A Lesson in the Commonality and Predominance Criteria of Federal Rule 23

Reyes v. Netdeposit, LLC, 802 F.3d 469 (3d Cir. 2015).  Sometimes things slip through the cracks.  This opinion by Chief Judge McKee was issued on September 2, but only now is it being discussed here.  This was a RICO class action in which the District Court denied class certification on the ground that there were no common issues, so that plaintiff could not satisfy either the commonality requirement of Federal Rule of Civil Procedure 23(a)(2) or the predominance of common questions of law and fact over individual issues, as required by Rule 23(b)(3).

The Third Circuit reversed and remanded for reconsideration under the standards that the Third Circuit articulated.  Among those were that plaintiff need only have proven factual issues by a preponderance of the evidence.  The District Court had wrongly held plaintiff to a higher standard, what Chief Judge McKee called “a burden of absolute proof.”

The commonality and predominance criteria are often treated together, and the District Court did that here.  Chief Judge McKee found no fault with that, but discussed the two prongs separately “in the interest of clarity.”

“Commonality does not require perfect identity of questions of law or fact among all class members.”  A single common question suffices.  To satisfy commonality, “th[e] bar is not a high one.”  Defendants cannot confuse the issue by focusing on supposed differences among class members because “[a] court’s focus must be on whether the defendant’s conduct [is] common as to all of the class members.”  These forgiving tests are not limited to RICO class actions, since Chief Judge McKee cited class action precedents of other types in support of those statements.

Plaintiff here offered a theory that relied on “a common mode of behavior and a general policy of fraud” by defendants.  The panel distinguished Wal-Mart Stores, Inc. v. Dukes, ___ U.S. ___, 131 S.Ct. 2541 (2011), which found no commonality where “the defendant operated in a discretionary, and thus arguably individualized way toward the members of the proposed class,” not in a common manner as plaintiff here suggested.

On predominance, the panel was similarly favorable to plaintiff in this case, and to plaintiffs in all cases.  Chief Judge McKee noted that, as with commonality, “the focus is on whether the defendant’s conduct was common to as to all of the class members, not on whether each plaintiff has a colorable claim.”  The District Court had relied on the fact that defendants used differing sales pitches in its allegedly wrongful conduct.  Chief Judge McKee rejected that rationale.  “[I]f absolute conformity of conduct and harm were required for class certification, unscrupulous businesses could victimize consumers with impunity merely by tweaking the language in a telemarketing script or directing some (or all) of the telemarketers not to use a script at all but to simply orally convey a general theme ….”  That would insulate those defendants from class actions, a result not contemplated by prior precedents, even those on which defendants relied.

Chief Judge McKee went on to emphasize the importance of class actions as “the only practical check against the kind of widespread mass-marketing scheme” alleged in this case.  He also observed that class actions “have the practical effect of allowing plaintiffs who have suffered relatively de minimis loss to nevertheless function as private attorneys general and thereby deter fraud in the marketplace.”  This ringing endorsement of class actions, along with the panel’s rulings that demonstrating commonality and predominance is more readily achieved than the District Court had believed, will be very useful to plaintiffs in class action cases going forward.