In This Issue:
Predominance and Related Issues Under Rule 23—A Vehicle to Rationalize Class Action JurisprudenceRule 23(b)(3)’s requirement that common issues of law and fact “predominate” over individual issues is becoming a significant means by which courts can scrutinize putative class actions seeking damages.
Sixth Circuit Affirms Denial of Class Action Raising Retiree Medical BenefitsThe Sixth Circuit has long applied special rules of construction that favor plaintiffs who seek to recover retiree medical benefits under collective bargaining agreements.
Federal Jurisdiction Remains Under CAFA After Class Certification DeniedThe Seventh Circuit recently weighed in on an important jurisdictional issue relating to the Class Action Fairness Act of 2005 (“CAFA”).
By John B. Lewis and Sara L. Witt
Rule 23(b)(3)’s requirement that common issues of law and fact “predominate” over individual issues is becoming a significant means by which courts can scrutinize putative class actions seeking damages.[1] The predominance inquiry analyzes “‘the relationship between common and individual issues’ and ‘tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation’” Vinole v. Centurywide Home Loans, Inc., 571 F.3d. 935, 944 (9th Cir. 2009), citing Hanlon v. Chrysler Corp., 150 F.3d. 1011, 1022 (9th Cir. 1998). Recently, several federal appellate courts have overturned lower courts’ class certifications based on a “predominance” or related analysis.
This article will examine the different approaches taken by courts in the “predominance” analysis and the issues that have been examined. As reflected in the case law, the unifying question is whether there are so many individual questions to be resolved that certification is impractical and unlikely to promote judicial economy.
As a threshold matter, there is no single test to determine when the “predominance” standard is met. Different courts have created different tests and standards for determining when certification is appropriate under Rule 23(b)(3). Some also analyze the presence of individualized questions under the commonality or typicality requirements of Rule 23(a)(2) or (3).
Some decisions have followed the historical standard that “the predominance requirement is met if [the] common question is at the heart of the litigation.” Powers v. Hamilton Cty. Public Defender Comm., 501 F.3d 592, 619 (6th Cir. 2007). Under these largely non-employment cases, a class is more easily certified. For instance, under the test it will be sufficient if an alleged injury to a class can be proven by common evidence. See Cordes & Co. Fin. Servs. v. A.G. Edwards & Sons, Inc., 502 F.3d 91, 107 (2d Cir. 2007). In other words, where a court’s focus is whether a single factual theory of wrongdoing exists, it is irrelevant that individualized questions are present. Compare Olden v. Lafarge Corp., 383 F.3d 495 (6th Cir. 2004) (granting certification in mass tort case on grounds of common cause of injury), with In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 209 F.R.D. 323 (S.D.N.Y. 2002) (denying certification in mass tort case on grounds that a common cause of injury was lacking).
Other courts have held that certain types of cases are not susceptible of common proof and, therefore, even under the most liberal “predominance” standard, certification is inappropriate. For example, several courts have held that a nationwide class is not certifiable in the antitrust context as individualized assessments are necessitated by varying local markets. See, e.g., Blades v. Monsanto Co., 400 F.3d 562 (8th Cir. 2005) (holding claims of farmers alleging conspiracy to fix prices of corn and soybean seeds highly individualized due to varied geography, markets and prices); Heerwagen v. Clear Channel Commc’n, 435 F.3d 219 (2d Cir. 2006) (holding rock concert ticket purchasers did not constitute a class for purposes of an antitrust action because of variations in the local markets). But see, In re Terazosin Hydrochloride Antitrust Litig., 220 F.R.D. 672, 695 (S.D. Fla. 2004) (noting that antitrust claims are “susceptible to proof using common evidence”).
Courts also have reasoned that common proof is lacking (and therefore certification inappropriate) where the underlying claims are based on individual bilateral contract or estoppel theories. In Sprague v. General Motors Corp., 133 F.3d 388 (6th Cir. 1998), a putative class of salaried retirees brought an Employee Retirement Income Security Act (“ERISA”) action against their former employer seeking lifetime basic health care coverage. The putative class included both early retirees and employees who had retired based on the company’s normal criteria—i.e. at the “usual” age. The district court refused to certify a class of the normal retirement age employees because the underlying claim as it related to them lacked merit. However, the district court certified the class of early retirees.
