Class Certification

The judicial determination that a proposed class action meets the legal requirements to proceed as a collective proceeding on behalf of all class members, as opposed to requiring individual litigation by each plaintiff. In federal court, class certification under Rule 23 requires satisfaction of numerosity, commonality, typicality, and adequacy requirements, plus one of three additional showings — typically that common questions predominate and that a class action is the superior method of adjudication. Class certification is often the pivotal moment in commercial class litigation — certification dramatically increases defendant liability exposure and settlement pressure, while denial typically ends the case for most absent class members. Funders in class action matters often key milestone-based funding draws to certification outcomes.

Because certification is often the single event that determines whether a case is worth pursuing at all, funders frequently structure capital draws so a larger tranche is released only after certification is granted, treating the pre-certification phase as the highest-risk portion of the investment. A funder's independent read on whether common questions will predominate under Rule 23 — not just counsel's assessment — is typically a precondition to committing capital to a proposed class action.