Rule 23(f), which allows discretionary interlocutory appeals of orders granting or denying class certification, became effective nearly three years ago on Dec. 1, 1998, when it was added to the Federal Rules of Civil Procedure by the 1998 amendments. Since then, litigants seeking appeals pursuant to this rule have done so without the benefit of clear guidelines as to how their applications for appeals would be evaluated by the Second Circuit.
Intermittently, the district courts have reflected on the standards relating to Rule 23(f) appeals, but in so doing have been limited to looking to the handling of such appeals by courts of appeals in other circuits. See, e.g., Simon v. Philip Morris Inc., 200 F.R.D. 21, 41-43 (E.D.N.Y. 2001) (discussing Rule 23(f) and circuit court cases examining circumstances under which Rule 23(f) appeals are appropriate). Recently, however, in In re Sumitomo Copper Litig., 262 F.3d 134 (2d Cir. 2001), the Second Circuit explained for the first time under what circumstances it would permit appeals pursuant to Rule 23(f). Between the requirements of the rule itself and those set forth in Sumitomo, practitioners in the Second Circuit now have a road map to follow as they seek appellate review of class certification rulings.
The 'Sumitomo' Opinion
In its Sept. 26, 2000, order in the Sumitomo case, the Second Circuit denied leave to appeal the district court's certification of a plaintiff's class of more than 20,000 copper futures contract traders. Sumitomo, 262 F.3d at 136. Nearly a year later, on Aug. 15, 2001, the Second Circuit issued its opinion for the express purpose of "explain[ing] that ruling and the standard that [it] applied and will apply in the future to petitions seeking leave to appeal a district court's grant or denial of class certification under Rule 23(f)." Id.
The Sumitomo opinion began with the language of Rule 23(f) itself, which provides that "[a] court of appeals may in its discretion permit an appeal from an order of a district court granting or denying class action certification under this rule if application is made to it within ten days after entry of the order." Id. at 138 (quoting Fed. R. Civ. P. 23(f)). The Second Circuit then examined the standards articulated by the Seventh, First and Eleventh Circuits, which were the first circuits to discuss the circumstances under which appeals should be accepted pursuant to Rule 23(f) applications. See id. at 138-39 (discussing opinions in Blair v. Equifax Check Servs., Inc., 181 F.3d 832 (7th Cir. 1999), Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288 (1st Cir. 2000), Prado-Steiman v. Bush, 221 F.3d 1266 (11th Cir. 2000)).
After surveying these cases, the panel held "[i]n line with our sister circuits" that appeals will be permitted only under two circumstances:
Petitioners seeking leave to appeal pursuant to Rule 23(f) must demonstrate either (1) that the certification order will effectively terminate the litigation and there has been a substantial showing that the district court's decision is questionable, or (2) that the certification order implicates a legal question about which there is a compelling need for immediate resolution.
Sumitomo, 262 F.3d at 139. In other words, petitioners must show that the certification order effectively sounds a "death knell" by "terminat[ing] the litigation either because the denial of certification makes the pursuit of individual claims prohibitively expensive or because the grant of certification forces the defendants to settle," and in addition that, even taking into account the district court's broad discretion, the class certification decision is questionable. Id. at 138 (discussing Blair, 181 F.3d at 834-35). Under that standard, however, as the Seventh Circuit colorfully noted in Blair in language quoted by the Second Circuit, "the reviewing court 'must be wary lest the mind hear a bell that is not tolling.'" Id.
Alternatively, petitioners must show that the class certification order at issue "implicates an unresolved legal issue concerning class actions." Id. As to that alternative, the Second Circuit approvingly quoted the First Circuit's opinion in Mowbray, 208 F.3d at 294, that the legal issue had to be "important to the particular litigation as well as important in itself and likely to escape effective review if left hanging until the end of the case." Sumitomo, 262 F.3d at 139.
By deciding that leave to appeal will be granted only if litigants seeking appellate review can show that one of these circumstances exists, the Second Circuit made clear its expectation that Rule 23(f) appeals would rarely be granted. While the court "[left] open the possibility that a petition failing to satisfy either of the foregoing requirements may nevertheless be granted where it presents special circumstances that militate in favor of an immediate appeal," it also "anticipate[d] ... that the standards of Rule 23(f) will rarely be met." Id. at 140.
The Second Circuit further suggested the difficulty of obtaining an appeal under Rule 23(f) by stating that interlocutory review is "particularly appropriate 'when it promises to spare the parties and the district court the expense and burden of litigating the matter to final judgment only to have it inevitably reversed by this Court on appeal after final judgment.'" Id. at 139 (quoting Prado-Steiman v. Bush, 221 F.3d 1266, 1274-75 (11th Cir. 2000) (emphasis added)).
