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Posts Tagged ‘equitable’

This is the third of what will be six posts summarizing my notes of the six presentations at the ABA’s 16th Annual Class Actions Institute held last month in Chicago.  For more on this excellent conference, see my October 31 and November 5 CAB posts.

Session 3 examined the conceptual issues and practical challenges that litigants and courts face in cases seeking certification under the different subparts of Rule 23(b), a question that took on increased importance following the Supreme Court’s Decision in Wal-Mart Stores, Inc. v. Dukes.   The panel presentation was titled “Don’t Blame Mrs. O’Leary’s Cow!” Rule 23(b)(3) Classes Under Fire and Rule 23(b)(2)’s Emerging Importance.  Jeffrey A. Leon moderated the panel, which consisted of Robert J. Axelrod, E.K. Cottrell, Professor Francis McGovern, and David S. Stellings.  

Unfortunately, due to a computer crash, I lost some of my notes from this presentation, but I have summarized some of the highlights below:

  • The courts are facing an ever-increasing tension between principle and pragmatism in deciding whether to certify class actions and under what procedure they should be certified.
  • Despite significant hurdles to class certification that have been imposed by the Supreme Court and other federal courts in recent years, the plaintiffs’ bar has a creative “gene” that keeps them pushing the envelope and experimenting on new methods of seeking aggregate redress.  This can be seen in many of the decisions in the lower courts over the past year, and is likely to continue into the future.
  • In the near future, we are likely to see mixed results, as some courts become more restrictive in granting class certification, while others are more receptive to creative ways of certifying classes.
  • Discovery and resolution of substantive issues and Daubert challenges are likely to come at an earlier stage in the process, regardless of the procedural vehicle under which certification is sought.
  • There is likely to be much more of a mixture of the subsections of Rule 23 used to certify classes, including combinations of classes in the same trial.
  • ERISA class actions are an area where the Rule 23(b)(2) class actions for monetary relief remain viable after Dukes.  Pennsylvania Chiropractic Ass’n v. Blue Cross Blue Shield Ass’n, No. 09 C 5619 (N.D. Ill. Dec. 28, 2011) provides a textbook list of reasons why courts may continue to refuse to certify ERISA claims for monetary relief after Dukes under Rules 23(b)(1), (2) and (3). 
  • But the Supreme Court’s decision in Cigna Corp. v. Amara, No. 09-804 (S. Ct. May 16, 2011) may have breathed new life into the argument that monetary relief may be available to plan members as part of the equitable relief that courts can provide, especially when a trustee is involved.  Among the equitable remedies  that may be available in a particular case is the “surcharge remedy”, which allows plan members to recover money as an equitable remedy for a trustee’s breach of fiduciary duty.  Amara may pave the way to arguments by plaintiffs that claims against a trustee for payment may be characterized as injunctions, for which certification under Rule 23(b)(2) may be appropriate notwithstanding the Supreme Court’s ruling in Dukes.   However, in February, the Second Circuit rejected the argument that claims for disgorgement made on behalf of a putative class of trustees of thousands of ERISA plans, holding that the necessity to determine how to divide any disgorged amount among the plaintiffs meant that the monetary relief was not “incidental” to any equitable relief as required under Dukes.  Nationwide Life Ins. Co. v. Haddock, 10-4237-cv, 2012 WL 360633 (2d Cir. Feb. 6, 2012).

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I’m embarrassingly late in posting a link to a terrific article from Steptoe & Johnson Partner Jennifer Quinn-Barabanov entitled Has Dukes Killed Medical Monitoring?  The article, published in the November 2011 Issue of DRI’s For the Defense Magazine, explores the potential impact of the Supreme Court’s decision Dukes in defending against class certification of product liability claims that seek as a remedy medical monitoring of class members who were exposed to an allegedly harmful product.

I highly recommend Quinn-Barabanov’s article for those of you who may have missed it when it came out in November.  The article is a must-read for anyone facing (or prosecuting) a medical monitoring class action.

It also makes at least two key contributions that are independent of the medical monitoring context.  First, it offers an analysis of the potential application of various aspects of the Wal-mart Stores Inc. v. Dukes decision outside of the employment discrimination context, including the arguably heightened commonality analysis and the admissibility of expert testimony in support of class certification.  Second, it is a good primer on the possible distinctions between truly injunctive relief, which still may be the basis for a Rule 23(b)(2) class action, and merely equitable relief incidental to a claim for monetary relief, which the Dukes Court held cannot support class certification under Rule 23(b)(2).

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Last week, Seventh Circuit Court of Appeals Judge Richard Posner authored an opinion addressing one of the key issues awaiting a ruling by the United States Supreme Court this term, holding that an employment discrimination class action seeking back pay could not be certified under FRCP 23(b)(2).   Here is a relevant excerpt from the opinion, Randall v. Rolls-Royce Corp., No. 10-3446, slip op.  at 12-14 (7th Cir., March 30 2011) (I have removed the internal citations for ease of reading),

[I]magine if the plaintiffs in this case were just seeking an injunction commanding basepay equalization between male and female employees.

But that’s not what they’re seeking, exclusively or even mainly; and indeed this isn’t a proper Rule 23(b)(2) suit.  Class action lawyers like to sue under that provision because it is less demanding, in a variety of ways, than Rule 23(b)(3) suits, which usually are the only available alternative. . . . Of particular significance, “plaintiffs may attempt to shoehorn damages actions into the Rule 23(b)(2) framework, depriving class members of notice and opt-out protections. The incentives to do so are large. Plaintiffs’ counsel effectively gathers clients—often thousands of clients—by a certification under (b)(2). Defendants attempting to purchase res judicata may prefer certification under (b)(2) over (b)(3).” . . . How far Rule 23(b)(2) can be stretched is the issue in the gigantic class action against Wal-Mart, Dukes v. Wal-Mart Stores, Inc. . . . now before the Supreme Court. The present case is not as big a stretch, but it is big enough. 

True, the only monetary relief sought is back pay; true, too—contrary to the common but erroneous notion that courts of equity can’t award monetary relief—they can do so if the award is merely incidental to the grant of an injunction or declaratory relief: “incidental” in the sense of requiring only a mechanical computation. That is the “clean-up” doctrine of equity. . . . In such a case, to make the class representative bring a second suit, for damages, on top of his injunctive action would create pointless redundancy. . . .

The plaintiffs argue that if only equitable relief is sought, a class action suit may be maintained under Rule 23(b)(2) even if the equitable relief is mainly monetary. We disagree. To read “injunctive” in the rule to mean “equitable” is to become mired in sticky questions of differentiating between “legal” and “equitable” actions—and such questions abound. . . .  We can avoid the mire by recognizing that Rule 23(b)(2) class actions are limited to cases in which “final injunctive relief or corresponding declaratory relief” is appropriate, rather than extending to all cases in which any kind of equitable relief is sought. . . . The monetary relief sought in a case, whether denominated legal or equitable, may make the case unsuitable for Rule 23(b)(2) treatment. . . .  As this case illustrates: calculating the amount of back pay to which the members of the class would be entitled if the plaintiffs prevailed would require 500 separate hearings. The monetary tail would be wagging the injunction dog. An injunction thus “would not provide ‘final’ relief as required by Rule 23(b)(2). An injunction is not a final remedy if it would merely lay an evidentiary foundation for subsequent determinations of liability.”

Could it be that the resolution of this issue is as simple as the recognition that “equitable” doesn’t mean “injunctive” and that class actions seeking monetary relief, whether “equitable” or “legal” can only be brought under Rule 23(b)(3), not Rule 23(b)(2)?  The Supreme Court should have an answer within the next two months.

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