Federal and Florida Courts Heighten the Requirements for Class Certification
Not so long ago, when a class action was filed, counsel anticipated that the court would decide the class certification issues based on the parties’ briefs and, perhaps, argument of counsel. Increasingly, however, courts are now requiring substantial evidence supporting the parties’ positions. This evidentiary requirement can be traced to the rule set forth years ago in General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147 (1982), that a court must conduct a “rigorous analysis” before deciding whether to certify a class. This article initially discusses the emerging trend among federal courts to apply a “preponderance of the evidence” burden of proof at the class certification stage, as opposed to “some showing” or “some threshold” of evidence. The article then discusses Florida’s general requirement that courts conduct evidentiary hearings before ruling on class certification and the standard of proof (or lack thereof) in Florida. Finally, the authors suggest that federal and Florida courts continue the federal trend of applying a “preponderance of the evidence” standard to aid practitioners in developing their cases for or against class certification.
Background: Class Certification Prerequisites
Like any civil case, a class action begins when the plaintiff files a complaint. Filing a complaint, however, does not automatically establish “a class” of plaintiffs who can collectively seek relief from a defendant. The class is merely putative and must be certified by the court in which the suit is pending for the litigation to proceed as an actual class action.1 Thus, whether a particular case will actually proceed as a class action hinges on the outcome of the named plaintiff’s motion for class certification.2 Class certification in federal court is governed by Fed. R. Civ. P. 23. The Florida counterpart is Fla. R. Civ. P. 1.220. Rule 23(a) lists four prerequisites — commonly referred to as 1) numerosity, 2) commonality, 3) typicality, and 4) adequacy of representation — that must be met for a court to certify a class. A putative class must also meet one of three requirements under Rule 23(b) (or, in Florida courts, Rule 1.220(b)). Although these requirements for class certification are well established, a surprisingly unsettled issue is the standard of proof necessary to satisfy each requirement.
Evidentiary Requirements for Class Certification in Federal Courts
Federal courts have increasingly adopted the “preponderance of the evidence” as the putative class plaintiff’s burden of proof.3 However, neither the 11th Circuit nor district courts sitting in Florida have applied that standard in reported decisions. This leaves attorneys who practice in Florida without any binding precedent as to the standard of proof when they submit their briefs and evidence on class certification.
• A Class May Be Certified Only After the Court Conducts a “Rigorous Analysis.” In the seminal General Telephone Co. case, the Supreme Court enunciated the now oft-cited requirement that a class may be certified only after a trial court performs a “rigorous analysis” and finds that the prerequisites of Rule 23(a) are satisfied.4 The Supreme Court reversed the certification of a class in a Title VII discrimination suit. The district court’s error was its “failure to evaluate carefully the legitimacy of the named plaintiff’s plea that he is a proper class representative under Rule 23(a).”5 In other words, the district court failed to conduct a “rigorous analysis.”6 “Sometimes the issues are plain enough from the pleadings to determine whether the interests of the absent parties are fairly encompassed within the named plaintiff’s claim, and sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question.”7
• Federal Courts Require Evidence, and a “Preponderance of the Evidence” Is Emerging as the Putative Class Representative’s Burden of Proof. It appears that the “rigorous analysis” requirement has combined with more recent developments, such as the extensive revisions to Rule 23 in 2003, to form the foundation for a heightened standard, that is, “preponderance of the evidence,” for those seeking class certification.8 The “preponderance of the evidence” standard requires the party with the burden of proof to prove that “the evidence more likely than not establishes each fact necessary to meet the requirements of Rule 23.”9 In other words, this burden of proof requires the movant’s evidence to outweigh the nonmovant’s evidence.10 The trend can be traced to a well-known Second Circuit opinion and continues to wind its way through courts in the Third, Fourth, Fifth, and 11th circuits. What emerges is a clear picture that the “preponderance of the evidence” standard is here to stay.