In contrast, the panel stated that "issues that would result at most in a modification of a certification order or whose ultimate resolution will depend on further factual development will be unlikely candidates for Rule 23(f) appeal." Id. at 140. Nor will a "novel legal question" necessarily meet the standards under Rule 23(f); to "compel immediate review," such a question must be of "fundamental importance to the development of the law of class actions" and, moreover, "likely to escape effective review after entry of final judgment." Id.
In the Sumitomo opinion, the Second Circuit also made clear that its determination of whether a district court's decision is sufficiently questionable to warrant interlocutory review would be "tempered" by its deference to the district court, which it observed is "often in the best position to assess the propriety of the class." Id. The Second Circuit encouraged district courts to make their views on the issue known: "Views expressed by the district court at the time of class certification, although not required, would be relevant to our determination of whether interlocutory appeal is warranted." Id. at 140.
In addition, the Sumitomo opinion indicated that stays are not likely to be granted pending review of an application under Rule 23(f). Warning parties "not [to] view Rule 23(f) as a vehicle to delay proceedings in the district court," the Second Circuit acknowledged that the rule gives the district court and the court of appeals discretion to stay the proceedings, but held "that a stay will not issue unless the likelihood of error on the part of the district court tips the balance of hardships in favor of the party seeking the stay." Id.
Key Points to Note
For practitioners considering seeking to appeal class certification orders under Rule 23(f), several notable points emerge from a review of the requirements set forth in the rule itself and in the Second Circuit's opinion in Sumitomo.
Rule 23(f) does not provide an automatic right to appeal an adverse class certification ruling. Rather, it gives the court of appeals "unfettered discretion" to permit or deny such an appeal (see Committee Notes for 1998 amendments, comparing discretion under Rule 23(f) to that exercised by Supreme Court in acting on petitions for certiorari), and, as indicated in Sumitomo, the Second Circuit sets a high bar for exercising that discretion in favor of an appeal.
In two recent cases, the Second Circuit has had occasion to apply the Sumitomo standards.1 In the Visa Check/Mastermoney case, the Second Circuit permitted an appeal under Rule 23(f) because "interlocutory jurisdiction was appropriate to resolve the uncertainty regarding the proper standard for evaluating expert opinions at the class certification stage, and to address the questions of predominance and manageability in light of individualized damage issues that emerge in tying cases." In re Visa Check/Mastermoney Antitrust Litig., No. 00-7699, 2001 WL 1242717, at 2 n.3 (2d Cir. Oct. 17, 2001).
Conversely, in National Asbestos Workers, the Second Circuit summarily denied plaintiffs' motion for permission to appeal the district courts' orders denying requests for class certification "because petitioners have failed to satisfy the standard enunciated in [Sumitomo] for the grant of an interlocutory appeal from a district court's class certification opinion." National Asbestos Workers Medical Fund v. Philip Morris, Inc., No. 00-8038, 2001 WL 1388744, at 1 (2d Cir. Nov. 2, 2001).
The petition must be filed within 10 days of entry of the order granting or denying class certification. To request that an appeal be permitted under Rule 23(f), the litigant must file a petition with the court of appeals within 10 days after entry of the order granting or denying class action certification. See Fed. R. Civ. P. 23(f). Since this 10-day period begins running on the date the order is entered, not the date the order is received by the parties, potential petitioners should be sure to stay aware of when the order is docketed.
Rule 6 of the Federal Rules of Civil Procedure indicates that the 10 days should be computed to exclude intermediate Saturdays, Sundays and legal holidays, thus typically counting the 10-day limit as two calendar weeks. See Fed. R. Civ. P. 6(a) ("When the period of time prescribed or allowed is less than 11 days, intermediate Saturdays, Sundays, and legal holidays shall be excluded in the computation."). There may be an argument, however, that Rule 26 of the Federal Rules of Appellate Procedure applies, and under that rule, a computation of the 10-day period would not exclude weekends or legal holidays. See Fed. R. App. P. 26(a)(2) ("Exclude intermediate Saturdays, Sundays, and legal holidays when the period is less than 7 days, unless stated in calendar days.").
The petition may be the petitioner's only shot to make its case. When preparing a petition to invoke Rule 23(f), practitioners should bear in mind that the petition itself is in all likelihood the only means they will have for making their case that an appeal should be granted. (Fed. R. App. P. 5 provides for only a petition and answer, although it is possible that the court would permit a reply.) Since the petition essentially serves as the litigant's brief in support of its request to appeal, filing the petition should not be viewed as merely a ministerial task or as simply fulfilling a procedural mechanism to request appellate review. Rather, the litigant should view the petition as its opportunity to demonstrate persuasively to the Second Circuit that the class certification ruling at issue comports with one of the bases for Rule 23(f) appeals set forth in Sumitomo.
