Concept
The Certification Order
Class action certification
The Certification Order
A certification order decides more than whether a suit may proceed as a class action. It decides whom the judgment will bind, and Rule 23(c) governs how the court reaches that decision: when it must rule, what the order must contain, what notice goes to class members, what the judgment must say, and how the court may narrow a class through subclasses and issue classes.1
The Rule 23(a) prerequisites and the Rule 23(b) category supply the grounds for certification; Rule 23(c) supplies the procedure and the consequences. The consequences carry weight because the result of a class action generally binds absent members, so the Rule surrounds the order with protections, notice foremost among them, that give people who never appeared the process they are due.2
The category the court has found decides much of what follows. A damages class under Rule 23(b)(3), which requires that common questions predominate and that class treatment be superior,3 carries mandatory notice and a right to opt out. A mandatory class under Rule 23(b)(1) or (b)(2) carries neither as of right, and the court may direct notice but need not.4
Rule 23(c) also lets the court certify less than the class proposed. A class that is defective in one respect need not be rejected, because the court may divide it into subclasses or certify only particular issues when appropriate.5 The three parts below follow the order through its life: the ruling and its review, the notice and exit rights it triggers, and the tools for tailoring a class to what the record supports.
Timing and Appellate Review
Rule 23(c)(1) tells the court when to decide and what to write. At “an early practicable time” after someone sues or is sued as a class representative, the court must decide by order whether to certify the action. An order that certifies must define the class and the class claims, issues, or defenses and must appoint class counsel, and an order granting or denying certification may be altered or amended before final judgment.6
The ruling comes early because it often decides the case. Certification is frequently the most important issue in a class action: a plaintiff who fails to obtain it may find the case financially impracticable to pursue alone, and a defendant who fails to defeat it may be forced to settle for a substantial sum or face the risk of economic devastation.7 Antitrust class actions show the point sharply. The lawyers who bring them are usually unwilling to prosecute without certification, and plaintiffs often seek the broadest class possible to increase damages and attorneys’ fees.8
The Rule sets no number of days. Before 2003 it required the decision “as soon as practicable after commencement of an action,” and the present phrase gives courts more flexibility.9 Appellate courts generally leave timing to the trial court. Many districts have local rules requiring the certification motion thirty to ninety days after the complaint is filed. Some courts apply those periods strictly and refuse untimely motions, while others extend them for good cause.10
Within that time the court may need facts that the pleadings do not supply. It sometimes permits limited discovery on matters pertinent to certification, but it usually decides before substantial merits discovery begins.11 It may not hold a preliminary hearing on whether the plaintiffs are likely to win. In Eisen v. Carlisle & Jacquelin the Supreme Court rejected the reading of Rule 23 that authorizes such a hearing as part of the certification decision.12 Rule 23 does not require a hearing of any kind, and some courts hold that parties are not entitled to one without showing prejudice. Courts nonetheless generally hold some type of hearing, especially when they must look beyond the pleadings, and some cases emphasize the need for one before certification is denied.13 Timing also shapes strategy, because a defendant that wins a merits motion before certification binds only the named plaintiffs, not the unnamed class members.14
Older opinions quote a different version of the Rule. Before 2003, Rule 23(c)(1) said that a certification order “may be conditional, and may be altered or amended before the decision on the merits.”15 The 2003 amendments deleted the language permitting conditional certification. According to the Advisory Committee Notes, a court that is not satisfied that Rule 23’s requirements have been met “should refuse certification until they have been met.” One court has nonetheless indicated that the amendments do not foreclose conditional certification in the context of a class settlement.16
The power to revise the order survives. The present Rule lets the court alter or amend it through final judgment, where the older text ended with the decision on the merits.17 A party seeking revocation or modification normally must show newly discovered facts or an intervening change in the law. The court may act on its own, but usually does so only when a significant change in the facts or the law warrants it.18 One court has put the point as both a power and a duty: courts retain each to realign classes during the action when appropriate.19
If the court rejects certification, the action proceeds as a normal action involving only the named parties, or does not proceed at all.20 Because a certification ruling can end a case or force its settlement, waiting for final judgment to review it would often come too late. Rule 23(f), added in 1998, therefore authorizes discretionary interlocutory appeals from certification decisions, and it lets the courts of appeals give guidance to the district courts on certification issues.21 A court of appeals may permit an appeal from an order granting or denying certification. The party seeking review must file a petition for permission to appeal with the circuit clerk within 14 days after the order is entered, or within 45 days if any party is the United States, a United States agency, or a United States officer or employee sued for an act or omission in connection with duties performed on the government’s behalf.22 The period was ten days until 2009.23
Two features of Rule 23(f) matter in practice. Review depends on permission: the court of appeals “may” permit the appeal, so no party has an appeal as of right. And an appeal does not stay proceedings in the district court unless the district judge or the court of appeals so orders, so the case keeps moving while a petition is pending.24 The Rule also excludes orders under Rule 23(e)(1), and the 2018 amendment to Rule 23(f) clarified that preliminary rulings are not subject to interlocutory review.25
Students often make one of two mistakes about Rule 23(f): they treat review as a right, or they treat a pending petition as a freeze on the district court. The Rule supports neither.
