Ninth Circuit Outlines Three-Part Test For Class-Certification Review

A unanimous court panel recently identified, for the first time, the specific criteria it will consider in evaluating whether to grant a petition to appeal under Rule 23(f).

May 9, 2005

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Rule 23(f) of the Federal Rules of Civil Procedure provides that class certification decisions are not immediately reviewable unless the appeals court first grants permission to seek relief by way of interlocutory appeal. The 9th U.S. Circuit Court of Appeals long had declined to provide guidance on the criteria it would employ in evaluating the contours of this rule - but a unanimous panel of the court recently identified, for the first time, the specific criteria it will consider in evaluating whether to grant a petition to appeal under Rule 23(f).

The opinion in Chamberlan v. Ford Motor Co., 402 F.3d 952 (2005), merits detailed analysis and consideration. Given the recent enactment of the Class Action Fairness Act, class action practitioners will increasingly find themselves prosecuting and defending class actions in federal courts. See 28 U.S.C. Section 1332(d). Further, it is no secret that class actions often turn on certification issues.

Moreover, Rule 23(f) itself provides no guidance regarding the standards employed in granting review. Instead, the drafters envisioned that "The courts of appeal will develop standards for granting review that reflect the changing areas of uncertainty in class litigation." See Advisory Committee Notes to Rule 23(f).

Chamberlan involved a class action in California state court against Ford Motor Co. under the California Consumer Legal Remedies Act, California Civil Code Section 1750, et seq., and California's Unfair Competition Law, Business & Professions Code Sections 17200, et seq.

Chamberlan alleged that Ford knowingly manufactured, sold and distributed automobiles containing defective plastic intake manifolds, which failed shortly after the manufacturer's warranty expired. She also alleged that Ford was aware of the defect at the time of sale and concealed its from its customers, and that Ford's limited recall campaign improperly excluded the majority of affected cars. Chamberlan sought various remedies, including damages and injunctive relief in the form of a complete notification and recall campaign.

After Ford removed the action to federal court, Chamberlan moved for class certification. Ford opposed certification on the grounds that individual issues of fact predominated over common issues. Specifically, Ford argued that facts differed depending on the type and model-year vehicle, and the individual buyer's expectations regarding the durability of the intake manifolds.

The U.S. District Court for the Northern District of California rejected these arguments and certified a class consisting of: "All consumers residing in California who currently own, or paid to repair or replace, the plastic intake manifold in any of the following cars: 1996-2001 model year Mercury Grand Marquis, 1998-2001 model year Ford Mustangs, 2002 model year Ford Explorers, 1996-2001 model year Ford Crown Victorias, or 1996-2001 Lincoln Town Cars."

Ford thereafter filed a motion for permission to file a discretionary, interlocutory appeal under Rule 23(f). In evaluating Ford's motion, the 9th Circuit explained that "We begin with the premise that Rule 23(f) review should be a rare occurrence." After reviewing the Advisory Committee Notes to Rule 23(f) and the decisions of other federal courts of appeals, the 9th Circuit settled on a three-part test.

The court reasoned that review of class certification decisions "would be most appropriate" when: (1) class certification sounds the death-knell of the litigation for either the plaintiff or defendant that is independent of the merits of the underlying claims, coupled with a class certification decision by the district court that is questionable; (2) the certification decision presents an unsettled and fundamental issue of law relating to class actions, important both to the specific litigation and generally, that is likely to evade end-of-the-case review; or (3) the district court's class certification decision is manifestly erroneous.

The court explained that these factors are mere guidelines, not a rigid test, and are not intended to circumscribe the broad discretion granted to the court of appeals under Rule 23(f). As such, the court declined to adopt a "sliding scale" approach whereby a less compelling district court decision would reduce the showing required for other factors. The court noted, however, that the third factor, even standing alone, may warrant relief under Rule 23(f).

Applying this test, the 9th Circuit denied Ford's petition for appellate review. In so doing, the court shed some light on the facts and circumstances that may warrant grant of review.

