Rule 23(c)(4) states that, “[w]hen appropriate, an action may be brought or maintained as a class action with respect to particular issues.” But do classes under Rule 23(c)(4), otherwise known as “issue classes,” also need to satisfy the requirements of Rule 23(a) and (b)? In Harris v. Medical Transportation Management, Inc., 2023 WL 4567258 (D.C. Cir. July 18, 2023), the D.C. Circuit confirmed that the answer is “yes.”
Harris was brought by a group of drivers who alleged that they and hundreds of other drivers who worked for Medical Transportation Management (“MTM”) and its subcontractors were not paid their legally mandated wages under federal and DC law. They brought claims under the Fair Labor Standards Act and DC’s wage-and-hour laws, and also for common-law breach of contract. Importantly, as required under those laws, the plaintiffs alleged that MTM was their employer under federal law, and a general contractor under DC law. See id., at *2. If MTM was indeed the employer, it could be liable under both FLSA and DC law, and if it is a general contractor, that status would separately subject it to strict liability under DC law for legal violations of its subcontractors. But if not, there would be no liability. Id.
Following class certification briefing, the district court granted plaintiffs’ motion to certify an issue class under that Rule 23(c)(4), encompassing the two questions of (1) whether MTM is a joint employer of the putative class and (2) whether MTM is a general contractor under DC law. See Harris, 2023 WL 4567258, at *3. But in doing so, the district court did not determine whether the issue class satisfied Rule 23(b). MTM sought permission to file an interlocutory appeal of the class certification decision, and the D.C. Circuit granted it, mainly to address the question of “under what conditions a Rule 23(c)(4) ‘issue class’ can be certified when no lawsuit or cause of action has been certified as a class.” Id. at *4.
Because “Rule 23(c)(4) does not create a fourth category of class action beyond those specified in Rule 23(b),” the D.C. Circuit held that the district court abused its discretion in certifying the issue class without first determining whether the issue class satisfied the requirements of Rule 23(a) and (b). Id. at *5. There is “no freestanding class to be certified under Rule 23(c)(4),” the panel explained, and “all certified classes must meet both the threshold requirements of Rule 23(a) and be maintainable under one of Rule 23(b)’s categories.” Id. at *6. The panel’s decision was grounded in the plain text of Rule 23, both in terms of its instruction that a class may be certified “only if” the conditions in (a) and (b) are met, and in Rule 23(c)(4)’s instruction that issue classes can be certified only “when appropriate.” According to the panel, the “appropriateness inquiry naturally includes the elementary class-action requirements of Rules 23(a) and (b).” Id. Further, Rule 23(c)(4)’s use of the phrase “maintained as a class action” “textually directs” courts right back to the requirements of Rule 23(a) and (b). Id. Finally, the panel noted that the “structure of Rule 23 in general and Rule 23(c) in particular counsel against finding a standalone Rule 23(c)(4) class.” Id.
Because the district court never determined whether the issue class satisfied Rule 23(b)(3), the panel remanded with instructions to do just that. But in doing so, the panel provided some guidance for the district court on remand and on issue classes generally:
- The panel noted that a “certified issue class should encompass a reasonably and workably segregable aspect of the litigation,” explaining that issue classes may be appropriate “where common questions predominate as to (i) the determination of liability, giving rise to a liability-only issue class; (ii) proof of a key element of a cause of action, such that there is an issue class for that element; or (iii) another aspect of the controversy that, if decided, would materially advance the fair resolution of the litigation.” Id. at *8.
- The panel also suggested that the predominance and superiority inquiries will be key under Rule 23(b)(3). As to predominance, “Plaintiffs cannot effectively skirt the functional demands of the predominance requirement by seeking certification of an overly narrow issue class and then arguing that the issue (inevitably) predominates as to itself.” Id. at *10. And as to superiority, the panel suggested that it was possible that a motion for partial summary judgment could be a better vehicle to decide these legal issues than an issue class. Id. at *11.
- Finally, the panel was clear that “Rule 23(b)(3)’s notice mandate means what it says,” and like any other Rule 23(b)(3) class, notice would be required for a Rule 23(b)(3) issue class. Id. at *12.
Harris makes clear that issue classes do not give plaintiffs a loophole to circumvent the requirements of Rule 23(a) and (b). Accordingly, defendants facing possible certification of issue classes should be prepared to deploy all of their normal class action defenses.