strike class allegations pursuant to FRCP 12(f). Manning v. Boston Medical, 725 F.3d 34 (1st Cir. 2013).

The district courts in the Second Circuit have taken a dim view of attempts to challenge class certification at the pleading stage.  In almost every case, the district courts have found motions to strike class allegations premature unless the motion addressed issues “separate and apart from the issues that will be decided on a class certification motion.”  Calibuso v. Bank of America Corp., 893 F.Supp.2d 374, 383 (E.D.N.Y. 2012).

For the most part, the district courts in the Third Circuit reject challenges to class certification prior to discovery, regardless of the procedure used.

Of the limited cases in the Fourth Circuit which addressed challenges to class certification at the pleading stage, a consistent holding is that if a plaintiff fails to allege sufficient facts to meet the requirements of FRCP 23, the court can strike the class allegations pursuant to FRCP 23(d)(4).

The Fifth Circuit, in several cases has addressed class allegation challenges at the pleading stage.  In Stewart v. Winter, 669 F.2d (5th Cir. 1982), the Fifth Circuit held it may be appropriate to deny class certification based on pleadings alone.  This was reaffirmed in John v. National Security Fire & Casualty Co., 501 F.3d 443 (5th Cir. 2007).

The Sixth Circuit has recognized a defendant can challenge class certification at the pleadings stage, and the courts have struck class allegations.

The Seventh Circuit has also recognized the ability of a district court to address class certification at any stage of the proceeding.

The Eighth Circuit has held class claims that fail to meet the requirements of FRCP 23 may be properly dismissed by granting a FRCP 12(b)(6) motion.

The Ninth Circuit has long recognized that class certification can, in some instances, be decided on the pleadings alone, but it has also recognized striking class allegations without discovery is rather premature.

Likewise, the Tenth Circuit has also recognized it may be appropriate to dismiss class allegations at the pleading stage; however, only a few courts have addressed early challenges to class certification.

The Eleventh Circuit has not clearly addressed the proper procedure to challenge class allegations.

Based on the review of the of existing case law, Daniels opines FRCP 12 is not an appropriate procedural device to challenge class certification.  He explains FRCP 12(f) provides a court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.  A complaint seeking class certification, Daniels notes, does not raise an insufficient defense, not does it typically contain, redundant, impertinent, or scandalous matters.

Similarly, Daniels notes FRCP 12(b)(6) is an inappropriate vehicle to strike class claims because an allegation in a complaint that a class action should be certified is not a claim for relief, which can be struck under FRCP 12(b)(6).

Daniels notes that FRCP 23 is self-contained, yet it does not contain any pleading requirements.  Specifically, FRCP 8 does not apply to a request for certification under FRCP 23 since such a request is not a claim for relief that is encompassed by FRCP 8.  A reasonable reading of FRCP 8; however, supports a requirement that a plaintiff must allege the composition of the proposed class and the factual basis of proposed-class claims since the plaintiff is the one seeking to pursue, on behalf of the putative class members, “claims for relief” against a defendant.  Daniels explains that since the two subdivisions of FRCP 23 were meant to work together, the appropriate procedure for a defendant to challenge class certification is by a motion to deny class certification under FRCP 23(c)(1)(A), coupled with a motion to strike under FRCP 23(d)(1)(D), should the motion to deny class certification be granted. While FRCP 23 provides the appropriate procedure to challenge class certification at the pleading stage, as elaborated below, use of FRCP 23 also allows for the development of an appropriate standard to address such a motion.

According to Daniels, it is important to recognize a decision to deny class certification, unlike a decision granting class certification, does not affect the substantive rights of the plaintiff, defendant, or putative class members, as until a class is certified, the lawsuit if between the named plaintiff and the defendant; therefore, the rights of the putative class members cannot be impacted.

FRCP 23 presents a familiar framework for making the certification decision: compliance with (i) the requirements of FRCP 23(a), and (ii) one section of FRCP 23(b) must be satisfied before a class can be certified.  In other words, Daniels states a plaintiff seeking class certification has the burden of establishing all the requirements of FRCP 23.  Daniels does point out that several courts have noted a district court faced with an early challenge to class certification must determine whether it is likely additional facts developed through discovery might change the certification analysis.  If a determination is made that additional discovery would not be helpful, then the district court should decide the motion for class certification.  If a determination is made that additional discovery is necessary, the district court can defer ruling and order discovery on the relevant issues.

Daniels cautions a district court should be limited to facts alleged in the complaint, and it should order only limited discovery to verify the accuracy and completeness of the information supplied by the defendant, or otherwise address reasonable concerns raised by the plaintiff.  He states the district court should consider prior opinions addressing similar legal issues on class certification before ruling on the motion for class certification.

Daniels concludes the Federal Circuit Courts generally agree the propriety of class certification can, in some situations, be addressed at the pleading stage.  He points to the lack of consensus on the appropriate procedure to raise such a challenge, and on the standard to use to decide the issue.  Daniels states class certification is a procedural determination on whether the requirements of FRCP 23 have been met so that multiple parties’ claims for relief can be properly combined in one suit.  This procedural determination, Daniels opines, should be made pursuant to FRCP 23, which allows for a standard that recognizes the discretion granted to the district courts to decide certification.

Yaron Shaham