Class Action Countermeasures : Class Action Lawyers & Attorneys : McGuireWoods Law Firm : Complex Litigation, Mass Torts

Property-rights class actions are difficult to bring, because property tends to be unique, and class actions do not work well with unique claims. But that doesn't stop plaintiffs from trying to certify classes asserting property based claims.

This week's case--Onyx Props. LLC v. Bd. Cty. Comm'ners of Elbert Cty., 2013 U.S. Dist. LEXIS 7151 (D. Colo. Jan. 17, 2013).--arises out of one such effort. The specific details are convoluted, but basically amount to the following: two developments in Elbert County, Colorado were, for various reasons, rezoned from an "A-Agriculture" designation to an "A-1" designation. This was apparently important to at least one set of property owners who ran a composting business--acceptable under one designation but not the other. When Elbert County told them to cease composting, they challenged its ruling in state court, and won; the court found that the rezoning was fatally flawed because it was based on the wrong map.

Not content with their victory in state court, the plaintiffs filed a §1983 class action, alleging that the defendant had violated their constitutional rights (and other property owners') by enacting and then enforcing invalid zoning regulations against them.  

The trial court in the District of Colorado denied their request for class certification on a number of grounds, but the most significant was that 

the property rights at issue differ appreciably between the proposed class members and, as such, the analysis as to whether the alleged illegal activities of the [Elbert County] BOCC violated the property owners' substantive due process rights requires individualized inquiry.

As a result, the plaintiffs could not establish commonality.  But the court went further, pointing out that the unique nature of the plaintiffs' property rights also precluded certification of either a damages class under Rule 23(b)(3) or an injunctive-relief class under 23(b)(2).  

Among other problems, any damages class would have trouble showing superiority, since in a property-based case

each class member has an interest in controlling his or her claim given the individualized nature of that claim.

Similarly, the plaintiffs' request for injunctive relief was not appropriate for class treatment because 

the BOCC's reliance on the regulations/map at issue to consider past determinations would require an individualized assessment of the applicability and the appropriate relief, as opposed to future injunctive relief to Elbert County citizens and members of the public

In short, the more the plaintiffs relied on their due process rights to their real property, the harder it was to fit their lawsuit into any classwide relief.  

For defense lawyers, the takeaway here is simple: the unique nature of property rights means that property-based class actions are almost always a bad idea.  The key is showing the court the specific ways in which real property differs in a given area.

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A common question new students of Rule 23(b)(2) ask is why it exists at all. After all, if an injunction truly offers indivisible relief, why would one seek to bring it on behalf of a class? Wouldn't the individual pursuing the injunction get relief for the class if she wins just by bringing the lawsuit in the first place?

There is an answer to this question, and it is one that has its roots in the desegregation era.  When blacks seeking desegregation orders sued for injunctions, they did so on behalf of a class to avoid the problem of racist school districts granting admission one at a time to the plaintiffs who sought the orders. At that point, there was a clear need for the class action device to ensure the real relief the plaintiffs sought (desegregation) could be accomplished.

As it turns out, the question of when a class action is necessary to effect injunctive relief has remained, and so a number of courts have imposed a "necessity" requirement (much like the "cohesiveness" requirement) on Rule 23(b)(2).

The most recent example of the "necessity" requirement came last week, in the case
M.R. v. Bd. of School Comm'ners of Mobile Cty., No. 11-0245-WS-C, 2012 U.S. Dist. LEXIS 154500 (S.D. Ala. Oct. 29, 2012).

M.R. involved ten student plaintiffs, who all alleged that they had been "long-term suspended" (suspended for more than two consecutive weeks) from their public schools without notice or a hearing, which they argued was a clear violation of their due process rights. Their lawsuit challenged Mobile County's suspension policy on behalf of all students of the school system. They sought no monetary relief.

The school system (after unsuccessfully challenging the lawsuit on standing grounds), opposed certification on the grounds that it was not necessary:

"The Board's point, quite simply, is that it would be superfluous to certify a class here because, if plaintiffs prevail on the merits, their requested injunctive declaratory and injunctive relief would have precisely the same scope and effect regardless of whether a class is certified or not."

(Emphasis added.)  Rather than dismiss the argument as chutzpah, the court did its research, and noted that

considerable authority demonstrates that, whether it is deemed a formal "requirement" or not, the necessity of the class mechanism to afford complete relief is a proper consideration in the Rule 23(b)(2) analysis. … In the typical case, the district court weighs the benefits (if any) of class certification under Rule 23(b)(2) against the inherent burdens associated with transforming ordinary litigation into a class action. Where the members of the proposed class would benefit from the relief sought by the individual plaintiffs even if no class were certified, those courts often find that the burdens outweigh the benefits and that class certification is properly denied as inappropriate.

While the court observed that the Eleventh Circuit had not yet ruled on this question, it pointed out that

the clear majority rule is that "need" is a proper consideration (even if not technically a "requirement" for class certification), and that class certification may be properly denied where a class is unnecessary to obtain the full measure of relief sought, such that it is not appropriate to bog down the litigation with the expense, delay, complexity and burden of class certification when there is no corresponding benefit to implementation of the resulting judgment.

(Emphases added.)  Since the only "need" the plaintiffs identified was additional discovery about the circumstances of other class members (which, the court noted, would only be necessary if the class was not in fact cohesive), the court refused to certify the class.