With respect to the first factor, the court rejected Ford's "conclusory" argument that the class certification order created immense pressure to settle, thus purportedly sounding the "death knell" of potentially ruinous liability. It reasoned that Ford had failed to demonstrate, through "declarations, documents, or other evidence," that its potential exposure would force a company of its size to settle without relation to the merits of the underlying claims.

The court explained that, "The potential recovery here may be 'unpleasant to a behemoth' company, but it is hardly terminal. ... [T]he impact of the class certification alone does not support an appeal."

The court also rejected Ford's argument that its petition raised unsettled questions of law because there was an intra-circuit split as to whether class certification required a "cursory analysis" or "rigorous review." Chamberlan, citing Hanlon v. Chrysler Corp., 150 F.3d 1011 (1998) (upholding certification of a national class against an auto manufacturer), and Valentino v. Carter-Wallace Inc., 97 F.3d 1227 (1996) (remanding so that the district court could provide further details justifying its decision).

The Chamberlan court declined to find any such conflict or unsettled question of law, and it reconciled these cases by explaining that they rested on different facts: Hanlon entailed plain issues and analytical framework, while Valentino required "deeper probing."

Ford also argued that the district court's decision was "manifestly erroneous" because it "egregiously" dispensed in a single sentence with the "predominance" requirement that common issues of law and fact must predominate over individual ones. The court rejected this argument, holding that "the issues were readily apparent," and that the district court "affirmatively found that a common nucleus of facts and potential legal remedies dominate this litigation, such as whether Ford had a duty to disclose its knowledge and failed to do so."

The Chamberlan decision has several important implications for class action lawyers. Initially, by crafting such a high standard for obtaining permission to appeal, the court made it clear that it will continue to defer to the district court's discretion and broad authority in analyzing and deciding class certification issues. As a matter of policy, it expressed significant reluctance to interfere with the district court's ability to manage class actions. Indeed, the factual predicate underlying the Chamberlan case establishes that successful Rule 23(f) petitions will be rare indeed, particularly for defendants.

For example, a defendant seeking permission to appeal under the "death knell" prong faces a significant hurdle. Under Chamberlan, it is insufficient to demonstrate that a client faces significant exposure. Much more is required; a defendant must submit competent evidence, including evidence of financial condition, establishing that the underlying certification order imposes imminent ruinous liability. This is a high standard indeed, and one that may be attainable only in the very rare case, particularly for more robust defendants.

Conversely, plaintiffs finding themselves at the short end of a certification order may face less difficulty in obtaining permission to appeal under the "death knell" situation. The Chamberlan court did not analyze the circumstances under which this factor may warrant a Rule 23(f) petition where the district court denies class certification. However, the advisory committee notes suggest a Rule 23(f) petition may be warranted where "the only sure path to appellate review if by proceeding to final judgment on the merits of an individual claim that, standing alone, is far smaller than the costs of litigation." It would appear that class actions more often than not present class representatives with precisely this dynamic.

Perhaps a defendant's best shot at obtaining permission to appeal is to establish a manifest error by the district court. Moreover, given the appeals court's significant deference to the district court's class certification analysis, a party petitioning under Rule 23(f) may be most successful by establishing an error of law, rather than one based on the incorrect application of law to fact. Further, as the Chamberlan court intimated, an error of law may be more likely to engender review at an early stage of the proceedings than a purported error based on a more developed factual record.

As a procedural matter, it also bears noting that litigants need not seek district court permission to file a Rule 23(f) petition, but may move the district court for an immediate stay of an adverse certification decision pending adjudication of the petition.

Finally, while the Chamberlan court indeed enunciated a new test under 9th Circuit law, the decision simply echoes long-standing policy of deference to district courts in class action matters. Moreover, the Chamberlan decision once again confirms that practitioners must undertake every effort to prevail on class certification issues at the trial court level, as the battle for certification is seldom won on appeal.

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David Martinez


Member of the Executive Board;
Member of the Firm's Diversity Committee;
Pro Bono Chair, Los Angeles Office

Dean Martoccia

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