A Rule 23(f) Refresher.
A Rule 23(f) Refresher
A recent opinion from the Third Circuit, Laudato v. EQT Corporation, 23 F.4th 256 (3d Cir. 2022), provides a helpful refresher on the procedure for obtaining interlocutory review of district courts’ class certification decisions—and also confirms the Third Circuit as perhaps the most liberal circuit in granting such review. This post will summarize the outcome and takeaways from Laudato as well as provide a survey of the standards that the circuits apply to requests for interlocutory review of class certification decisions.
I. Rule 23(f) Background
Rule 23(f) permits discretionary interlocutory appellate review of class certification decisions. As characterized by the Advisory Committee Notes, the discretion is “unfettered” and “akin to the discretion exercised by the Supreme Court in acting on a petition for certiorari.” Fed. R. Civ. P. 23(f) advisory committee’s note to 1998 amendment.
In practice, as described below, the various circuit courts of appeals apply differing but overlapping standards to determine whether to grant interlocutory review. The Third Circuit’s standard for Rule 23(f) interlocutory review remains arguably the most liberal and broad, as reiterated in Laudato.
II. The Third Circuit’s Approach: Laudato v. EQT Corporation, 23 F.4th 256 (3d Cir. 2022)
The Laudato case (originally known as Asbury v. EQT Corporation in the Western District of Pennsylvania), involved approximately 100 landowners’ claims against natural gas producers for storing natural gas in the landowners’ underground pore space. Asbury v. EQT Corp., No. CV 18-1005, 2021 WL 4897200, at *1 (W.D. Pa. Sept. 29, 2021). The district court granted the plaintiff’s motion for class certification without defining the class that was being certified. Id. at *1. Instead, the court ordered the parties to meet and confer regarding an appropriate class definition. Id.
In its order, the district court overtly encouraged the parties to settle, ordering another round of mediation and stating that it would be willing to suspend the parties’ filing requirements while settlement was being explored and/or completed. Id. at *3. The court noted that “it would seem in everyone’s best interests to resolve this case on a class basis,” because it would allow the defendants to definitively establish their rights and liabilities and for the plaintiffs to receive just compensation. Id. at *1 (emphasis original). The district court also wrote that “[a]ssuming Defendants are, true to their words, desirous of resolving the potential liabilities . . . it would appear in their interests to agree upon a . . . class definition.” Id. at *2.
The defendants filed a petition to appeal the district court’s certification decision with the Third Circuit Court of Appeals pursuant to Rule 23(f). On appeal, the Third Circuit granted the defendants’ motion, rejecting the plaintiff’s argument that the appeal should not be allowed because class certification was only preliminarily granted. Laudato, 23 F.4th at 259-61. To the contrary, the Third Circuit held, the district court’s decision unambiguously granted class certification. Id. That it did so without defining the class did not make the order granting class certification any less subject to a Rule 23(f) appeal. Id.
The Third Circuit stressed that, in contrast to other circuit courts of appeals, it uses “a more liberal standard” when exercising its “broad discretion” in the Rule 23(f) context. Id. at 260. Notably, the court provided the following nonexclusive list of factors that support interlocutory review:
- “when denial of certification effectively terminates the litigation because the value of each plaintiff’s claim is outweighed by the costs of stand-alone litigation”;
- “when class certification risks placing inordinate pressure on defendants to settle”;
- “when an appeal implicates novel or unsettled questions of law”;
- “when the district court’s class certification determination was erroneous”;
- and “when the appeal might facilitate development of the law on class certification.”
Id. (citing Rodriguez v. Nat’l City Bank, 726 F.3d 372, 376–77 (3d Cir. 2013) (internal punctuation omitted)).
The Third Circuit held that the defendants had shown that class certification risked placing inordinate pressure on the defendants to settle. Id. at 261. The court took issue with the district court’s opinion’s implied encouragement to settle, noting that this could exert even more pressure to settle than a typical grant of class certification. Id. Additionally, the court noted that “an appeal would present this Court with an opportunity to facilitate development of the law on class certification.” Id.
