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Courts Split on Issue of Standing and Class Action Certification

Putative class action claims often have the potential to reach individuals across state lines, therefore invoking multiple state laws. This can be an obstacle to class certification. Say a plaintiff files a lawsuit against a company that leaked their private information during a data breach, allowing third-parties to misappropriate this information. The plaintiff discovers that the data breach contained private information about many other individuals and requests to certify a class of individuals who suffered the same harm. The judge will have to decide whether individuals residing out-of-state could fall into the class description, and if so whether these potential unnamed plaintiffs need standing in order to make certification proper. The federal circuits are not in unison on this issue.

standing and class action certification

The Debate: Is Article III Standing Required for Class Certification?

Class actions are susceptible to several forms of procedural attacks because courts want to ensure that moving forward is the proper decision. This is because class actions are expensive and will require a significant amount of time and resources. A hot topic of debate among the courts is whether the named plaintiff needs to establish standing for potential unnamed plaintiffs at the certification stage.

Law Relevant to the Certification Analysis

Federal Rule of Civil Procedure (“FRCP”) 23 governs the certification process. To allow certification, FRCP 23(a) requires the presence of numerous Class Members, common questions of law and fact, typicality among the claims and defenses, and the ability of the named plaintiffs to adequately represent the class interests. In certain situations FRCP 23(b)(3) is invoked, which requires 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.”

The Circuit Split

The federal courts have come to different conclusions on how to address standing at the certification stage. Overall, the analysis hinges on whether Article III standing for all potential Class Members is a precursor to certification. 

  1. Standing is required for all potential Class Members: This presents obstacles because all of the Class Members are not yet named and multiple state laws could apply. If the proposed class definition is too vague and could encompass individuals that might not be able to establish standing, the court will likely deny certification. As such, it is easier for defendants in these jurisdictions to argue against class certification.
  2. Standing is only required for the requesting party: In these jurisdictions, only the named plaintiff will need to establish standing. These courts generally reason that since many potential plaintiffs are unknown, it is almost impossible to establish clear standing for them at the outset. Instead, they analysis will likely turn on satisfaction of the Rule 23(b)(3) predominance test.

 

How Did the Second Circuit Recently Resolve This Issue?

The district courts within the Second Circuit were split on the standing issue for years. This was explicitly resolved in a recent decision where the court concluded that only named plaintiffs need Article III standing at the certification stage.  It seems that the Second Circuit tried to reach this conclusion in a 2013 decision when explaining that FRCP 23 should govern where multiple state laws may potentially apply. The court held that there would be no problem if the laws do not materially vary.  However, since the court failed to unambiguously require Article III standing for named plaintiffs only, other cases still came to the conclusion that standing is mandatory for unnamed potential Class Members, maintaining the split on the issue.

The Langan court indicated that its analysis is in harmony with the Supreme Court’s preference on this issue – dealing with claim variations between Class Members down the road in a substantive matter versus trying to complete this analysis at the certification stage before all Class Members are known. The Second Circuit’s take on this issue holds many positive implications for future cases, including the following:

  1. It streamlines the process. Taking a step out of the analysis allows both the parties and the court to allocate their resources more judiciously.
  2. It allows courts to focus on substantive issues. Class certification already has several requirements that focus on the merits of the claims. Courts can concentrate their efforts on analyzing the FRCP 23 requirements at the certification stage and resolving any other issues relating to varied claims or laws down the road.
  3. It provides flexibility for the proposed class definition. Plaintiffs will not have to fine-tune their proposed class definition at the certification stage, which allows them to cast a wider net of similarly situated individuals.

Other circuits who are dealing with a split on the class certification standing dilemma should consider following suit. As litigators know too well, case law is not clear unless something is explicitly stated. Failing to do so leaves the door open for courts to reach opposite conclusions to what the court intended. Regardless, litigators should realize that taking this step out of the analysis does not necessarily make certification an easy task. The proposed class will still need to withstand FRCP 23’s requirements, which is subject to the Supreme Court’s instruction that courts need to complete a “rigorous analysis” under this rule.

Filed under: class action

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