TO: Chief Justice VandeWalle, Justice Neumann, Justice Sandstrom, Justice Maring, Justice Kapsner
FROM: Mike Hagburg
RE: Proposed Amendment to N.D.R.Civ.P. 23
The Court is considering an amendment to N.D.R.Civ.P. 23 that would allow trial court proceedings, such as discovery, to continue when a when a class action certification order is appealed. The Court asked whether any other jurisdictions have a similar rule or policy.
First, here is some background regarding appeals of class certification orders in other jurisdictions. Forty-three states operate under class actions rules similar to Fed.R.Civ.P. 23. The federal rule did not include a provision allowing interlocutory class certification appeals until Fed.R.Civ.P. 23(f) was adopted in 1998. This provision gives federal appellate courts discretion to accept interlocutory appeals of certification orders.
Few states have adopted Fed.R.Civ.P. 23(f) or any other interlocutory appeal provision for class actions. In the majority of states, certification decisions may only be appealed when they amount to a final decision. This may happen, for example, when a trial court's decision not to certify a class action brings the action to an end (this is called the "death knell" rule). Several states (California, Colorado and Montana, for example) allow interlocutory appeals only from orders denying class certification.
North Dakota and Iowa are the only states that have adopted the Uniform Class Actions Rule, which allows interlocutory appeals of all certification orders. In a handful of other states Indiana, Ohio, Oklahoma, Oregon, and Texas interlocutory appeals of orders granting or denying certification are possible. Because North Dakota and these states are similarly situated, this memorandum will focus on the approach taken to interlocutory appeals in these states.
The amendment to N.D.R.Civ.P. 23 now before the Court had its genesis in a proposal to replace the current interlocutory appeal language in N.D.R.Civ.P. 23 (d) and (e) with the language of Fed.R.Civ.P. 23(f). The Joint Procedure Committee rejected the federal language, but decided that adopting the proposed amendment allowing trial court proceedings to continue during an appeal of a certification order could provide some protection from delays caused by multiple appeals of certification decisions.
The general rule in North Dakota is that the trial court loses jurisdiction in a matter when a notice of appeal is filed. United Accounts v. Teleadvantage, Inc., 499 N.W.2d 115, 118 (N.D. 1993). This Court, however, has recognized that there are exceptions to this rule and it has suggested that it will consider whether such exceptions exist on a case-by-case basis. Id. at 118-119. The Court has not yet had the opportunity to determine whether a trial court loses jurisdiction to act in a matter when an interlocutory appeal is filed.
"Hornbook law" on interlocutory appeals suggests that trial courts retain jurisdiction to act on matters not directly pertinent to the appeal. "The taking of an interlocutory appeal generally deprives the trial court of authority to act regarding the matter that is the subject of the appeal. The court is not, however, barred from acting in matters unrelated to the appeal." 5 Am. Jur. 2d, Appellate Review § 432, at 176 (1995). Allowing proceedings such as discovery to continue at the trial court level when a class action certification order is appealed seems consistent with this general rule.
As noted above, Iowa is the only state other than North Dakota that has adopted the Uniform Class Actions Rules. Iowa does not appear to have a rule similar to that proposed in the amendment before the Court. However, in Koss v. City of Cedar Rapids, 300 N.W.2d 153, 156 (Iowa 1981), the Iowa Supreme Court recognized the existence of "divided jurisdiction" in matters where an interlocutory appeal is taken. The Koss court decided that an appellate court's exercise of jurisdiction to act on an interlocutory appeal did not preempt the trial court's jurisdiction as to issues and matters not involved in the interlocutory appeal. Id.
Texas has a similar rule on divided jurisdiction when interlocutory appeals are taken. In In re: M.M.O., 981 S.W.2d 72, 78-79 (Texas Ct. App. 1998), the court explained that Texas R.App.P. 43(d) allowed a trial court to continue to proceed in a class action pending an appellate decision on an interlocutory appeal of the trial court's certification order. Indiana also recognizes that divided jurisdiction exists in matters where interlocutory appeals are allowed. See Elder v. State, 482 N.E.2d 1383 (Ind. Ct. App. 1985).
Oregon has adopted a rule provision somewhat similar to the proposed amendment before the Court. Under O.R.S. § 19.225, the Oregon Court of Appeals has discretion to hear appeals of certification orders. Parties must apply for leave to appeal, and "[a]pplication for such an appeal shall not stay proceedings in the circuit court unless the circuit court judge or the Court of Appeals or a judge thereof shall so order." The Oregon rule does not state whether proceedings in the trial court will be stayed if the appellate court exercises its discretion and accepts an application to appeal.
While there is not an overwhelming amount of case law on this topic, it appears that the proposed amendment to N.D.R.Civ.P. 23 (which would allow trial court proceedings to continue pending appellate review of a class action certification order) would be consistent with the practice of other states that allow interlocutory appeals of orders granting or denying class certification.
In the Court's discussion of the proposed amendment, some of the justices expressed concern about discovery abuse if trial court proceedings could continue pending appeal. N.D.R.Civ.P. 23(j) does impose some "built in" protections against discovery abuse. This subdivision provides:
(1) Discovery under applicable discovery rules may be used only on order of the court against a member of the class who is not a representative party or who has not appeared. In deciding whether discovery should be allowed the court shall consider, among other relevant factors, the timing of the request, the subject matter to be covered, whether representatives of the class are seeking discovery on the subject to be covered, and whether the discovery will result in annoyance, oppression, or undue burden or expense for the members of the class.
(2) Discovery by or against representative parties or those appearing is governed by the rules dealing with discovery by or against a party to a civil action.