D.C. Circuit Rejects Rule Against "Fail-Safe" Class Certification

• Jurisdiction: United States,Federal
• Law Firm: Winston & Strawn LLP
• Subject Matter: Employment and HR, Litigation, Mediation & Arbitration, Retirement, Superannuation & Pensions, Class Actions
• Author: Jeff Wilkerson, Peter T. McKeon and Mia Uhunmwuangho
• Published date: 22 May 2023

Key Takeaways:

• Despite suggesting that truly fail-safe classes would likely fail to meet Rule 23(a)'s requirements, the D.C. Circuit held in an opinion splitting with several other circuits, that a separate legal rule against fail-safe classes is inappropriate and ungrounded from the text of Rule 23.
• The D.C. Circuit stated that the solution in cases like these is for the Court to work with counsel to redefine the class or define the class itself. We will follow the implications of this decision with interest, both on remand and in future cases.

In In re White, 2023 WL 2763812 (C.A.D.C., 2023), the D.C. Circuit'splitting with several other circuit courts'reversed a district court's order that denied class certification because the plaintiffs sought to certify a "fail-safe" class. While acknowledging the recognized criticisms of fail-safe classes, the D.C. Circuit held that a standalone rule against fail-safe classes is an inappropriate and "extra-textual" limitation on certification.

"Fail-safe" classes are classes for which membership can be determined only through a decision on the merits. See, e.g., In re Rodriguez, 695 F.3d 360, 369-70 (5th Cir. 2012). A quintessential example would be a class defined as "all persons whom Defendant defrauded." As courts criticizing such fail-safe classes have noted, fail-safe classes are unfair to defendants. See e.g. Zarichny v. Complete Payment Recovery Services, Inc., 80 F.Supp.3d 610, 624-26 (E.D.Pa., 2015). They present defendants with a "tails I win, heads you lose" situation'if the plaintiffs win on the merits, then the class is populated with those successful claims, but if or to the extent plaintiffs fail on the merits, the "losing" class members are, by definition, outside of the class and thus cannot be bound by an adverse judgement.

In White, the named plaintiff sued her former employer, alleging that it wrongfully denied her vested retirement benefits by undercounting her eligible hours of service. She sought to certify a class of former employees that had "been denied vested retirement benefits." The district court denied certification primarily on the ground that this was an improper fail-safe class because whether class members had "been denied vested retirement benefits" was a key issue to be decided on the merits.

On appeal, the D.C. Circuit held that the district court...