Josh H. Beisner and Brian D. Boyle*
A series of recent decisions rejecting certification of purported
nationwide class actions (both for trial and settlement purposes)
and several proposed amendments to Fed. R. Civ. P. 23 appear to
be stemming the flow of class action filings into the federal courts.
However, these recent developments are spawning a rapidly increasing
role for state courts in class action litigation, as plaintiffs'
counsel seek new, potentially friendlier fora in which to press
arguments that have not fared well in the federal courts.
This prospect of accelerating class action exposure in state courts
poses challenges for class defendants, particularly for out-of-state
defendants facing hostile local courts and jury pools. An increasing
premium is being placed on skillful employment of federal jurisdiction
and removal doctrines. And state courts, which generally have resisted
entreaties to draw major distinctions between state and federal
rules governing class actions, are facing a new round of invitations
to part company with the federal class action model.
The Federal Decisions
During the past eighteen months, five federal circuit courts have
addressed purported nationwide class actions involving common law
claims and have found them wanting under Rule 23(b)'s "predominance"
test. First, in the Rhone-Poulenc case, the Seventh Circuit (per
Judge Posner) overturned a district court order certifying a nationwide
class of hemophiliacs who allegedly had suffered injury from a blood-thickening
drug. Instrumental to the court's holding was the conclusion that
the state common law standards governing the putative class claims-primarily
negligence standards-varied materially among the various states.
The court concluded that these divergent state standards made it
impossible to craft a manageable set of common law jury instructions.
The Sixth Circuit followed with a similar holding in the American
Medical Systems case, granting a writ of mandamus to dissolve a
certified class in a medical prothesis case. The court specifically
noted its concurrence with Judge Posner's state law variations analysis
In June 1996, the Third and Fifth Circuits joined the chorus in
rapid succession. In the Castano case (discussed in the Fall 1996
issue of Litigation News), the Fifth Circuit reversed an order certifying
a nationwide class of cigarette smokers on non-personal injury claims
alleging that tobacco companies had fraudulently concealed the addictive
nature of tobacco. The court assumed that the individuated laws
of each of the fifty states would apply, and citing Rhone-Poulenc,
the court concluded that no single trial - and no single jury -
could manage such a epic proceeding consistent with Rule 23. And
last September, the Eleventh Circuit (in the Andrews case) reversed
and remanded a case involving alleged fraud in "900-number"
telemarketing programs, finding that the trial court had abused
its discretion in finding that the cases would be manageable.
This skepticism concerning the manageability of any nationwide
class trial of common law claims has developed alongside increasing
federal court hostility toward settlements of class actions that,
if proposed for trial, would fail to meet the certification requirements
of Rule 23. For example, in its Georgine decision, the Third Circuit
echoed the predominance/manageability concerns of its fellow appellate
courts in rejecting a proposed settlement of the claims of all persons
who had been exposed to cancer-causing asbestos, whether or not
they claimed any present injuries. The court found the "number
of uncommon issues" in the proceeding to be "colossal."
But more fundamentally, the court held that classes certified for
settlement purposes only must still meet the requirements of Rule
23, as though the matter were going to be tried. Reiterating the
views expressed in its 1995 GM Truck Fuel Tank Litigation decision,
the Third Circuit stated that "'a class is a class is a class'"
and that "'there is no language in [Rule 23] that can be read
to authorize separate, liberalized criteria for settlement classes.'"
The Supreme Court granted certiorari in the case and recently heard
oral argument on this critical class settlement issue. If Georgine
is upheld, the ruling will further lessen the attractiveness of
the federal courts to class action plaintiffs' counsel who will
elect to litigate in state courts for the additional reason that
it may be easier to settle cases there.