Once review is allowed, the court of appeals reviews the certification decision for abuse of discretion. Purely legal questions, such as whether a federal statute bars class actions in a particular kind of case or whether a superiority inquiry should be conducted under Rule 23(b)(2), receive de novo review.26 Rule 23 does not require findings and conclusions with a certification order, apart from the predominance and superiority findings that a (b)(3) class requires. Even so, the Manual for Complex Litigation advises the court to address each applicable criterion in findings and conclusions, because failure to do so “may result in reversal or remand for further proceedings after interlocutory appeal under Rule 23(f).” The Fifth Circuit has said that a court certifying a class “must detail with sufficient specificity how the plaintiff has met the requirements of Rule 23.”27
Notice and Opt-Out Rights
Rule 23(c)(2) ties the notice a court must give to the type of class it has certified. For a (b)(1) or (b)(2) class, the court may direct appropriate notice, so notice is discretionary. For a (b)(3) class, the court must direct the best notice practicable under the circumstances, including individual notice to every member who can be identified through reasonable effort.29 Notice and exit travel together, because only a (b)(3) member holds a right to opt out. The category chosen at the second gate therefore fixes both.30
The line follows from what each class asks of its members. Many (b)(3) damages claims are viable as individual actions, so a member must decide whether to go it alone. The other classes are all or nothing, because no member can really, or would want to, act independently of the class. A court may order notice there when the circumstances call for it, but it must order notice only in a (b)(3) class, where members face that practical decision.31 The choice is harder than it sounds. When members have no prior relationship and each stands to recover little, the class representative is in reality the class lawyer, who puts together the claim, funds the investigation, and makes the case’s decisions. Members in that position are “rationally indifferent” to the day-to-day decisions, perhaps even to the outcome.32 Notice is how such a member learns that a choice exists at all.
The Constitution frames these rules. A person ordinarily cannot be bound by a judgment in a suit to which he was not a party, and the Supreme Court has recognized class suits as an exception: “there is scope within the framework of the Constitution for holding in appropriate cases that a judgment rendered in a class suit is res judicata as to members of the class who are not formal parties to the suit.”33 The Court has also held that, in a class action predominantly for money damages, the absence of notice and an opportunity to opt out violates due process, citing Phillips Petroleum Co. v. Shutts.34 The leading due process decision on notice generally is Mullane v. Central Hanover Bank & Trust Co. Eisenn v. Carlisle & Jacquelin is the leading case on what individual notice requires. The named plaintiff’s own stake was only $70, and the Court observed that “[e]conomic reality dictates that petitioner’s suit proceed as a class action or not at all.”35 The district court adopted a less ambitious notice plan: notice to the New York Stock Exchange’s member firms, to about 2,000 identifiable class members, and to 5,000 members chosen at random, together with publication in several national newspapers.36 The Supreme Court rejected that plan. Relying on Rule 23(c)(2) and looking to due process case law for guidance, it held that individual notice was required for the 2,250,000 members whose names and addresses were known or easily ascertainable.37
The holding is categorical. Rule 23(c)(2) requires individual notice to every member who can be identified with reasonable effort, and nothing in the Rule suggests that the requirement can be “tailored to fit the pocketbooks of particular plaintiffs.” The requirement serves the member’s choice. Each identifiable member must be told that he may request exclusion and so keep his opportunity to press the claim separately, or that he may remain in the class and perhaps participate in managing the action.38
Eisen also settles who pays. The district court had placed 90 percent of the notice cost on the defendants after a preliminary hearing on the merits convinced it that the plaintiff was “more than likely” to prevail. The Supreme Court agreed with the court of appeals that the plaintiff must bear the cost of notice, because Rule 23 does not authorize a preliminary merits hearing as part of the certification decision.39 The result was demanding. A plaintiff with a $70 claim carried the cost of notice to more than two million members.
