January 29, 2021
by: Colin E. Flora
After several relatively quiet weeks from Indiana’s appellate courts, the last two days have been a flurry of appellate decisions that merit attention. More likely than not, next week, we’ll discuss the de facto companion decisions of Ladra v. State and Staat v. INDOT, dealing with issues relating to governmental immunity for roadways accumulating water that was dangerous to drivers. But, this week, there was a different topic that captured my attention, which draws me back to discussing the Seventh Circuit: the question of what constitutes a sufficient basis for finding numerosity under Federal Rule of Civil Procedure 23(a)(1) for the purpose of certifying a class action. Yes, you guessed it, this is another esoteric dive into a fascinating issue of civil procedure.
Before we depart the diving platform, let us pause to acknowledge a handful of other notable recent decisions from both within and beyond Indiana’s borders. We turn first to the California Court of Appeals’ opinion in Flores v. Liu. As the California court summarized:
Next, we head to the Fourth Circuit for a brief note on civil procedure, provided by Goodman v. Diggs. There, a pro se litigant filed a verified complaint, then a verified first amended complaint, and, finally, an unverified second amended complaint. At summary judgment, the district court deemed the defendants’ motion to be uncontradicted by evidence from the plaintiff. On first impression within the circuit, the Fourth Circuit ruled that it was error for the district court not to treat the prior verified complaints as affidavits for the purpose of summary judgment. Importantly, this was only true because the first two complaints were verified. If they had been unverified, as the second complaint was, they would have been no more relevant to the court’s inquiry than the second complaint, which is not evidence when offered only by the plaintiff. The Fourth Circuit’s ruling was guided by the Seventh Circuit’s 2017 decision in Beal v. Beller.
We now can dip our toes briefly into Indiana caselaw with two recent civil decisions out of the Indiana Supreme Court. First, in Doe v. Carmel Operator, LLC, the Indiana Supreme Court reaffirmed concrete principles of law that non-parties to arbitration agreements cannot enforce arbitration agreements where they are not intended third-party beneficiaries to the agreement, are not agents to the agreement, and are otherwise not entitled to exercise the doctrine of equitable estoppel. The court further reiterated that “equitable estoppel can be applied only if three elements are shown: lack of knowledge, reliance, and prejudicial effect.”
And, second, in Hartman v. BigInch Fabricators & Construction Holding Company, Inc., the court concluded that where a contract between a majority and minority shareholder governs how shares are to be evaluated, the contract terms govern and will allow discounts for shares constituting a non-controlling interest even though the shares are transferred in a closed-market sale and are not publicly available. Importantly, the court did not overrule cases such as Wenzel v. Hopper & Galliher, P.C., that held such measures were against public policy in the absence of a specific contractually agreed upon measure for evaluating shares.
With those important cases out of the way, let us now turn to Rule 23(a)(1) and Anderson v. Weinert Enterprises, Inc. As we’ve previously discussed, for courts applying class-action procedures mirroring Federal Rule 23, as Indiana does, a proponent of class certification must first demonstrate the four requirements of Rule 23(a) and then at least one of the requirements of Rule 23(b). The very first requirement of Rule 23(a) is that “the class is so numerous that joinder of all members is impracticable.” This requirement, embodied in Rule 23(a)(1), is generally called numerosity.
Despite being the very first showing required, as the Seventh Circuit observed: “Ample ink has been spilled discussing class action litigation and Federal Rule of Civil Procedure 23. Rare are the cases analyzing the Rule’s numerosity requirement. This is one of those cases.”
In a prior discussion, we briefly touched upon numerosity and noted that a standard rule of thumb, though no magic number, is that numerosity will be met when there are at least 40 members of the class. There are instances when classes having fewer than 40 members have been deemed sufficient to meet numerosity. Various factors may go into such a determination, such as whether the class is comprised of current employees who may be reticent to sue their employer. Ultimately, the touchstone is what the rule says: whether “joinder of all members is impracticable.” Mind you, “‘impracticable’ does not mean ‘impossible[.]’” Instead, “a class representative must show ‘that it is extremely difficult or inconvenient to join all the members of the class.’” “Answering that question requires evaluation of ‘the nature of the action, the size of the individual claims, and the location of the members of the class or the property that is the subject matter of the dispute.’”
Understanding the resolution of Anderson requires an important note about appellate review of determinations on class certification: the standard of review is whether the district court abused its discretion. That is a high burden for an appellant to overcome, making class certification decisions important ones to win at the trial court. It is that standard that sealed the result against class certification in Anderson. The district court engaged in the impracticability analysis of numerosity “and determined that Anderson failed to show it would be impracticable to join approximately 37 class members. In doing so, the court considered the proposed class’s geographic dispersion, overall size of the class, small dollar amounts involved with each individual claim, and Anderson’s ability to easily contact the class members.”
Because the district court engaged in an appropriate analysis and rendered a decision within the bounds of its ample discretion, the Seventh Circuit could not reverse on appeal.
The Seventh Circuit concluded with an important reminder:
The robust body of caselaw supporting the forty-person presumption remains undisturbed. Ultimately, whether numerosity is satisfied is to be judged on a case-by-case basis depending on the specific facts at issue. As one court may have said it best, “[a] court must rely on simple common sense when determining whether a class size meets the numerosity requirement.” In this instance, the district court’s judgement was that numerosity was not satisfied and the Seventh Circuit was not in a position to disturb that ruling.
Join us again next time for further discussion of developments in the law.
- Ladra v. State, 162 N.E.3d 1161 (Ind. Ct. App. 2021) (Robb, J.; Tavitas, J., dissenting), trans. granted and opinion vacated.
- Staat v. Ind. Dep’t of Transp., 164 N.E.3d 135 (Ind. Ct. App. 2021) (Bailey, J.; Tavitas, J., concuring in result), trans. granted and opinion vacated.
- Flores v. Liu, 60 Cal. App. 5th 278 (Cal. Ct. App. 2021) (Hoffstadt, J.).
- Spar v. Cha, 907 N.E.2d 974 (Ind. 2009) (Boehm, J.).
- Goodman v. Diggs, 986 F.3d 493 (4th Cir. 2021) (Wynn, J.).
- Beal v. Beller, 847 F.3d 897 (7th Cir. 2017) (Wood, C.J.).
- Doe v. Carmel Operator, LLC, 160 N.E.3d 518 (Ind. 2021) (Rush, C.J.).
- Hartman v. BigInch Fabricators & Constr. Holding Co., Inc., 161 N.E.3d 1218 (Ind. 2021) (Rush, C.J.).
- Wenzel v. Hopper & Galliher, P.C., 779 N.E.2d 30 (Ind. Ct. App. 2002) (Hoffman, S.J.), trans. denied.
- Anderson v. Weinert Enters., Inc., 986 F.3d 773 (7th Cir. 2021) (Scudder, J.).
- Flood v. Dominguez, 270 F.R.D. 413, 417 (N.D. Ind. 2010) (Simon, C.J.).
- Colin E. Flora, How Does a Class Action Case Work?, Hoosier Litig. Blog (July 6, 2012).
- Colin E. Flora, Seventh Circuit (Posner) Examine Role of Class Action Representative, Hoosier Litig. Blog (July 6, 2012).
*Disclaimer: The author is licensed to practice in the state of Indiana. The information contained above is provided for informational purposes only and should not be construed as legal advice on any subject matter. Laws vary by state and region. Furthermore, the law is constantly changing. Thus, the information above may no longer be accurate at this time. No reader of this content, client or otherwise, should act or refrain from acting on the basis of any content included herein without seeking appropriate legal or other professional advice on the particular facts and circumstances at issue.