First Circuit Reverses Certification of Defendant Class in Copyright Action

October 2, 2003. The U.S. Court of Appeals (1stCir) issued its opinion in Tilley v. TJX, reversing a District Court order certifying a defendant class in a copyright infringement case. The Appeals Court's opinion cautiously reverses the District Court's order on basis that the grounds relied upon by the District Court were inadequate. The Appeals Court left open the possibility that the District Court on remand could certify a defendant class on other grounds.

Rule 23 of the Federal Rules of Civil Procedure, which provides for class actions, is plaintiff/defendant neutral. However, as a practical matter almost all certified classes are plaintiff classes. Typically, the action of one or a group of defendants is asserted to have caused the same injury to a very large body of consumers, shareholders, or others. The situations in which a very large body of people or entities causes the same injury to a single party have heretofore been rare. However, this may be changing in the information economy. For example, the proliferation of computing equipment and internet based applications that facilitate copyright infringement could give rise to a number of scenarios in which copyright holders might seek certification of defendant classes.

Rule 23(a) provides that "One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class."

Rule 23(b) then requires that for a class to be certified, all of the requirements of Rule 23(a), and one of the prerequisites enumerated in Rule 23(b), must be satisfied.

Rule 23(b) lists the following:

"(1) the prosecution of separate actions by or against individual members of the class would create a risk of
  (A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or
  (B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or
(2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or
(3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. ..."

In this case, the District Court relied upon (b)(1)(B) and (b)(2).

In the present case, Gerardine Tilley is a graphic artist who created and published a wallpaper design. She registered a copyright for her design pursuant to 17 U.S.C. § 408. She alleges that Dennis East International, Inc. copied her copyrighted design without authority, and then advertised and sold home decor items bearing the replica to approximately 557 retailers throughout the United States, including TJX Companies, Inc.

Tilley filed a complaint in U.S. District Court (DMass) against Dennis East and TJX alleging copyright infringement. She sought both damages and injunctive relief.

Tilley also moved for certification of a defendant retailer class. The District Court certified the proposed class under Rule 23(b)(1)(B) for both damages and equitable relief, and in the alternative, under 23(b)(2) for injunctive relief only. The District Court designated TJX as the defendant class representative.

The District Court's reliance upon (b)(1)(B) was based upon the stare decisis effect. The term stare decisis, which does not appear in Rule 23, is legal Latin for the notion that courts should abide by or adhere to decided cases. That is, courts should, to some extent, follow the precedents set in previously decided cases. For Gerardine Tilley, the District Court considered that the anticipated effect of stare decisis on subsequent cases that she might bring against other retailer infringers was sufficient to satisfy the prerequisite set forth in (b)(1)(B).

The Appeals Court reversed and remanded.

First, the Court addressed Rule 23(b)(2). It held that (b)(2) can never serve as the basis for certifying a defendant class. It reasoned that "This language is quite clear: ``the party opposing the class´´ means the opposing party in the litigation. In ordinary circumstances, it will be the defendant -- the alleged wrongdoer -- who ``has acted or refused to act on grounds generally applicable to the class,´´ thereby making certification of a plaintiff class appropriate. In cases involving garden-variety defendant classes, there will be no single act or refusal to act on the part of the plaintiff (the party opposing the class) that makes injunctive or declaratory relief appropriate. Rather, it will be the defendants -- the members of the putative class -- who allegedly have acted in the same tortious or unlawful way (here, by selling infringing articles). The language of Rule 23(b)(2) leaves no room for such a circumstance to ground certification of a defendant class. For this reason, defendant classes generally lie outside the contemplation of Rule 23(b)(2)."

Second, the Court addressed Rule 23(b)(1)(B). The Court held that a stare decisis effect alone cannot serve as the basis for (b)(1)(B) certification. However, it added that a stare decisis effect, in combination with other factors, may satisfy (b)(1)(B).

The Court wrote that "The rule's ``by or against´´ language makes pellucid its universal applicability, so the difficulty here is not the appropriateness of applying the provision in actions involving defendant classes. Rather, the quandary concerns whether the mere possibility that the precedential effect of an individual suit will influence the outcome of later actions renders that suit, in the language of the rule, ``as a practical matter[,] dispositive of the interests of the other members not parties to the adjudications ....´´ Our negative answer to this question applies with equal force to both plaintiff and defendant class actions."

It continued that "Because the structure of Rule 23 makes very clear that subsection (b)(1)(B) was not intended to swallow the other three routes to certification spelled out in Rule 23(b), we conclude that the effect of stare decisis, standing alone, will not justify class certification under Rule 23(b)(1)(B)."

However, the Appeals Court added that "That is not to say that the potential impact of stare decisis is wholly immaterial to class certification under Rule 23(b)(1)(B). The rule is concerned with suits that would ``substantially impair or impede´´ the ability of absent class members to protect their interests in subsequent cases. Although stare decisis does not qualify as an effect that, in and of itself, would cause a substantial impairment or impediment, it is conceivable that stare decisis, in combination with other factors, might support a finding that a substantial impairment or impediment looms."

Finally, the Court wrote that "We are also cognizant of the idiosyncratic circumstances that would seem in some ways to make class certification an attractive device in cases such as Tilley's (in which a single copyright holder seeks to prevent continued infringement on the part of many defendants who sell identical articles). We therefore leave the district court free, on remand, to explore whether some suitable basis for class certification in fact exists."

This case is Gerardine Tilley v. TJX Companies, Inc. and Dennis East International, Inc., Appeals Court No. 03-8001, an appeal from the U.S. District Court for the District of Massachusetts, Judge Nancy Gertner presiding.