On appeal, the Sixth Circuit, en banc, held that the class of early retirees was not appropriate for certification either. The court reasoned that the commonality and typicality requirements were not met because too many individual questions were presented. See, e.g., 133 F.3d at 399 (“[e]ach claim, after all, depended on each individual’s particular interactions with GM … [a] plaintiff who proved his own claim would not necessarily have proved anybody else’s claim.”).
So, most courts today require more for certification than a common question at the “heart of the litigation.” Even if there are, in theory, common facts that might establish liability, class certification will be denied if individualized inquiries are central to the outcome of the case or if such inquires make the case unmanageable as a class action. See, e.g., McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d. Cir. 2008) (denying certification of a class of smokers in RICO action alleging deceptive advertising where action hinged on whether and the extent to which the individuals relied on the advertising in purchasing the cigarettes); Grandon v. Merrill Lynch & Co., 2003 US Dist. LEXIS 16003 (S.D.N.Y. Sept. 10, 2003) (holding “predominance” standard not met because laws governing fiduciary responsibilities varied in the states of which class members were residents and this variance would make a class action unmanageable).
Vinole v. Countrywide Home Loans, Inc., supra, exemplifies the high value courts place on ensuring that class certifications further Rule 23’s purpose of fostering efficiency and judicial economy. There, the court affirmed the district court’s denial of class certification in a wage and hour case in which the plaintiffs challenged Countrywide’s exempt classification of employees holding the position of home loan consultants. The Ninth Circuit held that certification was properly denied because the putative class did not meet the “predominance” standard. In so doing, the court reasoned:
Plaintiffs argue that [the burdens of individual proof that concerned the District Court] could be mitigated through the use of “innovative procedural tools” such as questionnaires, statistical or sampling evidence, representative testimony, separate judicial or administrative mini-proceedings, expert testimony, etc. * * * These arguments are not persuasive in light of our determination that Plaintiffs’ claims require a fact-intensive, individual analysis of each employee’s exempt status. 571 F.3d. at 947.
Thus, in using the “predominance” analysis to bar class certification, courts often focus on whether the class will promote efficiency and judicial economy.
In Vega v. T-Mobile USA, Inc., 564 F.3d 1256 (11th Cir. 2009), the district court had certified a class of all T-Mobile employees working in Florida who received certain commissions from the company on prepaid cellular accounts and had these commissions subsequently taken back if a customer deactivated the service within 180 days of activation. The underlying claims were for unpaid wages and unjust enrichment. On appeal, the Eleventh Circuit vacated certification, essentially finding that none of the requirements for class certification were met—i.e. numerosity, typicality, commonality, predominance and superiority.
The Eleventh Circuit noted, “[f]or the complaint to support class certification as to commonality and predominance, there must be common questions of law or fact among the class relating to one or both of these substantive claims [unpaid wages and unjust enrichment], and in addition, those common issues must predominate such that they ‘ha[ve] a direct impact on every class member’s effort to establish liability’ that is more substantial than the impact of individualized issues in resolving the claim or class of each class member.” (Citation omitted.) 564 F.3d. at 1270.
In its predominance analysis, the appellate court observed that even if the plaintiffs could establish a common contract, T-Mobile submitted affidavits from employees who were allegedly part of the putative class indicating that these employees were aware of the charge-back policy. Therefore, the court held the “predominance” standard was not met with regard to the unpaid wages claim as there were significant individualized issues relating to breach, materiality and damages. 564 F.3d at 1274. The court made a similar finding with respect to the unjust enrichment claim declaring: “[w]hether or not a given commission charge back was ‘unjust’ will depend on what each employee was told and understood about the commission structure and when and how commissions were ‘earned’.” Id. at 1275.
Another difference in how courts perform the “predominance” analysis is whether they consider factors other than proof of the underlying claim. Some decisions have considered only the claim when making the certification determination while others have analyzed additional issues such as damages and defenses.[2] See, e.g., Klay v. Humana, Inc., 382 F.3d 1241, 1254 n.7 (11th Cir. 2004) (noting that appropriate considerations include claims, defenses, potential compulsory counterclaims and permissive counterclaims which have been brought).
