Ninth Circuit holds that a class representative can voluntarily settle individual claims but retain a personal stake sufficient to appeal the denial of class certification

In the last few years, California Courts of Appeal have examined the question of whether an putative class representative can voluntarily settle individual claims while "agreeing" with the defendant that the plaintiff would retain a right to appeal the denial of class certification.  That examination hasn't gone well for plaintiffs:  "The parties' intent cannot compel this court to issue an advisory opinion on issues in which, after the settlement, Larner no longer retains any individual, personal stake."  Larner v. Los Angeles Doctors Hospital Associates, LP, 168 Cal. App. 4th 1291, 1298 (2008).  However, the Larner Court suggested that, had Larner "reserved any right to shift attorney fees to other class members," she might have retained an interest in the litigation sufficient to support her right to appeal.  Larner, at 1304.

After Larner, the trend continued, and with increasing momentum against plaintiffs.  Watkins v. Wachovia Corp., 172 Cal. App. 4th 1576 (2009) actually criticized Larner: "We believe that it is illogical to import the law governing 'pick off' cases into the context of a voluntary settlement."  Watkins, at 1591.  Watkins bluntly declared, "There are no public policy interests implicated by a settlement voluntarily accepted."  Watkins, at 1591.

The Ninth Circuit had occasion to examine this same issue.  In Narouz v. Charter Communications (9th Cir. Jan. 15, 2010), the Court examined "whether the settlement and voluntary dismissal by a class representative of his personal claims in a putative class action lawsuit renders moot his appeal of the denial of class certification."  Slip op., at 1172.  Identifying the issue as one open in the Ninth Circuit, the Court began its analysis with an examination of decisions arising in the context of "involuntary" claim expiration:

The Supreme Court held in Geraghty that when a class representative’s claims expire involuntarily, that representative “retains a ‘personal stake’ in obtaining class certification sufficient” to maintain jurisdiction to appeal a denial of class certification. Id. at 404. The Court reasoned that the class representative maintained at least an interest in spreading litigation costs and shifting fees and expenses to the other litigants with similar claims. Id. at 403; see also Deposit Guar. Nat’l Bank, Jackson Miss. v. Roper, 445 U.S. 326, 334 n.6 (1980).

Slip op., at 1175.  Much like the Larner Court, the Ninth Circuit held:

We hold that when a class representative voluntarily settles his or her individual claims, but specifically retains a personal stake as identified by Geraghty and Roper, he or she retains jurisdiction to appeal the denial of class certification. In so holding, we join several other circuits. See Richards v. Delta Air Lines, Inc., 453 F.3d 525 (D.C. Cir. 2006); Potter v. Norwest Mortgage, Inc., 329 F.3d 608 (8th Cir. 2003); Toms v. Allied Bond & Collection Agency, Inc., 179 F.3d 103 (4th Cir. 1999); Love v. Turlington, 733 F.2d 1562 (11th Cir. 1984).

Slip op. at 1175.  The Court then emphasized that "a class representative cannot release any and all interests he or she may have had in class representation through a private settlement agreement" and still assert the existence of a "personal stake" in the litigation.  Slip op. at 1175.

The Court then briefly criticized the District Court's failure to create a proper record for review when it refused to certify the proposed class for settlement purposes:  "It is clear here that the district court erred in denying class certification without providing any findings or providing any analysis of the Rule 23 factors."  Slip op., at 1179.  The Court succinctly said, "Meaningful appellate review is impossible."  Slip op., at 1179.

There was also a spirited exchange between District Judge Korman (Senior United States District Judge for the Eastern District of New York, sitting by designation), who concurred in the decision, and Circuit Judge Rymer, who dissented.