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Full Opinion
United States Court of Appeals
Fifth Circuit
F I L E D
August 13, 2003
In the
Charles R. Fulbruge III
United States Court of Appeals Clerk
for the Fifth Circuit
_______________
m 02-30540
_______________
IN THE MATTER OF:
MONUMENTAL LIFE INSURANCE COMPANY,
INDUSTRIAL LIFE INSURANCE LITIGATION.
MATTIE BRATCHER, ET AL.,
Plaintiffs,
MATTIE BRATCHER; JOHN BRATCHER;
CAROLINE BROWN,
ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED;
MARY SUE TRUESDALE;
MAXINE CASH,
ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED;
MILDRED BUFORD,
ALSO KNOWN AS MILDRED GAMLIN,
ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED,
Plaintiffs-Appellants,
VERSUS
NATIONAL STANDARD LIFE INSURANCE COMPANY, ET AL.,
Defendants,
MONUMENTAL LIFE INSURANCE COMPANY,
Defendant-Appellee.
*************************
IN THE MATTER OF:
UNITRIN, INC.,
INDUSTRIAL LIFE INSURANCE LITIGATION.
ROSIE LEE COTHRAN, ET AL.,
Plaintiffs,
ELIZABETH WALKER,
Plaintiff-Appellee,
VERSUS
SECURITY INDUSTRIAL INSURANCE COMPANY, ET AL.,
Defendants,
MONUMENTAL LIFE INSURANCE COMPANY,
Defendant-Appellee.
2
*************************
IN THE MATTER OF:
AMERICAN NATIONAL INSURANCE COMPANY,
INDUSTRIAL LIFE INSURANCE LITIGATION.
ROSE MARY ROACH,
ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED,
Plaintiff-Appellant,
VERSUS
AMERICAN NATIONAL INSURANCE COMPANY,
Defendant-Appellee.
3
*************************
IN THE MATTER OF:
WESTERN & SOUTHERN LIFE INSURANCE CO.,
INDUSTRIAL LIFE INSURANCE LITIGATION.
JOSEPH BELL, ETC., ET AL.,
Plaintiffs,
JOSEPH BELL,
INDIVIDUALLY AND ON BEHALF OF OTHERS SIMILARLY SITUATED;
WILLA ELLIS, DOCTOR;
THELMA WALKER OATIS,
ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED;
ALMA HYDE,
Plaintiffs-Appellants,
VERSUS
WESTERN & SOUTHERN LIFE INSURANCE COMPANY,
Defendant-Appellee.
_______________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
MDL Docket No. 1371,
Consolidated with No. 1391 and No. 1395
_________________________
4
Before SMITH, DENNIS, and CLEMENT, face amounts of $2000 or less and require
Circuit Judges. small weekly or monthly premiums. Defen-
dants comprise over 280 companies that issued
JERRY E. SMITH, Circuit Judge: industrial life policies over a fifty- to sixty-five-
year period.3
In what may be the ultimate negative value
class action lawsuit,1 plaintiffs challenge de- Plaintiffs allege two overtly discriminatory
fendantsâ alleged practice of paying lower ben- practices. First, they accuse defendants of
efits and charging higher premiums to blacks in placing blacks in industrial policies offering the
the sale of low-value life insurance. The dis- same benefits as do policies sold to whites, but
trict court denied plaintiffsâ motion to certify at a higher premium (dual rates). Second,
a class pursuant to FED. R. CIV. P. 23(b)(2), defendants allegedly placed blacks in specially-
finding, inter alia, that the majority of class designed substandard industrial policies pro-
members would not benefit from injunctive viding fewer or lower benefits than do com-
relief. Based primarily on Allison v. Citgo parable plans sold to whites (dual plans).
Petroleum Co., 151 F.3d 402 (5th Cir. 1998), These practices are memorialized in the in-
we reverse and remand. surerâs rate books and records, which explic-
itly distinguish dual rate and dual plan policies
I. by race.4 Although, before filing their motion
This is a consolidation of civil rights actions for class certification, plaintiffs challenged the
against three life insurance companies: Monu- insurersâ alleged practice of charging blacks
mental Life Insurance Company (âMonumen- substandard premiums because of non-racial
talâ), American National Insurance Company underwriting factors, such as mental condition,
(âANICOâ), and Western and Southern Insur- occupation, socioeconomic status, educational
ance Company (âWestern and Southernâ). level, living conditions, and personal habits,
Plaintiff policyowners, all of whom are black, plaintiffs no longer complain of such pretextual
allege that, for decades, defendants discrimi-
nated against them in the sale and administra-
tion of low-value life insurance policies, 2
(...continued)
known as industrial life policies,2 that have of the discriminatory policies were remediated.
3
Over the years, defendants have acquired other
1
A ânegative valueâsuit is one in which class insurance companies and thereby assumed blocks
membersâ claims âwould be uneconomical to liti- of in-force insurance policies issued by them.
gate individually.â Phillips Petroleum v. Shutts, Monumental currently administers policies issued
472 U.S. 797, 809 (1985); see also Castano v. by 200 different companies, while Western and
Am. Tobacco Co., 84 F.3d 734, 748 (5th Cir. Southern administers policies issued by approx-
1996). imately 80 companies. ANICO has assumed an in-
determinate number of in-force policies.
2
Defendants defend this practice on the basis
4
that (1) the race-distinct pricing was justified; As an example, a 1962 ANICO rate book
(2) the practice was approved by regulators; (3) the shows that, for a twenty-year-old black, a $500
racially discriminatory policies were no more pro- â20 Pay Lifeâ industrial policy charged a weekly
fitable than were those sold to whites; and (4) some premium of $0.41, while a twenty-year-old white
(continued...) paid only $0.32.
