Posts Tagged ‘23(b)(1)’

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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The seemingly revolutionary concept of a “reverse class action” has gotten some attention from the technical media lately, in reference to efforts by the holder of a copyright to seek common relief against a group of alleged infringers.  As pointed out earlier today by Mike Masnick in this entry on his blog TechDirt, “reverse class action” in this context is actually a procedural vehicle that is not new, but is rarely used in practice: certification of a class of defendants.

Rule 23(a) expressly contemplates the possibility of a defendant class because it provides that “[o]ne or more members of a class may sue or be sued as representative parties on behalf of all members only if” the prerequisites of numerosity, commonality, typicality, and adequacy are satisfied.  FRCP 23(a) (emphasis added).  However, the successful use of this mechanism in practice has proven rare.

Defendant classes in cases seeking damages are impractical in most cases because Rule 23(b)(3), the portion of the rule governing actions for damages, requires that class members be given notice and an opportunity to opt out of the case.  So, you could theoretically sue a class for damages if you could meet the other criteria, but each defendant would have the right to exclude himself or herself from the case, which could leave you back where you started.

Another possibility is an action for injunctive relief against a defendant class under FRCP 23(b)(2).  Depending on Supreme Court’s upcoming decision in Wal-mart v. Dukes, Rule 23(b)(2) could provide a mechanism for obtaining significant monetary relief as well, without the same opportunity as in Rule 23(b)(3) for class members to opt out.  However, courts are split on whether the express language of FRCP 23(b)(2) prevents certification of a defendant class.  Some courts have held that the language in FRCP 23(b)(2) permitting class certification when  “the party opposing the class has acted or refused to act on grounds that apply generally to the class . . .” means, logically, that the party opposing class certification cannot be the defendant.  However, other courts have allowed defendant classes under FRCP 23(b)(2), at least in special situations, such as a case against a class of government officials.   See Generally Brown v. Kelly, No. 07-3356-cv, slip op. (2d Cir., June 24, 2010) (discussing the split in the courts recognizing that Rule 23(b)(2) could be used to certify a class of local government officials under some circumstances, but reversing class certification on other grounds).

That leaves FRCP 23(b)(1).  Again, this section uses the phrase “by or against individual class members,” so it at least opens up the possibility of a defendant class.  However Rule 23(b)(1)(A) authorizes class actions only when individual actions “would establish incompatible standards of conduct for the party opposing the class,” potentially ruling out classes of defendants categorically under the same reasoning that has been applied to Rule 23(b)(2).  Rule 23(b)(1)(B) allows class actions where individual adjudications “would be dispositive of the interest of the other members” or “would substantially impede or impair their ability to protect their interests.”   It is not clearly established what circumstances might meet this standard, but the mere possibility that one case will have a stare decisis (precedential) effect on others is probably not  enough.  (See this 2003 Tech Law Journal article discussing Tilley v. TJX Cos., 345 F.3d 34 (1st Cir. 2003)).

For more on the concept of defendant classes (in the patent infringement context), see this June 2009 Los Angeles Lawyer article by Mark Anchor Albert.

For anyone curious about the possibility of defendant class actions in Canada, see this 2004 article by Vince Morabito  in the Duke Journal of Comparative and International Law.

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