The U.S. Court of Appeals for the Seventh Circuit recently reversed a trial court's certification of a putative class action for various failures to "rigorously analyze" the claims prior to certifying the class.
A copy of the opinion is available at: Link to Opinion
The plaintiff student attended a university (University) during the spring of 2020. During the Spring of 2020, the Covid-19 pandemic resulted in the university closing its campus, canceling one week of class and conducting the remainder of the semester's classes virtually.
The University never rescheduled the week of canceled classes. As a result, the Spring 2020 Semester was only fourteen weeks instead of the planned fifteen weeks of classes listed in the University's 2019-2020 Academic Catalog. The Academic Catalog also expressly stated that the catalog served as a contract between a student and the University. The catalog also established that during the Spring 2020 Semester the University charged all full-time, on-campus students $17,100 in tuition and an $85 activity fee. The University provided pro-rata refunds for room and board to students who were forced to leave their on-campus housing, but it did not provide refunds for tuition or activity fees.
Plaintiff filed a putative class action complaint on behalf of himself and all others similarly situated against the University. He alleged that the Academic Catalog constituted a contract between the students and the University and the University's changes to its curriculum resulted in a breach of contract and unjust enrichment.
The trial court eventually certified two (2) classes of all students during the Spring 2020 semester who paid or on whose behalf whose payment was made for tuition ("Tuition Class"), and a separate class for the activity fee ("Activity Class"). The University timely filed an interlocutory appeal of the trial court's certifications.
The Seventh Circuit reviewed the trial court's decision for an abuse of discretion. A trial court can abuse its discretion when it commits legal error. See Santiago v. City of Chicago, 19 F.4th 1010, 1016 (7th Cir. 2021). In the Seventh Circuit, this is a deferential standard but it must also be exacting because a decision regarding certification can have a considerable impact on the playing field of litigation. Orr v. Shicker, 953 F.3d 490, 497 (7th Cir. 2020).
To certify a class under Federal Rule of Civil Procedure 23, a Plaintiff must first meet the following four requirements: 1) numerosity, 2) commonality, 3) typicality, and 4) adequacy of representation. Fed. R. Civ. P. 23(a). Additionally, when certification is sought under Rule 23(b)(3), common questions of law or fact must "predominate" over individual inquiries, and class treatment must be the superior method of resolving the controversy." Santiago, 19 F.4th at 1016.
On appeal the University specifically challenged the trial court's analysis of the commonality and predominance requirements.
In order for class plaintiffs to meet their burden under the commonality standard, a "claim must depend on a common contention and that common contention … must be of such a nature that it is capable of class wide resolution — which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.'" Ross v. Gossett, 33 F.4th 433, 437 (7th Cir. 2022). Rule 23(b)(3) also requires the common question(s) to 'predominate' over the individual ones." See Howard v. Cook Cnty. Sheriff's Off., 989 F.3d 587, 607 (7th Cir. 2021).
When analyzing the certification of a class, the trial court must "rigorously analyze" the claims prior to certifying the class. Rule 23 does not set forth an exact pleading standard, but a party seeking class certification must affirmatively demonstrate their compliance with Rule 23(b)(3) by proving that there are sufficiently numerous parties, common questions of law or fact, etc." See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011).
On appeal, the University argued that the trial court erred by basing its certification decision solely on Plaintiff's allegations, without fully assessing the record. The Seventh Circuit first found that the trial court's certification order referred to Plaintiff's allegations without addressing his proffered evidence or examining how he would prove his allegations with common evidence under Rule 23(b). The Appellate Court also found that the trial court's predominance analysis only merely accepted Plaintiff's proffered common questions without referring to the common evidence presented to answer those questions that the trial court. This, the Seventh Circuit held, amounted to an abuse of discretion.
Additionally, the University also argued that the trial court did not identify or separately analyze the elements of Plaintiff's claims, and further argued this was critical to the court's predominance analysis. To determine "which issues are common, individual, and predominant," the court must "circumscribe[e] the claims and break them down into their constituent elements." Santiago, 19 F.4th at 1018; see also Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 815 (7th Cir. 2012).
The Seventh Circuit noted that the trial court's certification order was also deficient in this regard. The trial court's order only addressed one common question for each class without explaining that question's relative importance to each claim regarding whether any individual questions exist, or how the common question predominates over individual ones. The Appellate Court explained that the trial court's order should have been more detailed by identifying the elements of Plaintiff's two claims and separately analyzed them to better understand the relationship between each claim's common and individual questions. As a result, the trial court did not conduct the rigorous analysis required by Rule 23. Therefore, the trial court abused its discretion in certifying the Tuition and Activity Classes. See Beaton v. SpeedyPC Software, 907 F.3d 1018, 1025 (7th Cir. 2018).
Lastly, the University also argued that the trial court inappropriately rejected its arguments regarding the adequacy of Plaintiff's proof as "more closely related to the merits" of Plaintiff's claims. In addressing this issue, the Seventh Circuit noted at the class certification stage, a trial court "must walk a balance between evaluating evidence to determine whether a common question exists and predominates, without weighing that evidence to determine whether the plaintiff class will ultimately prevail on the merits." See Ross v. Gossett, 33 F.4th 433, 437 (7th Cir. 2022). The Appellate Court disagreed with the University, and explained how the trial court's analysis is not whether plaintiffs will be able to prove the elements on the merits, but only whether their proof will be common for all plaintiffs, win or lose. See In re Allstate Corp. Sec. Litig., 966 F.3d 595, 603 (7th Cir. 2020).
Accordingly, the Seventh Circuit vacated the trial court's certification of the Tuition and Activity Classes and remanded the case back to the trial court for further proceedings.
Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Admitted to practice law in Illinois
Alabama | California | Florida | Illinois | Massachusetts | New Jersey | New York | Ohio | Pennsylvania | Tennessee | Texas | Washington, DC
NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.
Our updates and webinar presentations are available on the internet, in searchable format, at:
Financial Services Law Updates
The Consumer Financial Services Blog™