Volume 15 A of the Encyclopedia of American Law.
VOLUME 19: FEDERAL RULES OF CIVIL PROCEDURE IV – CLASS ACTIONS AND COMPLEX LITIGATION (RULE 23)
Suing on Behalf of Many
Introduction to Volume 15 A
Rule 23 is one of the most powerful procedural tools in federal practice. It allows one or more persons to sue or be sued as representatives of a larger group. The class action is efficient. It allows courts to resolve disputes involving hundreds, thousands, or millions of people in a single proceeding. It also allows plaintiffs with small individual claims to band together to challenge systemic wrongdoing. A bank that overcharges millions of customers by one dollar each may not be challenged by any single customer. The cost of suing exceeds the recovery. But a class action makes the suit possible.
Rule 23 is also controversial. Class actions present risks of coercion. A defendant may face overwhelming pressure to settle rather than risk a catastrophic judgment. Class actions also present risks to absent class members. The class representative may not adequately represent their interests. The class action may settle for too little. Notice and opt‑out procedures are designed to protect absent class members, but they are not perfect.
This volume covers the four prerequisites of Rule 23(a): numerosity, commonality, typicality, and adequacy. It covers the three types of class actions under Rule 23(b): (b)(1) for limited fund cases, (b)(2) for injunctive relief, and (b)(3) for damages cases requiring predominance and superiority. It covers class certification procedure, notice to the class, settlement, and appeals. It also covers the Class Action Fairness Act of 2005, which expanded federal jurisdiction over large class actions.
PART ONE: THE REQUIREMENTS OF RULE 23(a)
Chapter 1: Numerosity – Rule 23(a)(1)
Rule 23(a)(1) requires that “the class is so numerous that joinder of all members is impracticable.”
There is no numerical minimum. The question is impracticability, not impossibility. A class of 40 may be sufficient. A class of 20 may not be. The court considers the geographic dispersion of the class, the ease of identifying class members, and the ability to manage individual suits.
In General Telephone Co. of the Northwest, Inc. v. EEOC (1980) , the Court held that the EEOC could bring a pattern or practice suit without joining individual claimants. The case did not involve Rule 23, but it illustrates the principle. Joinder is impracticable when the class is large and dispersed.
When joinder is impracticable, numerosity is satisfied. The court need not determine the exact size of the class. Reasonable estimates are sufficient.
Chapter 2: Commonality – Rule 23(a)(2)
Rule 23(a)(2) requires that “there are questions of law or fact common to the class.”
Wal‑Mart Stores, Inc. v. Dukes (2011) dramatically changed the commonality requirement. The case involved a class of 1.5 million female Wal‑Mart employees who claimed sex discrimination. The class alleged that Wal‑Mart’s policy of granting local managers discretion over pay and promotion caused disparate impact discrimination.
The Court held that the class did not satisfy commonality. The common question must be a question that is capable of class‑wide resolution. The resolution of the common question must generate a common answer that will drive the resolution of the litigation. The plaintiffs’ claim did not present a common question. The question was whether each individual manager had discriminated. That question required individual proof.
Justice Scalia wrote: “What matters to class certification… is not the raising of common ‘questions’—even in droves—but, rather the capacity of a class‑wide proceeding to generate common answers apt to drive the resolution of the litigation.”
After Dukes, plaintiffs must show that there is a common contention that is central to the validity of each claim. The common contention must be capable of class‑wide proof. The class must be sufficiently cohesive.
Examples . A class of home buyers who claim that a builder used defective drywall presents a common question: was the drywall defective? That question can be answered with common proof. A class of consumers who claim that a company made false statements in advertising presents a common question: were the statements false? That question can be answered with common proof.
A class of plaintiffs who claim that a company discriminated against them in individual transactions may not present a common question. The question may be whether each individual was discriminated against. That question requires individual proof.
Chapter 3: Typicality – Rule 23(a)(3)
Rule 23(a)(3) requires that “the claims or defenses of the representative parties are typical of the claims or defenses of the class.”
The typicality requirement ensures that the class representative’s interests are aligned with the interests of the class. The representative must have the same interest as the class members. The representative may not have a unique defense that would make the representative a less vigorous advocate.
