The Seventh Circuit has added its voice to a growing circuit split on Rule 23(c)(4) issue classes.  In Jacks v. DirecSat USA, LLC—a long-running class action alleging wage and hour violations by DirectSat satellite service technicians—that court weighed in on the scope of Rule 23(c)(4) and its interplay with Rule 23(b).  Jacks v. DirectSat USA, LLC, __ F.4th __, 2024 WL 4380256 (7th Cir. Oct. 3, 2024).             

Jacks had a lengthy procedural history.  After initially certifying a Rule 23(b)(3) class, the District Court decertified it following a 2013 Seventh Circuit decision.  Id. at *2.  Thereafter, the District Court certified “fifteen liability-related issues to proceed on a classwide basis under Rule 23(c)(4).”  Id.  Nearly four years later, the case was assigned to a new judge.  Id. at *3.  Three years after that, defendants moved to decertify the issue classes.  Id.  The new judge agreed, decertifying the issue classes because “defendants’ liability [could not] be determined on a classwide basis” and so the classes did not satisfy Rule 23(b)(3).  Id. 

On appeal, the Seventh Circuit began by confirming a District Court’s ability to “alter[] or amend[]” class certification orders before final judgment under Rule 23(c)(1)(C), citing this as an important and special element of Rule 23 that sets class certification decisions apart from other orders.  Id. at *5. 

It then addressed the “key question”:  “[W]hen seeking certification of an issue class under Rule 23(c)(4) in a case requesting damages, must a party show that common issues predominate in the resolution of the entire claim, or is it enough that common issues predominate as to each issues to be certified?”  Id. at *6.  The Court acknowledged the circuit split on this issue:  on the one hand, the Fifth Circuit only permits issue classes when the cause of action, taken together, satisfies Rule 23(b)(3); on the other, the Second, Third, Fourth, Sixth, and Ninth Circuits allow issue class certification as long as “common questions predominate in resolving the individual issues to be certified.”  Id.  The D.C. Circuit takes a “middle ground,” requiring an analysis of where certified issues fit into the dispute as a whole.  Id. 

The Seventh Circuit joined the majority view.  It held that “as part of satisfying its burden under Rule 23, a party seeking certification of an issue class under Rule 23(c)(4) must show that common questions predominate in the resolution of the specific issue or issues that are the subject of the certification motion and not as to the cause of action, taken as a whole.”  Id. at *7.  It also clarified that a party seeking to certify an issue class “must show that certifying the proposed issues would be the most practical and efficient way to resolve the litigation.”  Id. at *8.  Although the District Court applied the wrong standard in decertifying the issue classes, the Seventh Circuit affirmed because the record showed that determining liability and damages “would necessitate hundreds of separate trials,” thereby making the case inappropriate for class treatment.  Id. at *9. 

Issue classes continue to be an important part of class action practice, and practitioners should carefully consider the law of the relevant circuit.  This circuit split may lead to eventual intervention by the U.S. Supreme Court.