When and how can a defendant in a putative class action defeat a proposed class? Defendants served with class action complaints frequently struggle with this question. Typically, defendants wait until class certification briefing following lengthy discovery to contest class treatment. This waiting game carries a high cost – discovery in class action cases is usually lengthy (even when bifurcated to address class certification first), expensive, and contentious, carried on while potentially ruinous exposure dangles over the defendant’s head. Many defendants therefore consider filing early motions to strike class allegations prior to or during discovery to attempt to narrow the class—or strike it entirely—before plaintiffs move for certification.
This device carries with it both procedural and substantive questions. Defendants who move to strike have alternatively chosen to do so under Federal Rule of Civil Procedure 12(f) (pursuant to which the court may strike “redundant” or “immaterial” allegations) or under sections (c)(1)(A) and (d)(1)(D) of Rule 23 (which require the court to decide certification “at an early practicable time” and allow it to require amendment of the pleadings “to eliminate allegations about representation of absent persons”). In addition, courts faced with motions to strike have grappled with whether the motion places the burden on the defendant (as movant) to affirmatively demonstrate that a class cannot be certified or whether the burden remains with the plaintiff to demonstrate that Rule 23’s requirements for certification are met. Courts have also reached differing results as to what showing must be made to grant or deny a motion to strike; invariably, plaintiffs make conclusory allegations that their complaint satisfies Rule 23 and then argue that discovery is required so that they may demonstrate that they will meet the standard for certification.
A recent decision in the Western District of Pennsylvania sheds light on these important questions and may prove to be a future touchstone. Critically, the court’s treatment of the defendants’ motion to strike demonstrates that these motions can be a powerful tool in defeating cursorily pled class allegations at the pleadings, particularly where a class is not narrowly tailored.
The Western District Decision
On June 20, 2019, Judge Joy Flowers Conti, a Senior District Judge (and former Chief Judge) of the Western District of Pennsylvania issued In re: Railway Industry Employee No-Poach Antitrust Litigation, which granted defendants’ motion to strike the class allegations prior to discovery.
In re Railway involved antitrust claims against railway equipment suppliers. The plaintiffs, employees of the suppliers, alleged that defendants entered into unlawful “no-poach” agreements by which they agreed not to solicit or hire each other’s employees in violation of the Sherman Act. The defendants moved both to dismiss and to strike the class allegations in the complaint.
After denying most of the defendants’ motions to dismiss, the court then turned to the defendants’ motion to strike the class allegations. First, Judge Conti considered which Federal Rule of Civil Procedure governed the defendants’ motion. Citing the Third, Fourth, and Seventh Circuits as well as academic literature, the court concluded that Rule 23(d)(1)(D) applied. The court then addressed the dispute over burden of proof, holding that the burden is on the plaintiffs “to allege sufficient facts . . . to make a prima facie showing that the requirements of Rule 23 are satisfied or that at least discovery is likely to produce substantiation of the class allegations.”
After addressing these threshold questions, Judge Conti then turned to whether the factual allegations in plaintiffs’ complaint adequately alleged: (i) that plaintiffs were typical of the class they proposed to represent pursuant to Rule 23(a)(3); and (ii) that questions of law and fact common to the class members would predominate over individualized ones pursuant to Rule 23(b)(3).
With respect to typicality, the defendants argued that the “factual underpinnings” of each putative class member’s claim, such as the terms of her employment, necessarily rendered the named plaintiffs atypical. Following a lengthy analysis of typicality caselaw, the court found that the plaintiffs had adequately alleged typicality, holding that “the factual allegations in the [complaint] show that it is likely that discovery will reveal evidence that the claims of the named plaintiffs are typical of the claims of the putative class.”
The court reached a different conclusion with respect to plaintiffs’ allegations of predominance, however. The court reiterated that the plaintiffs must set forth factual allegations “to advance a prima facie showing of predominance or that at least it is likely that discovery will reveal evidence” that satisfies predominance. In the no-poach context, this requires plaintiffs to set forth factual allegations that the compensation structures of all the defendants are so rigid that compensation of all class members is “tethered together,” such that proof common to the class exists, or is likely to be uncovered during discovery.
Judge Conti held that the plaintiffs failed to meet this burden, as the complaint lacked the requisite specific factual allegations. Without such allegations, there was no basis to determine that antirust impact from the Defendants’ alleged conspiracy could be proven on a class-wide basis for all the employees in the putative class. The court further found plaintiffs’ proposed class definition to be overbroad and “lacking in precision,” as plaintiffs sought to represent nearly all of defendants’ employees from 2009 onwards despite also alleging that certain defendants had not entered into conspiracies until after that date.
In re Railway provides important guidance for class action defense counsel considering an early motion to strike. Besides offering clear analysis of both the Rule governing the motion and the parties’ respective burdens, the court’s decision demonstrates that plaintiffs cannot offer vague and conclusory allegations of predominance and then argue they are entitled to discovery. Rather, just as plaintiffs must offer specific factual allegations to state a claim for relief, so too must they set forth similarly detailed allegations to demonstrate that class treatment is warranted. Defense counsel would be well advised to consider leveraging the Railway court’s important decision in their next motion to strike class allegations.