Typicality is not demanding. The claims need not be identical. They must be “coextensive.” If the representative’s claim arises from the same event or course of conduct and is based on the same legal theory, typicality is satisfied.
In Falcon v. General Telephone Co. of the Southwest (1982) , the Court held that a plaintiff who claimed discrimination in hiring could not represent a class that also claimed discrimination in promotion. The claims were not typical. The representative’s claim required different proof.
Chapter 4: Adequacy – Rule 23(a)(4)
Rule 23(a)(4) requires that “the representative parties will fairly and adequately protect the interests of the class.”
Adequacy has two components. First, the class representative must have interests that are not antagonistic to the class. Second, the class attorney must be qualified to conduct the litigation.
Adequacy of the representative. The representative must be a member of the class. The representative must have a stake in the outcome. The representative must not have conflicts of interest. A representative who is subject to a unique defense may not be adequate. The defense may cause the representative to focus on protecting himself rather than the class.
Adequacy of counsel. The court must determine that the class attorney is experienced, knowledgeable, and competent. The attorney must have sufficient resources to litigate a complex class action. The attorney must not have conflicts of interest that would impair the representation of the class.
The court has the duty to inquire into the adequacy of the representation. The court may appoint independent counsel to represent the class if the named representative’s counsel is inadequate.
PART TWO: THE TYPES OF CLASS ACTIONS – RULE 23(b)
Chapter 5: The Three Categories
Rule 23(b) provides three types of class actions. The class must fit within one of the three categories.
Rule 23(b)(1) is for cases where separate actions would create a risk of inconsistent adjudications or would impair the ability of absent parties to protect their interests.
Rule 23(b)(2) is for cases where the defendant has acted on grounds generally applicable to the class, and the primary relief sought is injunctive or declaratory.
Rule 23(b)(3) is for damages actions where common questions predominate and a class action is superior to other methods of adjudication.
Chapter 6: (b)(1) – Inconsistent Adjudications and Limited Fund
Rule 23(b)(1)(A) applies when separate actions would create a risk of inconsistent adjudications that would establish incompatible standards of conduct for the defendant. A company that issues bonds may face a class action from bondholders. If separate actions resulted in different interpretations of the bond, the company would not know how to comply.
Rule 23(b)(1)(B) applies when separate actions would impair the ability of class members to protect their interests. A limited fund case is the classic example. There is not enough money to pay all claimants. The first claimants to sue would take all the money. Later claimants would get nothing. A class action allows all claimants to share equally.
Ortho Pharmaceutical Corp. v. Cosby (1986) illustrates (b)(1)(B). The case involved a limited fund. The defendant faced multiple claims arising from a single event. The total of the claims exceeded the defendant’s insurance coverage. The court certified a (b)(1)(B) class to ensure equitable distribution of the limited fund.
Chapter 7: (b)(2) – Injunctive Relief
Rule 23(b)(2) applies when “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.”
(b)(2) classes are common in civil rights cases. A prison policy that applies to all inmates may be challenged by a (b)(2) class. A discriminatory hiring policy may be challenged by a (b)(2) class.
(b)(2) classes are mandatory. Class members do not have the right to opt out. There is no notice requirement, although courts often require notice. The reason is that the relief is equitable. The class members are not seeking individual damages. They are seeking a change in the defendant’s behavior.
In Wal‑Mart v. Dukes, the Court held that (b)(2) certification was improper because the plaintiffs sought significant monetary relief. The claims for backpay were not incidental to the injunctive relief. The monetary relief was individual. The class was not cohesive enough for (b)(2) certification.
Chapter 8: (b)(3) – Damages, Predominance, and Superiority
Rule 23(b)(3) is the most common type of class action. It applies when “the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.”
Predominance is a higher standard than commonality. The common questions must be the center of the case. The individual questions must be minor. In a products liability case, the question whether a drug causes cancer may predominate over individual questions of causation.
Superiority requires the court to determine that a class action is the best method for resolving the dispute. The court considers:
- The interest of class members in individually controlling their own cases.
- The extent of any pending litigation.
- The desirability of concentrating the litigation in a particular forum.
- The likely difficulties in managing a class action.
A class action may not be superior if class members have large individual claims and can afford to sue individually. A class action may be superior if class members have small claims and cannot afford to sue individually.