5
underwriting procedures. pursuant to rule 23(b)(2), requesting that class
members be provided notice and opt-out
Defendants state that they issued âhun- rights. The district court denied certification,
dreds, perhaps thousands, of different indus- finding that plaintiffsâ claims for monetary re-
trial life insurance productsâ encompassing a lief predominate over their claims for injunc-
countless variety of underwriting standards. It tive relief, making rule 23(b)(2) certification
is undisputed that all companies that sold dual inappropriate. The court also found that, giv-
rate or dual plan policies have not done so en the large number of companies and policies
since the early 1970âs. Also, as early as 1988, involved, individualized hearings were neces-
some insurers voluntarily adjusted premiums sary to determine damages and whether claims
and/or death benefits to equalize the amount of were barred by the statute of limitations. De-
coverage per premium dollar. Still, plaintiffs fendants sought, and this court granted, inter-
estimate that over 4.5 million of the 5.6 million locutory review pursuant to FED. R. CIV. P.
industrial policies issued by defendants remain 23(f).
in-force; many other policies have been termi-
nated, surrendered, or paid-up without remedi- II.
ation.5 Defendantsâ expert estimates that the Defendants contend that class members
ratio of terminated policies to outstanding pol- cannot be readily identified by way of the class
icies is approximately five to one, meaning that definition. A precise class definition is neces-
slightly more than one million policies remain sary to identify properly âthose entitled to
in-force. relief, those bound by the judgment, and those
entitled to notice.â 5 JAMES W. MOORE ET
Plaintiffs sued for violations of 42 U.S.C. AL., MOOREâS FEDERAL PRACTICE § 23.21[6],
§§ 1981 and 1982, seeking (1) an injunction at 23-62.2 (3d ed. 2003); see DeBremaecker
prohibiting the collection of discriminatory v. Short, 433 F.2d 733, 734 (5th Cir. 1970).
premiums, (2) reformation of policies to equal- Some courts have stated that a precise class
ize benefits, and (3) restitution of past premi- definition is not as critical where certification
um overcharges or benefit underpayments. of a class for injunctive or declaratory relief is
Pursuant to 28 U.S.C. § 1407, the Judicial sought under rule 23(b)(2).6 Where notice and
Panel for Multidistrict Litigation (âMDLâ)
consolidated the actions against Monumental
6
and transferred them to the Eastern District of See Battle v. Commonwealth, 629 F.2d 269,
Louisiana for pretrial proceedings. Later, the 271 n.1 (3d Cir. 1980) (âWhere . . . the class ac-
MDL Panel took the same action with the tion seeks only injunctive or declaratory relief, for
cases against ANICO and Western and South- which the notice provision of Fed. R. Civ. P. 23-
ern. (c)(2) is not mandatory, the district court has even
greater freedom in both the timing and specificity
of its class definition.â); Rice v. City of Philadel-
Plaintiffs moved for certification of a class phia, 66 F.R.D. 17, 19 (E.D. Pa. 1974) (â[T]he
precise definition of the [(b)(2)] class is relatively
unimportant. If relief is granted to the plaintiff
5
Plaintiffs allege that Monumental has not ad- class, the defendants are legally obligated to com-
justed any of its dual rate or dual plan policies. ply, and it is usually unnecessary to define with
ANICO adjusted one of its four discriminatory precision the persons entitled to enforce compliance
âStandard No. 3 plans. (continued...)
6
opt-out rights are requested, however, a pre- Holding plaintiffs to the plain language of
cise class definition becomes just as important the class definition would be overly formalis-
as in the rule 23(b)(3) context. tic. In the first place, the district court, in de-
nying certification, apparently did not consider
Plaintiffs sought to certify a class comprised the pretextual claims as part of the proposed
of â[a]ll African-Americans who own, or class. Though referring to the âmass of poli-
owned at the time of policy termination, an cies involvedâ and the âdiffering underwriting
industrial life insurance policy that was issued practices among some 280 companies,â the
as a substandard plan or at a substandard court stated that in calculating damages, indi-
rate.â Defendants argue that the plain lan- vidualized hearings were necessary to account
guage of that definition does not comport with for the idiosyncracies of each policy. At no
the class plaintiffs seek to certify. As we have point did the court suggest that individualized
noted, before moving for certification plaintiffs hearings were necessary to determine liability,
had included not only blacks who had pur- as would be necessary if pretextual underwrit-
chased dual rate or dual plan policies, but also ing claims were part of the class.
blacks who allegedly were forced into sub-
standard plans, or forced to pay substandard Second, holding plaintiffs to the plain lang-
rates, through the use of non-racial underwrit- uage of their definition would ignore the on-
ing factors. going refinement and give-and-take inherent in
class action litigation, part icularly in the for-
In their motion for certification, plaintiffs mation of a workable class definition. District
narrowed the class, stating that â[t]he pro- courts are permitted to limit or modify class
posed class does not include those who may definitions to provide the necessary precision.7
have been subjected to covert socio-economic If the class is certified on remand, we trust that
forms of racial discrimination.â Plaintiffs spe- the plaintiffs or district court will amend the
cified that âthe term âsubstandardâ applies to definition accordingly.
overt race-distinct dual premiums and plans,
not to policies called substandard because of Defendants also argue that the definition
other factors such as socio-economic under- terms âown, or owned,â âindustrial life insur-
writing.â We agree with defendantsâ observa- ance policy,â âsubstandard plan,â and âsub-
tion that, as written, t he class definition in-
cludes all blacks who paid substandard rates or
7
were issued substandard plans. The definition See, e.g., Robidoux v. Celani, 987 F.2d 931,
makes no distinction between class members 937 (2d Cir. 1993) (âA court is not bound by the
who purchased dual rate or dual plan policies class definition proposed in the complaint and
and those forced into substandard rates or sub- should not dismiss the action simply because the
complaint seeks to define the class too broadly.â);
standard plans through the use of pretextual
Harris v. Gen. Dev. Corp., 127 F.R.D. 655, 659
underwriting practices. In other words, one (N.D. Ill. 1989) (â[I]t is certainly within this
must look to the certification motion for an courtâs discretion to limit or redefine the scope of
adequate description of the proposed class. the class.â); Meyer v. Citizens & S. Natâl Bank,
106 F.R.D. 356, 360 (M.D. Ga. 1985) (âThe
Court has discretion in ruling on a motion to certify
6
(...continued) a class. This discr etion extends to defining the
. . . .â). scope of the class.â) (citations omitted).
