Jennifer Duncan v. Governor of the Virgin Islands ( 2022 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 21-3024
_____________
JENNIFER DUNCAN,
Appellant
v.
GOVERNOR OF THE VIRGIN ISLANDS; KIRK
CALLWOOD, SR., Department of Finance; DIRECTOR
VIRGIN ISLANDS BUREAU OF INTERNAL REVENUE;
GOVERNMENT OF THE VIRGIN ISLANDS
_____________
On Appeal from the District Court of the
Virgin Islands of United States
(D.C. No. 3-18-cv-00057)
District Judge: Hon. Robert A. Molloy
_____________
Argued May 9, 2022
Before: JORDAN, MATEY, and ROTH, Circuit Judges.
(Filed August 31, 2022)
_____________
Joseph A. DiRuzzo, III [ARGUED]
Alexander Golubitsky
Daniel M. Lader
DiRuzzo & Company
401 East Las Olas Blvd. – Suite 1400
Fort Lauderdale, FL 33301
Counsel for Appellant
Kenneth Case
Aquannette Chinnery-Montell
Ian S.A. Clement [ARGUED]
Ariel M. Smith-Francois
Office of Attorney General of Virgin Islands
Department of Justice
34-38 Kronprindsens Gade
GERS Complex, 2nd Floor
St. Thomas, VI 00802
Counsel for Appellees
_______________
OPINION OF THE COURT
_______________
JORDAN, Circuit Judge.
Jennifer Duncan brought a putative class-action lawsuit
against the Government of the Virgin Islands and certain of its
high-ranking officials (collectively, the “Territory”), seeking
to end what Duncan describes as the Territory’s practice of
delaying income tax refund checks for most taxpayers but
expediting refunds for certain favored taxpayers and
government employees. This interlocutory appeal of the
District Court’s denial of class certification hinges largely on
2
the legal effect of a single fact: Duncan’s receipt of a refund
check from the Territory during the pendency of her lawsuit.
The District Court held that the refund check, while not in the
amount Duncan says she is owed, called into question
Duncan’s standing to press certain claims and made all of her
claims atypical of the claims of the putative class. The Court
also held that Duncan failed to meet her burden of proving that
she was an adequate representative of the class.
Although the District Court’s handling of this class-
certification dispute was thoughtful, we disagree with its
conclusion that the mid-litigation refund check deprived
Duncan of standing and rendered all of her claims atypical.
And, in evaluating whether Duncan was an adequate
representative, the District Court applied a legal standard
inconsistent with our precedent. We will therefore vacate the
order denying Duncan’s motion for class certification and
remand for further consideration.
I. BACKGROUND
A. The Lawsuit
Duncan makes no secret of what inspired her lawsuit. It
was a similar class action against the Government of Guam. In
Paeste v. Government of Guam, the Ninth Circuit affirmed the
grant of summary judgment to Guam taxpayers in their class-
action lawsuit against the territorial government. 798 F.3d
1228, 1231 (9th Cir. 2015). Struggling with budget deficits,
Guam had excessively withheld income taxes to support
government spending, rather than refunding the excess taxes.
Id. Some taxpayers got their refunds, however, through an
“expedited refund” process that devolved into arbitrariness and
3
favoritism. Id. The Ninth Circuit held that the challenged
process violated the Organic Act of Guam and the Equal
Protection Clause of the Fourteenth Amendment. Id. As
Duncan emphasizes here, the district court in Paeste certified
a class of taxpayers who were entitled to, but did not receive,
timely tax refunds. Id. at 1232 & n.3.
“Having been inspired by the Paeste litigation … ,
Duncan brought her action seeking to cause systemic change”
in the Virgin Islands income tax collection practices, those
taxes being the Territory’s largest source of revenue. (Opening
Br. at 4-5.) In her original class-action complaint, filed in
August 2018, Duncan alleged that the Territory owed
taxpayers at least $97,849,992.74 in refunds for the years 2007
through 2017. She also alleged that, for the years 2011 through
2017, the Territory failed to comply with the requirement in
title 33, section 1102(b) of the Virgin Islands Code, that the
Territory set aside ten percent of collected income taxes for the
purpose of paying refunds. As a consequence, she said, the
Territory left underfunded by more than $150 million the
required reserve for meeting those obligations.
Shortly after filing her original complaint, Duncan
moved for class certification. The District Court ordered class
discovery, during which Duncan deposed Marcella Somersall,
a recently retired employee of the Virgin Islands Bureau of
Internal Revenue (the “Bureau”) who was “familiar with the
process of expedited refunds[.]” (J.A. at 54.) Somersall
explained that the Bureau makes expedited refunds available
on an ad hoc basis to taxpayers experiencing a hardship, such
as a medical emergency or home displacement, if they write a
letter requesting an expedited refund. The director of the
Bureau reviews each request and decides whether to approve
4
or reject it. That decision is not subject to further review.
According to Somersall, the existence of the expedited refund
process has not been made public, and at least some procedures
for approving and denying requests are not written down. She
also testified that refunds were expedited automatically,
without a request, for all Bureau employees and for the
employees at the Department of Finance who processed refund
checks, as a “test to make sure that the files that went to
Finance [were] correct[.]” (J.A. at 85-86, 88-89.)
Armed with Somersall’s deposition testimony, Duncan
filed the now-operative First Amended Class Action
Complaint (the “Amended Complaint”). In general, that
pleading alleges that the Territory failed to timely pay income
tax refunds to nearly all taxpayers, while secretly allowing
expedited refunds for certain taxpayers, including all Bureau
employees and some Department of Finance employees. The
Amended Complaint sets forth five causes of action:
1. A refund action, pursuant to 26 U.S.C. (“I.R.C.”)
§ 7422 and title 33, section 1692 of the Virgin Islands
Code;
2. A petition for a writ of mandamus ordering the
commissioner of the Department of Finance and the
director of the Bureau to set aside ten percent of income
taxes for refunds, as required by title 33, section 1102(b)
of the Virgin Islands Code;
3. A request for declaratory and injunctive relief based on
violations of the Fourteenth Amendment by delaying
refunds to taxpayers generally while creating a separate
class of taxpayers given expedited refunds;
5
4. A request for declaratory and injunctive relief based on
violations of the Fourteenth Amendment by
automatically expediting refunds for all Bureau
employees and some Department of Finance
employees; and
5. A request for declaratory and injunctive relief based on
violations of the Virgin Islands’ equivalent of the
Administrative Procedure Act, V.I. Code Ann. tit. 3,
§§ 911 et seq., by creating an expedited refund process
outside of the prescribed rulemaking process.
The Amended Complaint also spells out the following
proposed class:
All persons and entities who: (a) have filed a
timely claim for refund of an overpayment of the
Virgin Islands Territorial Income Tax for any tax
year from at least 2003 to the present, (b) have
not been given by the USVI or the [Bureau], via
certified or registered mail, a timely notice of
disallowance of such claims, and (c) have not
been paid such refunds by the USVI.
(J.A. at 139.)
B. Duncan’s Refund
During class discovery, Duncan received from the
Territory a notice of “Arithmetic Correction” for her 2016 tax
return – the one year for which she claimed an unpaid refund.
