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Third Circuit Raises Bar for Class Certification

By Kristine L. Roberts, Litigation News Associate Editor – February 19, 2009

A recent ruling by the U.S. Court of Appeals for the Third Circuit adds to the line of cases requiring a more extensive inquiry into the class certification requirements of Federal Rule of Civil Procedure 23. In In re Hydrogen Peroxide Antitrust Litigation, a unanimous panel vacated the district court’s order certifying an antitrust class action and announced stringent standards for class certification procedures.

In 2005, several plaintiffs brought class actions claiming that manufacturers of hydrogen peroxide and related products had conspired to fix prices from 1994 through 2005. The cases were consolidated. After extensive discovery, the plaintiffs moved to certify a class, which the district court granted [PDF]. The Third Circuit allowed interlocutory review of the certification order under Rule 23(f).

In a 55-page opinion, Chief Judge Anthony J. Scirica clarified three aspects of class certification:

  • the decision to certify a class requires the court to find that each requirement of Rule 23 has been met, and any factual determination must be made by a preponderance of the evidence;
  • the courts must resolve all factual and legal disputes relevant to class certification, even if they overlap with the merits; and
  • the obligation to conduct a rigorous analysis extends to expert testimony.

Noting the lack of guidance on the “rigorous analysis” standard adopted by the U.S. Supreme Court in General Telephone Company v. Falcone in 1982, the Third Circuit stated that the Rule 23 requirements “are not mere pleading rules.” The court rejected a “threshold showing” standard, holding that a party’s assurance that it intends to satisfy Rule 23 is not enough.

Rigorous Analysis
Bradley C. Weber, Dallas, cochair of the ABA Section of Litigation’s Antitrust Litigation Committee, says that this aspect of the decision “brings the Third Circuit in line with other circuits requiring a rigorous analysis for class certification and rejecting reliance on the allegations contained in pleadings.”

Certification and Merits
The court also held that the existence of an overlap between class certification and the merits of a claim “is no reason to decline to resolve relevant dispute when necessary to determine whether a class certification requirement is met.” Weber points out that in the past courts were reluctant to become embroiled in fact disputes and weighing evidence. Now, says Weber, the Third Circuit joins a number of other circuits that require courts to decide such issues, even though the jury may ultimately reach a different conclusion.

Expert Testimony
Finally, the court held that weighing conflicting expert testimony at the class certification stage “is not only permissible; it may be integral to the rigorous analysis Rule 23 demands.” Matthew Heffner, Chicago, cochair of the Rule 23 Subcommittee of the Section’s Class Actions and Derivative Suits Committee, says that this holding may mean that litigants in the Third Circuit will invest more time and money on experts earlier in the litigation.

“If experts must prepare comprehensive reports, give deposition testimony, and spend time rebutting opposing experts’ opinions, the costs at the class certification stage will be much greater,” Heffner says.

Analysis of Rule 23
Andrew J. McGuinness, Ann Arbor, MI, cochair of the Antitrust subcommittee of the Section’s Class Actions and Derivative Suits Committee, observes that the panel relied on the 2003 Amendments to Rule 23, which, among other things, eliminated language stating that class certification could be granted on a tentative basis and altered the timing of the certification decision to allow for more thorough consideration.

The court used these amendments to address perceived contradictions in Third Circuit jurisprudence and bolster the “rigorous analysis” standard, explains McGuinness.

The impact of the decision outside of the Third Circuit and antitrust law remains to be seen. McGuinness notes that the court did not limit its analysis of Rule 23 to the antitrust context. Weber agrees that the principles announced regarding class certification are not restricted to antitrust cases. Yet Heffner maintains that “the decision is going to be a lot more influential in the area of antitrust law than in other areas.  The analysis can differ significantly depending on the type of case.”

Keywords: Antitrust, class actions, class certification, In re Hydrogen Peroxide Antitrust Litigation, Third Circuit, Federal Rules of Civil Procedure, Rule 23


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