So what can we take from this case? First, despite the lack of any tests in the text, Rule 23(b)(2) certification does require the plaintiffs to meet at least three requirements: indivisible relief, cohesiveness, and necessity. Second, this case reiterates an important trend: courts are paying more attention to when the cost and complexity of a class action are actually required in a case. For defendants who find themselves opposing frivolous or ill-thought-out class actions, that's a welcome development.

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Rule 23(b)(2) is available for class actions that seek injunctive or declaratory relief. It does not allow for opt-outs. Until last year, seeking Rule 23(b)(2) certification had become a strategic alternative for plaintiffs whose claims might not be certified under Rule 23(b)(3). Now, it's less clear that this alternative is available for "traditional" class actions.

Ten Cases to Educate You:

• Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).
• Winzler v. Toyota Motor Sales U.S.A., Inc., 2012 U.S. App. LEXIS 12297 (10th Cir. Jun. 18, 2012).
• McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (7th Cir. Feb. 24, 2012). 
• Jamie S. v. Milwaukee Public Schools, 2012 U.S. App. LEXIS 2089 (7th Cir. Feb. 3, 2012). 
• Kartman v. State Farm Mut. Auto. Ins. Co., 634 F.3d 883 (7th Cir. 2011).
• Gates v. Rohm & Haas Co., 655 F.3d 255 (3d Cir. 2011).
• Garcia-Rubiera v. Calderon, 570 F.3d 443 (1st Cir. 2009).
• Christ v. Beneficial Corp., 547 F.3d 1292 (11th Cir. 2008).
• Thomas v. Albright, 139 F.3d 227 (D.C. Cir. 1998).
• Robinson v. Hornell Brewing Co., 2012 U.S. Dist. LEXIS 51460 (D.N.J. Apr. 11, 2012).

Further Reading:

• Neil K. Gehlawat, Monetary Damages & the (b)(2) Class Action: A Closer Look at Wal-Mart v. Dukes, 90 Tex. L. Rev. 1535 (2012).
• David Marcus, Flawed But Noble: Desegregation Litigation & Its Implications for the Modern Class Action, 63 Fla. L. Rev. 657 (2011).
• Andrew Bradt, "Much to Gain & Nothing to Lose": Implications of the History of the Declaratory Judgment for the (b)(2) Class Action, 58 Ark. L. Rev. 767 (2006).

Questions to Consider:

• What forms of relief are appropriate for 23(b)(2)?
• Is hybrid certification still possible post-Dukes?
• After Dukes clarified the commonality standard, are implicit requirements (like cohesiveness) to Rule 23(b)(2) still necessary?

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 In the wake of Wal-Mart Stores, Inc. v. Dukes, plaintiffs and trial courts are still trying to determine exactly how to apply the clarified commonality standard of Rule 23(a)(2), and the standard for injunctive relief under Rule 23(b)(2). The good news for defendants, as demonstrated in the new case M.D. v. Perry, 2012 U.S. App. LEXIS 6061 (5th Cir. Mar. 23, 2012), the appellate courts are largely following the Supreme Court's lead in Dukes. (My apologies: Google Scholar doesn't have the opinion yet, and the Fifth Circuit website appears to be having difficulties.)

The plaintiffs challenged the state's long-term foster care program, known as the Permanent Managing Conservatorship ("PMC"). They alleged that Texas's mismanagement of the PMC had created a variety of problems for the 12,000 children under its care. They sought injunctive relief under Rule 23(b)(2).

The lower court acknowledged that different children would have been treated differently by the system, but certified the class anyway. It identified the "common question" uniting the class as the legality of the foster-child regime as administered in Texas. It reasoned that the Fifth Circuit had held that the commonality standard was not a demanding one, and that the plaintiffs' proposed common questions could apply to all class members, even if they yielded different answers for different class members.

The Fifth Circuit disagreed. First, it pointed out that that Dukes has changed its standard for commonality.

Thus, the commonality test is no longer met when the proposed class merely establishes that "there is 'at least one issue whose resolution will affect all or a significant number of the putative class members.'" Forbush, 994 F.2d at 1106 (emphasis added) (citation omitted). Rather, Rule 23(a)(2) requires that all of the class member's claims depend on a common issue of law or fact whose resolution "will resolve an issue that is central to the validity of each one of the [class member's] claims in one stroke."

(Emphasis in original.) And then it pointed out that, in this case, the alleged "common issues" had been pitched at too general a level to yield any common answers that would actually advance the litigation.

Accordingly, given the "amorphousness" of the proposed class's proffered common issues of fact and law, the district court should be particularly precise when explaining how the resolution of those claims "will resolve an issue that is central to the validity of each of the [individual class member's claims] in one stroke." Wal-Mart, 131 S. Ct. at 2551. The district court's present certification order failed to do so; thus, we conclude that it failed to perform the "rigorous analysis" that is required in order to find that the proposed class satisfied Rule 23(a)(2)'s commonality requirement.

(Emphasis added.)  But the Fifth Circuit did not stop there. After pointing out that a request for injunctive relief must be "specific," it also held that, because the plaintiffs had asked--indirectly--for individualized injunctive relief, that it was clear that the class lacked the cohesiveness to justify certification under Rule 23(b)(2).

"A proposed class cannot avoid Rule 23(b)(2)'s prohibition on claims for individualized relief by petitioning the district court to order the defendant to craft individualized "injunctive-type" relief for certain class members. See Jamie S., 668 F.3d at 499 (holding that proposed injunctive relief did not satisfy Rule 23(b)(2) when the district court's order "would merely initiate a process through which highly individualized determinations of liability and remedy are made; this kind of relief would be class-wide in name only, and it would certainly not be final"). Accordingly, we find that the requested individual relief implicitly establishes that at least some of the proposed class's underlying claims allege individual injuries that are not uniform across the class; thus, as currently pleaded, the proposed class lacks cohesiveness to proceed as a 23(b)(2) class.