(J.A. at 27.) The tax refund she sought for that year was
$7,104, but the Territory reduced the amount to $2,474, for
reasons unexplained by the notice. The Territory and
6
Duncan’s attorney subsequently corresponded “regarding
[Duncan’s] refund check[,]” and while the exact substance of
those conversations is unclear, Duncan’s attorney did
“indicate[] that [he] would let [the Territory] know” whether
Duncan would accept the reduced refund. (J.A. at 31.)
Ultimately, without a response from Duncan, the Territory
went ahead and issued her a refund check for $2,738.30 on
July 19, 2019.1
Duncan later represented to the District Court that she
contested the validity of the Arithmetic Correction, and she
testified in a deposition that she did not cash the check because
she disagreed with the reduced refund amount. She also told
the Court that, “[p]ursuant to [I.R.C.] § 6213(b), as mirrored to
the United States Virgin Islands,”2 the fact that she contested
the notice “invalidates such notice, and the Virgin Islands
Bureau of Internal Revenue must issue[] a Statutory Notice of
Deficiency should it wish to assert the proposed adjustments
again.” (J.A. at 25-26.)
1
No explanation is given for why the issued amount of
$2,738.30 was higher than the amount of $2,474 listed on the
notice of Arithmetic Correction.
2
As explained in more detail below, infra note 9,
Congress has provided that Virgin Islands tax laws are to
“mirror” (or apply) federal tax law, except that the proceeds of
taxes in the Virgin Islands are paid into the treasury of the
Territory.
7
C. The District Court’s Class-Certification
Decision
Following the close of class discovery, the District
Court denied Duncan’s motion to certify the proposed class. In
its analysis of the prerequisites for class certification set out in
Federal Rule of Civil Procedure 23(a),3 it concluded that
Duncan had met the first two: numerosity, because the
proposed class consists of 24,364 individuals and 49
corporations; and commonality, because the question of
whether the Territory has been delinquent in paying income tax
refunds is common to the class.
The Court held, however, that Duncan failed to meet the
typicality prerequisite under Rule 23(a)(3) because she had
received a refund check. Even though Duncan disagreed with
the refund amount and did not cash the check, her dispute with
the Territory had become one about calculation, not about
nonpayment, the Court said, and so her claim was different
from those of the rest of the class. The Court also decided, in
the context of its typicality analysis, that Duncan lacked Article
III standing to pursue her claims for declaratory and injunctive
3
Those prerequisites are:
(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.
Fed. R. Civ. P. 23(a).
8
relief. It determined that she could not rely on the Virgin
Islands’ taxpayer-suit statute, V.I. Code Ann. tit. 5, § 80,4 to
establish standing, because standing in federal court is
determined by federal law.
Duncan likewise failed to convince the District Court
that she was an adequate representative under Rule 23(a)(4).
The Court cited three reasons for that conclusion. First, it said
that, although Duncan declared her “interests … to be perfectly
aligned with those of the absent class members” (D.I. 8 at 9-
10), that assertion was unsupported by any evidence. Second,
it noted that Duncan focused on the adequacy of her lawyers to
represent the class, which is a separate issue governed by Rule
23(g),5 and she did not address the concern with her own
adequacy to represent the class. Third, in keeping with its
analysis of the typicality prerequisite, the Court said that
Duncan’s receipt of a refund check presented “significant
questions” as to whether her interests were aligned with those
of the class. (J.A. at 14.)
4
That statute provides, “A taxpayer may maintain an
action to restrain illegal or unauthorized acts by a territorial
officer or employee, or the wrongful disbursement of territorial
funds.” V.I. Code Ann. tit. 5, § 80.
5
That rule requires a court certifying a class to appoint
class counsel, which it must do after considering, among any
other pertinent factors, the work that proposed counsel has
already done in the action, proposed counsel’s experience and
knowledge, and the resources proposed counsel will commit to
representing the class. Fed. R. Civ. P. 23(g)(1).
9
Because the Court concluded that Duncan failed to meet
all four prerequisites under Rule 23(a), it declined to reach the
issue of what type of class to certify under Rule 23(b). Duncan
then petitioned us pursuant to Rule 23(f) for leave to appeal the
District Court’s denial of class certification. We granted the
petition.
II. DISCUSSION6
On appeal, Duncan argues that the District Court abused
its discretion in denying her motion for class certification.
Before examining those arguments focused on Rule 23(a),
however, we address the justiciability concerns raised by the
District Court.
A. Article III Justiciability
We agree with Duncan that the District Court erred in
concluding that her mid-litigation receipt of a refund check
deprived her of constitutional standing to pursue her claims.7
6
The District Court’s jurisdiction is in question and is
discussed in Section II.A of this opinion. It is our ultimate
conclusion that the Court had jurisdiction under 28 U.S.C.
§ 1331 and 48 U.S.C. § 1612. We have jurisdiction pursuant
to 28 U.S.C. § 1292(e) and Federal Rule of Civil Procedure
23(f), and “[w]e [always] have jurisdiction to review our own
jurisdiction when it is in doubt[.]” LeBoon v. Lancaster Jewish
Cmty. Ctr. Ass’n, 503 F.3d 217, 222 (3d Cir. 2007).
7
We take the District Court’s conclusion to apply not
only to Duncan’s three requests for declaratory and injunctive
relief but also to her request for a writ of mandamus. And
10
Although the Court’s conclusion was couched as one
pertaining to typicality under Federal Rule 23(a)(3), it can and
must be analyzed separately, because standing is a
jurisdictional doctrine that demands its own inquiry – apart
from and before a decision on whether Duncan satisfies the
typicality prerequisite for class certification. See Boley v.
Universal Health Servs., Inc., 36 F.4th 124, 130 (3d Cir. 2022)
(addressing “directly, as a question of jurisdiction[,]” an
argument that plaintiffs’ lack of standing destroyed typicality);
Mielo v. Steak ’n Shake Operations, Inc., 897 F.3d 467, 480
(3d Cir. 2018) (“[T]he standing inquiry must be limited to a
consideration of the class representatives themselves, after
which we may ‘employ Rule 23 to ensure that classes are
properly certified.’”).
The District Court’s merging of those two legal
concepts – standing and typicality – was an understandable but
significant misstep. Although “[t]he concepts of standing and
Rule 23(a) … appear related as they both aim to measure
whether the proper party is before the court to tender the issues
for litigation[,] … they are in fact independent criteria.” 1
William B. Rubenstein, Newberg and Rubenstein on Class
Actions § 2:6 (6th ed. 2022) [hereinafter Rubenstein].
Standing and typicality differ in the sources of law from which
they derive: the former, from the “case or controversy”
requirement in Article III of the U.S. Constitution, see U.S.
Const. art. III, § 2, cl. 1; see also Free Speech Coal., Inc. v.
although the Court did not question Duncan’s standing to bring
her refund action, its reasoning could just as easily apply to that
claim too. Our discussion here thus applies to all five causes
of action.
11
Att’y Gen., 974 F.3d 408, 421 (3d Cir. 2020) (“Article III of
the Constitution limits federal courts to deciding ‘Cases’ and
‘Controversies.’” (quoting Dep’t of Com. v. New York, 139 S.