• The Second Circuit Rejects “Some Showing” in Favor of the “Preponderance of the Evidence” Standard. The starting point for the standard of proof analysis is a landmark Second Circuit decision, In re Initial Public Offerings Sec. Litig. v. Merrill Lynch & Co. (IPO), 471 F.3d 24, 26 (2d Cir. 2006), in which the appellate court acknowledged that the issue of which standard of proof governs class certification decisions was “surprisingly unsettled.” There, investors filed class actions against underwriters alleging they engaged in a scheme to defraud the investors in connection with a series of initial public offerings. In ruling upon the plaintiffs’ motions for class certification, the district court noted that “the Supreme Court has been silent on the question of what showing plaintiffs must make in support of their motion for class certification.”11 The district court granted the motions in part and decided, based on Second Circuit precedent, that “plaintiffs — who have the burden of proof at class certification — must make ‘some showing.’ That showing may take the form of, for example, expert opinions, evidence (by document, affidavit, live testimony, or otherwise), or the uncontested allegations of the complaint.”12
The Second Circuit found that the trial court’s use of a “some showing” standard was error but acknowledged that it had been “less than clear as to the applicable standards for class certification. . . . ”13 The court went on to find that “the requirements of Rule 23 must be met, not just supported by some evidence,” and must be “fully established.”14
Even though IPO set forth guidance to the district courts, the Second Circuit “did not use the words ‘preponderance of the evidence’ in [IPO] to describe the standard of proof applicable to Rule 23 issues. . . . ”15 However, in Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d 196 (2d Cir. 2008), the Second Circuit expressly held that “[t]oday, we dispel any remaining confusion and hold that the preponderance of the evidence standard applies to evidence proffered to establish Rule 23’s requirements.”16
There, the Teamsters had initiated a class action, contending that the defendants violated securities laws in connection with mobile home loans sold as securities.17 The Teamsters relied on a fraud on the market theory and introduced expert testimony to attempt to show that the reliance element of their claims could be proven class-wide. The district court applied the preponderance of the evidence standard to resolve factual disputes related to the Rule 23 requirements.18 The district court found that the Teamsters failed to demonstrate fraud on the market by a preponderance of the evidence, and, accordingly, the class members would be required to prove reliance individually.19 Therefore, the Teamsters could not satisfy the predominance requirement for certification in Rule 23(b)(3). The Second Circuit agreed with the district court and affirmed the decision denying class certification. Although IPO, Teamsters, and many of the Second Circuit’s opinions that have applied the “preponderance of the evidence” standard have been federal securities fraud cases, other opinions demonstrate that the standard applies to all class certification orders in the Second Circuit.20
• The Third Circuit Rejects a “Threshold Showing” in Favor of the “Preponderance of the Evidence” Standard. The Third Circuit has followed the Second Circuit by requiring Rule 23 findings to be supported by a preponderance of the evidence.21 In In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305 (3d Cir. 2009), the plaintiffs claimed that manufacturers of hydrogen peroxide and related products conspired about the prices they would charge from 1994 to 2005. Upon the plaintiffs’ motion to certify a class of purchasers of hydrogen peroxide and related chemical products, both parties presented expert testimony addressing whether the plaintiffs’ antitrust claims could be proven class-wide. Defendants challenged the plaintiffs’ expert under Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993). Nevertheless, the district court certified a class pursuant to Rule 23(b)(3) stating that the plaintiffs made a “threshold showing” that their claims could be proven class-wide.
The Third Circuit reversed the certification order, finding, inter alia, that “invoking the phrase ‘threshold showing’ risks misapplying Rule 23.”22 Acknowledging that the issue was a “novel or unsettled question of law,”23 the court explained:
[a] “threshold showing” could signify, incorrectly, that the burden on the party seeking certification is a lenient one (such as a prima facie showing or a burden of production) or that the party seeking certification receives deference or a presumption in its favor. So defined, “threshold showing” is an inadequate and improper standard.24
The Third Circuit concluded that the district court failed to weigh the conflicting expert testimony and resolve factual disputes in the evidence.25 The court held that “a district court exercising proper discretion in deciding whether to certify a class will resolve factual disputes by a preponderance of the evidence and make findings that each Rule 23 requirement is met or is not met, having considered all relevant evidence and arguments presented by the parties.”26 Because the district court did not do so and did not have the benefit of the standard expressed by the Third Circuit, the case was remanded for the district court’s consideration.
• District Courts in the Fourth Circuit Adopt the “Preponderance of the Evidence” Standard. In Gariety v. Grant Thornton, LLP, 368 F.3d 356, 365 (4th Cir. 2004), a securities fraud class action, the district court certified a class of plaintiffs who had relied upon a fraud on the market theory instead of establishing that each individual class member relied on defendant’s alleged misrepresentations. The district court determined that the plaintiffs’ assertions of fraud on the market were “enough at the certification stage” because delving further would “require the court to make judgments and conclusions regarding the extent and nature of the fraud alleged by plaintiffs.”27 On appeal, the Fourth Circuit held that the district court failed to enforce the requirements of Rule 23 and explained:
If it were appropriate for a court simply to accept the allegations of a complaint at face value in making class action findings, every complaint asserting the requirements of Rule 23(a) and (b) would automatically lead to a certification order, frustrating the district court’s responsibilities for taking a “close look” at relevant matters, for conducting a “rigorous analysis” of such matters, and for making “findings” that the requirements of Rule 23 have been satisfied.28
The Fourth Circuit remanded the case to the district court to consider whether plaintiffs met the requirements of Rule 23(b)(3).29
At least two district courts in the Fourth Circuit have used Gariety’s language as support for applying the “preponderance of the evidence” standard.30 Likewise, at least one district court outside of the Fourth Circuit has interpreted Gariety as implying a “preponderance of the evidence” standard.31
• The Fifth Circuit Rejects Less Stringent Standards in Favor of the “Preponderance of the Evidence” Standard. The Fifth Circuit’s adoption of the “preponderance of the evidence” standard appears to originate with Oscar Private Equity Inv. v. Allegiance Telecom, Inc., 487 F.3d 261 (5th Cir. 2007). Oscar was a securities fraud case in which the district court certified a class, and the defendants appealed. The appeal turned on whether the district court properly permitted plaintiffs to rely on a fraud on the market theory to presume that each class member satisfied the reliance element of his or her securities claim.32 Considering the “in terrorem power of certification,” the Fifth Circuit found that it was appropriate for district courts to determine whether loss causation was established by a “preponderance of all admissible evidence” at the class certification stage.33
The Fifth Circuit found that the expert testimony plaintiffs submitted to prove loss causation was insufficient and amounted to “little more than well-informed speculation.”34 The plaintiffs’ expert indicated in her opinion that her work was intentionally incomplete given the pre-class certification stage of the litigation.35 The court found that the evidence the plaintiffs submitted was comprised of “raw opinion” and lacked the necessary “post-mortem data” required for class certification.36 Absent proof of loss causation, the plaintiffs did not trigger the presumption of class-wide reliance provided by the fraud on the market theory.