7
standard rateâ are ambiguous, further compli- requirements are satisfied, a rule 23(b)(2) class
cating identification of class members. This may be certified if âthe party opposing the
argument, too, is overly formalistic. See For- class has acted or refused to act on grounds
bush, 994 F.2d at 1105-06. generally applicable to the class, thereby mak-
ing appropriate final injunctive relief or corre-
Plaintiffsâ filings in the district court clari- sponding declaratory relief with respect to the
fied any ambiguities by stating that âthe class class as a whole.â FED. R. CIV. P. 23(b)(2).
is limited to industrial policies sold at a sub- Plaintiffs premise rule 23(b)(2) certification on
standard (i.e., higher) rate for African-Ameri- their request for an injunction prohibiting the
cans and a lower rate for Caucasians, or as a further collection of discriminatory premiums.
substandard plan (i.e., a more costly plan) for
African-Americans and a corresponding less A.
expensive plan for Caucasians.â Plaintiffs de- The court observed that âmanyâ proposed
fine industrial life insurance policies as class membersSSthose whose policies have
â(1) policies labeled as âindustrialâ or (2) those lapsed, those whose policies have already been
policies with a face amount of less than voluntarily adjusted by defendants, and those
$2,000.00 and weekly or monthly home pre- whose death benefits already have been
mium collection.â Defendants were provided paidSSwould not benefit from injunctive relief.
adequate notice and discovery by which to ar- The court concluded that âthis is a case in
gue that the narrowed class cannot be certified which individuality overrides any bland group-
pursuant to rule 23(b)(2). think, and money becomes the prime goal . . .
not injunctive relief.â Rule 23(b)(2) certifica-
III. tion is improper, the court held, where the
We review for abuse of discretion the denial classâs request for injunctive relief merely
of class certification. Jenkins v. Raymark In- serves as a bootstrap for a claim of monetary
dus., 782 F.2d 468, 471-72 (5th Cir. 1986). damages.
âImplicit in this deferential standard is a recog-
nition of the essentially factual basis of the cer- In Allison, we carefully explained the state-
tification inquiry and of the district courtâs in- ment in the advisory committee notes that rule
herent power to manage and control pending 23(b)(2) certification âdoes not extend to cas-
litigation.â Allison, 151 F.3d at 408. We re- es in which the appropriate final relief relates
view de novo however, the question whether exclusively or predominantly to money dam-
the district court applied the correct legal stan- ages.â FED. R. CIV. P. 23 advisory committee
dard. Forbush, 994 F.2d at 1104. notes (emphasis added).9 Allison did not hold,
All classes must satisfy the four baseline re-
quirements of rule 23(a): numerosity, com- 8
(...continued)
monality, typicality, and adequacy of represen-
sues,â but did not rely on this basis in denying
tation.8 FED. R. CIV. P. 23(a). Assuming these certification.
9
Allison, 151 F.3d at 411-12 (âThe Advisory
8
The district court noted that âoral argument Committee Notes make no effort to define or ex-
unveiled serious adequacy of representation is- plain the concept. Interpreting the term literally,
(continued...) (continued...)
8
as the district court believed, that monetary re- â[m]onetary remedies are more often related
lief predominates where it is the âprime goalâ directly to the disparate merits of individual
or a mere bootstrap to injunctive relief. In- claims.â Id. (citations omitted). Where the
stead, âdetermining whether one form of relief need to address the merits of individual claims
actually predominates in some quantifiable requires separate hearings, the efficiency
sense is a wasteful and impossible task that gained by class litigation is lost.
should be avoided.â Allison, 151 F.3d at 412
(citing 7A CHARLES A. WRIGHT ET AL., FED- In Allison, therefore, we held, id. at 415,
ERAL PRACTICE AND P ROCEDURE § 1775, at that monetary relief, to be viable in a rule
470 (2d ed. 1986)). In other words, certifica- 23(b)(2) class, must âflow directly from
tion does not hinge on the subjective intentions liability to the class as a whole on the claims
of the class representatives and their counsel in forming the basis of the injunctive or
bringing suit.10 declaratory relief.â Monetary relief must be
incidental, meaning that it is âcapable of
Instead, Allison looked to the nature of the computation by means of objective standards
rule 23(b)(2) device in defining when monetary and not dependent in any significant way on
relief predominates. That ruleâs focus on in- the intangible, subjective differences of each
junctive and declaratory relief presumes a class class memberâs circumstances.â11 Id.
best described as a âhomogenous and cohesive Additional hearings to resolve âthe disparate
group with few conflicting interests among its merits of each individualâs caseâ should be
members.â Id. at 413. Class certification unnecessary. Id.
centers on the defendantsâ alleged unlawful
conduct, not on individual injury. Once mone- Of course, rule 23(b)(2) certification
tary damages enter the picture, however, class requires the defendantsâ conduct to be ongoing
cohesiveness is generally lost, because such that injunctive relief will benefit at least
some class members. In Bolin v. Sears
Roebuck & Co., 231 F.3d 970, 972 (5th Cir.