On August 3, 2022, the Third Circuit released its decision on the merits of the defendants’ Rule 23(f) appeal, reversing the certification order and remanding the case. Laudato v. EQT Corp., No. 22-1224, 2022 WL 3081871 (3d Cir. Aug. 3, 2022). The court held that the district court had failed to conduct a sufficiently rigorous analysis of whether the named plaintiff satisfied Rule 23(a) and (b). Id. at *2. On remand, the district court remains free to determine that class certification is appropriate. Id. Any class certification order, however, must include a definition of the class and a complete list of claims to be treated on a class basis. Id.
With its Laudato opinion, the Third Circuit confirms that its standard for granting Rule 23(f) review remains liberal and subject to its “extremely broad discretion.” It is also noteworthy that the Third Circuit used this particular case to highlight its liberal approach. The standard for granting a Rule 23(f) petition would not need to be terribly liberal in order to allow appellate review when a class certification motion is granted with overt encouragement to settle, but the certified class is not even defined. The court’s decision to provide a nonexclusive list of circumstances that warrant Rule 23(f) appeal may further emphasize its willingness to allow these appeals. To avoid being overrun by appeals, the Third Circuit will likely rely on its discretion to exclude class certification orders that appear to fall into an appealable category.
III. The Various Circuit Courts’ Rule 23(f) Standards
Each of the circuit courts of appeals, aside from the Fifth Circuit, Eighth Circuit, and Federal Circuit, have provided opinions with guidance on when they will allow interlocutory appeals of class certification decisions. The differences between the approaches are subtle, and there is substantial overlap among areas of interest to the courts. Below is a brief overview of what the circuit courts of appeals view as important in making their decisions.
- First, Second, Sixth, Seventh, Ninth, Tenth, and DC Circuits
Although each of these circuits applies its own nuance to the inquiry, they generally rely on the presence of three factors to determine whether leave to appeal should be granted: 1) If the denial or grant of class status effectively ends the litigation by making it unfeasible for the plaintiff to proceed, or by exerting undue pressure on the defendant to settle; 2) if the appeal will permit the resolution of an unsettled legal issue that will evade review absent interlocutory appellate review; and 3) if the district court’s decision is erroneous. Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 293-94 (1st Cir. 2000); Hevesi v. Citigroup Inc., 366 F.3d 70, 76 (2d Cir. 2004); In re Delta Air Lines, 310 F.3d 953, 959 (6th Cir. 2002); Blair v. Equifax Check Servs., Inc., 181 F.3d 832 (7th Cir. 1999) (without requiring demonstration of clearly erroneous district court decision); Chamberlan v. Ford Motor Co., 402 F.3d 952, 959 (9th Cir. 2005) (further noting that interlocutory review is allowed “sparingly.”); Vallario v. Vandehey, 554 F.3d 1259, 1262 (10th Cir. 2009); In re Lorazepam & Clorazepate Antitrust Litig., 289 F.3d 98, 105 (D.C. Cir. 2002).
b. Fourth and Eleventh Circuits
The Fourth and Eleventh Circuit Courts of Appeals rely on five factors to determine whether Rule 23(f) review is appropriate: (1) whether the certification ruling is likely dispositive of the litigation; (2) whether the district court’s certification decision contains a substantial weakness; (3) whether the appeal will permit the resolution of an unsettled legal question of general importance; (4) the nature and status of the litigation before the district court (such as the presence of outstanding dispositive motions and the status of discovery); and (5) the likelihood that future events will make appellate review more or less appropriate. Lienhart v. Dryvit Sys., Inc., 255 F.3d 138, 144-45 (4th Cir. 2001); Prado-Steiman ex rel. Prado v. Bush, 221 F.3d 1266, 1274-76 (11th Cir. 2000); In re Delta Air Lines, 310 F.3d 953, 959 (6th Cir. 2002) (with an examination of the posture of the case to determine appropriateness of appeal). In the Fourth Circuit, if the certification decision is very likely to be reversed on appeal, a lesser showing of the remaining factors can suffice. Lienhart 255 F.3d at 144.
The circuit courts of appeals rely on different but mostly overlapping factors in determining whether to grant Rule 23(f) interlocutory review. In Laudato, the Third Circuit has reiterated its liberal willingness to grant Rule 23(f) review in a broad range of cases.