Accordingly, the Fifth Circuit concluded that the plaintiffs failed to satisfy the requirement that common issues predominate over individual issues in accordance with Rule 23(b)(3) and reversed the certification order. Two years later, in Alaska Electrical Pension Fund v. Flowserve Corp., 572 F.3d 221, 229 (5th Cir. 2009), the Fifth Circuit cemented Oscar’s holding.37 Drawing on its own precedent in Oscar,38 as well as Teamsters Local39 and Hydrogen Peroxide,40 the Fifth Circuit adopted the preponderance of the evidence standard as the movant’s burden of proving loss causation in order to invoke the presumption of reliance at the class certification stage.41 The appellate court vacated the trial court’s denial of class certification on other grounds that are specific to claims brought under the federal securities laws.
At least one district court in the Fifth Circuit has cited Alaska Electrical for the proposition that the “preponderance of the evidence” standard applies at the class certification stage in all cases, not just securities fraud actions.42
• The 11th Circuit Has Not Enunciated an Applicable Standard of Proof, But at Least One District Court Has Recognized the “Preponderance of the Evidence” Standard — Courts in the 11th Circuit must satisfy the the “rigorous analysis” requirement and conduct their own inquiries as to whether the requirements of Rule 23 have been satisfied.43 However, the 11th Circuit has not yet articulated the standard of proof required at the class certification stage. At least one district court in the 11th Circuit has drawn upon the Teamsters and Hydrogen Peroxide opinions from the Second and Third circuits, respectively, to conclude that the preponderance of the evidence standard was appropriate. In In re Healthsouth Corp. Sec. Litig., 257 F.R.D. 260, 272 (N.D. Ala. Mar. 31, 2009), the district court found that the stockholder plaintiffs established by a preponderance of the evidence — “even though such a stringent burden may not be necessary” — the Rule 23 requirements and entered an order certifying the class.44 “Indeed, if [p]laintiffs can meet this standard of proof, they could meet any lesser standard the 11th Circuit may choose to adopt.”45 As of the date of publication, the 11th Circuit has not addressed this issue.
Evidentiary Requirements for Class Certification in Florida Courts
Fla. R. Civ. P. 1.220 governs class certification in Florida courts and is modeled after Fed. R. Civ. P. 23. Rule 1.220(d)(1) contains an additional requirement not present in Rule 23: A trial court’s order on class certification must “separately state the findings of fact and conclusions of law upon which the determination is based. . . . ”46 Perhaps it is because of this additional requirement that Florida courts, unlike federal courts, almost invariably require evidentiary hearings on the issue of class certification.47 Also, unlike federal courts, no uniform standard of proof has emerged other than, arguably, an undefined threshold of “sufficient information.”48
• Florida Courts Have Adopted the “Rigorous Analysis” Test Used by Federal Courts. Florida appellate courts apply the same “rigorous analysis” requirement as their federal counterparts.49 In Florida Health Sciences Center, Inc. v. Elsenheimer, 952 So. 2d 575 (Fla. 2d DCA 2007), the Second District Court of Appeal noted that “a trial court must conduct a rigorous analysis to determine whether the plaintiff has met the requirements of Rule 1.220.”50 Thus, it appears that the level of analysis a Florida trial court must undertake is consistent with that of a federal trial court.51
• Florida Courts Require Evidence, and Evidentiary Hearings Are Generally Required. Like federal courts, Florida courts delve beyond the pleadings and require the movant to offer some evidence apart from the mere allegations of the complaint.52 Further, they require evidentiary hearings.53 Florida’s general requirement that courts conduct evidentiary hearings appears to originate with some combination of Falcon’s “rigorous analysis,” the Rule 1.220(d)(1) detailed order on class certification,54 and due process concerns.55 The hearing requirement may be traced to Barton-Malow Co. v. Bauer, 627 So. 2d 1233 (Fla. 2d DCA 1993).56 In that case, the Second District Court of Appeal reversed an order on class certification specifically because the trial court “needed to” but did not “conduct an evidentiary hearing prior to the entry of an order granting certification in this case.”57 It was undisputed on appeal that the trial court’s certification of a class was made “without any evidence in the record to support the decision.”58 The crux of the opinion lies in the following language:
However, when it is not clear from the pleadings that common issues predominate or that the proposed class representatives provide a superior method for the fair and efficient adjudication of the controversy, an evidentiary basis to support the order should usually prove necessary. The decision whether or not to certify a class should be made carefully, on the basis of sufficient information, and at an early stage in the case.59
The bottom line was that the trial court was required to “receive evidence” in order to exercise its discretion on issues, such as defining the class, creating subclasses or rejecting certification of the class, as an inferior method of adjudicating the controversy.60
