Making the Class Determination in Rule 23(b)(3) Class Actions

Fordham Law Review, Sep 2017

By John J. Madden and Denise G. Paully, Published on 01/01/74

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Making the Class Determination in Rule 23(b)(3) Class Actions

Fordham L. Rev. Making the Class Determination in Rule 23(b)(3) Class Actions John J. Madden 0 Denise G. Paully 0 Recommended Citation 0 John J. Madden and Denise G. Paully, Making the Class Determination in Rule 23(b)(3) Class Actions , 42 MAKING THE CLASS DETERMINATION IN RULE 23(b) (3) CLASS ACTIONS I. INTRODUCON The 1966 amendment1 of the original rule 232 was designed to substitute a more functional approach to class action for the abstract conceptualism of the old rule, 3 which gave the court no adequate guide in deciding which of the three types of class actions-true, hybrid or spurious-applied in a given case.4 Not designed to set precise guidelines for the handling of a class action,5 it was the new rule's flexibility which was to be the critical factor in achieving the practical effects sought; its success, therefore, depended to a large extent on how the district courts dealt with this flexibility.6 One of the major purposes of the class suit device, the achievement of judicial efficiency through the reduction of separate units of litigation, 7 was of particular import to actions instituted under subdivision (b) (3). Such actions were designed to ensure economies of time, effort and expense.8 The class action brought under this subdivision was premised upon a commonality of legal or factual questions among the class members; 9 the question of binding effect of the judgment, which had been left open under the original rule, was answered by providing that the judgment bound those persons who fit within the court's definition of the class. 10 Under the old rule's spurious class action, absentees were required to "opt-in" to the class to avail themselves of the judgment. This "permissive joinder" provision was dealt with in the amendment by providing that all class members would be bound unless they took affirmative steps to exclude themselves--"opt-outC--from the class.1 the Small Claimant, 10 B.C. Ind. & Com. L. Rev. 501, 514 (1969) [hereinafter cited as Ford]. Although concern was expressed concerning the potential abuse of such a flexible procedure (see Amendments to Rules of Civil Procedure for the United States District Courts, 383 U.S. 1029, 1035 (Black, J., dissenting); cf. Committee on Federal Rules of Civil Procedure, Judicial Conference-Ninth Circuit, Supplemental Report, 37 F.R.D. 71, 80-82 (1965)), fears of such abuse of discretion have proved ill-founded. Miller, Problems of Giving Notice in Class Actions, 58 F.R.D. 313, 334 (1973). 7. See Advisory Committee Notes 102-04; 3B J. Moore, Federal Practice fl23.02[1], at 71 (1974) ; Frankel 46; Handler, The Shift from Substantive to Procedural Innovations In Anti. trust Suits-The Twenty-Third Annual Antitrust Review, 71 Colum. L. Rev. 1, 10 (1971) [hereinafter cited as Handler]; Kaplan 388-91; Newberg 578; Wright, Class Actions, 47 F.R.D. 169, 170 (1970). The risk to parties of inconsistent determinations by different courts also was sought to be eliminated. Advisory Committee Notes 102-03; Ford 504. 8. Advisory Committee Notes 102-03. 9. See Wright Speech, supra note 3, at 564. 10. Advisory Committee Notes 99. See 3B J. Moore, Federal Practice 9 23.02[1], at 125-26 (1974); Frankel 43; Wright, Class Actions, 47 F.R.D. 169, 181 (1970). Absent members have standing to attack the judgment purporting to bind them in a later suit, and It is the latter court which determines the res judicata effect of the judgment. Advisory Committee Notes 105-06. See Note, Proposed Rule 23: Class Actions Reclassified, 51 Va. L. Rev. 629, 658 (1965); cf. Note, Collateral Attack on the Binding Effect of Class Action Judgments, 87 Harv. L. Rev. 589 (1974). 11. One of the abuses which the amended rule sought to correct was the "one-way Intervention" sometimes permitted under the old rule, whereby absent class members, who previously had not opted-in, were in some instances permitted to intervene after a judgment favorable to the class. By removing the necessity of a class member's intervention, the amended rule eliminated this problem. Advisory Committee Notes 105-06; see Newberg 578. However, the provision that all absentees were deemed members of the class unless they exercised their option to exclude themselves was one of the most criticized features of the rule prior to its adoption. See Committee on Federal Rules of Civil Procedure, Judicial Conference, Ninth Circuit-Supplemental Report, 37 F.R.D. 71, 76-77 (1965); part IV infra. As a practical matter, on the average less than one percent of those sent notice opt-out, Pomerantz, New Developments in Class Actions-Has Their Death Knell Been Sounded?, 25 Bus. Law. 1259, 1266 (1970) [hereinafter cited as Pomerantz], and only 10 to 15 percent of those remaining file claims once liability has been established or a settlement approved. Simon, Class Actions-Useful Tool or Engine of Destruction, 55 F.R.D. 375, 379 (1973) [hereinafter cited as Simon]. Although it was initially felt that the reasonably strict de (...truncated)


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John J. Madden, Denise G. Paully. Making the Class Determination in Rule 23(b)(3) Class Actions, Fordham Law Review, 2018, Volume 42, Issue 4,