Ct. 2551, 2565 (2019))); and the latter, from Federal Rule of
Civil Procedure 23(a)(3), see In re Nat’l Football League
Players Concussion Injury Litig. (In re NFL), 821 F.3d 410,
427 (3d Cir. 2016) (“Rule 23(a)(3) requires that the class
representatives’ claims be ‘typical of the claims … of the
class.’” (omission in original) (quoting Fed. R. Civ. P.
23(a)(3))). There’s an important practical difference too. “[A]
lack of standing necessitates dismissal of claims, whether
brought in a class action or in any other kind of suit[,]” while a
lack of typicality simply results in the denial of class
certification. Boley, 36 F.4th at 130; accord 1 Rubenstein
§ 2:6. Accordingly, to the extent the District Court thought that
Duncan, the only named plaintiff in this purported class action,
lacked standing to assert her claims, the appropriate remedy
would have been to dismiss those claims, not deny class
certification.
The District Court also erred insofar as it believed that
the justiciability doctrine implicated by the mid-litigation
refund check was standing, as opposed to mootness. “Standing
and mootness are ‘two distinct justiciability doctrines.’”
Hartnett v. Pa. State Educ. Ass’n, 963 F.3d 301, 306 (3d Cir.
2020). Standing looks to whether a live controversy exists
“[a]t the start of litigation,” while mootness examines whether
“some development” occurred during the litigation such “that
there is no longer a live controversy.” Id. at 305-06. Because
the parties here agree that any justiciability concerns stem from
the effect of the refund check that Duncan received almost a
year after she initiated this lawsuit – and because Duncan
12
clearly appears to have had standing at the start of the case –
the pertinent justiciability doctrine is mootness.
The difference is not merely one of semantics. Looking
at the refund check as raising a question of mootness makes it
easier for Duncan to stay in federal court. “At the start of
litigation, the burden rests on the plaintiff, ‘as the party
invoking federal jurisdiction,’ to show [her] standing to sue.”
Id. at 305 (quoting Spokeo, Inc. v. Robins, 578 U.S. 330, 338
(2016)). Once standing is shown at the outset, however, the
defendant then bears the “heavy burden” of persuading a court
that the case has become moot. Id. at 305-06 (quoting Friends
of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S.
167, 189 (2000)). Further, as we observed in Richardson v.
Bledsoe, “Article III mootness is more ‘flexible’ than other
justiciability requirements, especially in the context of class
action litigation.” 829 F.3d 273, 278 (3d Cir. 2016) (quoting
U.S. Parole Comm’n v. Geraghty, 445 U.S. 388, 400 (1980)).
In that context, “special mootness rules apply.” Brown v.
Phila. Hous. Auth., 350 F.3d 338, 343 (3d Cir. 2003).
One such rule is the so-called “picking off” exception to
mootness. That exception, as explained in Richardson, is a
specific application of the relation-back principle and “permits
courts to relate a would-be class representative’s (now moot)
claim for relief back in time to a point at which that plaintiff
still had a personal stake in the outcome of the litigation.” 829
F.3d at 279; accord Paeste, 798 F.3d at 1233 (observing in
passing that “the named plaintiffs’ refunds were expedited,
even though they submitted no requests for expedited
treatment, in an apparent attempt to render this case moot”).
The picking-off exception allows a plaintiff to continue
representing a class, notwithstanding otherwise mooted claims,
13
if two conditions are met: first, that “an individual plaintiff’s
claim for relief is acutely susceptible to mootness”; and
second, that “it is clear from the complaint that the plaintiff is
seeking to represent a class[.]” Richardson, 829 F.3d at 286;
accord LaSpina v. SEIU Pa. State Council, 985 F.3d 278, 290
(3d Cir. 2021) (“[W]hen a plaintiff files a motion to certify a
class when his individual claim still is live, the mooting of that
claim while the motion is pending permits the court to decide
the certification motion.”).
It is quite possible that the Territory has not met its
heavy burden of demonstrating that Duncan’s individual
claims are moot, making resort to the picking-off exception to
mootness arguably unnecessary. While in Richardson the
plaintiff’s “individual claim for relief” undoubtedly “ha[d]
become moot[,]” 829 F.3d at 279, it is not at all clear that the
Territory can say that of Duncan’s claims. True enough, the
Territory issued a refund check to Duncan, so she is not entirely
a victim of the unpaid-refund process she has described. But
she has not received all that she claims she is owed. She
maintains that she was entitled to a refund of $7,104 but
received a check for only $2,738.30. That “partial remedy”
might not moot her claims. See Calderon v. Moore, 518 U.S.
149, 150 (1996) (per curiam) (“[E]ven the availability of a
‘partial remedy’ is ‘sufficient to prevent [a] case from being
moot.’” (alteration in original)); see also United States v.
Washington, 142 S. Ct. 1976, 1983 (2022) (“If there is money
at stake, the case is not moot.”).
On the other hand, the check for $2,738.30 may be a
complete remedy if, as the Arithmetic Correction notice
represents, Duncan’s itemized deductions were incorrectly
computed and the amount of the check reflects the proper
14
refund amount to which she is entitled. Although Duncan
claims that she “has not received the full value of the income
tax refund (i.e., she is still owed $4,365.70, plus statutory
interest)” (Opening Br. at 21), she never actually states what
she believes is wrong with the new calculation. She instead
relies primarily on what she’s done since receiving the refund
check. Namely, she points to her refusal to cash that check,
which she likens to rejecting a settlement offer or an offer of
judgment.8 Since such offers cannot moot a case when they
are not accepted, Campbell-Ewald Co. v. Gomez, 577 U.S. 153,
165-66 (2016), her position is sensible advocacy. She also
claims that she formally challenged the refund amount and that
the Territory did not respond to her challenge. As a matter of
Virgin Islands law, she says, that rendered the refund check a
legal nullity, such that she’s still owed the entirety of the
$7,104 she originally claimed.9
8
Federal Rule of Civil Procedure 68 says, in relevant
part, that “a party defending against a claim may serve on an
opposing party an offer to allow judgment on specified terms,”
which, if timely accepted and then filed with the court, requires
the clerk to enter judgment. Fed. R. Civ. P. 68(a). If the offer
is not timely accepted, it is considered withdrawn. Fed. R. Civ.
P. 68(b).
9
Duncan’s argument relies heavily on the so-called
“mirror code[, by which] Congress designed Virgin Islands tax
law to mirror the tax laws in effect on the mainland.” Cooper
v. Comm’r, 718 F.3d 216, 219 (3d Cir. 2013); see also 48
U.S.C. § 1397 (providing that “[t]he income-tax laws in force
in the United States of America and those which may hereafter
be enacted shall be held to be likewise in force in the Virgin
Islands of the United States, except that the proceeds of such
15
We need not confront the complexities of the mootness
question here, however, because, even assuming Duncan’s
claims were mooted by the issuance of the refund check, the
picking-off exception applies. The first condition of the
exception is met because her claims were always of a type
acutely susceptible to mootness.10 Small claims for cash can
always be mooted swiftly with payment of the amount claimed.