9
(...continued) 2000), we purported to apply Allison to a pro-
predominant means âcontrolling, dominating, [or] posed rule 23(b)(2) class of one million
prevailing.â But how that translates into a work- consumers who alleged that the defendant had
able formula for comparing different types of rem- employed various illegal practices to coerce
edies is not at all clear.â) (citation omitted). payment of otherwise-discharged pre-
bankruptcy debt. We observed that â[m]ost of
10
But see Molski v. Gleich, 318 F.3d 937, 950 the class consists of individuals who do not
(9th Cir. 2003) (expressly rejecting Allison and in- face further harm from Searâs [sic] actions.â
stead âfocus[ing] on the language of Rule 23(b)(2) Id. at 978. In fact, only one class member who
and the intent of the plaintiffs in bringing the suitâ);
might benefit from injunctive relief was
Robinson v. Metro-North Commuter R.R., 267
F.3d 147, 163-64 (2d Cir. 2001) (stating that rule
23(b)(2) certification is appropriate only where
11
âreasonable plaintiffs would bring the suit to obtain The predomination requirement serves two
the injunctive or declaratory relief soughtâ and âthe basic purposes, namely the interests of class mem-
injunctive or declaratory relief sought would be bers who may wish to pursue monetary claims in-
both reasonably necessary and appropriate were dividually, and interests of judicial economy. Alli-
the plaintiffs to succeed on the meritsâ). son, 151 F.3d at 415.
9
identified. Id.12 certification is inappropriate. This ignores the
discretion given a district court to order notice
Here, by contrast, even defendantsâ expert and opt-out rights when certifying a rule 23-
estimates that one million dual rate or dual (b)(2) class. See FED. R. CIV. P. 23(d)(2).
plan policies remain in-force.13 The exact
number of class members continuing to pay As âfundamental requisites of the
discriminatory premiums is unknown, but we constitutional guarantees of procedural due
are willing to assumeSSwithout contrary evi- process,â Eisen v. Carlisle & Jacquelin, 417
dence from defendantsSSthat the number ex- U.S. 156, 174 (1974), notice and opt-out are
ceeds the de minimis standard set by Bolin. mandatory for damage classes certified under
rule 23(b)(3). Though rule 23 does not
B. explicitly extend these safeguards to rule
To the extent that Bolin misinterprets Alli- 23(b)(2) classes, due process requires the
son by conditioning certification on the provision of notice where a rule 23(b)(2) class
number of class members that will âtruly seeks monetary damages.15
benefitâ from injunctive relief, it reflects a
concern that plaintiffs may attempt to On the other hand, there is no absolute
âshoehorn damages actions into the Rule right of opt-out in a rule 23(b)(2) class, âeven
23(b)(2) framework, depriving class members where monetary relief is sought and made
of notice and opt-out protections.â14 Indeed, available.â Penson, 634 F.2d at 994; Kincade
we suggested in Allison , 151 F.3d at 413, that v. Gen. Tire & Rubber Co., 635 F.2d 501,
monetary relief may predominate âwhen its 605-07 (5th Cir. Jan. 1981). Under our prece-
presence in the litigation suggests that the pro- dent, should the class be certified on remand,
cedural safeguards of notice and opt-out are class members must be provided adequate
necessary.â Defendants seize on this point, ar- notice, and the district court should consider
guing that plaintiffsâ request for notice and the possibility of opt-out rights.16
opt-out is a tacit admission that rule 23(b)(2)
15
Allison, 151 F.3d at 412 n.4 (citing Johnson
12 v. Gen. Motors Corp., 598 F.2d 432, 436-38 (5th
When the class action was filed, the defendant
was suing one of the class members in state court. Cir. 1979)); Penson v. Terminal Transp. Co., 634
Although defendant abandoned the suit, the court F.2d 989, 994 (5th Cir. Unit B Jan. 1981). The
raised the possibility that the controversy had not type of notice afforded to rule 23(b)(2) class mem-
been mooted. Bolin, 231 F.3d at 978 n.46. bers seeking monetary relief will not always be
âequivalent to that required in (b)(3) actions.â
13
As noted, plaintiffsâ expert contends that 4.5 Johnson, 598 F.2d at 438.
million of the 5.6 million industrial life insurance
16
policies issued by defendants remain in-force. See Jefferson v. Ingersoll Intâl, Inc., 195
F.3d 894, 898 (7th Cir. 1999) (contemplating the
14
Bolin, 231 F.3d at 976; see also McManus v. use of opt-out rights for a rule 23(b)(2) class); Eu-
Fleetwood Enters., 320 F.3d 545, 554 (5th Cir. bank v. Billington, 110 F.3d 87, 94 (D.C. Cir.
2003) (â[C[]lass members would potentially re- 1997) (holding that the language of rule 23 is suf-
ceive a poor substitute for individualized money ficiently flexible to afford district courts the
damages, without the corresponding notice and opt- discretion to grant opt-out rights for rule 23(b)(2)
out benefits of Rule 23(b)(3) . . . .â). (continued...)
10
Allisonâs statement that monetary relief iform relief flowing from defendantsâ liability,
may predominate where notice and opt-out are âserves essentially the same functions as the
necessary reflects only the inescapable fact that procedural safeguards and efficiency and man-
such safeguards are most appropriate where ageability standards mandated in (b)(3) class
individual issues diminish class cohesiveness. actions.â Allison, 151 F.3d at 414-15.