Notice and opt out. (b)(3) classes require notice to class members. Rule 23(c)(2) requires the best notice practicable under the circumstances. The notice must describe the action, the class definition, the claims, the right to opt out, and the binding effect of the judgment.
Class members have the right to opt out of a (b)(3) class. A class member who opts out is not bound by the judgment. The class member may sue separately.
PART THREE: CLASS CERTIFICATION PROCEDURE
Chapter 9: Timing of Certification – Rule 23(c)(1)
Rule 23(c)(1) requires the court to decide whether to certify a class “at an early practicable time.” The court may condition the certification on the class representative’s compliance with discovery obligations.
The court may certify a class even before discovery is complete. But the court must have enough information to determine whether the Rule 23 requirements are satisfied.
Chapter 10: Class Definition
The class must be defined with objective criteria. The class definition must allow the court to determine who is in the class. Subjective definitions are not permitted.
A class defined as “all persons who were injured by the defendant’s conduct” is not sufficient. The class must be defined so that a person can determine membership based on objective facts. A class defined as “all persons who were subject to the defendant’s policy of requiring overtime work without pay from January 1, 2015, to December 31, 2020” is sufficiently objective.
Chapter 11: Class Certification Hearing
The court must conduct a rigorous analysis of the Rule 23 requirements. The court may receive evidence. The court may hold an evidentiary hearing. The court may consider expert testimony.
The court’s determination is by a preponderance of the evidence. The plaintiff bears the burden of proving that the Rule 23 requirements are satisfied.
The court may not consider the merits of the case at the certification stage. The court must assume that the plaintiff’s claims are true. The court may, however, consider evidence that is relevant to the Rule 23 requirements even if the evidence also goes to the merits.
In Comcast Corp. v. Behrend (2013) , the Court held that the plaintiff must prove that damages can be measured on a class‑wide basis. The plaintiff’s damage model must be consistent with the plaintiff’s theory of liability. If the damage model does not measure damages on a class‑wide basis, the class cannot be certified.
Chapter 12: Subclasses – Rule 23(c)(4)
The court may divide a class into subclasses. Each subclass is treated as a separate class. The court must appoint separate class counsel for each subclass.
Subclasses are appropriate when the interests of class members diverge. A class of home buyers may be divided into those who purchased before a certain date and those who purchased after. The damages may be different.
Chapter 13: Certification Orders
The certification order must define the class, identify the class representative, and state the claims, defenses, and issues for the class. The order may be conditional. The court may later amend the order.
The court may decertify a class if later developments show that the class action is not manageable.
PART FOUR: NOTICE, OPT OUT, AND FINAL JUDGMENT
Chapter 14: Notice to Class Members – Rule 23(c)(2)
Rule 23(c)(2) requires notice for (b)(3) classes. The notice must be the best notice that is practicable under the circumstances. For large classes, individual notice must be sent to all class members who can be identified through reasonable effort.
The notice must state:
- The nature of the action.
- The definition of the class.
- The class claims, issues, and defenses.
- That a class member may appear through an attorney.
- That a class member may opt out.
- The binding effect of a judgment on class members who do not opt out.
The cost of notice is borne by the plaintiff. In large class actions, the cost can be substantial.
Chapter 15: Opt Out – Rule 23(c)(2)(B)(v)
Class members in a (b)(3) class may opt out. The notice must specify the time and manner for opting out. The deadline must be reasonable. The class member who opts out is not bound by the judgment. The class member may sue separately.
The right to opt out is the primary protection for absent class members. The Court has held that the Due Process Clause requires the opportunity to opt out for (b)(3) classes. Phillips Petroleum Co. v. Shutts (1985).
Chapter 16: Final Judgment – Rule 23(c)(3)
The final judgment must describe the class members who are bound by the judgment. The judgment must be specific. A judgment that binds “all persons similarly situated” is not sufficient.
The judgment in a (b)(1) or (b)(2) class binds all class members. There is no opt out. The judgment in a (b)(3) class binds class members who did not opt out.
PART FIVE: CLASS ACTION SETTLEMENT
Chapter 17: Court Approval – Rule 23(e)
Rule 23(e) requires court approval for any settlement of a class action. The court may not approve a settlement until after the certification hearing. The court must consider whether the settlement is fair, reasonable, and adequate.