Cf. Weiss v. Regal Collections, 385 F.3d 337, 347 (3d Cir.
2004) (holding that claims under the Fair Debt Collections
taxes shall be paid into the treasuries of said islands”). She
claims that the Territory’s Arithmetic Correction notice is the
equivalent of a notice for an assessment arising out of “a
mathematical or clerical error” under I.R.C. § 6213(b)(1), of
which she allegedly requested an abatement pursuant to I.R.C.
§ 6213(b)(2)(A). She says that, from there, it was the
Territory’s responsibility to follow different deficiency
procedures if it wanted to adjust her refund amount. I.R.C.
§ 6213(b)(2)(A). According to Duncan, that would have
included filing a notice of deficiency, but the Territory never
did so. Id. §§ 6212, 6501. Accordingly, she says, she is right
back to being “entitled to a refund of the full amount claimed
on her income tax return.” (Opening Br. at 24.)
10
For the same reason, we also need not decide whether
Duncan’s refusal to cash the issued check is analogous to the
rejected settlement offers and offers of judgment at issue in
Campbell-Ewald Co. v. Gomez, 577 U.S. 153 (2016), nor
whether there is any merit to Duncan’s argument that her
purported challenge to the refund amount, once it went
unanswered, rendered the check a nullity as a matter of Virgin
Islands law. See supra note 9.
16
Practices Act, with a maximum recovery of $1,000 plus
attorneys’ fees and expenses, were “acutely susceptible to
mootness”), abrogated on other grounds by Campbell-Ewald,
577 U.S. 153. And the Territory does not offer much reason to
reach a contrary conclusion here. It argues simply that there
are over 19,000 pending tax returns that claim refunds – and
thus tens of thousands of viable class plaintiffs. But the size of
the proposed class is irrelevant to how susceptible to mootness
its claims are. The Territory also argues that it did not intend
to pick off Duncan’s claim. The Territory does not, however,
point to any authority saying the picking-off exception requires
an inquiry into the defendant’s specific intent. What is
required is a showing of “acute[] susceptib[ility] to
mootness[.]” Richardson, 829 F.3d at 286.
The second condition for applying the picking-off
exception to mootness is also met in this case. It has been clear
from the beginning that Duncan seeks to represent a class. She
labeled her original complaint a “Class Action Complaint” and
expressly stated her desire to bring her lawsuit on behalf of
others similarly situated. (D.I. 1.) She then promptly moved
for class certification, just weeks after filing her original class-
action complaint. Cf. Holmes v. Pension Plan of Bethlehem
Steel Corp., 213 F.3d 124, 135 (3d Cir. 2000) (“So long as a
class representative has a live claim at the time [she] moves for
class certification, neither a pending motion nor a certified
class action need be dismissed if [her] individual claim
subsequently becomes moot.”).
Accordingly, because Duncan’s claims are acutely
susceptible to mootness and she expressed a clear intent to
represent a class, we will relate her claims back to the date she
filed her lawsuit, in August 2018, when she had not received a
17
refund check and thus had live claims based on the Territory’s
failure to pay. Richardson, 829 F.3d at 289-90. At that point,
the case had no justiciability problems – either standing or
mootness – and so we may proceed to the merits of the class-
certification issues.
B. Prerequisites to Class Certification Under
Rule 23(a)11
As noted earlier, supra note 3, “[t]o satisfy Rule 23(a),
a plaintiff must ‘prove that there are in fact sufficiently
numerous parties, common questions of law or fact, typicality
of claims or defenses, and adequacy of representation.’”
Russell v. Educ. Comm’n for Foreign Med. Graduates, 15
F.4th 259, 265-66 (3d Cir. 2021) (quoting Comcast Corp. v.
Behrend, 569 U.S. 27, 33 (2013)); Fed. R. Civ. P. 23(a)(1)-(4).
The District Court’s denial of class certification followed from
its conclusion that Duncan failed to satisfy the last two
requirements – typicality and adequacy of representation. We
disagree in part with the District Court’s analysis of typicality,
and in whole with its analysis of adequacy. Those analyses
“reflect[] application[s] of incorrect standards, [so] remand is
appropriate.” In re Hydrogen Peroxide Antitrust Litig., 552
F.3d 305, 322 (3d Cir. 2008); accord In re Schering Plough
Corp. ERISA Litig., 589 F.3d 585, 603 (3d Cir. 2009) (“The
11
“We review a class certification order for abuse of
discretion, which occurs if the district court’s decision ‘rests
upon a clearly erroneous finding of fact, an errant conclusion
of law or an improper application of law to fact.’” In re
Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 312 (3d Cir.
2008).
18
District Court should reconsider … on remand under the
correct legal standard[.]”).
1. Typicality Under Rule 23(a)(3)
Typicality requires that “the claims or defenses of the
representative parties are typical of the claims or defenses of
the class[.]” Fed. R. Civ. P. 23(a)(3). As we observed in In re
Schering Plough Corp. ERISA Litigation, the typicality
prerequisite is intended to “ensur[e] that the class
representatives are sufficiently similar to the rest of the class –
in terms of their legal claims, factual circumstances, and stake
in the litigation – so that certifying those individuals to
represent the class will be fair to the rest of the proposed class.”
589 F.3d at 597. In a nutshell, typicality guards against class
representatives who have “unique interests that might motivate
them to litigate against or settle with the defendants in a way
that prejudices the absentees.” Baby Neal ex rel. Kanter v.
Casey, 43 F.3d 48, 63 (3d Cir. 1994). To weed out those
atypical class representatives, courts must be satisfied about
the following:
(1) the claims of the class representative must be
generally the same as those of the class in terms
of both (a) the legal theory advanced and (b) the
factual circumstances underlying that theory; (2)
the class representative must not be subject to a
defense that is both inapplicable to many
members of the class and likely to become a
major focus of the litigation; and (3) the interests
and incentives of the representative must be
sufficiently aligned with those of the class.
19
In re Schering Plough, 589 F.3d at 599.
The District Court’s analysis of typicality in this case
contained two separate lines of reasoning.12 As to Duncan’s
claim for a refund, the Court reasoned that the refund check
later issued by the Territory “places Duncan in a substantially
different position than the class she seeks to represent.” (J.A.
at 10.) According to the Court, while Duncan “is now
necessarily engaged in a dispute as to [the Territory’s]
calculation of the magnitude of her overpayment[,]” the rest of
the proposed class would ostensibly be in a “fundamentally
different” dispute over the Territory’s “statutory
noncompliance and nonpayment[.]” (J.A. at 10.) As to
Duncan’s remaining claims for mandamus, declaratory relief,
and injunctive relief, however, the Court held only that Duncan
lacked constitutional standing to bring those claims.
With respect to the refund claim, we cannot say that the
Court abused its discretion in concluding that the claim was not
typical of the class. After Duncan received a refund check, her
12
The District Court also noted in passing its concern
that Duncan would be atypical with respect to corporations
included in the putative class. In particular, the District Court
observed that “the alleged injuries suffered by the absent
corporate class members” are likely to differ from those
experienced by Duncan. (J.A. at 11 n.5.) Our dissenting
colleague argues we can affirm, at least in part, on that basis.