Then, conflicts among class members and is- Therefore, to deny certification on the basis
sues of adequate representation are most likely that the damage claims would be better
to surface. Rule 23(b)(3) is the default vehicle brought as a rule 23(b)(3) class serves no
for certification, but only because notice and function other than to elevate form over
opt-out rights are mandatory components. A substance.18 Indeed, interests of judicial
district court is empowered by rule 23(d)(2) to economy are best served by resolving
provide notice and opt-out for any class plaintiffsâ claims for injunctive and monetary
action, so rule 23(b)(2) certification should not relief together.
be denied on the mistaken assumption that a
rule 23(b)(3) class is the only means by which IV.
to protect class members.17 Applying Allisonâs predominance test, the
district court determined that the requested
All of this further demonstrates the futility monetary relief does not flow from liability to
of the district courtâs and dissentâs inquiry as the class as a whole. The court stated that
to whether the âprime goalâ of the class is in- âmany and a variety of hearings would be re-
junctive or monetary relief. The rule 23(b)(2) quired to determined personalized harm to
predominance requirement, by focusing on un- each individual plaintiff because of the mass of
policies involved, differing underwriting prac-
tices among some 280 companies, differing
16 built-in benefits, account dividends, and age at
(...continued)
classes). policy issuance.â
17
One of the dissentâs two reasons for finding
class certification inappropriate concerns our
18
supposed âsuggestionâ that notice and opt-out Our view that the rule 23(b)(2) and (b)(3)
rights are necessary. In Allison, 151 F.3d 414, devices may work in tandem is strengthened by the
however, we explained that â[t]he fact that the roots of subdivision (b)(2), which was added âto
predomination requirement serves to protect the Rule 23 in 1966 primarily to facilitate the bringing
rights of class members . . . does not imply . . . that of class actions in the civil rights area.â 7A
the availability of monetary relief in a (b)(2) class CHARLES A. WRIGHT ET AL., FEDERAL PRACTICE
action depends solely or directly on whether class AND PROCEDURE § 1775, at 470 (2d ed. 1986).
members are entitled to notice or opt-out rights.â Before its adoption, the rules made no explicit
As mentioned, this courtâs precedent requires that reference to class actions involving injunctive or
notice be provided where a rule 23(b)(2) class declaratory relief, and âthere was some uncertainty
seeks damages, see supra note 15, so it is circular whether a class action seeking one of those
for the dissent to argue notice as a basis for remedies was an appropriate device for vindicating
denying certification. Our direction to the district civil rights.â Id. at 470-71. Rule 23(b)(2) was
court to consider the possibility of opt-out rights adopted to facilitate the use of injunctive relief, not
speaks nothing as to whether such rights are to compartmentalize claims for damages under rule
necessary or even desirable. 23(b)(3).
11
A. 151 F.3d at 415, we recognized that, for this
Plaintiffs contend they seek equitable res- reason, backpay generally does not
titution in the form of a constructive trust for predominate over injunctive or declaratory
class members who no longer have in-force relief.
policies. By characterizing this relief as
equitable, plaintiffs hope to demonstrate that It would be mistaken to presume that be-
that that relief is inherently compatible with cause backpaySSa remedy readily calculable on
rule 23(b)(2) certification, thereby avoiding a classwide basisSSis compatible with a rule
Allisonâs monetary predominance inquiry. De- 23(b)(2) class, any other remedy designated as
fendants argue that plaintiffs, who never used equitable may automatically piggyback a claim
the term âconstructive trustâ in the district for injunctive relief. To be sure, equitable
court, are trying to âre-packageâ their monetary remedies are less likely to
straightforward request for damages. predominate over a classâs claim for injunctive
relief, but this has more to do with the uniform
Equitable monetary relief is compatible with character of the relief rather than with its label.
a rule 23(b)(2) class.19 Importantly, this pro- Therefore, rather than decide whether
nouncement has been limited to the context of plaintiffsâ claim for restitution is legal or
title VII backpay, a remedy designated by stat- equitable in nature, we apply Allison and ex-
ute as âequitable.â 42 U.S.C. § 2000e-5(g)(1); amine whether the claim predominates over
Great-West Life & Annuity Ins. Co. v. Knud- the request for injunctive relief.
son, 534 U.S. 204, 218 n.4 (2002). Backpay
is therefore unique in that it is âan integral B.
component of Title VIIâs âmake wholeâ This is not a case in which class members
remedial scheme.â Allison, 151 F.3d at 415; are entitled to a one-size-fits-all refund;
see also Johnson v. Ga. Highway Express, assuming liability is established, individual
Inc., 417 F.2d 1122, 1125 (5th Cir. 1969). damages will depend on the idiosyncracies of
Not coincidentally, as compared to compen- the particular dual rate or dual plan policy.
satory damages, âcalculation of back pay gen- For example, the age at which a class member
erally involves less complicated factual de- purchased a dual rate policy will have an im-
terminations and fewer individual issues.â pact on how long the insured paid premiums
Coleman v. Gen. Motors Acceptance Corp., and consequently on the amount of damages.
296 F.3d 443, 449 (6th Cir. 2002). In Allison, Some policies contain built-in benefits
covering occurrences outside of death, such as
19
loss of limb; others pay periodic dividends. As
See Allison, 151 F.3d at 415-16 (âIf the in- we have observed, som e defendants,
stant case involved only claims for equitable mon- beginning in 1988, voluntarily adjusted
etary relief, Pettway [v. Am. Cast. Iron Pipe Co.,
premiums and benefits for some policies sold
494 F.2d 211, 257 (5th Cir. 1974)] would control.
Pettway, however, did not address the availability
on a race-distinct basis.
in (b)(2) class actions of other forms of monetary
relief, such as compensatory and punitive damages Plaintiffs propose using standardized
. . . .â); Pettway, 494 F.2d at 257 (âAll that need formulas or restitution grids to calculate
be determined is that conduct of the party opposing individual class membersâ damages.
the class is such as makes such equitable relief Defendants counter that âthousandsâ of grids
appropriate.â).