The courts in the Eleventh Circuit have held that the need for individualized damage determinations may render a putative class unmanageable (and, therefore, common questions do not predominate). See Pickett v. IBP Inc., 182 F.R.D. 647 (M.D. Ala. 1998), rev’d on other grounds, 209 F.3d 1276 (11th Cir. 2000). Other jurisdictions, however, have held that the issue of damages should not be the basis for the denial of certification, or, at least, should not necessarily defeat certification. See In re Magnetic Audiotape Antitrust Litig., 2001 U.S. Dist. LEXIS 7303 at *25 (S.D.N.Y. June 1, 2001) (holding need for individualized damages determinations will not defeat certification); In re Scrap Metal Antitrust Litig., 527 F.3d 517, 535 (6th Cir. 2008) (holding necessity of individualized damages determination in antitrust action does not necessarily make class certification inappropriate and “the ‘fact of damages’ was a question common to the class” and, therefore, the ‘predominance’ standard was met even if the amount of damages sustained varied among class members).
Choice of law issues may be another basis for denying certification even though courts employ different Rule 23 analyses. The Seventh Circuit has held “[n]o class action is proper unless all litigants are governed by the same legal rules . . . [where] claims must be adjudicated under the law of many jurisdictions, a single nationwide class is not manageable.” In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1018 (7th Cir. 2002) (reversing the district court’s certification of two nationwide classes based on warranty and consumer fraud claims). See, also, Stirman v. Exxon Corp., 280 F.3d 554, 564 (5th Cir. 2002) (holding “predominance” standard not met where claim based on implied covenant to market natural gas and no showing made that the state laws governing the claims were consistent regarding this covenant); Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180 (9th Cir. 2001) (reasoning “predominance” not shown because state laws on claims of negligence, products liability and medical monitoring varied).[3]
An issue related to differences in applicable law arises where plaintiffs seeking certification attempt to bring state law wage and hour claims alongside federal Fair Labor Standards Act (FLSA) claims. Federal courts have denied class action certification of the state-law claim on the grounds that the FLSA collective action certification procedure requiring all class members to opt-in (as opposed to the opt-out procedure applied to the state class action claims) precludes the federal court from exercising jurisdiction over the state claims. See, e.g., De Asencio v. Tyson Foods, Inc., 342 F.3d 301 (3d. Cir. 2003). But see, Lindsay v. Government Employees Insurance Co., 448 F.3d 416 (D.C. Cir. 2006).
The “predominance” analysis is becoming increasingly important in class action jurisprudence. Many courts now may deny certification under Rule 23(b)(3) even when there are substantial common facts but where individual questions, such as the need to resolve individually determinative issues or the substantive law of different states, are present. As one district judge (now on the Seventh Circuit) has said:
“The issue of predominance . . . goes to the very heart of class certification. * * * While there are undoubtedly numerous common issues of law and fact concerning the plaintiffs’ allegations of discrimination, resolving the issue of liability with respect to any named plaintiff simply will not bind or determine the issue of liability for any of the remaining class members.” Rochlin v. Cincinnati Insurance Co., 2003 WL 21852341 *12 (S.D. Ind. July 8, 2003).
With the purposes of Rule 23 in mind, courts are increasingly looking to ensure that the class-wide issues do, indeed, “predominate” over individual ones. Predominance is one means to ensure that any class action certification meets the goals of Rule 23 and that dissimilar claims are not combined because of a handful of common issues.
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[1] The “predominance” requirements may also be relevant under section (b)(2). See, Heffner v. Blue Cross and Blue Shield of Alabama Inc., 443 F.3d. 1330, 1343 (11th Cir. 2006) (indicating that the requirement under Rule (b)(2) that injunctive relief be appropriate for “the class as a whole” implicates an analysis similar to the “predominance” analysis).
[2] Under Ohio law, for example, courts generally consider only the underlying claims in determining whether the “predominance” standard is met while federal courts may consider other issues. See, Terminal Supply Co. v. Farley, 1991 Ohio App. LEXIS 46, at *16-18 (Ohio App. Jan. 11, 1991) (noting that though Ohio courts consider claims only, in order to gain certification, plaintiffs must, nonetheless, show that the same facts establish liability for all class members).
[3] As stated in note 1, courts often consider “predominance” factors in determining whether certification is proper under Rule 23(b)(2) as under Rule 23(b)(3). Courts also have held that choice of law issues may render certification inappropriate under Rule 23(b)(2). See, Christ v. Beneficial Corp., 547 F.3d 1292 (11th Cir. 2008) (holding certification of a nationwide class not proper under Rule 23(b)(2) due to the choice of law issues).
