By a 4 to 3 majority, the Michigan Supreme Court last week remanded for further consideration a trial court's decision to certify a large environmental class action. The Court directed the trial court to re-evaluate its determination that plaintiffs satisfied at least two (but possibly all five) of the prerequisites for certification under Michigan Court Rule 3.501(A). Henry v. Dow Chemical Company, ___ Mich. ___, 2009 WL 2356729, Case No. 136298 (July 31, 2009). One of the principal issues (among others) raised by the appeal was whether the "rigorous analysis" required by the U.S. Supreme Court in its 1982 decision of General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147 which requires federal trial courts to closely scrutinize motions for class certification under Federal Rule of Civil Procedure 23 also applies to Michigan courts applying a similar state rule. Their answer: a firm "kind of, but not really."
In other words, the Henry Court rejected the "rigorous analysis" label as such, asserting that the U.S. Supreme Court has provided "little guidance as to what a 'rigorous analysis' actually entails." Instead, the Henry Court offered what it believes to be more tangible guidelines:
- The party seeking a class (almost invariably the plaintiff) has the burden of proof that each of the required prerequisites for certification is satisfied.
- The trial court may certify a class "only if" each prerequisite is satisfied (i.e., numerosity, predominance of common issues, typicality of the named plaintiff's claims, adequacy of representation, and superiority).
- The trial court may not accept as true the plaintiff's mere assertion that it has satisfied the prerequisites, nor is it bound by those assertions (overruling in this aspect Neal v. James, 252 Mich. App. 12 (2002)).
- The trial court might be able to determine that the prerequisites are satisfied on the pleadings alone (if, for example, there are detailed factual allegations that the defendant admits, which almost never happens), but otherwise must "probe behind the pleadings." Such further inquiry frequently includes allowing discovery and the holding of an evidentiary hearing to "independently determine" whether the prerequisites are met.
- Trial courts must be mindful that in evaluating these issues they "shall analyze any asserted facts, claims, defenses, and relevant law without questioning the actual merits of the case." This aspect of the majority's opinion will likely invite debate (and distraction) that federal courts have largely gotten past in recent years. The issue for certification is not the merits of the plaintiff's claim per se. The issue frequently is whether or not, in evaluating the plaintiff's and each class member's claims, common issues predominate over individual issues. This also relates to the question of typicality: if the proofs that must be evaluated to determine whether the class representative has a valid claim are different from those pertaining to many class members' claims, then common issues do not predominate and these prerequisites are not satisfied. In other words, simply trying the named plaintiff's claims will not resolve the absent class members' claims. This distinction is well-established in federal jurisprudence (which the Henry decision frequently cites).
- While not entirely clear, the Henry decision may be significant to the extent that it is read to apply if not in words then in deed a more deferential level of review to a trial court's class certification decision than would likely apply in federal appellate courts. Both federal and Michigan decisional law (including Henry) state that trial courts have "broad discretion" in determining whether to certify a class. But federal appellate courts routinely review each of the prerequisites to determine whether a class was properly certified. The Henry court did not do this. Instead, the Court only directed the trial court to revisit its ruling on those prerequisites for which the wording of the class certification order demonstrated a failure to apply the "independently determine" standard. In particular, the majority did not engage in any analysis of the prerequisite that was the focus of Dow's challenge: predominance.
This omission might be explained by footnote 41 of the majority's opinion, which invites the trial court to reanalyze all the prerequisites "[t]o the extent that [it] determines that the standard it initially used is inconsistent with the proper standard." Thus, it is possible that the Court did not do a substantive review of predominance because of the possibility that the trial court would revisit that issue on remand. If this is so, it leaves open the possibility of a further substantive review of predominance, etc., if the trial court again certifies the class. Otherwise, leaving it up to the trial court to decide whether it used the right standard (without analyzing each of the challenged prerequisites on appeal) would imply a level of deference seemingly at odds with the "clear error" (factual determinations) and "abuse of discretion" (application of legal standards to facts) standards of review that the Henry court recognized as applicable.
What does this mean for companies and other clients that may be sued in class actions in Michigan state courts? While it is important that the circumstances of each case be carefully evaluated by experienced Michigan counsel (the claims at issue, the locale, the judge, identity of opposing counsel, etc.), many defendants choose to remove a class action to federal court if it is possible to do so, hoping for a more rigorous analysis of the class certification request and perhaps a more searching review on appeal if a class is certified. Federal courts appear to be more focused on careful scrutiny, in part out of concern for the due process rights of the parties, especially absent class members. This concern was not discussed in Henry. While Henry is a somewhat balanced decision, there is little in it to alter the predilection for defendants to remove. With the passage of the Class Action Fairness Act by the U.S. Congress several years ago, most (but not all) class actions now qualify for federal jurisdiction.