(Emphasis added.)  The Fifth Circuit remanded the case for further consideration. (It reasoned that the plaintiffs might be able to allege a more limited class that could justify certification.)

The applications of this opinion to defense work are clear. First, like the Seventh Circuit in Jamie S., the Fifth Circuit has affirmed that a plaintiff may not simply plead around Rule 23(a)(2) by keeping her claims amorphous. And second, the Fifth Circuit has also affirmed the "cohesiveness" standard implicit in Rule 23(b)(2), and shown its importance in a world with a more rigorously-enforced commonality standard.

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To get lawsuits into court and past preliminary motions, plaintiffs often have to argue some pretty stupid things. They have to argue that they did not know coffee is hot or that they trusted Google Maps directions over their own eyes. Sometimes, to get a class action that far, plaintiffs' lawyers have to argue that entire populations that dumb, such as when they argue that people did not know that Nutella is fattening. What's a defense lawyer to do in situations like this?

The Third Circuit has offered some help. The lawsuit, McNair v. Synapse Group, Inc. (3d Cir. 2012), involved the high-stakes, high-pressure business of magazine subscriptions. Each of the named plaintiffs had bought a magazine subscription through Synapse, one of those offers that involved crazily low rates and--unless cancelled--automatic renewal. As most behavioral economists would tell you, making a default "automatic renewal" would be very profitable, because most people won't bother to cancel a magazine subscription. But the plaintiffs alleged that Synapse stacked the deck even further in its favor, by disguising its automatic renewal notices as just so much junk mail. (According to internal documents, Synapse had determined that fewer people cancelled after an unmarked notice than after one marked "Automatic Renewal.")

The plaintiffs had originally brought their case as a class action for damages, but the trial court determined that, since the lawsuit was based on allegations of fraud, individualized issues (like reliance) would predominate over common ones.

So the plaintiffs amended their complaint to seek injunctive relief instead. Synapse opposed, arguing that, since the plaintiffs would not suffer any future injury, they could not seek injunctive relief. (The plaintiffs' response was twofold: (1) it was not always clear which subscription deals were Synapse deals, and (2) given a good enough initial deal, they could not guarantee they would not subscribe again.) The trial court allowed the amendment, reasoning that it was possible one of the plaintiffs might wind up subscribing with Synapse again. Two years later, it declined to certify this new class as well, this time because those same individualized issues meant the proposed class was not cohesive enough to justify certification under Rule 23(b)(2).

The plaintiffs appealed under Rule 23(f). The central question the Third Circuit faced was whether plaintiffs in this situation (fooled once, might get fooled again) had standing to seek injunctive relief. In this case, it concluded they did not. It began by describing the "future injury" requirement for injunctive relief

When, as in this case, prospective relief is sought, the plaintiff must show that he is "likely to suffer future injury" from the defendant's conduct. Lyons, 461 U.S. at 105. In the class action context, that requirement must be satisfied by at least one named plaintiff.

And it then turned to what the plaintiffs had actually alleged about their harms.

Appellants have effectively acknowledged that they, unlike the class members they seek to represent, are not Synapse customers and are thus not currently subject to Synapse's allegedly deceptive techniques for obtaining subscription renewals. Unless they decide to subscribe again, then, there is no reasonable likelihood that they will be injured by those techniques in the future. They do not allege that they intend to subscribe again.

[Internal citations omitted.] Having set up the reasoning, the Third Circuit offered a very blunt assessment of the plaintiffs' argument that, despite having been allegedly deceived once, they would not be able to avoid the same problem in the future.

Perhaps [plaintiffs] may accept a Synapse offer in the future, but, speaking generally, the law accords people the dignity of assuming that they act rationally, in light of the information they possess. … If Appellants' suggestion is that they may not be able to help themselves when confronted with a really good subscription offer, they have still not provided a basis for standing. Pleading a lack of self-restraint may elicit sympathy but it will not typically invoke the jurisdiction of a federal court.

(Emphasis added.)  

The McNair opinion has some clear uses for defense counsel. The most obvious is its clear explication of the future injury rule, and its implicit affirmance of the cohesiveness requirement of Rule 23(b)(2). But it may serve even more use as an object lesson: from both a rhetorical and a practical standpoint, it still makes sense to argue to a court that your opponents are not stupid, and it's rarely a good idea to argue to a court that your clients are.

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Six months after the Supreme Court decided Wal-Mart Stores, Inc. v. Dukes, courts are still working out how best to apply the newly-clarified standard of commonality. This week, the Seventh Circuit offered some further guidance.

In Jamie S. v. Milwaukee Public Schools, the plaintiffs--seven disabled public-school students--challenged Milwaukee's implementation of the Individuals with Disabilities Education Act.  The trial court denied certification, but allowed the plaintiffs to amend their complaint. It then certified the amended class proposal, and proceeded to a bench trial, where it found various violations of the IDEA, and ordered a complex, court-monitored remedial scheme. Both sides appealed: MPS appealed the certification, while the plaintiffs appealed the denial of certification of their first proposed class.

The Seventh Circuit vacated the trial court's certification order. It began by discussing how school districts implement the IDEA:

As relevant here, local districts must identify children with disabilities, determine whether these children require special-education services, and develop individualized education programs ("IEPs") tailored to each student's specific needs. Each step in the process is highly individualized because every child is unique.

