Class certification is often discussed as a “stage” of litigation, but the Second Circuit’s recent decision in Jin v. Shanghai Original, Inc. et al[1] is a good reminder that, even after a class is certified, class treatment must remain appropriate throughout the litigation. In Jin, the Second Circuit upheld the decertification of a class after “red flags” alerted the court that plaintiffs’ counsel was no longer serious about taking the case to trial. The opinion is particularly significant in practice areas where settlement is the expectation and trial the exception—and it provides a roadmap for defense counsel contemplating a motion to decertify if class counsel does not remain diligent. Whether to do so may depend on the case. A class decertified for counsel’s failures of representation may just be scooped up and reasserted by a different (and more adequate) lawyer. But in cases with serious proof problems, class decertification on adequacy grounds may effectively end the litigation.

Case Background

In Jin, employees of Joe’s Shanghai restaurants[2] sued the restaurant chain in federal court in New York, alleging wage and hour violations under New York Labor Law (“NYLL”) and the Fair Labor Standards Act.[3] The district court certified a class of employees at a single location for the NYLL claims only under Rule 23(b)(3),[4] and appointed John Troy of Troy Law, PPLC as class counsel.[5] The case then proceeded toward trial.

Just five days before trial was scheduled to start, however, the district court sua sponte decertified the class, holding that the representation provided by class counsel was no longer adequate.[6] The district court noted “numerous red flags” over the preceding months, including class counsel’s failure to investigate their own claims that defendants had induced class members to opt out and repeated failure to submit a joint pretrial order that complied with the judge’s practice requirements.[7] When class counsel submitted a revised witness list shortly before trial, it became apparent that class counsel planned to call only two class members to testify.[8] The district court deemed this pretrial submission a “significant intervening event” triggering decertification.[9] In particular, the district court noted that the rights of absent class members would be put in jeopardy where the relevant payroll and other pay-related records no longer existed, making “substantial testimony critical to plaintiffs’ class claim.”[10]

The Second Circuit’s Decision

The Court of Appeals affirmed, holding that the trial court acted within its discretion because class counsel’s conduct made clear that “counsel was no longer adequately representing the class.”[11] The court explained, “Rule 23(g) requires courts to consider several criteria, including counsel’s efforts investigating the claims, experience with class actions, knowledge of the area of law, and resources.”[12]

Further, the Court of Appeals made clear that trial courts do not require a “significant intervening event” to decertify a class that no longer meets the requirements of Rule 23, reversing a handful of district court decisions to the contrary.[13] A court may—and should—decertify sua sponte whenever it determines that a class falls short of the requirements, including where class counsel’s representation of absent class members is deficient. This decision reinforces the trial court’s oversight role in class action litigation, and clarifies that class counsel’s representation from beginning to end must meet the standards of Rule 23 in order to maintain class certification. Notably, however, the Court specifically left open the question of what standard applies if a defendant moves to decertify a class, noting that “[b]ecause the issue of whether a significant intervening event or a similar type of showing might be appropriate when a defendant moves to decertify is not before us, we do not address this issue.”[14]

Takeaways

The Second Circuit’s decision is reassuring for defense counsel when facing opportunistic or incompetent class counsel. By building a record of unprofessional behavior, defense counsel has recourse to the court to seek decertification of the class, regardless of the standard that applies to such motions. Indeed, even though the decision does not explicitly resolve the governing standard in the Second Circuit for motions to decertify, it is a reminder that defendants can move to decertify a class at any point during the litigation if they amass evidence that the class no longer satisfies the requirements of Rule 23.

Seeking decertification on the basis of class counsel’s performance may not be the right strategy in every instance—for instance, where another firm is likely to step in to prosecute the case. But a motion to decertify on the basis of inadequate representation may prove a useful tool where there are serious issues that render the claims unattractive to plaintiffs’ counsel—like the problems of proof in Jin.