Since 1993, a myriad of decisions have followed Barton-Malow’s footsteps by requiring evidentiary hearings.61 However, the opinions are not always clear on how much or what type of evidence must be presented. On one end of the spectrum are cases like Baptist Hosp. of Miami, Inc. v. DeMario, 661 So. 2d 319, 321 (Fla. 3d DCA 1995), in which the order certifying the class is based on the entry of default against the defendant. There, the plaintiff brought a class action lawsuit against a hospital based on purported overcharges for copies of medical records.62 Due to internal misrouting of the lawsuit papers, the hospital never made an appearance to defend the litigation.63 On the basis of the default, the trial court certified a class.64 Later, the hospital moved to set aside the default; a successor judge denied the motion, and the hospital appealed.65 The appellate court found the certification to be in error: “The bare fact that a default has been entered is not a substitute for the factual inquiry and exercise of judicial discretion called for by the class action rule.”66 Citing Falcon’s “rigorous analysis” requirement and Barton-Malow’s “sufficient information” requirement, the appellate court vacated the class certification order.67
Further along the spectrum are cases like UGI Corp. v. Marcucilli, 939 So. 2d 347 (Fla. 2d DCA 2006), in which the court conducted a hearing that was not “evidentiary.” The appellate court found that when the putative class representative’s request for certification rested “on the unsupported allegations of the class action complaint and the motion for class certification,” the trial court abused its discretion by certifying the class without first conducting an evidentiary hearing.68 Although there was a hearing, it lasted for only 10 minutes, no witnesses testified, no affidavits were offered, and no documents or other exhibits were received in evidence.69 Only the attorneys’ arguments, which referred to papers that had not been authenticated or received in evidence, were heard.70
Similarly, in Marco Island Civic Ass’n v. Mazzini, 805 So. 2d 928 (Fla. 2d DCA 2001), the appellate court reversed the trial court’s order certifying a defendant class of subdivision residents, finding that the trial court erred in determining that the individual defendant could fairly and adequately protect and represent the interests of the class.71 Although there was a hearing on plaintiff’s motion to certify a defendant class, the plaintiff presented no evidence at that hearing.72 Additionally, the complaint was not verified, and the motion to determine class representation was not accompanied by affidavits.73 The appellate court ruled that the trial court erred 1) by concluding that the representative — who was proceeding pro se— would fairly and adequately represent the class and 2) by determining that class representation was superior to other available methods for adjudicating the issues.74
Deficiencies existed in City of Tampa v. McAfee, 896 So. 2d 943 (Fla. 2d DCA 2005), when the order granting class certification contained no detailed findings of fact and only “cursory conclusory statements” and when the hearing was informal, with no presentation of affidavits or witnesses.75 The appellate court noted the “serious undertaking” of a class action: “It can permanently affect the rights and lives of people who have little knowledge or understanding of the action. It is important for a trial court to consider fully the ramifications of such an action before entering an order granting certification.”76 The appellate court reversed and remanded “to permit the trial court to conduct the necessary hearing.”77
Finally, there are cases in which some evidence is presented, but it simply does not meet the Barton-Malow mandate that certification of a class be based on “sufficient information.” In Seminole County v. Tivoli Orlando Assoc. Ltd., 920 So. 2d 818, 923 (Fla. 5th DCA 2006), a hearing was conducted, and although the plaintiff presented three depositions, the evidence was not enough to allow the trial court to make adequate factual determinations.78 The appellate court found that the movant “did not provide sufficient information to satisfy the typicality requirement” and that “[t]he trial court’s order contained neither rigorous analysis nor evidentiary support for its conclusion.”79 The hearing on class certification was “conducted informally, without the presentation of affidavits, testimony, or evidence other than the three depositions.”80 Therefore, the trial court had abused its discretion by certifying the class.81
Although these cases provide guidance, they do not establish clear parameters for the movant’s burden of proof on a motion for class certification.
• Florida Courts Have Not Enunciated a Standard of Proof at the Class Certification Stage. Unlike their federal counterparts, Florida courts have not adopted a specific standard of proof that the movant for class certification must satisfy. The only arguable standard is Barton-Malow’s “sufficient information” standard,82 a phrase that presently leaves litigators and trial courts relatively in the dark about the standard of proof required to support a motion for class certification. What exactly is “sufficient information”? Is it a sort of minimal standard, akin to “some evidence”? Or is it a more stringent standard, such as “preponderance of the evidence” or “clear and convincing evidence”?