Consistent with Eisen, lower courts require notice in (b)(3) actions to all members whose identities can be determined with reasonable effort. When some members cannot be identified, a class may still be certified, although the inability to identify a substantial percentage of the class may be a reason to deny certification.40 The 2018 amendments revised the notice rules to emphasize electronic mail and social media.41
The content of the notice matters as much as its delivery, because the notice is the document that explains the member’s choice. The Rule requires the notice to state, in plain, easily understood language, the following matters:42
- the nature of the action;
- the definition of the class certified;
- the class claims, issues, or defenses;
- that a class member may enter an appearance through an attorney if the member so desires;
- that the court will exclude from the class any member who requests exclusion;43
- the time and manner for requesting exclusion; and
- the binding effect of a class judgment on members.
These items describe an opt-out design. In a (b)(3) class, the best practicable notice and an opportunity to opt out are what make it possible to bind absent members.44 A member who does nothing stays in the class, and a member who wants out must ask in the time and manner the notice states.
Eisen governs (b)(3) classes, not every class. In Wal-Mart Stores, Inc. v. Dukes the Court observed that Rule 23(b)(2) does not require notice and opt-out rights, presumably because it is thought, rightly or wrongly, that notice has no purpose when the class is mandatory and that depriving people of the right to sue in this manner complies with due process. The Court added that the (b)(3) protections are missing from (b)(2) not because the Rule considers them unnecessary but because it considers them unnecessary to a (b)(2) class. When a class seeks an indivisible injunction benefitting all its members at once, there is no reason to inquire case by case whether common issues predominate or whether class treatment is superior.45
A mandatory class can bind members who would prefer that no suit be brought, and that is not peculiar to mandatory classes. In any conceivable case, some members will wish to assert their rights and others will not. The stockholders’ derivative suit is almost invariably brought by minority stockholders to challenge action that the majority approves, yet it is routinely regarded as an appropriate class suit.46 A taxpayer suit challenging a proposed public expenditure is another familiar class suit, and it is difficult to believe that many such cases lacked taxpayers who would have preferred that the suit not be brought.47
Discretionary notice remains available in any class action. Rule 23(d)(1)(B) lets a court require appropriate notice to some or all class members, to protect them and to conduct the action fairly, of any step in the action, of the proposed extent of the judgment, or of the members’ opportunity to signify whether they consider the representation fair and adequate, to intervene, or otherwise to come into the action.48
The line blurs when a mandatory class includes money claims. The Court has held that the absence of notice and opt-out violates due process in a class action predominantly for money damages. It has not held that to be so where the monetary claims do not predominate, and the serious possibility that it may be so was an added reason not to read Rule 23(b)(2) to include the monetary claims in that case.49 Lower courts are divided over whether due process requires an opportunity to opt out in mandatory classes under Rules 23(b)(1)(A), 23(b)(1)(B), and 23(b)(2) that seek monetary relief, and the Supreme Court has raised but not decided the issue.50 The protections of predominance, superiority, individual notice, and exclusion are costly, so class counsel often try to fit an action into one of the first two categories. Dukes held that claims for both equitable relief and damages, such as back pay, cannot be certified solely under (b)(2) to avoid the (b)(3) requirements when the damages claims are not merely incidental.51
The three categories compare as follows on notice, exit, and the content of the judgment:
- A (b)(1) class carries discretionary notice, no practical right to act independently of the class because the class is all or nothing, and a judgment that describes the members the court finds to be in the class.52
- A (b)(2) class carries discretionary notice, no right to opt out because an indivisible injunction benefits every member at once, and a judgment that describes the members the court finds to be in the class.53
- A (b)(3) class carries mandatory individual notice paid for by the representative, a right to exclusion on request, and a judgment that specifies or describes those who were sent notice, did not opt out, and are found to be class members.54
The notice choice leads directly to the question of who is bound. Whether or not it favors the class, the judgment in a class action must describe the members it covers: in a (b)(1) or (b)(2) class, those the court finds to be class members,55 and in a (b)(3) class, those to whom the Rule 23(c)(2) notice was directed, who have not requested exclusion, and whom the court finds to be class members.56 The Advisory Committee intended the judgment, whether favorable or not, to bind all class members who did not request exclusion, which is what makes notice worth its cost.57 Finality is the point. A class action is one of several mechanisms, bankruptcy being another, that compel similarly situated claimants into one proceeding and achieve finality beyond those who have already sued.58
Binding effect has limits. One recognized exception to it arises when absent members were not given the required notice and opportunity to opt out.59 When a state court enters the class judgment, its effect elsewhere is governed by the Full Faith and Credit Clause, under which Congress may prescribe the effect of state judgments, a power it has exercised chiefly through 28 U.S.C. § 1738.60
A member who opts out of a (b)(3) class stands outside the judgment in both directions. The member is not bound by it, and the member cannot later take advantage of it.61 The two halves go together, because the member chose exclusion before anyone knew who would win and so gives up the judgment’s benefits along with its burdens. A member who opts out and then watches the class prevail cannot use the verdict, and a member who stays in and watches the class lose is bound by the loss.
