The Sixth Circuit Court of Appeals last week affirmed a denial of class certification in Pilgrim v. Universal Health Card, one of the first appellate opinions in the country relying on the Supreme Court’s watershed class certification opinion of Wal-Mart v. Dukes in a consumer class action. In the process, the Sixth Circuit may have also given new traction to a potent but rarely used tactic in the defense playbook, the early preemptive motion to deny class certification or strike class allegations.
The defendant company in Pilgrim marketed a healthcare discount program. Members were supposed to receive, in exchange for a membership fee, discounts at health care providers in the program’s network. Two individuals found the program wanting because of a lack of participating providers in their area. They sued claiming the companies’ advertising was deceptive, and sought certification of a nationwide class of about 30,000 people. Not long after answering, the defendant filed a motion to strike the class allegations. The district court granted that motion, and then dismissed for lack of subject matter jurisdiction because, stripped of class allegations, the named plaintiffs’ own claims fell short of amount-in-controversy requirements for federal jurisdiction.
The Sixth Circuit affirmed in last week’s decision, written by Judge Jeffrey Sutton, an influential jurist reputed to be on the short list for a Supreme Court nomination in a Republican administration, and whose views will carry weight with judges in other Circuits. The court first held that Rule 23(b)(3)’s requirement that common issues of law or fact predominate was not met because “each class member’s claim would be governed by the law of the State in which he made the challenged purchase, and the differences between the consumer-protection laws of the many affected States would cast a long shadow over any common issues of fact plaintiffs might establish.” In so holding, the Sixth Circuit echoes other courts (like In re Bridgestone/Firestone and Castano v. American Tobacco) that have been skeptical of nationwide class actions that try to join together claims under fifty different states’ laws, which often vary in material respects. How, after all, would the court possibly instruct a jury on all those different states’ laws?
This, of course, is not the first and certainly won’t be the last consumer class decision to rely on Wal-Mart or to address whether claims under a multiplicity of state laws can be certified as a unified class. But, where it may well have more lasting significance is in its acceptance of the defense strategy of preemptively moving to strike class allegations.
In consumer class actions, the class certification decision is often the single most important juncture in the case because without the leverage that class status confers, plaintiffs have no incentive to continue litigating their own individual claims, which are often worth only a few dollars. Normally in federal court, that crucial decision comes after a motion by the plaintiff, who thus controls the timing. And the timetable has been trending later and later. Prior to 2003, Rule 23 required class certification to be decided “as soon as practicable after commencement of an action,” but that language has now been changed to “an early practicable time.” What’s more, prominent recent decisions such as In re Hydrogen Peroxide emphasize that class should be decided on a robust factual record after ample discovery.
With those marching orders, district courts have become more gun-shy about deciding class certification on the pleadings or before significant factual development. For their part, plaintiffs have generally welcomed the more protracted schedule: When the day of reckoning finally comes, they may be less likely to get a class certified due to the heightened standards of decisions like Wal-Mart and Hydrogen Peroxide; but in the meantime, they enjoy considerable leverage just from the overhanging threat of class certification (not to mention the ability to impose costs on their opponents through often burdensome discovery).
In this case, however, the Sixth Circuit bucked the trend. “The problem for the plaintiffs,” the Sixth Circuit explained, “is that we cannot see how discovery or for that matter more time would have helped them.” In short, “no proffered or potential factual development offers any hope of altering” the obstacles to class certification. Thus, it was fully appropriate for the district court to dispose of the class issue through the early motion to strike.
This more aggressive approach to weeding out defective class actions could be seen as the class analogue to Bell Atlantic Corp v. Twombly, a landmark 2007 Supreme Court decision empowering district courts to dismiss at the outset complaints that do not pass a threshold “plausibility” test. To be sure, the strategy won’t work in every case. In closer situations, where class certification turns on genuinely disputed issues of fact and requires complicated analysis, a pleadings-stage motion to strike probably will be unavailing. But in cases where the obstacles to class certification look overwhelming, the Sixth Circuit’s decision may give new vigor to a defense strategy that has seen mixed results in the past. The cost of the long, hard discovery slog that usually precedes class certification is reason enough for defendants in putative class actions -- particularly those in the Sixth Circuit states of Michigan, Ohio, Kentucky, and Tennessee -- to take a close look at whether there is a better way.