Class actions and the implications of Rule 23

J. Russell Jackson is a partner in the Mass Torts Group at Skadden, Arps, Slate, Meagher & Flom LLP and the author of a 2010 ABA Journal Blawg 100 legal blog, www.consumerclassactionsmasstorts.com.

Professor Scott Dodson, in his post “Squeezing class actions,” argues that the Supreme Court is being too restrictive in its reading of the class action prerequisites in Rule 23.  He describes this as an “assault on class actions.”  As support for his argument, he begins by outlining two purposes of class actions:  efficiency and “encourag[ing] public litigation to enforce public ends.”

The Supreme Court thus is acting at cross purposes to Rule 23 when its opinions “suggest[] that class actions ought to be disfavored and used only in rare cases,” Professor Dodson asserts.

Far from encouraging expansive use of the class action device, the history of Rule 23 counsels for just such a restrictive approach.  Rule 23 as we know it – with its (b)(1), (b)(2) and (b)(3) divisions of classes – has its genesis in the 1966 amendments made by the Civil Rules Advisory Committee.  Previously, what we know as a “damages” or “(b)(3)” class action had been known as a “spurious” class, and a judgment regarding a spurious class did not bind absent class members.  Rather, they had to affirmatively opt into the judgment after it was rendered.

There was considerable debate within the Committee about whether the Rule should be amended to allow spurious classes to bind absent class members, and the Committee ultimately imposed what it believed were very high hurdles to class certification in order to prevent abuse of the tool.  Rule 23’s built-in skepticism toward certification is evident from the Committee Notes describing the 1966 Amendment:

In the situations to which this subdivision [(b)(3)] relates, class action treatment is not as clearly called for as in those described above, but it may nevertheless be convenient and desirable depending upon the particular facts. . . . The court is required to find, as a condition of holding that a class may be maintained under this subdivision, that questions common to the class predominate over the questions affecting individual members.  It is only where this predominance exists that economies can be achieved by means of the class action device. . . .  [A]lthough having some common core, a fraud case may be unsuited for treatment as a class action if there was material variation in the representations made or in the kinds or degrees of reliance by the persons to whom they were addressed.  A “mass accident” resulting in injuries to persons is ordinarily not appropriate for a class action because of the likelihood that significant questions, not only of damages but of liability and defenses to liability, would be present, affecting the individuals in different ways.  In these circumstances an action conducted nominally as a class action would degenerate in practice into multiple lawsuits separately tried.

Not only was the predominance requirement of Rule 23(b)(3) viewed by the Committee as a substantial impediment to certification, but the superiority requirement was as well.  Indeed, a forthcoming article from Professor Eric Voigt forcefully argues that – unlike the Seventh Circuit in In re AquaDots Products Liability Litigation, No. 10-3847 (Aug. 17, 2011) – the 1966 Advisory Committee understood the superiority requirement to mean that the plaintiff bore the burden of establishing that a class action would be superior not just to other forms of actual litigation, but to alternative forms of dispute resolution as well.  Thus, Professor Voigt argues, if a defendant had instituted a voluntary recall and refund program, that could make the proposed class fail the superiority requirement.

The notion that the 1966 Advisory Committee ever would have anticipated or encouraged the explosion of class action litigation that has occurred in the last forty-five years is contradicted by the history of the Committee’s deliberations.  John Rabiej, the former chief of the Rules Committee Support Office at the Administrative Office of the United States Courts, has published a history of Rule 23 that sets out what various members of the 1966 Advisory Committee were thinking when they amended Rule 23.  Rabiej repeatedly refers to the fact that class actions prior to the amendment were few – estimated at “about ten each year in federal and state courts apiece” – and that the Committee members did not foresee large numbers of class actions stemming from their amendments.  Indeed, the Committee understood that binding absent class members to the judgment in a (b)(3) class was a huge departure from prior practice regarding “spurious” class actions, but the Committee “was satisfied that the rule’s limiting provisions provided an effective self-regulating means that would exclude most cases from the rule’s ambit.  The rule was expected to apply to only a small number of cases.”  Moreover, the Committee expected courts to be reluctant to certify class actions simply because of the binding nature of the judgment on most absent class members.

As Rabiej explains it, Rule 23 “was never expected nor designed to handle a wide array of class actions,” but after the 1966 amendments “lawyers and courts began to push the envelope, using the class-action device in novel ways and in new circumstances.”  Rabiej concludes:

But the amended rule evolved far beyond the drafters’ expectations, raising a new generation of difficult issues. . . . To reach more cases, the bench and bar have creatively construed and applied the rule in ways not contemplated by the rule’s drafters.  As the reach of the rule has expanded to new areas, the number of unfair results it has produced has increased.  It has been unable to bear the additional demands imposed on it.  The history of the amendments to Rule 23 reflects an ongoing effort by the advisory committee to rein in the use of the class-action device in inappropriate cases without unduly interfering with the rule’s operation in appropriate cases.

Given the history of the Rule 23 and the expectations of the drafters on the Advisory Committee, it hardly seems accurate to describe the Supreme Court’s recent decisions requiring a careful adherence to Rule 23’s prerequisites as an “assault” on the rule, judicial activism, or actions inconsistent with the rule’s purposes.