On July 15, the U.S. Court of Appeals for the Second Circuit held that a district court has the power to decertify a class after a jury verdict. Mazzei v. The Money Store, No. 15-2054 (2d Cir. Jul. 15, 2016).

The Money Store case involved a class of mortgage borrowers who challenged post-acceleration late fees. The district court certified a class that included borrowers whose loans were owned or serviced by The Money Store. After a trial, the jury awarded $133.80 to Mazzei (the class representative) and $32 million in damages for the class. The Money Store then moved to decertify the class, arguing that the plaintiff failed to prove privity between The Money Store and borrowers whose loans the company only serviced. Proof of a contractual relationship, The Money Store argued, was necessary to establish privity between the class members and the company. This district court agreed and decertified the class.

On appeal, Mazzei argued that the trial court’s factual findings contradicted the jury’s determinations and violated the Seventh Amendment. Affirming the district court, the Second Circuit stated that the district court has “the affirmative duty of monitoring its class decisions in light of the evidentiary development of the case” throughout the progression of the case. The power for a trial court to decertify a class after trial is “not only authorized by Federal Rule 23 but is a corollary.” The Second Circuit also found that there was no violation of the Seventh Amendment because a litigant does not have a constitutional right to represent a class and the rights of absent class members are not impaired — their claims survive through tolling, and they are free to file individual actions after decertification.

One of the lessons from The Money Store is that a class certification ruling is always subject to challenge if the class representative does not prove the necessary elements of class certification. Because a trial court is obligated to make certification determinations under Federal Rule of Civil Procedure 23, the trial court can make factual determinations based on the evidentiary record presented at trial related to decertification, just as the court would at the certification stage of litigation. In effect, this allows the certification battle to continue in parallel with the trial on the merits and provides additional incentive for defendants to develop and pursue facts favorable to decertification for use at trial.

This strategy may be particularly useful where the class certification or asserted legal issues involve complex facts that may be more fully developed at trial than at the class certification stage. Class action litigants who receive an unfavorable class certification may continue to challenge certification at trial by developing an evidentiary record that supports not only their claims and defenses, but also their position regarding class certification.