The court may approve a settlement even if the class would not have been certified for trial. The parties may settle a case that would not have been certifiable. The court must still ensure that the settlement is fair.
Objections. Class members may object to the settlement. The court must consider the objections. The court may hold a fairness hearing. The court may reject the settlement if it is not fair.
Notice of settlement. The class must be given notice of the settlement. The notice must describe the terms of the settlement. The notice must inform class members of the right to object.
Class settlement and opt out. The right to opt out applies in (b)(3) class settlements. Class members must be given the opportunity to opt out of the settlement.
Coupon settlements. Rule 23(e)(2)(C) provides special scrutiny for settlements that provide non‑cash relief. A settlement that provides coupons or other non‑cash relief must be approved only if it is fair and adequate.
Chapter 18: Objectors and Objections
Class members who object to a settlement may appeal. The objector must have standing. The objector must have a concrete interest in the settlement.
In Devlin v. Scardelletti (2002) , the Court held that an unnamed class member who objected to a settlement could appeal the approval of the settlement. The objector need not intervene. The right to appeal is part of the right to object.
Chapter 19: Attorneys’ Fees in Class Actions
The class attorney is entitled to a reasonable fee. The fee may be calculated in two ways.
Percentage of the fund. The fee is a percentage of the recovery. The percentage is typically 25 to 33 percent of the common fund. This method is used when the settlement produces a fund of money.
Lodestar method. The fee is based on the number of hours worked multiplied by a reasonable hourly rate. The court may multiply the lodestar by a factor if the case was difficult or the result was exceptional.
The court may award fees even if the recovery is non‑cash. In a civil rights case that produces injunctive relief, the attorney may recover fees under 42 U.S.C. § 1988.
In Microsoft Corp. v. Baker (2017) , the Court held that a class member who objects to a settlement may not appeal the denial of class certification separately from the settlement. The objector must wait until the final judgment.
PART SIX: APPELLATE REVIEW
Chapter 20: Appeal of Class Certification – Rule 23(f)
Rule 23(f) permits the court of appeals to hear an appeal from an order granting or denying class certification. The appeal is discretionary. The party seeking appeal must file a petition within 14 days of the order.
The court of appeals considers:
- Whether the certification order involves a novel or unsettled question of law.
- Whether the certification order is manifestly erroneous.
- Whether the appeal will materially advance the ultimate termination of the litigation.
The Advisory Committee Note states that permission to appeal is most likely when the certification decision is dispositive of the case. If the denial of certification will end the case, the plaintiff may be granted permission to appeal.
Chapter 21: Appeal of Final Judgment
A class member who is bound by the final judgment may appeal. The class member need not have opted out. A class member who did not opt out is bound by the judgment. The class member may also appeal the judgment.
PART SEVEN: THE CLASS ACTION FAIRNESS ACT OF 2005 (CAFA)
Chapter 22: Expansion of Federal Jurisdiction
CAFA significantly expanded federal jurisdiction over class actions. The Act was passed in response to concerns that state courts were too friendly to class plaintiffs.
CAFA gives federal district courts original jurisdiction over class actions when:
- The amount in controversy exceeds $5,000,000.
- The class has at least 100 members.
- Any member of the class is a citizen of a different state from any defendant.
CAFA requires only minimal diversity. The complete diversity rule does not apply. A class action may be removed to federal court even if some class members are citizens of the same state as the defendant.
Chapter 23: Exceptions
CAFA contains exceptions. The court must decline jurisdiction if:
- The primary defendants are states, state officials, or state agencies.
- The class has fewer than 100 members.
- The amount in controversy is less than $5,000,000.
- The action is brought solely for injunctive relief.
The home state exception applies if two‑thirds or more of the class members are citizens of the state where the action was filed, and the primary defendants are citizens of that state.
The local controversy exception applies if:
- More than two‑thirds of the class members are citizens of the state where the action was filed.
- At least one defendant is a citizen of that state.
- The principal injuries occurred in that state.
- There is no other similar class action against the same defendant.
Chapter 24: Removal Under CAFA
A defendant may remove a class action under CAFA. The notice of removal must be filed within 30 days of the defendant’s receipt of the initial pleading. The defendant may remove without the consent of other defendants. The unanimity rule does not apply.