Because Florida courts have adopted other class certification requirements from federal jurisprudence, such as Falcon’s “rigorous analysis,” perhaps they should consider adopting the “preponderance of the evidence” standard that is emerging among federal courts. This would serve several practical purposes. It would give both trial courts and litigants more guidance as to the quality and quantity of the evidence that must be presented in order to certify a class (and to avoid reversal on appeal). Creating a uniform standard of proof might also prevent forum shopping, to the extent that Florida courts and federal courts sitting in Florida all adopt the “preponderance of the evidence” standard.
Although the Florida class action rule is modeled after the federal rule, Florida courts generally require evidentiary hearings at the class certification stage, while federal courts do not. Additionally, neither Florida courts nor federal courts sitting in Florida have enunciated a uniform standard of proof at the class certification stage. Increasingly, however, federal courts are adopting the preponderance of the evidence standard for weighing evidence proffered to meet class certification requirements. Trial courts and litigants would benefit if Florida and federal law uniformly provided a clear standard of proof for class certification, such as the preponderance of the evidence standard utilized in the Second, Third, Fourth, and Fifth circuits.
1 See, e.g., Narouz v. Charter Commc’n, LLC, 591 F.3d 1261 (9th Cir. 2010).
2 In some cases, a defendant may choose to file a motion to deny class certification. Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 940-41 (9th Cir. 2009).
3 See, e.g., Second Circuit: In re Flag Telecom Holdings, Ltd. Sec. Litig., 574 F.3d 29, 35 (2d Cir. 2009) (citing In re Initial Pub. Offerings Sec. Litig. v. Merrill Lynch & Co. (hereinafter IPO), 471 F.3d 24, 41 (2d Cir. 2006), and Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d 196, 202 (2d Cir. 2008)); Third Circuit: In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 320 (3d Cir. 2009); District Court in Fourth Circuit: In re Mills Corp. Sec. Litig., 257 F.R.D. 101, 104 (E.D. Va. 2009); Fifth Circuit: Alaska Elec. Pension Fund v. Flowserve Corp., 572 F.3d 221, 228 (5th Cir. 2009) (citing Oscar Private Equity Inv. v. Allegiance Telecom, Inc., 487 F.3d 261, 265 (5th Cir. 2007)); Court of Federal Claims: Fauvergue v. U.S., 86 Fed. Cl. 82, 95-96 (Fed. Cl. 2009) (analyzing class certification under Rule 23 of the Rules of the U.S. Court of Federal Claims); Rasmuson v. U.S., 2010 WL 125972, *5 (Fed. Cl. Jan. 8, 2010).
4 Gen. Telephone Co. of the Southwest v. Falcon, 457 U.S. 147, 161 (1982) (emphasis added).
5 Id. at 160.
6 See id. at 161.
7 Id. at 160.
8 See, e.g., In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 318-320 (3d Cir. 2009) (“While these  amendments [to Rule 23] do not alter the substantive standards for class certification, they guide the trial court in its proper task — to consider carefully all relevant evidence and to make a definitive determination that the requirements of Rule 23 have been met before certifying a class.”).
9 Hydrogen Peroxide, 552 F.3d at 320 (citing Teamsters, 546 F.3d at 202).
10 See, e.g., Tracy v. Goldberg, 289 F.2d 467, 468 (3d Cir. 1961) (likening the “preponderance of the evidence” standard to balancing scales).
11 IPO, 471 F.3d at 29.
12 Id. at 30. It appears that the “some showing” standard developed out of an earlier Second Circuit opinion, Caridad v. Metro-North Commuter R.R., 191 F.3d 283, 292 (2d Cir. 1999).
13 Id. at 32.
14 Id. at 33.
15 Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d 196, 202 (2d Cir. 2008).
17 Specifically, the Teamsters alleged defendants violated §§10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §78a et seq., and Rule 10b-5, 17 C.F.R. §240.10 b-5.
18 Teamsters, 546 F.3d at 200.
20 See, e.g., Spagnola v. Chubb Corp., 2010 WL 46017, *12 (S.D.N.Y. Jan. 7, 2010) (involving claims for breach of contract, violations of New York insurance statutes, unjust enrichment, and injunctive relief).
21 Hydrogen Peroxide, 552 F.3d 305, 320 (3d Cir. 2009).
22 Id. at 321.
23 Id. at 322.
24 Id. at 321.
25 Id. at 324.
26 Id. at 320.
27 Gariety v. Grant Thornton, LLP, 368 F.3d 356, 364 (4th Cir. 2004).
28 Id. at 365 (citing, inter alia, the language of Rule 23(b)(3) listing the “matters pertinent to these findings” of predominance and superiority).
29 Id. at 370.
30 See In re Mills Corp. Sec. Litig., 257 F.R.D. 101, 104 (E.D. Va. 2009) (citing In re Safety-Kleen Corp. Bondholders Litig., 2004 WL 3115870, *2 (D.S.C. Nov. 1, 2004) (“Although there is a scarcity of cases on point, the existing authority suggests that the preponderance of the evidence standard should be applied.. . . This court makes its findings in evaluating the propriety of class certification by applying the preponderance of the evidence standard.”)).