12
must be constructed to account for the myriad restitution grids, though based on objective
of policy variations. That may be so, but the data, involves the sort of complex data manip-
monetary predominance test does not contain ulations forbidden by Allison, we read Allison
a sweat-of-the-brow exception. Rather, we to the contrary. The policy variables are iden-
are guided by its command that damage tifiable on a classwide basis and, when sorted,
calculation âshould neither introduce new and are capable of determining damages for indi-
substantial legal or factual issues, nor entail vidual policyowners; none of these variables is
complex individualized determinations.â unique to particular plaintiffs.21 The pre-
Allison, 151 F.3d at 415. valence of variables common to the class
makes damage computation âvirtually a me-
In the list of policy variables cited by de- chanical task.â Alabama v. Blue Bird Body
fendants and the district court, none requires Co., 573 F.2d 309, 326-27 (5th Cir. 1978)
the gathering of subjective evidence.20 This is (quoting Windham v. Am. Brands, Inc., 565
not, for example, like Allison, a title VII case F.2d 59, 68 (4th Cir. 1977)).22
in which class membersâ claims for
compensatory and punitive damages
necessarily âimplicate[] the subjective 21
In this sense, the instant case is unlike OâSul-
differences of each plaintiffâs circumstances.â livan v. Countrywide Home Loans, Inc., 319 F.3d
Id. at 417. Rather, assuming that unlawful 732, 744-45 (5th Cir. 2003), in which we found
discrimination is found, class members monetary damages predominant in a proposed rule
automatically will be entitled to the difference 23(b)(3) class alleging violations of Texasâs
between what a black and a white paid for the statute prohibiting the unauthorized practice of
same policy. Not coincidentally, such law. Non-lawyers were alleged to have used âlegal
skill or knowledgeâ in the preparation of mortgage
damages flow from liability in much the same
closing documents. Whether certain practices by
manner that an award of backpay results from
the non-lawyers violated the statute was
a finding of employment discrimination. determinable on a classwide basis; we explained,
Pettway, 494 F.2d at 256-58. however, that monetary damages predominated,
because the extent of these practices varied by
We are well aware that, as Allison qualifies, transaction, and plaintiffs were entitled to a refund
151 F.3d at 415, the calculation of monetary only for those practices that violated the statute.
damages should not âentail complex indi- Therefore, each transaction had to be dissected to
vidualized determinations.â Although it is ar- determine the extent of liability and damages.
guable that the construction of thousands of
22
One is left wondering in what circumstances
(if any) the dissent would permit monetary
damages in a rule 23(b)(2) class. Remarkably, the
20
Had plaintiffs not limited their proposed class dissent makes no attempt to explain its view that
to dual rate and dual plan policies, individual hear- insurance policy factors such as premium rate,
ings would be necessary to determine whether pre- issue age, and benefits paid are based on
textual underwriting practices were used to force âintangible, subjective differences.â Allison, 151
the respective class members into substandard F.3d at 415. Instead, Allisonâs statement that
plans. In that instance, we agree with the district damages be âcapable of computation by means of
court that the large number of defendants and un- objective standardsâ is ideal for refund-type cases
derwriting practices would be relevant to finding such as this, in which damages are calculable using
the predominance of monetary damages. (continued...)
13
Finally, defendantsâ records contain the in- F.2d 731, 733 (5th Cir. 1983). It commences
formation necessary to determine disparities when the plaintiff either has actual knowledge
between, on the one hand, dual rate and dual of the violation or has knowledge of facts that,
plan policies, and on the other hand, plans sold in the exercise of due diligence, would have
to whites. Damage calculations do not require led to actual knowledge.23 State law may
the manipulation of data kept outside further toll the running of limitations. Gartrell
defendantsâ normal course of business. v. Gaylor, 981 F.2d 254, 257 (5th Cir. 1993).
Defendantsâ complaints to the contrary are
belied by the fact that, since 1988, many Doubtless most class members, the majority
policies have been adjusted to account for of whom are poor and uneducated, remain
racial disparity. unaware of defendantsâ discriminatory
practices. Of the thirteen representative
V. plaintiffs, defendants point to only one, Jo Ella
As noted, defendants have not sold dual Brown, whose claim may have expired
plan or dual rate policies since the 1970âs; because of actual knowledge of defendantsâ
some class members purchased their policies practices.
as far back as the 1940âs. The district court
denied certification also on the basis that indi- To hold that each class member must be de-
vidualized hearings are necessary to determine posed as to precisely when, if at all, he learned
expiration of the statute of limitations for par- of defendantsâ practices would be tantamount
ticular sets of policies. The predominance of to adopting a per se rule that civil rights cases
individual issues necessary to decide an affirm- involving deception or concealment cannot be
ative defense may preclude class certification. certified outside a two- or three-year period.24
Castano, 84 F.3d at 744. Limitations is an af- Waste Mgmt. Holdings, Inc., 208 F.3d 288,
firmative defense. FED. R. CIV. P. 8(c);
2 JAMES W. MOORE, MOOREâS FEDERAL
PRACTICE § 8.07[1], at 8-34 (3d ed. 2003). 23
E.g., Harris v. Hegmann, 198 F.3d 153, 156-
57 (5th Cir. 1999); Jensen v. Snellings, 841 F.2d
Although, under §§ 1981 and 1982, state 600, 606 (5th Cir. 1988).
law governs the substantive limitations period,
24
federal law determines when the period The district courtâs reliance on Barnes v. Am.
accrues. Perez v. Laredo Junior Coll., 706 Tobacco Co., 161 F.3d 127 (3d Cir. 1998), is mis-
placed. The proposed class, all smokers before age
nineteen, brought medical monitoring claims
against defendant tobacco companies. The court,
22
(...continued) id. at 149, determined that individual issues existed
factors developed and maintained in the course of as to the accrual of the statute of limitations, which
defendantsâ business. Id. The dissent evidently required a determination for each plaintiff as to
would limit damages in rule 23(b)(2) classes to when âhe began smoking and how much he has
instances in which there is no variance among the smoked since then.â By definition, the limitations
âspecific characteristics of each policy and period had commenced for each and every class
policyholder,â a standard that necessarily would member. Here, accrual of the statute of limitations
require that each class membersâ damages be is premised on defendantsâ common practice of
identical. It is safe to say that the dissentâs novel concealment, so a presumption of unawareness by
approach is unsupported by caselaw. the plaintiff class is warranted.