(Emphasis added.) As one might expect, the rest of the opinion follows inexorably from that account. The Seventh Circuit vacated the order on three grounds. First, it found that the class was not identifiable from the proposed definition. The trial court had certified a class of

Those students eligible for special education services from the Milwaukee Public School System who are, have been or will be either denied or delayed entry or participation in the processes which result in a properly constituted meeting between the IEP team and the parents or guardians of the student.

As the Seventh Circuit found,

A significant segment of the class (of unknown and unknowable size) comprises disabled students who may have been eligible for special education but were not identified and remain unidentified.

(Emphasis in original.)

The Seventh Circuit also found that the class lacked commonality.

The plaintiffs identify the following common issue: "[A]ll potential class members have suffered as a result of MPS' failure to ensure their Child Find rights under IDEA and Wisconsin law." This completely misunderstands Rule 23(a)(2). Whether MPS failed in its obligations under the IDEA and thereby deprived an eligible disabled child of a free appropriate public education is the bottom-line liability question in any individual plaintiff's IDEA claim. To bring individual IDEA claims together to litigate as a class, the plaintiffs must show that they share some question of law or fact that can be answered all at once and that the single answer to that question will resolve a central issue in all
class members' claims.

(Emphasis in original.) This is, of course, remarkably similar to the language in Dukes. But the Seventh Circuit too it slightly further, providing an example to illustrate why plaintiffs' proposed common issue was not common at all:

To illustrate the commonality problem in the certified class, consider two hypothetical students within the class: one has a disability and would be eligible for special education but has never been identified as being disabled nor gone through the IEP process; another was identified as disabled and received a timely IEP meeting, but the child's parents did not attend the IEP meeting and were not notified of their right to do so. Both scenarios involve violations of the IDEA, but what common question can be answered that would assist the court in determining MPS's liability for each? On the plaintiffs' theory, that question is something like this: Did MPS fulfill its IDEA obligations to each child? But while that generic question is surely a part of both children's claims, it must be answered separately for each child based on individualized questions of fact and law, and the answers are unique to each child's particular situation.

(Emphasis added.)

Finally, the court held that since the plaintiffs had not established any common issue, there could be no common injunctive relief that would apply to all class members. As it held:

"While the compensatory-education remedies will often or always be injunctive in nature, there can be no single injunction that provides final relief to the class as a whole. It is no answer to say that the June 9 remedial order affects the entire class; that order merely establishes a system for eventually providing individualized relief. It does not, on its own, provide "final" relief to any class member."

The application for defense counsel should be clear. In an effort to avoid the dictates of Dukes, plaintiffs continue to label both issues and and relief as "common," even if the proposed common issue is so abstract as to be meaningless in a trial or in granting relief. The Seventh Circuit's "single answer" formulation can help explain to courts just when a common issue is truly common, as opposed to when the only real commonality to the class is their counsel's desire for certification.

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The last few weeks have been exceptionally busy for appellate decisions involving class actions. In addition to Judge Easterbrook's In re Aqua Dots opinion, the Sixth Circuit's Pipefitters opinion, the Second Circuit's Literary Works opinion, and the Ninth Circuit's reversal of the Bluetooth settlement, the Third Circuit has offered up a pair of opinions involving predominance and common evidence. In one, Behrend v. Comcast Corp., a panel appeared to limit the reach of In re Hydrogen Peroxide on expert evidence, affirming certification of an antitrust case again the cable provider in part because it held that a Daubert inquiry is not necessary at class certification. In the other, Gates v. Rohm & Haas Co., a different panel affirmed the denial of certification of an environmental class action. In doing so, it appeared to follow Hydrogen Peroxide in requiring a "rigorous analysis" of expert proof, even if the parties themselves had stipulated no Daubert hearing would be necessary.

In general, Gates is an extremely useful opinion for defendants. Leaving aside its implicit analysis of the Daubert issue (which is likely to be hotly contested for some time to come), the Third Circuit made a number of other statements explaining just how difficult it can be to demonstrate either cohesiveness (for a Rule 23(b)(2) class) or predominance (for a Rule 23(b)(3) class).

I blogged about this case last year when the trial court denied certification. So, since it remains applicable, I'll repeat the factual summary from there.

Gates is an environmental case, in which the plaintiffs sued Rohm & Haas for polluting the water and air around Ringwood, Illinois with chemicals including vinylidene chloride, a known carcinogen. The plaintiffs sued for violations of CERCLA and state law, and sought damages for medical monitoring and damage to property. The proposed class action – like many environmental class actions – would turn on questions of causation, which can pose a number of thorny individualized issues in toxic torts. So, in addition to seeking damages, the plaintiffs sought an injunction compelling Rohm & Haas to set up a medical monitoring regime.

The district court refused to certify a class, finding that the Rule 23(b)(2) class lacked "cohesiveness" and the 23(b)(3) class lacked predominance. The plaintiffs appealed.  The Third Circuit affirmed. Among its holdings:

The "cohesiveness" requirement for Rule 23(b)(2) is more stringent than the predominance requirement for Rule 23(b)(3).

As all class members will be bound by a single judgment, members of a proposed Rule 23(b)(2) injunctive or declaratory class must have strong commonality of interests.

The Third Circuit also noted that

Commentators have noted that certification requirements under Rule 23(b)(2) are more stringent than under (b)(3).

The plaintiffs could not rely on proof of a composite, "average" class member to establish factual predominance.

