In a recent published decision, the United States Court of Appeals for the Third Circuit clarified the standards that district courts must apply when certifying discrete issues–rather than an entire action–for classwide adjudication under Rule 23(c)(4).
What Is Rule 23(c)(4)?
Rule 23(c)(4) is an obscure part of federal class action practice. It states, simply, “When appropriate, an action may be brought or maintained as a class action with respect to particular issues.”
Because the rule (and its commentary) provide so little guidance, courts have had to fill the gap with criteria for issue certification. The Fifth Circuit, for example, has adopted a narrow holding that issue-class certification is appropriate only when a plaintiff shows that a court should certify an entire action as a class, reasoning that Rule 23(c)(4) “is a housekeeping rule that allows courts to sever the common issues for a class trial.”
But most circuits have rejected this approach and found that issue certification may be appropriate even if full Rule 23(b) certification is impossible. For example, the Sixth Circuit has said that issue-class certification is proper “where common questions predominate within certain issues and where class treatment of those issues is the superior method of resolution.”
The Third Circuit’s Latest Rule 23(c)(4) Decision
The recent case before the Third Circuit–Russell v. Educational Commission for Foreign Medical Graduates–involved a Pennsylvania nonprofit organization that certifies foreign medical school graduates for United States medical-residency programs. The organization certified a particular doctor despite having suspicions that he had misrepresented his identity on his applications. Law enforcement eventually arrested the doctor for possessing fraudulent or altered immigration documents, medical diplomas, medical transcripts, letters of recommendation, and birth certificates. He pleaded guilty to using a fraudulent Social Security number to obtain a medical license.
Following the doctor’s guilty plea, two former patients of the doctor sued the organization that signed off on his participation in a residency program, alleging negligent infliction of emotional distress. The plaintiffs brought their claims as a putative class action on behalf of all the doctor’s former patients.
Because there were clear individualized issues of injury, causation, and damages, the district court could not certify the class for full adjudication. But it did find that issues of duty and breach could be decided as to the entire class under Rule 23(c)(4), with injury, causation, and damages reserved for individual proceedings.
Addressing the issue-class certification in the case before it, the Third Circuit (in an opinion written by Judge Restrepo and joined by Judges Bibas and Porter) held that the district court abused its discretion when certifying the duty-and-breach issue class.
The Circuit held that a court resolving a motion to certify an issue class must make three determinations:
(1) Whether the proposed issue class satisfies Rule 23(a)’s numerosity, commonality, typicality, and adequacy requirements;
(2) Whether the proposed issue class “fit[s] within one of Rule 23(b)’s categories”; and
(3) Whether it is “appropriate” to certify these issues as a class.
Applying this standard, the Third Circuit reversed for two reasons. First, the Circuit found that the district court abused its discretion by failing to analyze whether the duty and breach elements satisfied Rule 23(b)(3). Second, the Circuit also held that the district court abused its discretion by certifying a class without considering all nine issue certification factors that the Court had earlier announced in Gates v. Rohm and Haas Co.
Although the Third Circuit vacated the district court’s class certification order, it explicitly declined to adopt the Fifth Circuit’s rule that issue classes are appropriate only when an entire case is suitable for class certification.
Practical Considerations for Rule 23(c)(4)
Rule 23(c)(4) has been on the books for more than 50 years, but only recently have plaintiffs’ attorneys started paying attention to it as an alternative to traditional class certification. As more circuits weigh in, it is likely to garner more attention and attract putative class actions that attorneys might not have considered traditionally strong candidates for classwide adjudication. In particular, claims that have clear individualized injury, causation, and damages questions might now find new life as issue-class cases.
Because the question has never been before the Supreme Court, each circuit’s law has different and important variations in how to analyze motions for issue-class certification. Companies and practitioners should be familiar with their home Circuit’s requirements when assessing a putative class action’s changes at certification.