D.C. Circuit Rejects Freestanding Rule Against "Fail-Safe" Classes

• Published date: 06 June 2023
• Subject Matter: Employment and HR, Litigation, Mediation & Arbitration, Retirement, Superannuation & Pensions, Class Actions, Trials & Appeals & Compensation
• Law Firm: Mayer Brown
• Author: Mr Kevin Ranlett, Archis Parasharami and Daniel E. Jones

The D.C. Circuit recently deepened a circuit split over whether district courts may certify a "fail-safe" class. In In re White, 64 F.4th 302 (D.C. Cir. 2023),the D.C. Circuit agreed that fail-safe classes are generally improper, but rejected the views of other circuits that categorically forbid such classes . Instead of what it described as an "extra-textual" limitation on class certification, the D.C. Circuit held that the existing requirements of Rule 23 (and a district court's discretion to alter proposed class definitions) should be used to prevent certification of fail-safe classes.

Fail-safe classes

A fail-safe class is "one that is defined so that whether a person qualifies as a member depends on whether the person has a valid claim." Messner v. Northshore Univ. Healthsystem, 669 F.3d 802, 825 (7th Cir. 2012). Clear-cut examples of a fail-safe class are classes of "all individuals who the defendant defrauded" or "all applicants against whom the defendant illegally discriminated."

Defining a class in terms of the underlying merits poses at least two major problems. First, although identifying whether someone ultimately is a class member is impossible until the merits have been decided, class notice must be sent out long before that point. Second, if the only members of a fail-safe class are people with winning claims (i.e., those who have been defrauded or discriminated against), then the class has no members if the defendant wins at trial'meaning that no one is bound by a final judgment in the defendant's favor. Subjecting a defendant to a class-wide trial that it can only lose but never win is profoundly unfair.

Unsurprisingly, most courts of appeals have held that it's improper to certify fail-safe classes. See, e.g., Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, 31 F.4th 651, 669 n.14 (9th Cir. 2022) (en banc); Cordoba v. DIRECTV, LLC, 942 F.3d 1259, 1276-77 (11th Cir. 2019); Orduno v. Pietrzak, 932 F.3d 710, 716 (8th Cir. 2019); McCaster v. Darden Rests., Inc., 845 F.3d 794, 799 (7th Cir. 2017); Byrd v. Aaron's Inc., 784 F.3d 154, 167 (3d Cir. 2015); In re Nexium Antitrust Litig., 777 F.3d 9, 22 (1st Cir. 2015); EQT Prod. Co. v. Adair, 764 F.3d 347, 360 n.9 (4th Cir. 2014); Young v. Nationwide Mut. Ins. Co., 693 F.3d 532, 538 (6th Cir. 2012).

But the Fifth Circuit has refused to hold that fail-safe classes are categorically impermissible, In re Rodriguez, 695 F.3d 360, 370 (5th Cir. 2012), and in White, the D.C. Circuit has...