A few weeks ago, with little fanfare, the Tenth Circuit clarified the standard of evidence it requires for class certification, and the result is one that will be extremely helpful for defendants. The case, Wallace B. Roderick Revocable Living Trust v. XTO Energy, Inc., No. 12-3176, 2013 U.S. App. LEXIS 13842 (10th Cir. Jul. 9, 2013), is a gas royalty class action. These lawsuits have been fairly popular among plaintiffs' lawyers, because of the perception that they are easy to certify.
In Roderick Trust, the Trust alleged that the defendant gas company "systematically underpaid royalties" but deducting the costs of preparing the gas for market. It sued for breach of contract and unjust enrichment, and sought an accounting. After discovery, the Trust moved for certification. The lower court certified the class, and the gas company appealed.
The Tenth Circuit reversed. And the meat of its opinion actually occurs when it lays out the standard for proving a class action:
Here, the district court's analysis of Rule 23(a)'s commonality requirement is in tension with the rule that "actual, not presumed, conformance with Rule 23(a) remains . . . indispensable." Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 160, 102 S. Ct. 2364, 72 L. Ed. 2d 740 (1982). Specifically, the district court applied a less demanding standard whereby "[c]lass certification requirements are liberally construed, and doubts may be resolved in favor of certification." Further, the court may have altered the burden of proof by requiring XTO to disprove commonality.
(Emphasis added.) Specifically, the Tenth Circuit found that the Trust had not met its burden of showing that the "implied duty" to market gas that it alluded to as a common issue in fact existed.
The Trust claims there is an implied duty of marketability in every class member's lease. The problem, however, is that the Trust has not shown--and the district court did not specifically find--that the duty exists classwide. The district court assumed the IDM was present in each lease because XTO "failed to point to any lease provision unambiguously negating . . . the existence of any implied duty of marketability." But given known variations in lease language, we think it was the Trust's burden to affirmatively demonstrate commonality on the implied duty of marketability.
(Internal citations omitted.) In other words, when the evidence is ambiguous, ties go to the defendant. This standard is very similar to the "preponderance" standard the Third Circuit announced in Hydrogen Peroxide, and should be a powerful reminder that class certification is not supposed to be automatic.
I am realistic about the way litigation works. The common plaintiff's tactic of filing bare-bones class certification motions means that, as a practical matter, defendants will often have to shoulder the burden of persuasion when opposing class certification, because they are the first to advance substantive arguments in the debate. That general, practical dynamic is unlikely to change. But Roderick Trust helps to even the odds a little.