Requirements of Class Action by Federal Rule of Civil Procedure 23
The standard of proof governing class action described by the Second Circuit:
(1) A district judge may certify a class only after making determinations that each of the Rule 23 requirements has been met;
(2) Such determinations can be made only if the judge resolves factual disputes relevant to each Rule 23 requirement and finds that whatever underlying facts are relevant to a particular Rule 23 requirement have been established and is persuaded to rule, based on the relevant facts and the applicable legal standard, that the requirement is met;
(3) The obligation to make such determinations is not lessened by overlap between a Rule 23 requirement and a merits issue, even a merits issue that is identical with a Rule 23 requirement;
(4) In making such determinations, a district judge should not assess any aspect of the merits unrelated to a Rule 23 requirement
The prerequisites of numerosity, commonality, typicality, and adequacy of representation by Federal Rule of Civil Procedure 23(a)
Numerosity
A class of more than 40 commands a presumption of sufficient numerosity.
In securities fraud class actions, the numerosity requirement may be satisfied by a showing that a large number of shares were outstanding and traded during the relevant period.
Commonality
Rule 23(a)(2) demands the existence of common questions of law or fact between members of the class. Common questions must also generate common answers apt to drive the resolution of the litigation.
Commonality does not mandate that all class members make identical claims and arguments or that the circumstances of their securities purchase be identical.
The commonality requirement has been applied permissively by courts in the context of securities fraud litigation, and minor variations in the class members' positions will not suffice to defeat certification.
Common questions of law and fact are present where the alleged fraud involves material misrepresentations and omissions in documents circulated to the investing public, press releases and statements provided to the investment community and the media, and investor conference calls.
Typicality
If each class member's claim arises from the same course of events, and each class member makes similar legal arguments to prove the defendant's liability, Rule 23(a)'s typicality requirementis satisfied.
The typicality analysis asks whether the claims and defenses of the representative parties are typical of the claims or defenses of the class.
Adequacy
The representative parties will fairly and adequatedly protect the interests of the class.
Adequacy entails inquiry as to whether:
(1) plaintiff's interests are antagonistic to the interest of other members of the class
(2) plaintiff's attorneys are qualified, experienced and able to conduct the litigation
The first prong of this analysis serves to uncover conflicts of interest between named parties and the class they seek to represent and ensure that the proposed class representative possesses the same interest and suffered the same injury as the class members.
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