Proposed Rule 23 Amendments
As discussed in detail in the Fall 1996 issue of Litigation News,
the Advisory Committee on Civil Rules has proposed a series of amendments
to Rule 23. Although the amendments under consideration are hardly
revolutionary, they would make certification of class actions in
federal court somewhat more difficult. For example, the amendments
would require a trial court to weigh the burdens of class litigation
against the likely benefits to class members (a test to weed out
cases that in terms of individual recovery "just ain't worth
it"). Another amendment would authorize appellate review of
class certification at the discretion of the court of appeals, a
step that may cause more careful scrutiny of class proposals at
the trial court level. And another provision would specifically
authorize the certification of settlement classes, even in instances
where a case could not be afforded class treatment for purposes
Despite arguments by many frequent targets of purported class actions
that the Committee should proceed with recommending adoption of
all (or at least most) of the proposed amendments at a meeting in
early May 1997, there are indications that the Committee will defer
recommending any changes until next year, allowing time for the
Committee to absorb the Supreme Court's decision in Georgine expected
later in the year.
State Courts to the Fore?
The federal court's increasing hostility toward certification of
class actions requiring the application of multiple states' laws,
their increasing scrutiny of settlement classes, and the possibility
that more restrictive class certification requirements will be introduced
into Rule 23 is driving class actions toward state courts. And this
phenomenon will invite immediate litigation of the question seemingly
left unanswered in the Supreme Court's 1985 Shutts decision-whether
and under what circumstances a single state's law might properly
be deemed to apply to the claims of a nationwide group of consumers.
In Shutts, of course, the Supreme Court found it inconsistent with
the Due Process Clause for the courts of Kansas to apply that state's
substantive law to the contractual claims of class members who had
no meaningful contacts whatsoever with the Kansas forum. But the
Shutts Court did not have occasion to address the possibility that
a single jurisdiction's law might properly be selected to apply
to the claims of a multistate class on the basis of the defendant's
contact with the forum-e.g., the defendant's principal place of
business or state of incorporation. While there are many grounds
for questioning the logic and constitutionality of such a choice-of-law
outcome (very recently, Chief Judge Morey Sear (E.D. La.) rejected
a "one state's law fits all" argument in the course of
denying class certification in In re Ford Motor Company Bronco II
Product Liability Litigation), the argument is now being made with
increasing frequency by plaintiffs' counsel.
The emergence of state fora as the primary class action battlegrounds
(surely an unintended result of the recent federal decisions and
rules amendment proposals) poses new challenges for class defendants.
Many state courts that are proving popular among plaintiffs' class
action counsel are, in many respects, poorly suited to manage unwieldy
multistate class litigation. For instance, many state trial courts
function without clerical assistance, have little familiarity with
the laws of other jurisdictions, and are unaccustomed to managing
complex national litigation.
As the tidal wave of state court filings continues, long-settled
class action procedural principles will be subject to a fresh examination.
Although in some locales only lip service is given to the point,
most state courts profess to abide by some hybrid of Fed. R. Civ.
P. 23 and regard federal class action precedents as authoritative.
However, these courts are now all being pressured to deviate from
federal precedent on issues that have made the federal courts less
attractive fora for instituting class litigation, and some state
courts are beginning to oblige.
Because of these and other concerns, class defendants have been
forced to devote increasing attention to the jurisdictional and
removal principles that offer safe passage to the federal courts.
In turn, as state courts have become more active in recent years,
the federal courts have been giving frequent, closer scrutiny to
jurisdictional issues that feature prominently in the removal of
class litigation. For example, after years of silence on the issue,
three decisions issued within the last year have created a split
among the Fifth and Eleventh Circuits (in the Allen and Tapscott
cases, respectively) and the Second Circuit (in its Gilman decision)
on the question whether classwide punitive damages claims may ever
be aggregated in determining whether the jurisdictional amount has
been satisfied in diversity cases.
Ultimately, legislative and quasi-legislative action may be necessary
to arrest the flood of putative class actions flowing into state
courts. Several state legislatures are considering measures to restrict
the filing and certification of class actions (particularly those
on behalf of out-of-state putative class members). However, it is
unclear that sufficient action will be taken in a sufficient number
of states to stem the tide. Ultimately, federal legislation may
be the only effective response to this burgeoning problem.
*Messrs. Beisner and Boyle, both partners in the Washington, D.C.
office of O'Melveny & Myers LLP, are class action litigators.