The District Court must determine whether the amount in controversy exceeds $5,000,000. The court may aggregate the claims of all class members. The court may consider the attorney’s fee demand in determining the amount.
In Dart Cherokee Basin Operating Co. v. Owens (2015) , the Court held that the notice of removal need only plausibly allege that the amount in controversy is satisfied. The plaintiff may challenge the allegation.
APPENDIX 1: GLOSSARY
Adequacy of representation – The requirement that the class representative and class counsel will fairly and adequately protect the interests of the class.
CAFA – The Class Action Fairness Act of 2005. Expanded federal jurisdiction over class actions.
Class definition – The description of the class. Must be objective and allow the court to determine who is in the class.
Commonality – The requirement that there are questions of law or fact common to the class. Commonality requires that the common questions be capable of class‑wide resolution.
Coupon settlement – A settlement that provides non‑cash relief. Subject to special scrutiny under Rule 23(e)(2)(C).
Home state exception – An exception to CAFA jurisdiction when two‑thirds of the class members and the primary defendants are citizens of the state where the action was filed.
Local controversy exception – An exception to CAFA jurisdiction when more than two‑thirds of the class members are citizens of the state where the action was filed, at least one defendant is a citizen of that state, and the principal injuries occurred in that state.
Numerosity – The requirement that the class is so numerous that joinder of all members is impracticable.
Opt out – The right of a class member in a (b)(3) class to exclude themselves from the class. An opt out is not bound by the judgment.
Predominance – The requirement that common questions predominate over individual questions in a (b)(3) class action.
Rule 23 – The Federal Rule of Civil Procedure governing class actions.
Superiority – The requirement that a class action is superior to other methods of adjudication in a (b)(3) class action.
Typicality – The requirement that the claims of the class representative are typical of the claims of the class.
APPENDIX 2: SELECT BIBLIOGRAPHY
Books and Treatises
Newberg, Herbert B., and William B. Rubenstein. Newberg on Class Actions. 6th ed. Thomson Reuters, 2022 (5 volumes).
Rubinstein, William B. “The Future of Class Actions in the Federal Courts.” Harvard Law Review 132 (2019): 1.
Yeazell, Stephen C., and Joanna C. Schwartz. Civil Procedure. 10th ed. Wolters Kluwer, 2019 (Chapter 6 – Class Actions).
Leading Cases
Wal‑Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011).
Comcast Corp. v. Behrend, 569 U.S. 27 (2013).
Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997).
Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999).
Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985).
Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974).
Dart Cherokee Basin Operating Co. v. Owens, 575 U.S. 32 (2015).
Law Review Articles
Bone, Robert G. “The Glorious Past and Uncertain Future of the Bundle of Rights Metaphor.” William & Mary Law Review 62 (2021): 1.
Burbank, Stephen B. “The Class Action Fairness Act of 2005 in Historical Context: A Preliminary View.” University of Pennsylvania Law Review 156 (2008): 1439.
Coffee, John C., Jr. “Class Wars: The Dilemma of the Mass Tort Class Action.” Columbia Law Review 95 (1995): 1343.
Issacharoff, Samuel. “Class Action Conflicts.” University of Chicago Law Review 80 (2013): 27.
Marcus, Richard L. “Reviving Rule 23(b)(3) After Wal‑Mart.” Duke Law Journal 62 (2012): 1.
Miller, Arthur R. “The New Class Action Rule: Federal Rule of Civil Procedure 23.” New York Law School Law Review 42 (1998): 1.
Nagareda, Richard A. “Class Certification in the Age of Aggregate Proof.” Cornell Law Review 84 (1999): 1567.
Nagareda, Richard A. “The Preexisting Duty Rule and the Future of Class Actions.” Vanderbilt Law Review 60 (2007): 1.
Redish, Martin H. “Wholesale Justice: Constitutional Democracy and the Problem of the Class Action Lawsuit.” Stanford Law Review 54 (2002): 1585.
Rubenstein, William B. “The Fairness Hearing: A Comparative Look at the Rule 23 Hearing on Class Action Settlement.” Columbia Law Review 107 (2007): 1.
Tidmarsh, Jay. “The Future of Class Action Procedure.” University of Pittsburgh Law Review 75 (2014): 1.
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