31 See, e.g., DeMarco v. Robertson Stephens, Inc., 228 F.R.D. 468, 470 (S.D.N.Y. 2005) (a pre-IPO opinion noting that “some circuits have strongly implied that plaintiffs must demonstrate their compliance with Rule 23 by a preponderance of the evidence”; citing,inter alia, Gariety, 368 F.3d 356, and nonetheless applying a “some showing” standard of proof).
32 Oscar Private Equity Inv. v. Allegiance Telecom, Inc., 487 F.3d 261, 262 (5th Cir. 2007). Plaintiffs in 10b-5 securities fraud class actions must establish reliance, which may be established by a fraud-on-the-market theory. Id. at 264. That theory permits a presumption of reliance if the plaintiffs demonstrate that the cause of the decline in price was due to the revelation of the truth and not the release of the unrelated negative information. Id.
33 Id. at 269.
34 Id. at 270.
35 Id. at 271.
37 Alaska Electrical Pension Fund v. Flowserve Corp., 572 F.3d 221, 228 (5th Cir. 2009).
38 Oscar Private Equity Inv. v. Allegiance Telecom, Inc., 487 F.3d 261 (5th Cir. 2007).
39 Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d 196 (2d Cir. 2008).
40 Hydrogen Peroxide, 552 F.3d 305 (3d Cir. 2009).
41 Alaska Electrical Pension Fund v. Flowserve Corp., 572 F.3d 221, 229 (5th Cir. 2009) (“In short, [the plaintiff] bore the burden of establishing loss causation by a preponderance of the evidence in order to obtain certification of its proposed class.”).
42 See Hancock v. Chicago Title Ins. Co., 2009 WL 4665343, *1, *3 (N.D. Tex. Dec. 9, 2009) (denying plaintiff’s motion to certify a class for claims of 1) money had and received and 2) breach of implied contract).
43 See, e.g., Williams v. Mohawk Indus., Inc., 568 F.3d 1350, 1358 (11th Cir. 2009).
44 In re Healthsouth Corp. Sec. Litig., 257 F.R.D. 260, 285 (N.D. Ala. March 31, 2009).
45 Id. at 272.
46 Fla. R. Civ. P. 1.220(d)(1).
47 See, e.g., Lanca Homeowners, Inc. v. Lantana Cascade of Palm Beach, Ltd., 541 So. 2d 1121, 1122 (Fla. 1988); Brodeur v. Dale E. Peterson Vacations, Inc., 7 So. 3d 567, 568 (Fla. 1st D.C.A. 2009); Barton-Malow Co. v. Bauer, 627 So. 2d 1233, 1235 (Fla. 2d D.C.A. 1993); Browning v. Angelfish Swim School, Inc., 1 So. 2d 355, 358 (Fla. 3d D.C.A. 2009); The Club at Admiral’s Cove, Inc. v. Skigen, 879 So. 2d 57, 58 (Fla. 4th D.C.A. 2004); Terry L. Braun, P.A. v. Campbell, 827 So. 2d 261 (Fla. 5th D.C.A. 2002); In re Florida Microsoft Antitrust Litig., 2002 WL 31423620, *2 (Fla. Cir. Ct. Aug. 26, 2002).
Although federal courts have begun to raise the bar for a plaintiff to prove the elements of Rule 23, they remain disinclined to conduct hearings on the issue. Rule 23 does not require federal courts to hold evidentiary hearings on motions to certify a class action. See Merrill v. S. Methodist Univ., 806 F.2d 600, 608 (5th Cir. 1986); Franks v. Kroger Co., 649 F.2d 1216, 1223 (6th Cir. 1981); Marcera v. Chinlund, 565 F.2d 253, 255 (2d Cir. 1977); 3 Newberg on Class Actions §7.9 (4th ed.) (citing, inter alia, Jones v. Hutto, 763 F.2d 979 (8th Cir. 1985); Bradford v. Sears, Roebuck & Co., 673 F.2d 792 (5th Cir. 1982)). But see Manual for Complex Litig. (4th) §21.21 (citing, inter alia, Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 676 (7th Cir. 2001) (“A hearing under Federal Rule of Civil Procedure 23(c) is a routine part of the certification decision.”); Morrison v. Booth, 730 F.2d 642, 644 (11th Cir. 1984)); Bus. and Comm. Litig. in Fed. Courts §16:35 (2d ed. 2005) (citing Morrison, 730 F.2d at 644; Marcera, 565 F.2d at 253; Shepard v. Beaird-Poulan, Inc., 617 F.2d 87, 89 (5th Cir. 1980) (“A court may abuse its discretion if it denies or revokes class certification without such a hearing.”); Guerine v. J&W Inv., Inc., 544 F.2d 863, 865 (5th Cir. 1977)). Federal appellate courts have stated that the district courts “may” hold evidentiary hearings, Grayson v. K Mart Corp., 79 F.3d 1086, 1099 (11th Cir. 1996), or that they “should ordinarily” conduct such hearings, Merrill, 806 F.2d at 608. The courts’ focus is ensuring that plaintiffs are “afforded a full opportunity to develop a record containing all the facts pertaining to the suggested class and its representatives.” Int’l Woodworkers of Am. v. Chesapeake Bay Plywood Corp., 659 F.2d 1259, 1268 (4th Cir. 1981). The failure to conduct an evidentiary hearing will not result in a reversal of class certification unless the proponent of the hearing can establish that the hearing would have affected the substantial rights of the parties. See, e.g., Grayson, 79 F.3d at 1099; Merrill, 806 F.2d at 608.