The petition must comport with Federal Rule of Appellate Procedure 5. Rule 5 of the Federal Rules of Appellate Procedure governs "request[s for] permission to appeal when an appeal is within the court of appeals' discretion" and requires a party to "file a petition for permission to appeal." Fed. R. App. P. 5(a)(1). Rule 5 also sets forth specific requirements as to the contents of the petition: it must include the facts necessary to understand the question presented; the question presented; the relief sought; and the reasons the appeal should be allowed and is authorized by a statute or rule. Fed. R. App. P. 5(b)(1).
Additionally, the petition must attach a copy of the order, decree or judgment complained of and any related opinion or memorandum, as well as any order stating the district court's permission to appeal or finding that the necessary conditions are met. Id. While the rules do not specify any page limit on petitions, litigants would be well-served by taking as a guideline the 20-page limit that the Rules establish for motions and responses to motions. See Fed. R. App. P. 27(d).
In setting forth the reasons the appeal should be allowed, the petitioner should strive to show, in accordance with the standards set forth in the Sumitomo opinion, that "the certification order will effectively terminate the litigation and there has been a substantial showing that the district court's decision is questionable," or that "the certification order implicates a legal question about which there is a compelling need for immediate resolution." Sumitomo, 262 F.3d at 139.
A party opposing a petition for appeal also must comport with Federal Rule of Appellate Procedure 5. The party opposing a petition for appeal should be mindful that it may file an answer in opposition to the petition, but Rule 5 requires that such an answer be filed "within 7 days after the petition is served." Fed. R. App. P. 5(b)(2). Moreover, this seven-day period is seven calendar days, not excluding intermediate Saturdays, Sundays and holidays. See Fed. R. App. P. 26(a).
An appeal under Rule 23(f) does not stay the litigation, and it is unlikely that a stay will issue. Rule 23(f) specifies that, even if the court of appeals permits appeal, the appeal does not stay proceedings in the district court unless either the district court or the court of appeals so orders. In addition, as the Second Circuit made clear in Sumitomo, stays are unlikely to be granted pending review of an application under Rule 23(f). Sumitomo, 262 F. 3d at 140.
The district court can recommend to the court of appeals whether an appeal under Rule 23(f) should be permitted. In its class certification ruling, the district court can, and often does, give the appellate court its recommendation as to whether an appeal under Rule 23(f) should be permitted. Cf. National Asbestos Workers Med. Fund v. Philip Morris, Inc., 71 F.Supp.2d 139, 160 (E.D.N.Y. 1999) ("Courts of appeals are specifically encouraged to rely on the advice of the district court in deciding whether to take an interlocutory appeal.").
For example, in Doe v. Karadzic, 192 F.R.D. 133 (S.D.N.Y. 2000), which pre-dated the Sumitomo opinion, the district court explicitly stated its "belief that an interlocutory appeal on the issue of certification would unduly delay a final judgment" and, further, that "any appeal would likely be fruitless," emphasizing "the district court's broad discretion with regard to issues of class certification." Id. at 144. The court therefore "strongly recommend[ed] against permitting ... an appeal [under Rule 23(f)]." Id.
Conversely, in the Visa Check/Mastermoney case, the district court recommended to the Second Circuit that it take an interlocutory appeal of the class certification order and explicitly stated its belief that the order raised "substantial and novel questions involving the standards a district court should apply in evaluating a class motion and the interaction of those standards with antitrust principles." In re Visa Check/Mastermoney Antitrust Litig., 192 F.R.D. 68, 89 (E.D.N.Y. 2000). The Second Circuit permitted the appeal. See In re Visa Check, 2001 WL 1242717, at 2 n.3.
After Sumitomo, which expressly stated that the Second Circuit would look to district courts for guidance on class certification issues, district courts are likely to continue offering the Second Circuit their explicit recommendations as to whether Rule 23(f) appeals should be permitted.
(1) In both cases, the petitions had been filed before the Sumitomo opinion issued.
Marjorie Press Lindblom is a litigation partner at the New York City office of Kirkland & Ellis. She was lead counsel for one of the defendants in the National Asbestos Workers case and was also involved in the firm's representation of one of the defendants in the Simon v. Philip Morris Inc. case, both discussed in this article. Mary Jane Lee is a litigation associate with the firm's New York office and also worked on the National Asbestos Workers case.
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This article is reprinted with permission from the December 3, 2001 edition of New York Law Journal. c 2001 NLP IP Company