By Jeffrey R. Vlasek
The Sixth Circuit has long applied special rules of construction that favor plaintiffs who seek to recover retiree medical benefits under collective bargaining agreements. In the seminal case of UAW v. Yard-Man, Inc., 716 F.2d. 1476 (6th Cir. 1983), cert. denied, 465 U.S. 1007 (1984), the court fashioned what it described as an “inference” that such benefits would vest. Over the next 25 years, the court interpreted its own “inference” as more or less a presumption, resulting in unionized employers losing retiree medical disputes in virtually every reported case, and accelerating the demise of many troubled manufacturers. While every other circuit to consider this issue has rejected the existence of any inference or presumption in favor of vesting, the trend in the Sixth Circuit in favor of retirees has largely continued.
On November 3, 2009, however, the Sixth Circuit decided the case of Harps v. TRW Automotive U.S. LLC, 2009 U.S. App. LEXIS 24242; 187 LRRM (BNA) 2464 (6th Cir. 2009), in which it affirmed the dismissal of retiree medical claims under a labor contract. In Harps, the company had negotiated agreements with the United Auto Workers (“UAW”) that included retiree medical benefits for a plant in Cleveland, Ohio. In late 2001, the company announced the shutdown of the facility and the parties negotiated a plant closing agreement that also referenced such benefits. The company continued to pay retiree health benefits for several years afterwards.
In 2005, the company wrote to the retiree medical plan participants to advise them of modifications to its plan. Among the changes was a shift in prescription drug benefits to take advantage of changes in Medicare, as well as an increase in certain premium payments by the employer. The company also, however, capped its premium contributions to 2006 levels, and advised the retirees that they would be responsible for future premium increases. The UAW opposed the changes and ultimately filed a putative class action on its own behalf and on behalf of the retirees, and their spouses and dependents.
On January 26, 2009, the United States District Court for the Northern District of Ohio granted the employer’s motion to dismiss for failure to state a claim upon which relief could be granted. In so holding, the district court explained that the CBA attached to the complaint unambiguously disclaimed the company’s obligation to provide the plaintiffs with vested, lifetime retiree health benefits, and that the shutdown agreement did not enlarge the right to those benefits. The union and retirees appealed.
The Sixth Circuit affirmed the dismissal of the plaintiffs’ claims. It first found that the union had waived any argument regarding the vesting of retiree medical care under the labor agreement. In any case, the court found that the agreement did not confer any right to lifetime retiree medical care, but, instead, limited the duration of medical benefits to the contract’s term. The court similarly agreed with the district court that the plant closing agreement did not expand the right to retiree medical care.
While Harps is an unreported decision, it is an important victory for employers in the Sixth Circuit. It first demonstrates that despite Yard-Man and its progeny, courts can dismiss retiree medical claims based upon the language of the collective bargaining agreement. Second, the court’s opinion reflected its acceptance of durational clauses on retiree medical benefits, and its acknowledgement of language that can effectively limit such benefits to the contract’s term. The Harps decision may be of use to employers with operations in the Sixth Circuit that wish to avoid unbargained-for retiree healthcare obligations.
The Seventh Circuit recently weighed in on an important jurisdictional issue relating to the Class Action Fairness Act of 2005 (“CAFA”). In Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805 (7th Cir. 2010), the court addressed whether a case that is removed to federal court under CAFA should remain there if class certification is denied. Judge Richard Posner, writing for the court, answered the question affirmatively, concluding that a federal court retained jurisdiction with CAFA even if the class is not certified. Judge Posner based his opinion on CAFA’s language and the fact that jurisdiction under the statute “attaches when a suit is filed as a class action, and that invariably precedes certification.” 592 F.3d. at 806. As Judge Posner found, this interpretation lead to a better result because if a state had different criteria for certifying a class than Rule 23, the remanded case could “continue as a class action in state court.” Id. Such a result also would be contrary to CAFA’s intent “of relaxing the requirement of complete diversity of citizenship so that class actions involving incomplete diversity can be litigated in federal court.” Id. at 807.
The court’s conclusion also is in keeping with the general principle that, once properly invoked, federal jurisdiction is not lost by subsequent developments. In reaching its conclusion the Seventh Circuit joined the Eleventh Circuit in Vega v. T-Mobile USA, Inc., 564 F.3d. 1256, 1268 n. 12 (11th Cir. 2009).
The Cunningham Charter decision is one step toward rationalizing federal court jurisdiction under CAFA. Others are sure to follow.
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