But because the District Court relegated that observation to a
footnote and the parties have not addressed the issue in any
way, we believe it best to leave the matter for the District
Court’s consideration on remand, with input from the parties.
20
claim with respect to her 2016 tax refund, if any such claim
still exists,13 is that the Territory did not issue the check in the
correct amount, not that the Territory failed to issue a check at
all. Although her claim might be “the same as [that] of the
class in terms of … the legal theory advanced[,]” insofar as her
claim would continue to proceed as a refund action, In re
Schering Plough, 589 F.3d at 599; see also WIT Equip. Co. v.
Dir., V.I. Bureau of Internal Revenue, 185 F. Supp. 2d 500, 503
(D.V.I. 2001) (amount of tax liability may be litigated through
a refund action), we are not concerned only with the legal
theory of Duncan’s claim; we are also concerned with “the
factual circumstances underlying that theory[.]”14 In re
Schering Plough, 589 F.3d at 599.
13
Again, Duncan argues that she “has not received the
full value of the income tax refund (i.e., she is still owed
$4,365.70, plus statutory interest)” (Opening Br. at 21), but she
never actually points out a problem with the accuracy of the
new calculation in the Arithmetic Correction notice.
14
Duncan would have to prove additional facts to
collect the $4,365.70 difference between the $7,104 claimed in
her return and the $2,738.30 issued by the Territory. She
would have to present evidence showing why the Territory’s
recalculation is incorrect. That information is not apparent
from the Arithmetic Correction notice, and she has not yet
explained why she questions the recalculation. Alternatively,
she might pursue an argument similar to the one she presses
here to dispute the District Court’s mootness holding: that she
is still owed a check for $7,104 because she formally
challenged the refund amount, which rendered the first refund
check a legal nullity. See supra notes 9-10 and accompanying
text. Those disputes may or may not be a significant distraction
21
Those factual circumstances have nothing to do with the
rest of the class’s refund claims, which ostensibly rely only on
the factual premise that the class members are entitled to refund
checks but haven’t yet received them. There is thus at least
some meaningful risk that Duncan will have to “devote time
and effort” to facts unique to her claim, which would come “at
the expense of issues that are common and controlling for the
class.” Beck v. Maximus, Inc., 457 F.3d 291, 297 (3d Cir.
2006).15 For that reason, the District Court was then within its
discretion in concluding that Duncan’s refund action is not
typical of those of the class.
from Duncan’s role as class representative, but we cannot say
that the District Court abused its discretion in deciding they
would be.
15
The existence of that meaningful risk justifies but
does not compel the conclusion the District Court reached with
respect to the refund claim. All we are saying is that the
District Court was within the bounds of its discretion in
concluding that Duncan’s refund claim is atypical. In the
analysis of the typicality prerequisite (or any other part of Rule
23), courts are to examine legal and factual issues as they then
stand. See Benjamin ex rel. Yock v. Dep’t of Pub. Welfare, 701
F.3d 938, 951 (3d Cir. 2012) (“[E]ven after a certification order
is entered, the judge remains free to modify it in the light of
subsequent developments in the litigation.” (quoting Gen. Tel.
Co. of Sw. v. Falcon, 457 U.S. 147, 160 (1982))). We do not
relate back the Rule 23 inquiry to the start of the litigation in
the same way that we do with the picking-off exception, which
only applies in the separate doctrinal context of constitutional
mootness. Cf. supra Section II.A.
22
We cannot say the same, however, for the Court’s
holding with respect to the remaining claims for mandamus,
declaratory relief, and injunctive relief, which rested on
entirely different reasoning and likely raise issues that are of
consequence to all class members alike. See Baby Neal, 43
F.3d at 63 (allowing modification of the class “so that the class
action encompasses only the issues that are truly common to
the class”). As summarized above, the Court decided Duncan
lacked standing to bring those claims and therefore was
atypical of the class. For the reasons already discussed,
though, the Court’s concerns over Article III justiciability were
unfounded. Supra Section II.A. Justiciability doctrines thus
will not “subject [Duncan] to [a] unique defense[] that could
become a focus of the litigation[.]” In re Schering Plough, 589
F.3d at 599. And we see no other reason to conclude that
Duncan’s claims for mandamus, declaratory relief, and
injunctive relief are atypical, nor has any been suggested. On
remand, the District Court can consider whether such a reason
exists. See id. at 600 (remanding for district court to consider
typicality issues “it did not delve into”). It is worth bearing in
mind, however, that the central point with respect to the claims
for mandamus, declaratory relief, and injunctive relief is the
question of systemic, arbitrary, and indefinite withholding of
refunds, which is “essentially the same” for every class
member, regardless of whether he or she is the lucky recipient
of a long-delayed refund check. Baby Neal, 43 F.3d at 63. In
other words, “[i]n fashioning injunctive relief, … a court would
focus on the defendants rather than on the plaintiffs.” Id. It
thus seems unlikely that those claims will raise the same
typicality concerns as did the refund claim.16
While the Dissent agrees with our conclusion that the
16
issuance of a refund check for some or all of Duncan’s tax
23
2. Adequacy of Representation Under
Rule 23(a)(4)
As to the adequacy prerequisite, the District Court
applied a legal standard inconsistent with our precedent, so we
will remand for it to reconsider whether Duncan has made a
sufficient showing that intra-class conflicts of interest are
absent.
The adequacy prerequisite demands that “the
representative parties will fairly and adequately protect the
interests of the class.” Fed. R. Civ. P. 23(a)(4). Its primary
purpose is “to determine whether the named plaintiffs have the
ability and the incentive to vigorously represent the claims of
the class.” In re Cmty. Bank of N. Va. Mortg. Lending Pracs.
Litig., 795 F.3d 380, 393 (3d Cir. 2015). Thus, for a class
representative to be adequate, she must “have a minimal degree
of knowledge about the case and have no conflict of interest
refund renders her atypical with respect to her refund claim, it
argues that the refund check will also necessarily “muddle her
prospective claims for relief with an atypical defense.”
(Dissent at 2.) That Duncan received a refund check after a
long delay, however, says nothing about the problem of
systemic, arbitrary, and indefinite withholding of refunds,
which is the central point of the other claims in the case. That
problem is not only a matter of past practice (if Duncan’s
allegations are accepted as true), it is also a matter of
predictable future practice and hence of prospective injury in
fact for Duncan just as for other tax payers. The check the
Territory tendered Duncan for the 2016 tax year does not
change that at all.
24
with class counsel and members of the class[.]” In re Suboxone
(Buprenorphine Hydrochlorine & Naloxone) Antitrust Litig.,
967 F.3d 264, 272 (3d Cir. 2020) (cleaned up); see also Dewey
v. Volkswagen Aktiengesellschaft, 681 F.3d 170, 183 (3d Cir.
2012) (“[T]he linchpin of the adequacy requirement is the
alignment of interests and incentives between the
representative plaintiffs and the rest of the class.”). “A conflict
must be fundamental to violate Rule 23(a)(4).” Dewey, 681
F.3d at 184 (internal quotation marks omitted).
