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By: R. Bruce Allensworth, Andrew C. Glass, David D. Christensen

A recent decision of the Third Circuit Court of Appeals significantly bolsters the standard of proof that plaintiffs must satisfy in motions for class certification under Rule 23 of the Federal Rules of Civil Procedure (“Rule 23”).  In In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305 (3d Cir. 2008, as amended Jan. 16, 2009), the Third Circuit emphasized that the broad discretion district courts have to control the class certification process does not “soften the rule” that each requirement of Rule 23 must be satisfied.  Class certification is a critical stage of any class action because it is the point at which the court decides whether the action may proceed on a classwide basis rather than simply as an individual case.  Rule 23(a) requires plaintiffs to demonstrate, in part, that there are questions of fact or law common to the class, and Rule 23(b)(3) requires plaintiffs to establish, in part, that those common questions predominate over questions affecting only individual members.  Because the class certification decision is often the defining moment of a class action – one that can signal the “death knell” for plaintiffs or place “unwarranted pressure” on defendants to settle meritless claims – the Third Circuit instructed that district courts must engage in a “thorough examination of the factual and legal allegations” raised by the action.  Further, because In re Hydrogen Peroxide was authored by Third Circuit Chief Judge Anthony J. Scirica, who as chair of the Standing Committee on Rules of Practice and Procedure oversaw extensive revisions to Rule 23, the decision is likely to impact federal courts’ class action jurisprudence nationwide.

With its decision, the Third Circuit clarified three aspects central to the class certification process, discussed in turn below. 

A Mere “Threshold Showing” of Predominance Does Not Satisfy Rule 23
In certifying a Rule 23(b)(3) class, which is a class that seeks primarily money damages, the district court stated that “[s]o long as plaintiffs demonstrate their intention to prove a significant portion of their case through factual evidence and legal arguments common to all class members, that will now suffice.”  Id. at 321.  The district court further stated that “plaintiffs need only make a threshold showing” that common questions predominate over individual ones.  Id.  The Third Circuit ruled, however, that neither plaintiffs’ expressed intentions nor a mere threshold showing could satisfy Rule 23.  Reversing the district court, the Third Circuit held that plaintiffs must actually set forth evidentiary proof, rather than a promise to do so at some future point, that class certification is warranted under Rule 23.  In addition, the court ruled that plaintiffs must establish the Rule 23 requirements by a preponderance of the evidence.  In other words, plaintiffs must demonstrate that the “evidence more likely than not establishes each fact necessary to meet the requirements of Rule 23.”  Id. at 320.  The Third Circuit criticized the district court for adopting a “lenient” burden, or presumption of deference, for the party seeking certification.

Courts Must Resolve Relevant Factual and Legal Disputes When Ruling on Class Certification Motions
In re Hydrogen Peroxide requires district courts to resolve all factual or legal disputes that would affect the court’s certification decision.  This may even require an analysis of the merits of the case at the class certification stage to determine whether certification is appropriate.  An analysis of the substantive elements of plaintiffs’ claims may also be necessary to evaluate whether plaintiffs have set forth a feasible trial plan where one is required by a court, namely one showing that the claims are susceptible to proof on a classwide basis.  Plaintiffs’ assurances that they intend or plan to devise a feasible trial plan at some future point do not meet their burden. 

Courts Must Weigh Expert Testimony
In conjunction with ruling that district courts must consider all relevant evidence necessary to decide class certification, the Third Circuit emphasized that this ruling encompasses consideration of expert testimony.  The court rejected the district court’s assumption that it could not weigh the parties’ competing expert testimony in deciding whether to certify a class.  Accordingly, under In re Hydrogen Peroxide, where expert testimony is necessary to the class certification decision, a district court must resolve disputes between competing expert testimony.  Furthermore, neither credibility issues nor concern for addressing the merits of a case can impede the rigorous analysis required to resolve such disputes.

Impact on Class Action Defense
The Third Circuit decision is likely to impact federal courts’ class action jurisprudence nationwide.   As noted, Chief Judge Scirica served from 1998 to 2003 as chair of the Standing Committee on Rules of Practice and Procedure.  In this role, the Chief Judge oversaw extensive revisions to Rule 23, which revisions support conducting a rigorous analysis of each class certification motion. 

For class action defendants, In re Hydrogen Peroxide heralds a welcomed bolstering of the standard of proof that plaintiffs must satisfy.  Other aspects of the decision will also likely benefit class action defendants, including the emphasis on courts understanding how the merits of class claims intersect with class certification and the role expert testimony can play in defeating class certification.