14
296 (1st Cir. 2000). Such a result would fore- The requirement of âwidespread publicity,â
close use of the class action device for a broad McGovern, 621 F.2d at 154, suggests,
subset of claims, a result inconsistent with the however, that the appropriate frame of
efficiency aims of rule 23. Though individual reference is the national media market, at least
class members whose claims are shown to fall for issues of national importance. Several
outside the relevant statute of limitations are publications listed by defendants, including the
barred from recovery, a rebuttable Washington Post, the Wall Street Journal, and
presumption that the class lacks knowledge of USA Today, are available throughout the Unit-
defendantsâ concealment is warranted at the ed States, and although many other
class certification stage. publications are local newspapers, that fact is
entirely consistent with national treatment of
Instead, defendants rely on a theory of con- the issue. Neither the district court nor
structive notice, arguing that widespread me- defendants give good reason for
dia reporting of the issue over the last several geographically splicing constructive notice.
decades should have âexcite[d] the inquiry of We therefore have no difficulty concluding
a reasonable person.â Conmar Corp. v. Mistui that whether plaintiffs were provided
& Co. (U.S.A.), Inc., 858 F.2d 499, 504 (9th constructive notice is an issue that can be
Cir. 1998). Where events receive âwidespread decided on a classwide basis.
publicity, plaintiffs may be charged with
knowledge of their occurrence.â United Klans The order denying class certification is
of Am. v. McGovern, 621 F.2d 152, 154 (5th REVERSED, and this matter is REMANDED
Cir. 1980); In re Beef Antitrust Indus. Litig., for further proceedings consistent with this
600 F.2d 1148, 1170 (5th Cir. 1979). The dis- opinion. We express no view on the district
trict court believed constructive notice to be courtâs ultimate decision whether to certify in
an individual issue, or at least a regional one, light of todayâs opinion, nor do we opine on
stating that âwhether a plaintiff in Michigan, as the ultimate merits of the substantive claims.
compared to a plaintiff in Louisiana, had con-
structive notice, is a fact issue which needs to ENDRECORD
be determined individually and not on a class- ENDRECORD
wide basis.â
Whether the media reports were sufficiently
publicized so as to provide constructive notice
is an issue reserved for the merits. Our
analysis is limited to whether this issue is
determinable on a classwide basis. Had
defendants provided evidenceSSor even
allegedSSthat media treatment of this issue
was more prevalent in some regions of the
country than in others, the district courtâs
observation that individualized hearings are
required to determine the geographic reach of
constructive notice might be sustainable.
15
CLEMENT, Circuit Judge, dissenting:
Based on Allison v. Citgo Petroleum Co., 151 F.3d 402 (5th Cir. 1998), and McManus v.
Fleetwood Enters., 320 F.3d 545 (5th Cir. 2003), the district court properly denied class certification
to Plaintiffs.
Plaintiffs seek class certification under Rule 23(b)(2), which permits cases meeting the
requirements of Rule 23(a) to be certified as class actions if âthe party opposing the class has acted
or refused to act on grounds generally applicable to the class, thereby making appropriate final
injunctive relief or corresponding declaratory relief with respect to the class as a whole.â FED. R. CIV.
P. 23(b)(2). Unlike Rule 23(b)(1) or (b)(3), Rule 23(b)(2) âwas intended to focus on cases where
broad, class-wide injunctive or declaratory relief is necessary.â Allison, 151 F.3d at 412.
Rule 23(b)(2) is silent as to whether monetary remedies may be sought in conjunction with
injunctive or declaratory relief, but the Advisory Committee Notes on Rule 23 state that class
certification under (b)(2) âdoes not extend to cases in which the appropriate final relief relates
exclusively or predominantly to money damages.â Id. at 411. Based on this language, the Fifth Circuit
âneither allow[s] certification without regard to the monetary remedies being sought, nor restrict[s]
certification to classes seeking exclusively injunctive or declaratory relief.â Id. The key question is
whether âthe predominant relief sought is injunctive or declaratory.â Id. at 411-412; Parker v. Time
Warner Entm't Co., L.P., 331 F.3d 13, 15 (2d Cir. 2003). The corresponding question is whether the
monetary relief is incidental to the requested injunctive or declaratory relief.25 Allison, 151 F.3d at
415. If injunctive or declaratory relief does not predominate (or if monetary relief is not incidental),
25
Incidental damages are defined as those âthat flow directly from liability to the class as a whole on the
claims forming the basis of the injunctive or declaratory relief.âId.
16
class certification under Rule 23(b)(2) is inappropriate.26 Id.
There are two circumstances in which Rule 23(b)(2) class certification is inappropriate. First, Rule
23(b)(2) does not provide for procedural safeguards like notice and opt-out rights, primarily because
the class is presumed to be âhomogenous and cohesiveâ due to âthe group nature of the harm alleged
and the broad character of the relief sought.â Id. at 413 (emphasis added). Therefore, if notice and/or
opt-out rights seem to be necessary, then certification under Rule 23(b)(2) may be inappropriate. Id.
(â[M]onetary relief âpredominatesâ under Rule 23(b)(2) when its presence in the litigation suggests
that the procedural safeguards of notice and opt-out are necessary.â).