Focusing on the conflict-of-interest component, the
District Court held that Duncan came up short on the adequacy
prerequisite because she failed to provide evidence to support
a lack of a conflict. The Court emphasized that Duncan had to
demonstrate that she satisfied Rule 23(a)(4) “by a
preponderance of the evidence.” (J.A. at 14 (citing Reyes v.
Netdeposit, LLC, 802 F.3d 469, 485 (3d Cir. 2015)).) Thus, it
did not matter that the Court found unconvincing the
Territory’s argument that its “first to file[,] first to get paid”
scheme would pit plaintiffs against each other in a race to get
a refund, so all class members were in conflict with one
another. (J.A. at 14.) What mattered, the Court decided, was
that Duncan, as bearer of the burden of proof, did not put forth
any evidence that intra-class conflicts were lacking.
On appeal, Duncan challenges that holding, arguing that
she is “seeking systemic change” and that “each Virgin Islands
taxpayer who is owed a tax refund is similarly situated with
other Virgin Islands taxpayers who are owed tax refunds.”
(Opening Br. at 28-29.) She thus asserts she “is at a loss to
identify a potential intra-class conflict.” (Opening Br. at 29.)
The Territory, for its part, rests on the District Court’s
reasoning, arguing that Duncan continues to provide nothing
25
more than “unsworn statements” of the sort that the District
Court rejected. (Answering Br. at 15-16.) The Territory does
not actually identify any conflicts of interest that Duncan has
with the rest of the class.
It is true that “[f]actual determinations necessary to
make Rule 23 findings must be made by a preponderance of
the evidence.” In re Hydrogen Peroxide, 552 F.3d at 320. In
other words, Rule 23 “does not set forth a mere pleading
standard” under which a district court is to accept as true all
factual allegations from a proposed class representative.
Ferreras v. Am. Airlines, Inc., 946 F.3d 178, 183 (3d Cir. 2019)
(quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350
(2011)). Nor does the Rule establish “a prima facie showing
or a burden of production” or, perhaps more obviously, “a
presumption in … favor” of the party seeking certification. In
re Hydrogen Peroxide, 552 F.3d at 321. At the same time,
however, the law does not demand a plaintiff to prove a
negative. At least when it comes to a search for conflicts of
interest, we have not found – and neither have the parties nor
the District Court identified – any authority requiring the sort
of evidence that the District Court here found lacking. On the
contrary, our case law supports the discretion of a district court
to find adequacy of representation on a record like this.
Consider, for example, our basis for affirming the
certification of a class of borrowers in In re Community Bank
of Northern Virginia Mortgage Lending Practices Litigation,
795 F.3d 380. In that case – which had been before us on
appeal twice before – five subclasses were created to
ameliorate the statute-of-limitations problems identified in
previous appeals. Id. at 394. Another significant difference
between the third appeal and the previous ones was that the
26
plaintiffs had abandoned settlement negotiations and had
formed a litigation class, which had the effect of eliminating a
previous concern that plaintiffs with timely claims would be
jockeying against those with arguably time-barred claims for
portions of a fixed settlement amount.17 Id. We concluded that
no fundamental intra-class conflicts would prevent
certification of the new litigation class, because all five
subclasses were “pursuing damages under the same statutes
and the same theories of liability, and the differences among
them will not, at least as things presently stand, pit one group’s
interests against another.” Id.
Of particular note here, we explicitly relied on the
plaintiffs’ joint consolidated amended complaint to identify the
statutes and theories of liability on which they were pursuing
their claims. Id. at 390-91, 394. And we quoted at length from
their certification motion in order to explain the delineations
among the five subclasses. Id. There is no indication that
anything else was considered in deciding whether there were
conflicts of interest within the class. There was no suggestion
that anything further might be needed. Our approach
sanctioned a court’s making reasonable inferences, based on
the way in which the class, the subclasses, and the claims are
drawn up, to identify possible conflicts of interest and to decide
whether those conflicts prevent certification. Id. at 394. We
thus saw no abuse of discretion in the district court’s decision
to certify a class and subclasses. Id. at 394-95.
A similar analysis was employed in In re Suboxone
(Buprenorphine Hydrochloride & Nalaxone) Antitrust Litig.,
17
See infra note 18.
27
421 F. Supp. 3d 12 (E.D. Pa. 2019), aff’d, 967 F.3d 264. The
district court there evaluated requests to certify three different
classes. Id. at 45. In holding that there were no conflicts of
interest within each class, the court never pointed to any
evidence to support its finding. As to the first class, it was
“undisputed” that the named class representative’s interests
were aligned with members of the class. Id. at 51. And as to
the latter two, the defendant “d[id] not identify, and [the district
court could not] find, any likelihood of conflict of interest
among the class members.” Id. at 68. On appeal, we affirmed
the district court’s “thorough, thoughtful, and well-reasoned
opinion,” and we entertained (but rejected) the defendant-
appellant’s “speculative” arguments that there were conflicts
of interest within one of the classes. In re Suboxone, 967 F.3d
at 267, 273. Again, at no point did we refer to any evidence
presented by the plaintiffs to support a conclusion that there
were no such conflicts.
What seems clear from those precedents is that a
plaintiff, to satisfy her burden to show she is an adequate
representative of a proposed class, need not present evidence
of the sort one might expect at summary judgment.18 Accord
18
We set aside for present purposes those cases arising
from a review of a proposed class settlement, in which conflict-
of-interest issues seem to arise with some frequency. See Nick
Landsman-Roos, Note, Front-End Fiduciaries:
Precertification Duties and Class Conflict, 65 Stan. L. Rev.
817, 823-24 (2013) (“[A]lmost all of the appellate-level
treatment of class conflict has been on the back end, concerned
with the possibility of conflicts of interest at settlement.”). In
those cases, some class members will often object to the terms
of a proposed settlement agreement, claiming that it allocates
28
1 Rubenstein § 3:55 (“The plaintiff has the affirmative burden
of establishing each of the Rule 23(a) requirements, but the
elements needed to establish adequacy of representation …
may be established in the first instance by a simple
demonstration of facts in the motion for class certification.”).
In fact, we’re not sure what affirmative evidence of a lack of a
conflict of interest would look like.19 Rather, the definition of
more favorable remedies to some in the class at the expense of
others. E.g., Amchem Prods., Inc. v. Windsor, 521 U.S. 591,
606-07 (1997); In re NFL, 821 F.3d 410, 432 (3d Cir. 2016);
Dewey v. Volkswagen Aktiengesellschaft, 681 F.3d 170, 185
(3d Cir. 2012). But even in those cases, the only other piece of
“evidence” we have tended to consider, besides the definition
of the class and the relief sought, is, quite naturally, the
settlement agreement. See Dewey, 681 F.3d at 185 (“To
properly analyze the intra-class conflict alleged here, we must
look to the class as certified as well as to the terms of the
settlement agreement.”); In re NFL, 821 F.3d at 433 (“[T]he
terms of the settlement reflect that the interests of current and
future claimants were represented in the negotiations.”).
19
Perhaps that is why some have proposed a different
understanding of the adequacy-of-representation prerequisite.
