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Class Action Countermeasures Discussions of the Strategic Considerations Involved In Class Action Defense

Classic Cases – Sprague v. General Motors Corp.

Posted in Certification

The final "classic case" for now, Sprague v. General Motors Corp. involved an alleged violation of the Employee Retirement Income Security Act of 1974 (ERISA). The plaintiffs had sued GM claiming that it had not provided them with the fully "paid up" lifetime healthcare benefits it had promised when it convinced them to take early retirement. The trial court certified a class of 50,000 early retirees, and declined to certify a class of 34,000 general retirees. GM appealed the certification of the early retiree class, and the plaintiffs appealed the denial of certification of the general retiree class. The Sixth Circuit reversed the certification, and affirmed the denial of certification–a complete victory for the defendant. In doing so, it made several important holdings about commonality and typicality:

Commonality. As the court pointed out, a common issue had to have some level of specificity. (An issue discussed here before.) Otherwise, every mass lawsuit would meet the commonality requirement, simply because the question "are class members residents of the Milky Way Galaxy?" would be a common issue.

It is not every common question that will suffice, however; at a sufficiently abstract level of generalization, almost any set of claims can be said to display commonality. What we are looking for is a common issue the resolution of which will advance the litigation.

In other words, a common issue must be a common material issue.

Reliance.  The court also held that, because GM made different statements to different retirees, their ERISA claims were not suitable for class treatment.

GM’s statements to the early retirees were not uniform. Among other things, the statements varied (1) based on the person making the representation, (2) based on the particular special early retirement pro- gram that applied, (3) from facility to facility, and (4) from time to time. Given the wide variety of representations made, there must have been variations in the early retirees’ subjective understandings of the representations and in their reliance on them. Some retirees might have interpreted GM’s statements to mean that their benefits were vested. Others might have understood that their benefits were subject to change. Some early retirees might have relied on GM’s statements about health care benefits, while for others the statements might have made no difference at all in the decision to retire early.

Like the Fifth Circuit in Castano, the court here came up with a succinct description of the largest problem with classes that require a finding of reliance.

Typicality.  The most quoted part of the Sprague opinion involved typicality. The court held that plaintiffs had not met the typicality requirement because proving their claims would not prove the claims of the other class members. As the court put it:

In pursuing their own claims, the named plaintiffs could not advance the interests of the entire early retiree class. Each claim, after all, depended on each individual’s particular interactions with GM-and these, as we have said, varied from person to person. A named plaintiff who proved his own claim would not necessarily have proved anybody else’s claim. The premise of the typicality requirement is simply stated: as goes the claim of the named plaintiff, so go the claims of the class. That premise is not valid here.

(Internal citations omitted.)

The primary lesson defendants can derive from Sprague is a simple one: when possible, frame issues to show the court how resolving them will not advance the litigation for the whole class. After all, the point of allowing a class action to proceed is that proving the plaintiff’s case will prove the class’s case as well. If that underlying premise is false, then a class action is not appropriate.

  • http://www.philippine-lawyer.com/ Philippine Lawyer

    Thank you for this helpful information.