Certification And Its Discontents: Rule 23 And The Role Of Daubert

Keywords: certification motion, Rule 23, class actions, Daubert, class certification,

The certification motion is the make-or-break event of a Rule 23 class action lawsuit. For defendants in particular, a successful motion for class certification can transform a garden-variety lawsuit into a bet-the-company case, dramatically expanding the risks and expenses of continued litigation and creating considerable pressure to settle. As the Seventh Circuit has observed, a class certification ruling "usually is the district judge's last word on the subject" and ordinarily "there is no later test of the decision's factual premises." Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 676 (7th Cir. 2001). Although the district court has authority to alter or amend a class certification order at any time before final judgment, see Fed. R. Civ. P. 23(c)(1)(C), that possibility often is insufficient to counterbalance the actual costs and potentially ruinous effects of defending a certified class action.

As a result, both parties increasingly bring to bear all the ammunition possible to the class certification hearing, including expert testimony. Over time, a consensus has emerged among the federal circuit courts of appeals that a district court not only may, but must undertake a rigorous factual analysis where necessary to determine whether the class certification elements have been satisfied, including resolution of conflicting expert proof. Where experts appear, however, Daubert issues inevitably surface. What role the Daubert standard for admission of expert opinion should play in class certification remains very much an open question. The Seventh Circuit and the Eleventh Circuit have held that where reliability challenges are raised, the court must conduct a full Daubert analysis of expert testimony presented for or against class treatment. The Ninth Circuit, however, has diverged from this trend, and a decision expected from the United States Supreme Court this term could decide the issue once and for all.

Rule 23

In pertinent part, Rule 23(a) provides:

(a) Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if:

the class is so numerous that joinder of all members is impracticable, there are questions of law or fact common to the class, the claims or defenses of the representative parties are typical of the claims or defenses of the class; and the representative parties will fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a). In practice, these are referred to as the "numerosity," "commonality," "typicality," and "adequacy" requirements. Most federal class actions also must meet two additional requirements set out in Rule 23(b): the court must "find[] that the questions of fact or law common to class members predominate over any questions affecting only class members and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy" - the "predominance" and "superiority" requirements. Fed. R. Civ. P. 23(b)

Eisen and Its Aftermath

Unfortunately, the first toe the Supreme Court dipped into the waters of Rule 23 created significant and lasting confusion about the trial court's role in class certification. In 1974, the Court decided Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974). At stake was a then-recent amendment to Rule 23 requiring individual notice to class members (currently codified at Rule 23(c)(2)(B)). After holding a preliminary evidentiary hearing and finding that the plaintiff showed a strong likelihood of success on the merits, the trial court shifted 90% of notice costs to the defendants.

The Supreme Court reversed, holding that Rule 23 placed the procedural and financial burdens of providing notice to absent class members squarely and exclusively on the plaintiff. The Court criticized the district court's assumption that Rule 23 authorized an examination of the plaintiff's likelihood of success, announcing that "[w]e find nothing in...