See Richard A. Nagareda, Administering Adequacy in Class
Representation, 82 Tex. L. Rev. 287, 362-63 (2003)
(reimagining the law of class actions “as the enlightened
regulation of the market for representation of absent class
members” and proposing a register of class-settlement
agreements disclosing “a reasoned explanation of the choices
made and the realistic alternatives foregone in the design of the
settlement terms”); Jay Tidmarsh, Rethinking Adequacy of
Representation, 87 Tex. L. Rev. 1137, 1139 (2009) (proposing
29
a class, the factual allegations of the complaint, and the relief
sought are themselves highly indicative of a putative class
representative’s theory of the case and whether she will seek
relief that benefits the entire class. Cf. Dewey, 681 F.3d at 184(“A conflict concerning the allocation of remedies amongst
class members with competing interests can be fundamental
and can thus render a representative plaintiff inadequate.”).
That information can be – and, indeed, has been – considered
in evaluating intra-class conflicts. In re Cmty. Bank, 795 F.3d
at 390-91, 394; In re Suboxone, 967 F.3d at 267, 273. After
reviewing that information, hearing the parties’ arguments, and
making reasonable inferences, a district court may find that an
intra-class conflict “more likely than not” is absent. In re
Hydrogen Peroxide, 552 F.3d at 320. Of course, if a court
concludes otherwise based on that same type of information, it
may deny the certification motion on that basis too. See
Danvers Motor Co. v. Ford Motor Co., 543 F.3d 141, 150 (3d
Cir. 2008) (vacating certification order because, “[a]s reflected
by the allegations of just the named plaintiffs,” the “proposed
class members will likely need to pursue different, and
possibly conflicting, legal theories to succeed”).
To be clear, that mode of analysis is not a reversion to
“a mere pleading standard.” Ferreras, 946 F.3d at 183
a “recast[ing]” of the adequacy prerequisite such that
“[r]epresentation by class representatives and counsel is
adequate if, and only if, the representation makes class
members no worse off than they would have been if they had
engaged in individual litigation”). As interesting as those
proposals may be, we are bound to follow our existing
precedent.
30
(quoting Dukes, 564 U.S. at 350). A district court need not
accept as true, for example, a putative class representative’s
bare allegation that there is an “alignment of interests and
incentives between the representative plaintiffs and the rest of
the class[,]” Dewey, 681 F.3d at 183, or, as here, Duncan’s
argument that “there are no intra-class conflicts” (Opening Br.
at 29). But a court ought to examine the documents bearing
directly on how the class is drawn, what the complaint asserts
to be the operative facts, and what relief is sought (in addition
to any other information or evidence bearing on whether there
is a conflict of interest), and then make an independent finding
on whether the interests of that class, more likely than not, are
aligned with the putative class representative.
With that clarification, we will remand for the District
Court to reconsider whether Duncan has established that she is
an adequate representative of the proposed class.20
20
Our dissenting colleague notes that, because he would
affirm the denial of class certification on grounds of
atypicality, he need not address Duncan’s adequacy as a class
representative. Nevertheless, he says, “the overlap in these
concepts seems likely to lead to the same conclusion that the
District Court did not abuse its discretion.” (Dissent at
n.2.) And, while not disputing our conclusion that the District
Court applied an incorrect legal standard in ruling on the
adequacy of Duncan’s representation of the class, our
colleague also seems to suggest that remanding on that ground
is insufficiently deferential to the District Court because, on
remand, the District Court may yet conclude that Duncan is an
inadequate representative. (Dissent slip op. at 5-6.) But the
District Court, for all its careful work in deciding the class
certification motion, did apply the wrong standard on the
31
question of adequacy, and application of an incorrect legal
standard is by definition an abuse of discretion. See In re
Hydrogen Peroxide Antitrust Litig., 552 F.3d at 312 & n.9 (“A
district court by definition abuses its discretion when it makes
an error of law.”) (quoting, inter alia, Koon v. United States,
518 U.S. 81, 100 (1996)). Accordingly, remand for application
of the correct legal standard is a proper course and, we believe,
the better one.
On remand, if the Court determines that the
prerequisites of Rule 23(a) have been met, it should also
consider in the first instance whether to certify the class under
Rule 23(b)(2) (“A class action may be maintained if Rule 23(a)
is satisfied and if: ... the party opposing the class has acted or
refused to act on grounds that apply generally to the class, so
that final injunctive relief or corresponding declaratory relief
is appropriate respecting the class as a whole[.]). Duncan urges
that we make that decision ourselves but, “[p]rior to certifying
a class, a district court must resolve every dispute that is
relevant to class certification.” Ferreras v. Am. Airlines, Inc.,
946 F.3d 178, 183 (3d Cir. 2019) (emphasis added). For that
reason, we have consistently remanded for district courts to
consider Rule 23 requirements that they did not previously
reach. E.g., Richardson v. Bledsoe, 829 F.3d 273, 290 n.15 (3d
Cir. 2016) (“On remand … the District Court may consider the
additional class certification requirements that it did not
previously reach when it erroneously concluded that the class
was unascertainable.”); Byrd v. Aaron’s Inc., 784 F.3d 154,
171 (3d Cir. 2015) (“[W]e will remand to the District Court to
consider the remaining Rule 23 certification requirements in
the first instance.”); Shelton v. Bledsoe, 775 F.3d 554, 565 (3d
Cir. 2015) (“On remand, the district court must consider
32
III. CONCLUSION
For the foregoing reasons, we will vacate the District
Court’s order denying Duncan’s class-certification motion and
remand for further consideration.
whether the properly-defined putative class meets the
remaining Rule 23 requirements for class certification.”).
33
MATEY, Circuit Judge, dissenting.
I agree with the majority’s clear distinction between the
requirements of Article III and the directives of Rule 23. So
too, the application of those principles to Duncan’s putative
class claim for damages. But I apply those same conclusions to
the rest of Duncan’s Complaint and, mindful that district courts
“possess[] broad discretion to control proceedings and frame
issues for consideration under Rule 23,” I would affirm the
judgment denying class certification. In re Hydrogen Peroxide
Antitrust Litig., 552 F.3d 305, 310 (3d Cir. 2008). So I
respectfully dissent.
I.
Class certification starts with the trial court determining
whether “the putative class satisfies the numerosity,
commonality, typicality, and adequacy of representation
provisions of Rule 23(a).” In re Citizens Bank, N.A., 15 F.4th
607, 612 (3d Cir. 2021). A searching inquiry, as certification is
only appropriate “if, after rigorous analysis, the district court
concludes that plaintiffs satisfy each and every element by a
preponderance of the evidence.” Id. (cleaned up). If the district
court “harbor[s] doubt as to whether a plaintiff has carried her
burden under Rule 23, the class should not be certified.” Mielo
v. Steak ‘n Shake Operations, Inc., 897 F.3d 467, 483 (3d Cir.
2018).