Second, Rule 23(b)(2) only permits monetary relief in the form of âuniform group remedies.â Id.
at 414; McManus, 320 F.3d at 554. Uniform group remedies are consistent with Rule 23(b)(2) for
two reasons: (1) they are âcapable of computation by means of objective standards,â thus avoiding
the need for âcomplex individualized determinationsâ and procedural safeguards like notice and opt-
out rights; and (2) the group nature of the remedy ensures that the class remains âhomogenous and
cohesive.â27 Allison, 151 F.3d at 413, 415 (noting that âas claims for individually based money
damages begin to predominate, the presumption of cohesiveness decreasesâ). Therefore, Rule
23(b)(2) class certification is inappropriate where the monetary relief requires âa specific or
26
Equitable monetary relief, such as back pay, is not subject to the Allison predomination test. Allison, 151
F.3d at 415-16 (âIf the instant case involved only claims for equitable monetary relief, [Pettway v. American
Cast Iron Pipe Co., 494 F.2d 211 (5th Cir. 1974)] would control. Pettway, however, did not address the
availability in (b)(2) class actions of other forms of monetary relief, such as compensatory and punitive
damages, nor did it have any occasion to do so.â).
27
Footnote 22 of the majority opinion misrepresents the meaning of the term âuniform group remediesâ.
In a Rule 23(b)(2) class action, each class member does not need to receive the exact same amount of monetary
relief. Allison, 151 F.3d at 415. However, the monetary relief awarded must be based on the âgroup nature of
the harm allegedâ rather than the individual harm suffered by each class member. Id. at 413, 415.
17
time-consuming inquiry into the varying circumstances and merits of each class memberâs individual
case.â Id.
Under the test articulated in Allison, it is clear that Rule 23(b)(2) class certification is inappropriate
in this case. First, the majority opinion suggests that notice and opt-out rights are necessary: âUnder
our precedent, should the class be certified on remand, class members must be provided adequate
notice, and the district court should consider the possibility of opt-out rights.â
Second, a uniform group remedy is not possible in this case because Plaintiffs seek individualized
remedies based on the specific characteristics of each policy and policyholder.28 Plaintiffs concede that
the âamount of the awards varyâ based on âfactors including the premium rates charged to African-
Americans and Caucasians, the issue ages for each policy, and the benefits provided.â Monetary relief
in a Rule 23(b)(2) class action should not be âdependent in any significant way on the intangible,
subjective differences of each class memberâs circumstances.â Allison, 151 F.3d at 415; Bolin v.
Sears, Roebuck & Co., 231 F.3d 970, 975 n.22 (5th Cir. 2000) (stati ng that Rule 23(b)(2) was
created to address âgroup, as opposed to individual[,] injuriesâ). Therefore, Rule 23(b)(2) class
certification is inappropriate here.
Review of the record provides further evidence that Rule 23(b)(2) class certification is
inappropriate. Plaintiffs seek: (1) an injunction prohibiting the collection of discriminatory premiums;
(2) reformation of existing policies to equalize benefits; and (3) restitution of past premium
overcharges or benefit overpayments. The parties appear to agree that: (1) the basis of Plaintiffsâ suit
is the issuance of hundreds of different indust rial life insurance policies by several hundred
28
Part IIIB of the majority opinion concedes that the individual issues in this case have diminished the
cohesiveness of the class to the point where notice and opt-out rights are necessary.
18
Defendants over a period of 50 to 65 years; (2) Defendants ceased issuing such policies in the mid-
1970s (or, at the latest, the early 1980s); (3) many, if not most, of the industrial life insurance policies
are no longer in effect; and (4) a large number of the remaining policies have been modified to some
extent by Plaintiffs or Defendants. In this light, the first and second remedies sought by Plaintiffs
would seem to be of little consequence to many, if no t most, Plaintiffs because the injunction and
reformation would only affect those Plaintiffs who still hold industrial life insurance policies that have
remained largely unaltered for over 20 years (and up to 75 years). For Plaintiffs who do not fit into
this category, the only relief would be monetary in nature: the restitution of past premium
overcharges or benefit overpayments.
In sum, the factual basis of Plaintiffsâ suit indicates that injunctive or declaratory relief does not
predominate and that the monetary relief is not incidental. McManus, 320 F.3d at 553-54 (concluding
that the factual basis of plaintiffsâ suit was âmarkedly different from the paradigm Rule 23(b)(2) class
action,â and thus class certification under Rule 23(b)(2) was inappropriate); James v. City of Dallas,
254 F.3d 551, 572 (5th Cir. 2001) (analyzing the factual basis of plaintiffsâ suit and concluding that
class certification was appropriate). As this Court stated in McManus, permitting this case to be
certified under Rule 23(b)(2)
would undo the careful interplay between Rules 23(b)(2) and (b)(3) [because] the class members
would potentially receive a poor substitute for individualized money damages, without the
corresponding notice and opt-out benefits of Rule 23(b)(3)[,] and defendants would potentially
be forced to pay what is effectively money damages, without the benefit of requiring plaintiffs to
meet the rigorous Rule 23(b)(3) requirements.
320 F.3d at 554. This Court should not allow plaintiffs âto shoehorn damages actions into the Rule
19
23(b)(2) frameworkâ and thus blur the distinctions between the different types of class actions.29
Bolin, 231 F.3d at 976. Therefore, I respectfully dissent.
29
Part IIIB of the majority opinion indicates that: (1) it is âfutileâ to inquire whether injunctive/declaratory
or monetary relief predominates in a class action, and (2) âthe [R]ule 23(b)(2) and (b)(3) devices may work
in tandem,â even when the plaintiffs have only sought certification under Rule 23(b)(2). In effect, the majority
opinion suggests that courts are free to certify class actions as they wish, without regard to the character of the
class action or the strictures of Rule 23. Such avoidance of the rules governing class certification contravenes
both the intent of Rule 23 and the caselaw of this Court. Allison, 151 F.3d at 415 n.9 (â[O]ur cases have
adopted the position taken by the Rule 23 advisory committee that monetary relief may not be sought in a (b)(2)
class action if it predominates over the requested injunctive or declaratory relief.â); McManus, 320 F.3d at 554.
20
21