Plaintiffs cannot substitute evidence of exposure of actual class members with evidence of hypothetical, composite persons in order to gain class certification. … Averages or community-wide estimations would not be probative of any individual's claim because any one class member may have an exposure level well above or below the average.

Nor could plaintiffs use regulatory standards as shortcuts for common proof.

Although the positions of regulatory policymakers are relevant, their risk assessments are not necessarily conclusive in determining what risk exposure presents to specified individuals. … Thus, plaintiffs could not carry their burden of proof for a class of specific persons simply by citing regulatory standards for the population as a whole.

In short, the Third Circuit came out definitively against using some of the various shortcuts plaintiffs have employed to convince courts to certify a class despite the lack of actual common proof. As both a taxonomy of these shortcuts, and an explanation of why they don't work, this is a good opinion for class-action defense lawyers to keep in their toolkit.

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Today, the Supreme Court issued its much-anticipated opinion in Wal-Mart v. Dukes.

For those who like to skip ahead to the end to figure out whether their side won, the Court ruled in favor of Wal-Mart. That said, the real winner was the late Professor Richard Nagareda, whose articles on commonality clearly influenced Justice Scalia's majority opinion.

In ruling for Wal-Mart, the Court issued two holdings: it held (5-4) that the plaintiffs had not met their burden on proving commonality, and (unanimously) that the plaintiffs could not certify a class for money damages under Rule 23(b)(2).

Now, what does the decision itself mean? Obviously, lawyers will be poring over the opinion in the coming months to tell us just that. But here are some highlights from the opinion.

Commonality means not common questions, but common answers.

Their claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.

The "rigorous inquiry" required for class certification is a factual inquiry.

Rule 23 does not set forth a mere pleading standard. A party seeking class certification must affirmatively demonstrate his compliance with the Rule—that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc.

Plaintiffs must bring individualized monetary claims under Rule 23(b)(3).

[W]e think it clear that individ- ualized monetary claims belong in Rule 23(b)(3). The procedural protections attending the (b)(3) class— predominance, superiority, mandatory notice, and the right to opt out—are missing from (b)(2) not because the Rule considers them unnecessary, but because it considers them unnecessary to a (b)(2) class.

Statistical proof will not cure all problems with a proposed class.

The Court of Appeals believed that it was possible to replace such proceedings with Trial by Formula. A sample set of the class members would be selected, as to whom liability for sex discrimination and the backpay owing as a result would be determined in depositions supervised by a master. The percentage of claims determined to be valid would then be applied to the entire remaining class, and the number of (presumptively) valid claims thus derived would be multiplied by the average backpay award in the sample set to arrive at the entire class recovery—without further individualized proceedings. We disapprove that novel project. Because the Rules Enabling Act forbids interpreting Rule 23 to abridge, enlarge or modify any substantive right, a class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims.

(Internal citations omitted.)

And what does this mean for class-action litigation?

It means we're likely to see more robust challenges to commonality at the certification stage. It also means that we're likely to see fewer class actions pitched as seeking "injunctive relief" when what the plaintiffs (and their lawyers) really want is money damages. Combined with the Court's other class-action decisions this term, it seems clear that the limits of the class action are more sharply defined, which defense attorneys can use to protect their clients from spurious class actions.
 

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 Most professional objectors are fee-seekers (or, as one court called them, "remoras"). But not all; some, like the Public Citizen Litigation Group and the Center for Class Action Fairness, are non-profits that seek to keep class settlements for the benefit of class members instead of class counsel.

Alan B. Morrison, one of the founders of the Public Citizen Litigation Group and a member of the American Law Institute, has long experience in objecting to class actions. As he has put it:

What we found was that all the lawyers in every case, as well as virtually every district court judge, were very unhappy to see us and not at all pleased with the substance of our objections. To say that we were considered the proverbial skunk at the garden party would be about as politely as it could be put, even though the Rules clearly gave class members the right to appear and object.

In a recent article in the George Washington Law Review, he explains--from a nonprofit objector's point of view--the effect of the "little changes" in the ALI Principles of Aggregated Litigation. Among them:

• Shifting focus from the predominant relief to the kind of relief in approving settlements. This gets to a problem that has been hotly discussed lately: can a court certify a class seeking monetary relief under Rule 23(b)(2)? The ALI prescribes looking at the kind of relief (money, injunction) rather than which relief "predominates." It seems primarily concerned with allowing class members to opt out when money is at stake; an option available under Rule 23(b)(3) but not Rule 23(b)(2).
• Requiring courts to look for structural conflicts in the class.  As Morrison summarizes: "The ALI now more broadly forbids the certification of a class when there are structural conflicts that may result in one group of claimants being short-changed to the benefit of another, and it included a special provision dealing with the problem of future claims."
• Blessing the lodestar cross-check. In other words, the ALI has approved courts calculating what counsel's hourly fees would have looked like, and using that figure as a benchmark for determining whether the contingency fee is outsized.
• Making the results of the claims procedure public. Doing so keeps objectors informed, and may provide incentives to keep attorneys fees in line with actual relief to the class.

So what can defense lawyers learn from Morrison's review of the ALI? Be transparent in the settlement process. It's a simple--though hardly an easy--lesson. The temptation for most defense lawyers is to make a strong showing of serving the client's interest by selling class counsel on a settlement with large fees, quick-pay or clear sailing provisions, and relief that appears valuable but doesn't cost much. But if the settlement appears to be the result of collusion, then it will invite objections, or rejection by the court. As I've pointed out before, settling on the cheap can often prove extremely expensive. The ALI's Principles of Aggregate Litigation only reinforce that lesson.