The Rule 23(a)(3) typicality analysis ensures “that the
class representatives are sufficiently similar to the rest of the
class—in terms of their legal claims, factual circumstances,
and stake in the litigation—so that certifying those individuals
to represent the class will be fair to the rest of the proposed
1
class.” In re Schering Plough Corp. ERISA Litig., 589 F.3d
585, 597 (3d Cir. 2009) (emphasis omitted). Here, two of the
doubts raised by the District Court about Duncan’s typicality
justify its finding that Duncan did not satisfy her burden.1
A. Duncan Has Her Tax Refund
The District Court and the majority agree that Duncan’s
refund receipt rendered her atypical. That is surely correct
because with check in hand, Duncan was in a “substantially
different position than the class she seeks to represent.” App.
10. Yet much of her Complaint survives because, the majority
reasons, giving Duncan her tax refund does not muddle her
prospective claims for relief with an atypical defense.
But why? The Virgin Islands will still say that Duncan,
like other taxpayers, has received her refund.2 And “[i]t is well
established that a proposed class representative is not ‘typical’
under Rule 23(a)(3) if [she is] subject to a unique defense that
is likely to become a major focus of the litigation.” Schering,
589 F.3d at 598 (cleaned up). That is reason enough to
“motivate [her] to litigate against or settle with the defendants
in a way that prejudices the absentees.” Baby Neal ex rel.
Kanter v. Casey, 43 F.3d 48, 63 (3d Cir. 1994).3
1
The third, as the majority explains, improperly merged
Article III and Rule 23(a).
2
The Virgin Islands explained that Duncan’s refund
was part of a “batch” released by the Bureau. Response Br. 3.
3
Duncan also contends, in several pages of briefing,
that her refund represented less than what she was owed. An
argument she may raise but the class may not, because they
2
Duncan disagrees. She analogizes the refund to “an
unaccepted settlement offer” under Federal Rule of Civil
Procedure 68,4 which cannot moot her case. Opening Br. 16–
18 (quoting Campbell-Ewald Co. v. Gomez, 577 U.S. 153,
165–66 (2016)). But the Virgin Islands did not offer Duncan
anything under Rule 68 or otherwise. It returned Duncan what
she was owed. And, of course, Duncan’s argument also sneaks
in standing to satisfy Rule 23(a), which the majority agrees will
not suffice.5
received no refunds to contest—providing more evidence of
her atypicality.
4
Stating, in relevant part: “At least 14 days before the
date set for trial, a party defending against a claim may serve
on an opposing party an offer to allow judgment on specified
terms . . . . [But] [a]n unaccepted offer is considered withdrawn
. . . .” Fed. R. Civ. P. 68(a)–(b).
5
A point the Supreme Court has long emphasized. See,
e.g., Sosna v. Iowa, 419 U.S. 393, 403 (1975) (finding lead
plaintiff’s claim was not moot while noting “the district court
must [still] assure itself that the named representative will
adequately protect the interests of the class.”); U.S. Parole
Comm’n v. Geraghty, 445 U.S. 388, 405–07 (1980) (“Our
conclusion that the controversy here is not moot does not
automatically establish that the named plaintiff is entitled to
continue litigating the interests of the class. It does shift the
focus of examination from the elements of justiciability to the
ability of the named representative to fairly and adequately
protect the interests of the class.” (cleaned up)). Likewise, the
picking off doctrine is a “mootness exception,” not a Rule
23(a) exception, and cannot save Duncan’s claim. Richardson
v. Bledsoe, 829 F.3d 273, 286 (3d Cir. 2016).
3
B. Duncan’s Claim Cannot be Typical of a Corporate
Tax Refund
Nor can I see an abuse of discretion in the District
Court’s conclusion that Duncan was not typical of the forty-
nine corporations included in the proposed class. Including
those dissimilar members, the District Court explained, “may
provide an independent basis to find that Duncan’s claims are
not typical.” App. 11 n.5. And that cannot be seriously
questioned. Corporate taxpayers do not follow the same
schedules, in code or calendar, as individuals. Making Duncan
entirely atypical, and therefore an unsuitable representative of
the proposed class “in terms of their legal claims, factual
circumstances, [or] stake in the litigation.” Schering, 589 F.3d
at 597.6
II.
Duncan responds to all of this by forecasting a parade
of horribles. What if the Virgin Islands issues refunds for the
6
Finding Duncan fails Rule 23(a)(3) typicality, I need
not address adequacy under Rule 23(a)(4). Though the overlap
in these concepts seems likely to lead to the same conclusion
that the District Court did not abuse its discretion. See Beck v.
Maximus, Inc., 457 F.3d 291, 296 (3d Cir. 2006) (“The
Supreme Court has noted the typicality and adequacy inquiries
often tend to merge because both look to potential conflicts and
to whether the named plaintiff’s claim and the class claims are
so interrelated that the interests of the class members will be
fairly and adequately protected in their absence.” (cleaned
up)).
4
next representative? And the next? Fair questions, grounded in
the debts and delays alleged by many challenges to the
financial practices of the Virgin Islands simmering on district
court dockets. See, e.g., Gov’t Emps. Ret. Sys. of V.I. v. Gov’t
of V.I., 995 F.3d 66, 103–05 (3d Cir. 2021) (Matey, J.,
concurring in part and dissenting in part). But facts do not
march in Duncan’s parade. Indeed, even after some discovery,
there is no evidence that the Virgin Islands did anything more
than legitimately pay Duncan her refund. And even if that does
not moot her claim, it can leave her outside looking in, “unless
the defendant is executing a strategy of buying off class
representatives successively in an effort to derail the suit.” See
Culver v. City of Milwaukee, 277 F.3d 908, 912 (7th Cir. 2002)
(Posner, J.). Searching only for an abuse of discretion,
Duncan’s speculations cannot rise to that level.
Finally, says Duncan, the intra-class conflicts and
individual defenses do not prove she cannot represent the class.
I agree. But “may” is not “must,” and while a lead plaintiff can
still lead despite differences in claims and controversies,7
nothing in Rule 23 demands it.8 Holding otherwise risks
7
See, e.g., DL v. D.C., 860 F.3d 713, 725–26 (D.C. Cir.
2017) (representatives with mooted claims still typical and
adequate because they “displayed a strong commitment” to
resolution and “responded to all developments in a timely and
professional fashion” (cleaned up)); Snyder v. Ocwen Loan
Servicing, LLC, 258 F. Supp. 3d 893, 905 (N.D. Ill. 2017)
(representatives adequate because they “maintain[ed] interests
in pursuing statutory damages”).
8
See, e.g., Pettrey v. Enter. Title Agency, Inc., 584 F.3d
701, 707 (6th Cir. 2009) (representatives that “settled and
released all of their claims” inadequate); Culver, 277 F.3d at
5
handicapping the discretion of district courts, and upending the
careful balance established in Rule 23. Preferring that
predictable formula, I would affirm the District Court’s denial
of class certification. For that reason, I respectfully dissent.
912 (representative inadequate where claim was moot, he
“lack[ed] . . . any material stake in prosecuting th[e] litigation,”
and showed “lack of energy”); see also Reed v. Bowen, 849
F.2d 1307, 1312 (10th Cir. 1988) (“[W]e rely on the district
court to determine whether mooted named plaintiffs will
remain adequate class representatives.”).
6