48 See Barton-Malow Co. v. Bauer, 627 So. 2d 1233, 1234 (Fla. 2d D.C.A. 1993); Baptist Hosp. of Miami, Inc. v. Demario, 661 So. 2d 319, 321 (Fla. 3d D.C.A. 1995); Seminole County v. Tivoli Orlando Assoc. Ltd., 920 So. 2d 818, 824 (Fla. 5th D.C.A. 2006).
49 See, e.g., Baptist Hosp. of Miami, Inc. v. DeMario, 661 So. 2d 319, 321 (Fla. 3d D.C.A. 1995) (citing Falcon, 457 U.S. at 161); Policastro v. Stelk, 780 So. 2d 989, 991 (Fla. 5th D.C.A. 2001) (citing Falcon); Earnest v. Amoco Oil Co., 859 So. 2d 1255, 1258 (Fla. 1st D.C.A. 2003); Stone v. Compuserve Interactive Servs., Inc., 804 So. 2d 383, 387 (Fla. 4th D.C.A. 2001); Rollins, Inc. v. Butland, 951 So. 2d 860, 867 (Fla. 2d D.C.A. 2006); Gilman v. John Hancock Variable Life Ins. Co., 2003 WL 23191098, *5 (Fla. Cir. Ct. Oct. 20, 2003).
50 Elsenheimer, 952 So. 2d at 575 (citing Rollins, Inc. v. Butland, 951 So. 2d 860, 867 (Fla. 2d D.C.A. 2006)).
51 See also Kia Motors Am. Corp. v. Butler, 985 So. 2d 1133 (Fla. 3d D.C.A. 2008) (reversing order granting certification of a class of automobile purchasers in a lawsuit brought against an automobile manufacturer and stating that a trial court “must conduct a rigorous analysis to determine whether the elements of [Rule 1.220] have been met”); Hess Corp. v. Grillasca, 2009 WL 4931668 (Fla. 2d D.C.A. Dec. 23, 2009) (citing the “rigorous analysis” requirement and holding that class certification was improper because individualized issues predominated, rendering the class action unmanageable).
52 See, e.g., Slade v. Federated Nat’l Ins. Co., 904 So. 2d 623, 625 (Fla. 4th D.C.A. 2005).
53 City of Tampa v. Addison, 979 So. 2d 246, 252 (Fla. 2d D.C.A. 2007) (citing Fla. Health Sci. Ctr., Inv. v. Elsenheimer, 952 So. 2d 575, 581 (Fla. 2d D.C.A. 2007); and Ernie Haire Ford, Inc. v. Gilley, 903 So. 2d 956, 959 (Fla. 2d D.C.A. 2005)). See also Barton-Malow Co. v. Bauer, 627 So. 2d 1233, 1235 (Fla. 2d D.C.A. 1993).
54 A pair of Florida decisions demonstrates both the application of Rule 1.220(d)(1) and the requirement of evidence for ruling on class certification. In Terry L. Braun, P.A. v. Campbell, 781 So. 2d 480 (Fla. 5th D.C.A. 2001) (Braun I), the trial court had granted in part and denied in part the motion to certify a class of patients alleging that the defendant professional association had wrongfully hired the individual defendant even though the individual did not have a license to practice dentistry. Braun I, 781 So. 2d at 481. The trial court had certified a class as to the claims for implied contract, negligence, and battery, but denied the motion to certify the deceptive and unfair trade practices and express contract claims. Id. at 482. The only issue on appeal was whether the trial court’s factual findings and conclusions of law complied with Rule 1.220(d)(1). Id. at 481. The appellate court found that the order was “devoid” of the requisite findings and, thus, remanded the case for additional proceedings. Id. at 482. On remand, the trial court reached the same conclusions and made findings of fact and conclusions of law as required by Rule 1.220(d)(1). In Terry L. Braun, P.A. v. Campbell, 827 So. 2d 261 (Fla. 5th D.C.A. 2002) (Braun II), the parties again appealed the order granting in part and denying in part the motion for class certification. Id. at 264. Although the court conducted a hearing, only one of the patients/class members testified. Id. at 268. The appellate court thus found that there was not enough evidence to satisfy each of the requirements for class certification. Id. at 266-269. The appellate court ultimately agreed with the defendant and affirmed the denial of certification of claims while reversing the certification of the other claims. Id. at 269.