Subclasses and Issue Classes
Rule 23(c)(5) allows a court, when appropriate, to divide a class into subclasses that are each treated as a class, and Rule 23(c)(4) allows an action, when appropriate, to be maintained as a class action as to particular issues.63 Both tools exist because a proposed class is often flawed in only one respect. Its members may include groups whose interests pull against each other, or the case may combine one question every member shares with several that no two members share. Subclasses divide the people; issue classes divide the questions.
The words “treated as a class” carry a consequence. Each subclass must satisfy every requirement for certification: the three threshold requirements, the four Rule 23(a) prerequisites, and the requirements of at least one Rule 23(b) category. The proponent bears the burden of showing that the class may properly be divided.64 Division also has a price. Multiple subclasses may breed confusion and conflicts among the classes, their representatives, and their counsel, requiring greater judicial supervision and possibly creating manageability problems. If the court creates too many, plaintiffs may have difficulty showing that each subclass satisfies numerosity.65
One central use of subclasses is to cure the conflict that Rule 23(a)(4) forbids. In Amchem Products, Inc. v. Windsor the settling parties achieved a global compromise with no structural assurance of fair and adequate representation for the diverse groups and individuals affected. Each named party served generally as representative for the whole, not for a separate constituency.66 Ortiz v. Fibreboard Corp. drew the lesson. A class divided between holders of present and future claims requires division into homogeneous subclasses, with separate representation to eliminate conflicting interests of counsel, because “for the currently injured, the critical goal is generous immediate payments,” and that goal “tugs against the interest of exposure-only plaintiffs in ensuring an ample, inflation-protected fund for the future.” Older opinions cite the subclass provision as Rule 23(c)(4)(B).67 Whether to permit subclasses normally rests in the trial court’s discretion, but some cases leave none, as when claims of exposure to a harmful substance come from both people already physically injured and people who have not been.68
Subclasses also address problems of cohesion. Where the gravamen of a securities complaint is oral misrepresentations, a court will be reluctant to permit a class action, but where similar misstatements appear in a series of prospectuses or other documents, the court may divide the plaintiffs into subclasses.69 Courts have likewise used subclasses where some members have claims or damages theories that others lack, and the Manual for Complex Litigation observes that subclassing “sometimes represents a workable solution for differences in substantive law and for choice of law difficulties.”70
The power to create a subclass is, in one court’s words, “clear and unambiguous,” and who should be included and how large the subclass should be are questions for the district court. Notice to each member of the subclass would be essential under Rule 23(c)(2), and any notified member of a damages subclass may opt out.71 Subclassing thus connects to the notice rules above: a subclass certified under (b)(3) carries its own mandatory notice and exit rights.
Where subclasses divide the members, Rule 23(c)(4) divides the case. In ordering a bifurcation or partial certification, the trial court will normally try the common issues first, followed by trials of the individualized issues. The decision whether to bifurcate lies within the trial court’s discretion after an inquiry into the factual and legal aspects of the case.72 A single trial on the defendant’s conduct is where aggregation pays off, while questions such as exposure and damages may stay individual.
An issue class remains a class action, so the Rule 23(a) prerequisites of numerosity, commonality, typicality, and adequacy of representation must all be met for partial certification.73 The contested question is whether the Rule 23(b)(3) requirement that common questions predominate must be satisfied for the cause of action as a whole.74 Most courts say no, and the Sixth Circuit followed that approach in Martin v. Behr Dayton Thermal Products LLC. The reasoning is structural: if overall predominance were required, Rule 23(c)(4) would do no work, because a plaintiff seeking only an issue class would still have to satisfy the more demanding (b)(3) criteria. The Fifth Circuit once took the opposite view in Castano v. American Tobacco Co., treating (c)(4) as a “housekeeping rule” and requiring the cause of action as a whole to satisfy predominance, but later Fifth Circuit decisions have retreated from that position.75
The contrast shows why the Rule says “when appropriate.” The Principles of the Law of Aggregate Litigation urge issue certification where resolving the common issue would materially advance multiple claims by addressing the core of the dispute in a manner superior to other realistic procedural alternatives, so as to generate significant judicial efficiencies.76 Because the court ordinarily tries the common issues first and the individualized ones afterward, it should also examine whether issue certification raises Seventh Amendment concerns.77