The trial court certifies a class. Discovery proceeds and the case goes to trial The jury returns a verdict for the plaintiff class. Can the defendant use post-trial motions to seek class decertification, effectively annulling the verdict? Yes, according to the Second Circuit. Indeed Fed. R.Civ. P. 23(c)(1)(C) specifically permits the court to alter or amend an order that grants or denies class certification at any time “before final judgment.” But as Mazzei v. The Money Store, 2016 U.S. App. LEXIS 12994 (2nd Cir. July 15, 2016) illustrates, post-trial decertification carries with it a host of issues not present before trial, including those discussed below.
In Mazzei, the trial court certified a class of borrowers whose loans were either owned by or serviced by The Money Store (“TMS”). Plaintiff alleged that TMS charged class members for post-acceleration late fees, which, he asserted, were not allowed under the loan documents.
The class lawsuit went to trial and resulted in a jury verdict of $133.80 for the named plaintiff and $32 million plus prejudgment interest for the class. In post-trial motions, TMS asked the court to decertify the class, based largely on TMS’ argument that plaintiff failed to prove class-wide privity of contract because TMS did not own all loans, but merely serviced some of them. The district court granted the motion and decertified the class.
On appeal, the plaintiff first argued that decertification was unavailable after a verdict in favor of the certified class. The Second Circuit had no trouble disposing of this argument, noting the plain language of Rule 23(c)(1)(C) that permits a court to alter a certification order “before final judgment.”
Next, the plaintiff argued that the decertification order violated class’ jury trial rights under the Seventh Amendment. In rejecting this argument, the court first observed that decertification did not violate the Seventh Amendment rights of the named plaintiff because he “will receive damages on his individual claim in the amount awarded him by the jury.” Moreover, the named plaintiff had no constitutional right to represent the class; that right is entirely a creature of Rule 23. The appellate court also determined that decertification did not violate the Seventh Amendment rights of class members because members of the decertified class were free to start individual actions, without fear of facing a statute of limitations argument since “the filing of a putative class action tolls the statute of limitations with respect to all absent would-be class members until the time class certification is denied.”
One of the more troubling issues that the appellate court had to address arose from the tension created by the implicit finding of the jury that the plaintiff had established class-wide privity and the trial court’s conclusion that he had not. This tension raised the question of the standard to be applied in deciding certification issues after the jury has returned a verdict. The Second Circuit began its analysis of this issue by noting that “[n]ormally the district court resolves factual issues related to class certification, making its findings based on the preponderance of the evidence.” But after the conclusion of a trial, that standard runs head long into the deference that courts are required to give to a jury’s verdict. To resolve the issue, the appellate court invoked the standard that applies to a Rule 59 motion for a new trial on “weight-of-the-evidence” grounds. Under that standard, “when a district court considers decertification (or modification) of a class after a jury verdict, the district court must defer to any factual findings the jury necessarily made unless those findings were ‘seriously erroneous,’ a ‘miscarriage of justice,’ or ‘egregious.'” Applying this standard, the Second Circuit upheld the decertification order, concluding that the jury’s implicit finding of class-wide privity was “seriously erroneous.” And without privity, typicality and predominance of common questions of law or fact – two foundation elements to obtain class certification – were absent.
The principal take-away from Mazzei is that until final judgment, class certification is always in play. This requires defense counsel to continually review and analyze the evidence as it is developed before trial and presented at trial.