55 See, e.g., Ernie Haire Ford, Inc. v. Gilley, 903 So. 2d 956, 958-59 (Fla. 2d D.C.A. 2005) (finding that the trial court had “rendered its decision certifying the class without setting a hearing on the question” and effectively certified the class “without observing the basic tenets of due process that provide a party fair notice and a reasonable opportunity to be heard before the entry of a decree,” which “deprive[d] both parties of their right to demonstrate or contest the requirements of a class action”).
56 Lanca Homeowners, Inc. v. Lantana Cascade of Palm Beach, Ltd., 541 So. 2d 1121, 1122 (Fla. 1988), appears to be the earliest published, appellate decision in Florida that refers to a trial court conducting an evidentiary hearing on a motion for class certification. Further mention of evidentiary hearings does not return until 1993. Williams v. Dade County, 625 So. 2d 1254, 1255 (Fla. 3d D.C.A. 1993). Neither Lanca nor Williams describes the scope of either the evidence needed for class certification or the hearing.
57 Barton-Malow Co. v. Bauer, 627 So. 2d 1233, 1234 (Fla. 2d D.C.A. 1993).
58 Id. at 1235.
59 Id. (citing Merrill v. So. Methodist Univ, 806 F.2d 600 (5th Cir. 1986); and Manual on Complex Litig. 2d, 30.1 (1985)) (internal quotation marks omitted).
60 Id. at 1235.
61 Seminole County v. Tivoli Orlando Assoc. Ltd., 920 So. 2d 818, 823 (Fla. 5th D.C.A. 2006); City of Tampa v. McAfee, 896 So. 2d 943, 946 (Fla. 2d D.C.A. 2005); Ernie Haire Ford, Inc. v. Gilley, 903 So. 2d 956, 958 (Fla. 2d D.C.A. 2005); Terry L. Braun, P.A. v. Campbell, 872 So. 2d 261, 265, 268 (Fla. 5th D.C.A. 2002). See also Cheatwood v. Barry Univ., Inc., 2002 WL 4629 (Fla. Cir. Ct. Jan. 1, 2002). In some recent class action jurisprudence, Florida courts have referred to a “rare case” in which an evidentiary hearing may not be required. See UGI Corp. v. Marcucilli, 939 So. 2d 347, 347-348 (Fla. 2d D.C.A. 2006) (citing Elsenheimer, 952 So. 2d at 581) (“[T]his was not one of those rare cases in which an evidentiary hearing was not required.”). However, there is a dearth of published appellate decisions that address “rare cases” that may sidestep the evidentiary hearing requirement. In Rudolph v. Dept. of Corrections, No. 67-02-CA-178, 2002 WL 32182165 (Fla. Cir. Ct. Dec. 30, 2002), the court’s decision not to require an evidentiary hearing on class certification appears to have been a result of the parties’ agreement to hold a nonevidentiary hearing. The court did not state that this was the type of “rare case” that could avoid the requirement of an evidentiary hearing.
62 Baptist Hospital of Miami, 661 So. 2d at 320.
63 Id. at 321.
66 Id. at 322.
67 Id. However, the court affirmed the entry of default as to the individual claim against the hospital. Id.
68 UGI Corp. v. Marcucilli, 939 So. 2d 347, 347-48 (Fla. 2d D.C.A. 2006).
69 Id. at 347.
71 Marco Island Civic Assoc., Inc. v. Mazzini, 805 So. 2d 928, 929-30 (Fla. 2d D.C.A. 2001).
72 Id. at 930.
74 Id. at 931 (citing Fla. R. Civ. P. 1.220(b)(3)).
75 City of Tampa v. McAfee, 896 So. 2d 943, 946 (Fla. 2d D.C.A. 2005).
76 Id. at 946.
77 Id. at 947. See also Fla. Health Sciences Ctr., Inc. v. Elsenheimer, 952 So. 2d 575, 580 (Fla. 2d D.C.A. 2007) (reversing a “boilerplate” order granting class certification that was entered following a hearing at which no testimony was presented and no affidavits or depositions were offered in evidence).
78 Seminole County v. Tivoli Orlando Assoc. Ltd., 920 So. 2d 818, 824 (Fla. 5th D.C.A. 2006).
79 Id. at 823.
80 Id. at 824.
81 Id. at 825.
82 Barton-Malow, 627 So. 2d at 1235.
Edward M. Waller, Jr., is a shareholder at Fowler White Boggs P.A., practicing in the areas of business litigation, class actions, health care litigation, and lender liability. He is also the class action team leader at Fowler White Boggs P.A.
Julie Simone Sneed is a shareholder at Fowler White Boggs P.A., practicing in the areas of business litigation and class action litigation.
Ashley Bruce Trehan is an associate at Fowler White Boggs P.A., practicing in the areas of business litigation and class action litigation. Ms. Sneed and Ms. Trehan are members of the class action team at Fowler White Boggs P.A.