SHEPHERD, Circuit Judge.
This is a consolidated appeal from various district court orders in a lengthy and multifarious class action lawsuit against Target Corporation. Class member Leif Olson challenges the class certification for lack of adequate representation due to an alleged intraclass conflict. Class member Jim Sciaroni does not object to the certification but appeals the district court's approval of the settlement agreement. Together, Olson and Sciaroni also challenge the district court's order requiring them to post a bond of $49,156 to cover the costs of this appeal. For the reasons discussed below, we remand for further consideration
In 2013, Target announced a security breach by third-party intruders that compromised the payment card data and personal information of up to 110 million Target customers. Some months later, 112 consumer representatives initiated a class action lawsuit against Target in the U.S. District Court for the District of Minnesota. The parties eventually agreed to settle. Upon request from the consumer-plaintiffs, the district court preliminarily certified a settlement class defined as "[a]ll persons in the United States whose credit or debit card information and/or whose personal information was compromised as a result of the [Target] data breach." The court also preliminarily approved the parties' proposed settlement agreement, which calls for Target to create a $10 million settlement fund for the class. Under the agreement, class members with documented losses are compensated from the fund first, and the remaining balance is distributed equally among class members with undocumented losses. Class members who suffered no loss from the security breach receive nothing from the settlement fund. The agreement also allows class counsel to request fees of up to $6.75 million, which Target must pay in addition to the $10 million fund. Finally, the settlement requires Target to commit to specific improvements in its data security practices, such as appointing a chief information security officer, developing safeguards to control identifiable security risks, and providing security training to employees.
Between the district court's preliminary and final orders certifying the class and approving the settlement, class members Leif Olson and Jim Sciaroni each objected to the settlement, alleging inadequate compensation and excessive attorneys' fees. Additionally, Olson argued that the class could not be certified because it failed to meet the basic prerequisites of Federal Rule of Civil Procedure 23(a). Olson alleged that, unlike the class representatives, he incurred no expenses or costs making him eligible for compensation from the settlement fund. App. 309-10. Despite receiving no pecuniary relief, as a class member Olson is bound under the settlement to release Target from liability for any claims he may someday have should the breach injure him in the future. According to Olson, class members who are, like himself, ineligible for monetary compensation make up what he terms a "zero-recovery subclass." Olson argued that no named plaintiff belongs to this purported subclass, App. 309, and therefore the court should certify a separate subclass with independent representation.
The district court overruled Olson's objection and issued final certification and approval of the settlement.
We review a district court's decision to certify a class for abuse of discretion.
A district court may not certify a class until it "is satisfied, after a rigorous analysis," that Rule 23(a)'s certification prerequisites are met.
Though the Supreme Court has not articulated what, specifically, a "rigorous analysis" of class certification prerequisites entails, at a minimum the rule requires a district court to state its reasons for certification in terms specific enough for meaningful appellate review. "[S]omething more than mere repetition of [Rule 23(a)'s] language [is required]; there must be an adequate statement of the basic facts to indicate that each requirement of the rule is fulfilled."
The district court's certification of the settlement class does not meet this standard. In its preliminary order, the court replaces analysis of the certification prerequisites with a recitation of Rule 23 and a conclusion that certification is proper. Regarding Rule 23(a)(4)'s representation adequacy requirement — the issue at the heart of Olson's appeal — the court states: "the Settlement Class Representatives and Settlement Class Counsel will fairly and adequately protect the interests of the Settlement Class as the Settlement Class Representatives have no interest antagonistic to or in conflict with the Settlement Class and have retained experienced and competent counsel to prosecute this matter on behalf of the Settlement Class." These remarks are conclusions, not reasons, and on their own they do not constitute a "rigorous analysis" of whether certification is proper in this case.
To be sure, there were no objections at the time the court entered its preliminary order, and thus the class was initially certified without the benefit of adversarial briefing on the issue. But Olson objected before final certification, alleging an intraclass conflict that, if substantiated, would preclude certification of a single class and warrant inquiry into certification of an independent subclass.
Addendum 22 (emphasis added).
The lack of legal analysis in both the preliminary and final orders suggests that class certification was the product of summary conclusion rather than rigor. We hold that the district court abused its discretion by failing to rigorously analyze the propriety of certification, especially once new arguments challenging the adequacy of representation were raised after preliminary certification.
Though not exhaustive, Olson's objection raises important concerns for the district court to evaluate upon remand. First, whether an intraclass conflict exists when class members who cannot claim money from a settlement fund are represented by class members who can. Second, if there is a conflict, whether it prevents the class representatives "from fairly and adequately protecting the interests of all of the class members."
To be clear, we take no position on the propriety of class certification. We only conclude at this point that the record is inadequate for our review because the district court has not conducted a meaningful analysis of class certification.
We next address the district court's imposition of a $49,156 appeal bond under Rule 7 of the Federal Rules of Appellate Procedure. The parties agree that only $2,284 of the bond reflects the direct costs of this appeal. The remaining $46,872, according to the district court, is included in the bond to cover "the financial harm the class will suffer as a result of the delay caused by the appeal," such as disruptions in the claims process, hindered distribution of settlement funds to class members, and the administrative costs of maintaining the settlement website and toll-free telephone number. Appellants argue that these delay costs cannot be included in the bond because no applicable statute or federal rule allows Appellees to recover those costs if Appellants lose their appeal.
The issue is one of first impression in our Court: whether costs associated with delays in administering a class action settlement for the length of a class member's appeal may be included in an appeal bond under Federal Rule of Appellate Procedure 7. While we ordinarily review the imposition of a Rule 7 bond for abuse of discretion, the determination of costs allowable in the bond is a legal question reviewed de novo.
Rule 7 allows a district court to "require an appellant to file a bond or provide other security in any form and amount necessary to ensure payment of costs on appeal." Fed. R. App. P. 7. Appeal bonds are a type of guarantee for an appellee
We find our sister circuits' approach sensible and fair. By linking the amount of the bond to the amount the appellee stands to have reimbursed, the rule secures the compensation due to successful appellees while avoiding creating "an impermissible barrier to appeal" through overly burdensome bonds.
In light of our holding, we reverse and remand for the district court to reduce the Rule 7 bond to reflect only those costs that Appellees will recover should they succeed in any issues remaining on appeal following the district court's reconsideration of class certification.
The record provides an inadequate basis for effective appellate review because the district court failed to articulate its analysis of the numerous disputed issues of law and fact regarding the propriety of class certification. We accordingly remand this case to the district court with instructions to conduct and articulate a rigorous analysis of Rule 23(a)'s certification prerequisites as applied to this case, which must expressly evaluate the arguments raised in
Additionally, we recognize that, in light of our decision to remand this case to the district court for reconsideration of class certification, Appellant Olson has prevailed on his appeal. While there is some authority suggesting that this ordinarily moots a challenge to a bond,