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 Last week, while the legal world was abuzz over the Supreme Court argument on Wal-Mart v. Dukes, Judge Posner was quietly putting the finishing touches on Randall v. Rolls Royce, which provides his own take on some of the same issues.

As in Dukes, the plaintiffs sought to represent a class of women who alleged gender discrimination under Title VII. As in Dukes, they alleged that, because they were women, they had received less money for comparable work, and were passed over for promotions within the company. As in Dukes, they sought certification under Rule 23(b)(2), while seeking monetary relief in the form of "back pay." However, unlike the Dukes plaintiffs, the Randall plaintiffs only sought to represent 500 women, so this was hardly "too big to certify." 

The lower court denied certification, holding that the plaintiffs had not demonstrated commonality, typicality, or adequacy (there were conflicts within the class), and that certification of a class seeking monetary relief was not appropriate under Rule 23(b)(2). So the plaintiffs appealed under Rule 23(f).

Judge Posner began his opinion by noting one of the strategic quirks about this Rule 23(f) appeal. Rolls Royce had solid defenses to most of plaintiffs' claims; so it would behoove it not to oppose certification, because in the very likely event a certified class lost, it would never face another gender discrimination claim from the class members for any conduct through 2011. Judge Posner also spent a paragraph on the plaintiffs' conflict of interest (one also present in the Dukes class): since some class members were in management they'd be defendants in other class members' claims.

Having dealt with those issues, Judge Posner turned to Rule 23(b)(2). As he noted:

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.

So, like in Dukes, the question became whether the plaintiffs could seek certification under Rule 23(b)(2) when they were also seeking back pay. According to Judge Posner, they could not.

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. See, e.g., Medtronic, Inc. v. Intermedics, Inc. 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.

...

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.

...

The proper approach in this case would thus have been for the plaintiffs to seek class certification under Rule 23(b)(3)—which requires full notice so that class members can opt out if they want to bring an independent suit for damages or other monetary relief—but to ask for injunctive as well as monetary relief.

The plaintiffs also argued, in the alternative, that they should be allowed to substitute new class representatives (using intervention under Fed. R. Civ. P. 24) should the court find the originals inadequate. But Judge Posner held that, in this case, that would not be an option.

It would go too far to suggest that unless substitution for the original named plaintiffs is sought as soon as a substantial challenge to certification is made, the district judge is justified in denying it. Such a rule might involve constant interruptions of the proceeding—procedural hiccups—as nervous class action counsel tried to add new class representatives every time the defendants raised an objection to certification. But it was obvious from the outset that these named plaintiffs faced a serious chal- lenge to their status as class representatives. And with the entire class in one location (a single plant in Indiana), class counsel had ample opportunity to sift through potential named plaintiffs before deciding on Randall and Pepmeier. Intervention shouldn’t be allowed just to give class action lawyers multiple bites at the certification apple, when they have chosen, as should have been obvious from the start, patently inappropriate candidates to be the class representatives.

With the exception of the substitution question, this case provides a possible road map for the Supreme Court's decision in Wal-Mart v. Dukes. Wal-Mart raised the same adequacy issues in its brief, and the same Rule 23(b)(2) arguments. Size of the class aside, the facts of the case are remarkably similar to the Dukes class. Whether the Supreme Court will follow that road map, of course, remains to be seen.

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Yesterday was the long-anticipated oral argument in Wal-Mart v. Dukes.  I've attached a copy here.  Overall, the Justices were clearly prepared for the argument, although they--like almost everyone else--had trouble keeping all of the facts straight.  A few highlights:

• Justices Ginsburg, Kagan, and Sotomayor took an early lead in questioning Ted Boutrous (who argued for Wal-Mart).  
• Boutrous was clearly having a good day.  He had command of almost all of the facts, and was able to subtly correct various Justices at different points when they got lost in the weeds.
• Justices Kennedy and Scalia each had problems with the coherence of plaintiffs' underlying theory.  As Justice Kennedy put it: "your complaint faces in two directions. Number one, you said this is a culture where Arkansas knows, the headquarters knows, everything that's going on. Then in the next breath, you say, well, now these supervisors have too much discretion. It seems to me there's an inconsistency there"
• Awarding "back pay" under Rule 23(b)(2) seemed to cause most Justices heartburn.  Justice Ginsburg called it "a very serious problem in this case."  
• Several Justices, including Sotomayor and Scalia, had trouble accepting the legitimacy of the proposed statistical proof.

So where does that leave the case?  The "more question" rule doesn't provide much guidance in this case.  But it does appear that the Justices were wrestling with the questions of how to prove commonality and whether 23(b)(2) certification is appropriate.  If I had to predict, I'd say that Wal-Mart's probably in better shape than the plaintiffs at this point.  Of course, we'll find out in June.

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If you'll forgive the second piece of self-promotion in a week: the Washington Legal Foundation (which keeps the always-interesting Legal Pulse blog) has just published a Legal Opinion Letter evaluating several of the arguments in favor of overturning the 9th Circuit's Dukes v. Wal-Mart decision, written by yours truly.  

I'll be participating in a briefing for the WLF on this issue in a few weeks (specific details when I get them), and another one a few days later for the American Constitution Society.   

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Commonality is rarely the subject of much discussion in class certification. The plaintiff often treats it as a perfunctory hurdle, subsumed into the more difficult questions of predominance (under Rule 23(b)(3)) or cohesiveness (under Rule 23(b)(2)).  But, much like numerosity, commonality is a requirement that may reward careful scrutiny when a defendant opposes class certification.

