Laudato v. EQT Corporation, ___ F.4th ___ (3d Cir. 2022). Federal Rule of Civil Procedure 23(f) states that “[a] court of appeals may permit an appeal from an order granting or denying class-action certification under [Federal Rule of Civil Procedure 23], but not from an order under Rule 23(e)(1).” There is no explanation in Rule 23(f) as to when such permission should be granted. In this opinion by Judge Smith, which involved an unusual District Court ruling on a motion for class certification, the Third Circuit amplified the standard that it applies and distinguished that standard from those of certain other Circuits.
This putative class action complained that defendant had been “storing natural gas in six separate storage fields, thereby utilizing the landowners’ underground pore space without providing them due compensation” (footnote omitted). The District Court, stating that “it would seem in everyone’s best interests to resolve this case on a class basis,” said that “class certification will be granted, with instructions…. In sum, the Court is convinced, and therefore holds, that class treatment is appropriate.”
But the court rejected plaintiff’s proposed class definition, directed the parties to meet and confer about an “appropriate” definition, and withheld a ruling on the appointment of a class representative, class counsel, and certification of certain issues. The court said that it “summarily will adopt the side’s proposals that are most reasonable and consistent with the law.”
Defendant sought review under Rule 23(f). Plaintiff opposed that, arguing first that the District Court had not entered an order that granted or denied class certification. Judge Smith disagreed. The District Court’s order “contained its final word on certification itself, leaving only the action of summarily adopting whatever reasonable proposal might arise from the parties’ conference.” Accordingly, the order granted class certification and could properly be the subject of a Rule 23(f) application.
Judge Smith then turned to the standard for granting Rule 23(f) review. “The Committee Notes from Rule 23’s 1998 amendment describe this [Rule 23(f)] permission as granting something ‘akin to the discretion exercised by the Supreme Court in acting on a petition for certiorari’ and as giving courts of appeals ‘unfettered discretion.’” Plaintiff invoked cases from the Second and Seventh Circuits, which adopted “restrictive standards of review that will rarely be met.”
But contrary to some other Circuits, Judge Smith said, quoting Rodriguez v. Nat’l City Bank, 726 F.3d 372, 376–77 (3d Cir. 2013), the Third Circuit “exercises our very broad discretion using a more liberal standard.” Rodriguez “identified several circumstances in which appellate review is appropriate,” including: “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.” Some of those considerations came from Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 164–65 (3d Cir. 2001).
Each side offered three reasons why review should, or should not, be granted. The panel granted review, focusing primarily on the “pressure to settle” criterion. The uncertainty about the class definition, Judge Smith said, might create even more settlement pressure than normal. Added to that was the fact that the District Judge “repeatedly suggested that it knew EQT’s interests better than EQT did and hinted at the consequences of not playing along,” and that the judge had urged “another round of mediation.” The panel also noted that “an appeal would present this Court with an opportunity to facilitate development of the law on class certification.”
This decision should be limited to its strange facts. Judges frequently urge parties to go to mediation, sometimes more than once, as the District Judge here did. That should have played no part in the panel’s decision. The other facts, unique as they are, led Judge Smith to state that “the Clerk shall issue an order advising the parties that the Court is considering summary action. See 3d Cir. I.O.P. 10.6. The parties will be given an opportunity to file arguments in support of or in opposition to summary action.” That, too, is extraordinary and highlights what should be the “good for this trip only” nature of this opinion.