In Gaston v. Exelon Corp., 247 F.R.D. 75 (E.D. Pa. 2007), a group of African-American employees sued their employer for engaging in various policies (including its promotion and compensation decisions) that they claimed violated Title VII. They sought to represent a class of employees

who have been or may be subjected to Exelon's challenged policies and practices that deny Black exempt employees equal opportunity …

Exelon filed a motion to strike class allegations, which the court granted in part, ruling that no 23(b)(2) class was possible. When the plaintiffs later moved to certify a Rule 23(b)(3) class, the court actually found a number of problems with plaintiffs' class proposal. The class definition was not ascertainable. The named plaintiffs were subject to unique defenses, making them inadequate and atypical representatives. But the fundamental problem the court found was that the proposed common issues were not common.

In fact, the court took a Goldilocks-like approach to commonality (that is, if Goldilocks hadn't liked the baby bear's stuff either). It found that the proposed common issues were either too broad, too narrow or just plain irrelevant. What do I mean by too broad? As the court put it:

[P]laintiffs' first proposed question is “whether PECO's performance evaluation policy or practices negatively impact Class members.” Id. Were a question of this sort suitable to demonstrate commonality, that requirement would become a puff of smoke. Plaintiffs could simply propose the ques- tion “has employer discriminated against class mem- bers” and always meet the commonality requirement. Obviously, something more is necessary.

As for too narrow:

Other supposedly common questions that plaintiffs identify apply only to a small fraction of the proposed class. The question “whether Class members are less likely to be promoted into intermediate- or high-level salary grades than are otherwise-similar White employees,” for example, only applies to class members who were eligible for a promotion into those grades.

And finally, the court found that the remaining common questions had no bearing on the case itself.

Other questions, such as “whether Class members are less likely to be in high-level salary grades,” are simply irrelevant to a Title VII suit. As we discussed above, it is not sufficient for plaintiffs merely to identify a disparity in the representation of black employees in higher salary grades. They must also identify a pattern or practice of employment decisions during the class period that has resulted in this disparity.

What does this analysis mean for defendants? Despite the traditional view that commonality is a low hurdle for the plaintiff to clear, it is still worth challenging when the only common questions have nothing to do with the heart of the case.

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One of the strongest justifications for class actions is that they address large social wrongs that would otherwise go unremedied. But can there be a wrong that is simply too large for a class action to handle it properly? Something truly huge, like apartheid or genocide.

Some plaintiffs' lawyers, like Hausfeld LLP, say no. In fact, the Hausfeld firm has staked its business model on that view.

Unfortunately, in most cases, the answer is probably yes. Some issues, like genocide or other large-scale human-rights violations, may simply be too complex to attack on a classwide basis in an American courtroom.

For example, take the case of Presbyterian Church of Sudan v. Talisman Energy, 226 F.R.D. 456 (S.D.N.Y. 2005). The proposed class definition hints at the scope of the problem into which the plaintiffs sought to insert the Southern District of New York. They asked to represent:

All non-Muslim, African Sudanese inhabitants of blocks 1, 2 or 4 or Unity State … [the “Class Area”] at any time during the period January 1, 1997 to June 15, 2003 [the “Class Period”], who were injured during that period by acts of the Sudanese military or allied militia constituting genocide, extra-judicial killing, enslavement, forced displacement, attacks on civilians constituting war crimes, confiscation and destruction of property, torture or rape.

The plaintiffs alleged that the defendants—Talisman Energy and the state of Sudan—

collaborated in a joint military strategy of ethnic cleansing against the plaintiffs for the purpose of creating a secure buffer zone that facilitated the development and exploitation of oil reserves …

The plaintiffs sought relief under the Alien Tort Claims Act (which allows foreign nationals to bring lawsuits in the US under certain circumstances), and requested certification under both Rule 23(b)(2) and Rule 23(b)(3).

The court held that the 23(b)(2) request, which simply asked for the creation of a "constructive trust," was

an ill-disguised claim for damages. Consequently, the plaintiffs' request is precisely the sort of sham request for injunctive relief that the Second Circuit has stated cannot support a Rule 23(b)(2) certification.

In deciding whether to certify a Rule 23(b)(3) damages class, the court rehearsed a number of different approaches. It noted that the vast majority of ATCA classes had never reached certification, and of the three that had been certified, none were under Rule 23(b)(3). It examined the closest analogous class actions it could find—toxic torts, mass accidents, products-liability cases—and noted that certification of these classes was rare as well. Ultimately, the court held that, while there were “certainly important common issues to be resolved at trial,” causation would likely require an individualized inquiry.

The plaintiffs will have to show with respect to each individual class member that the injuries for which they are claiming damages were actually caused by the Campaign. Given that Talisman intends to show that warfare persisted through much of the Class Period between shifting, protean factions of rival rebel groups based loosely on tribal affiliations, and that such warfare included attacks on villages in the Class Area, proximate causation of each attack will be a hotly contested issue.

ATCA class claims raise a host of complex issues, none of which are easy to resolve at any level. They often involve delicate questions of international relations. They can pose a public relations problem for companies that do not handle the issues properly. And they raise valid and difficult questions of conscience for individual employees. But, addressing these issues, even just by deciding liability for historical injuries, is enormously complex. If the American executive branch—which is in charge of foreign policy—has yet to find an effective solution to these tragic problems, it’s hardly surprising that the courts have not, either.

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While I was on my self-imposed editing hiatus (shameless plug: The Class Action Playbook  comes out in September), the Ninth Circuit handed down its en banc opinion in Dukes v. Wal-Mart. The court worked overtime to tie its opinion to the specific facts and arguments in front of it, which may prevent some generalizing about the opinion. (Not that that has ever stopped legal pundits.)  

First, some background: Dukes is a Title VII sex-discrimination case. The plaintiffs alleged that, as women, they received less money for comparable work, and that they were passed over for promotions within the company. Their complaint sought injunctive relief, “back pay” (technically monetary relief, although some courts have held that, as restitution, it does not fall under Rule 23(b)(3)) and punitive damages. The trial court certified a class under Rule 23(b)(2). Wal-Mart appealed, challenging the trial court’s finding of commonality and its reliance on plaintiffs’ statistical expert. A 3-judge panel upheld the certification. Wal-Mart asked for en banc reconsideration, leading to this opinion.

The Ninth Circuit’s slip opinion is 137 pages, 95 of which constitute the majority opinion. Given the procedural history of the case, as well as the presence of concurrences and an impassioned dissent, the opinion is not a model of clarity. Nonetheless, the trial court reached a few basic conclusions that will likely occupy class-action lawyers.

• First, it reaffirmed the need for a “rigorous analysis” of Rule 23’s requirements, one that may overlap with the merits of a given case.
• Second, it upheld certification of class claims – including for “back pay” – under Rule 23(b)(2).
• Third, it held that a court may rely on a plaintiff’s statistical evidence to find commonality, even if that evidence is contested by the defendant.
• The Ninth Circuit did not rule on whether the proposed trial plan violated Wal-Mart’s due process rights. But it did speak approvingly of the trial in Hilao v. Estate of Marcos – a class action from the 1990s brought by a class of Filipino torture victims that relied heavily on statistical evidence – as one way to bring a class trial.

What does this opinion mean for class-action strategy?

• Plaintiffs are likely to continue to seek certification under Rule 23(b)(2) when possible, which means that defendants should become well-versed in the “cohesiveness” requirement.
• Specific Daubert-based challenges to questionable statistics are more important than ever.
• And defendants (particularly in the Ninth Circuit) would do well to review opinions on how courts have conducted classwide trials in the past.

While I have no inside knowledge on whether Wal-Mart intends to appeal this decision, the fact that it comes from the Ninth Circuit means there is a stronger-than-usual chance that the Supreme Court will grant certiorari to address the issues.

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When faced with a complex factual issue, where it would be difficult to certify under Rule 23(b)(3) (because individual issues of causation or liability clearly predominate over common issues), plaintiffs will sometimes seek injunctive relief under Rule 23(b)(2) instead. From a rhetorical standpoint, seeking injunctive relief under Rule 23(b)(2) makes a powerful argument for certification – an injunction is true group relief; why wouldn’t it be appropriate to certify a class looking for an injunction?

This rhetorical technique has largely worked. A number of plaintiffs’ and defense counsel I’ve spoken with operate under the distinct impression that it is easier to certify a class under Rule 23(b)(2) than it is under Rule 23(b)(3), and that what holds plaintiffs back from seeking more injunctions is the lack of monetary relief on which to base a fee request.

This impression is wrong. To see just how wrong, take the case of Gates v. Rohm & Haas Co., --- F.R.D. ---, 2010 WL 774327 (E.D. Pa. March 5, 2010). Gates is an environmental case, in which the plaintiffs sued Rohm & Haas for polluting the water and air around Ringwood, Illinois with chemicals including vinylidene chloride, a known carcinogen. The plaintiffs sued for violations of CERCLA and state law, and sought damages for medical monitoring and damage to property. The proposed class action – like many environmental class actions – would turn on questions of causation, which can pose a number of thorny individualized issues in toxic torts. So, in addition to seeking damages, the plaintiffs sought an injunction compelling Rohm & Haas to set up a medical monitoring regime.

Rather than arguing that Rule 23(b)(2) did not apply because plaintiffs also sought money damages (a common argument), Rohm & Haas apparently directly challenged whether Rule 23(b)(2) would allow for certification in this case. And the trial court held that it did not:

While 23(b)(2) class actions have no predominance or superiority requirements, it is well established that the class claims must be cohesive. A (b) (2) class may require more cohesiveness than a (b)(3) class because in a (b)(2) action, unnamed members are bound by the action without the opportunity to opt out. The district court has the discretion to deny certification in Rule 23(b)(2) cases in the presence of disparate factual circumstances. The determination of whether a class involves individualized issues is important for two reasons: (1) unnamed members with valid individual claims are bound by the action without the opportunity to withdraw and may be prejudiced by a negative judgment in the class action; and (2) the suit could become unmanageable and little value would be gained in proceeding as a class action if significant individual issues were to arise consistently. At base, the (b)(2) class is distinguished from the (b)(3) class by class cohesiveness. Injuries remedied through (b) (2) actions are really group, as opposed to individual injuries. The members of a(b)(2) class are generally bound together through preexisting or continuing legal relationships or by some significant common treat such as race or gender. Indeed, a court should be more hesitant in accepting a(b)(2) suit which contains significant individual issues than it should under subsection 23(b)(3).

The individual issues that defeat the predominance requirement of Rule 23(b)(3) also defeat the cohesion requirement of Rule 23(b) (2).

(Multiple quotations, citations, and footnotes omitted; emphases added.)

The lesson here is a simple, but powerful one. A plaintiff cannot seek to avoid individualized issues by changing the rule under which she seeks certification. If individualized issues predominate, then the class will not be cohesive enough to certify under Rule 23(b)(2).

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