ERISA CLASS A - Morgan Lewis

© Morgan, Lewis & Bockius LLP

ERISA CLASS ACTIONS

Brian T. Ortelere MORGAN, LEWIS & BOCKIUS LLP

1701 Market Street Philadelphia, PA 19103-2921

(215) 963-5150 [email protected]

Kimberly J. Gost

MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street

Philadelphia, PA 19103-2921 (215) 963-5267

[email protected]

© Morgan, Lewis & Bockius LLP 2

I. Introduction/Rule 23(a)

A. Threshold considerations to certification

1. At the outset, the class representative shoulders the burden of proving that the putative class satisfies the requirements of Rule 23. Georgine v. Amchem Prods., Inc., 83 F.3d 610, 624 (3d Cir. 1996), aff’d, 521 U.S. 591 (1997). See also Hudson v. Delta Air Lines, Inc., 90 F.3d 451, 456 (11th Cir. 1996) (same), cert. denied, 519 U.S. 1149 (1997); Groover v. Michelin N. Am., Inc., 187 F.R.D. 662, 664 (M.D. Ala. 1999) (“The party seeking to maintain the class action bears the burden of demonstrating that all prerequisites to class certification have been satisfied.”).

(a) At least for one court, the Plaintiff “is not required to make an extensive evidentiary showing.” LaFlamme v. Carpenters Local No. 730 Pension Plan, 212 F.R.D. 448, 452 (N.D.N.Y. 2003).

(b) “The purpose of this inquiry, according to the United States Supreme Court, is to ensure that a class action is an economical means of addressing the legal claims and that the legal claims of both representatives and class members will be fairly resolved through the process.” Crosby v. Bohwater Inc. Retirement Plan for Salaried Employees, 212 F.R.D. 350, 355 (W.D. Mich. 2002).

2. Amendments to Rule 23, effective December 1, 2003, afford the district court considerable discretion regarding the timing of class certification. See infra at 55.

B. Burdens of proof

1. First, the representative must prove all of the requirements of Rule 23(a) – numerosity, commonality, typicality, and adequacy of representation. Brengettsy v. LTV Steel Republic Hourly Pension Plan, No. 98-5742, 1999 WL 965682, at *2 (N.D. Ill. Oct. 15, 1999) (“The party seeking certification has the burden of establishing that each of the requirements has been satisfied.”).

2. Second, after the elements of Rule 23(a) are satisfied, the putative class representative must then prove that the suit fits into one of the categories enumerated in Rule 23(b). Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614 (1997) (“In addition to satisfying Rule 23(a)’s prerequisites, parties seeking class certification must show that the action is maintainable under Rule 23(b)(1), (2) or (3).”); Rodger v. Electronic Data Sys. Corp., 160 F.R.D. 532, 535 (E.D.N.C. 1995) (“These prerequisites are mandatory and the failure to establish just one bars class certification.”). In fact, “[t]he class action device was designed as ‘an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.’” General Tel. Co. of Southwest v.


Falcon, 457 U.S. 147, 155 (1982) (quoting Califano v. Yamasaki, 442 U.S. 682, 700-01 (1979)). But see Bunnion v. Consol. Rail Corp., No. 97-4877, 1998 U.S. Dist. LEXIS 7727, at *9 (E.D. Pa. May 14, 1998) (“The Supreme Court has explained that ‘class actions serve an important function in our system of civil justice.’”) (quoting Gulf Oil Co. v. Bernard, 452 U.S. 89, 99 (1981)).

(a) For some courts, the prerequisites to certification are stringent. It is axiomatic that “careful attention to the requirements of Fed. Rule Civ. Proc. 23 remains . . . indispensable.” Falcon, 457 U.S. at 157. See also In re Am. Med. Sys., Inc., 75 F.3d 1069, 1078-79 (6th Cir. 1996) (District court, while having broad discretion over certification, must “conduct a ‘rigorous analysis’ into whether the prerequisites of Rule 23 are met before certifying a class.”). Adhering to the Supreme Court’s mandate that “rigorous” scrutiny be utilized in such instances, Falcon, 457 U.S. at 161, leads to the conclusion, for some, that “[c]lass actions may not be approved lightly.” Glick v. E.F. Hutton & Co., 106 F.R.D. 446, 447 (E.D. Pa. 1985) (quoting Seiler v. E.F. Hutton & Co., 102 F.R.D. 880, 885 (D.N.J. 1984)). See also Sprague v. General Motors Corp., No. 94-1896, 1998 U.S. App. LEXIS 84, at *18 (6th Cir. Jan. 7, 1998) (“[A] district court may not certify any class without ‘rigorous analysis’ of the requirements of Rule 23.”); Krueger v. New York Tel. Co., 163 F.R.D. 433, 438 (S.D.N.Y. 1995) (“Court must be ‘satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied.’”) (quoting Falcon).

(b) Considerations of efficiency should animate the certification analysis. Crown Cork & Seal Co. v. Parker, 462 U.S. 345, 349 (1983) (Court should consider not only technical requirements of Rule 23, but also the “principal purpose of the class action procedure – promotion of efficiency and economy of litigation”); In re Unisys Corp. Retiree Medical Benefits Litig., No. 969, 2003 WL 252106, at * 7 (E.D. Pa. Feb. 4, 2003) (“When the Court looks down the road to determine how this case would be tried, it is obvious that the litigation is unmanageable as a class action and would ultimately splinter into individual issues, which would have to be tried separately.”).

(c) Certification rulings should not create, or impinge, upon substantive rights. As the Supreme Court held, “no reading of the Rule can ignore the [Rules Enabling Act’s] mandate that rules of procedure ‘shall not abridge, enlarge or modify any substantive right.’” Ortiz v. Fibreboard Corp., 119 S. Ct. 2295, 2314 (1999) (quoting 28 U.S.C. § 2072(b)).


(d) Other courts, however, insist that the question whether to certify remains solely within the district court’s discretion. E.g., Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147, 165 (2d Cir. 2001)(“We see no basis for the imposition of a bright-line rule . . . that would plainly nullify the district court’s legislatively granted discretion in making certification determinations.”); Bittinger v. Tecumseh Prod. Co., No. 96-1231, 1997 WL 460744, at *7 (6th Cir. Aug. 14, 1997) (“Within the confines of Rule 23, the district court has broad discretion in deciding whether to certify the class.”). Indeed, “Rule 23 should be given broad rather than restrictive interpretation.” Becher v. Long Island Lighting Co., 164 F.R.D. 144, 148 (E.D.N.Y. 1996). See also Walsh v. Northrop Grumman Corp., 162 F.R.D. 440, 444 (E.D.N.Y 1995) (“It is well settled that Rule 23 is to be construed liberally in order to best serve the ends of justice and to promote judicial economy.”); Wimbush-Bowles v. GTE Serv. Corp. Plan for Employees’ Pensions, No. 98-598-CIV-T-25F, Mem. Op. at 5 (M.D. Fla. Aug. 6, 1999) (Courts “should resolve any doubt in favor of class certification.”); Flanagan v. Allstate Ins. Co.; No. 01 C 1541, 2004 WL 1403817 at * 2 (N.D. Ill. June 22, 2004)(“when using the broad discretion regarding the certification of a class, a court should err in favor of maintaining the class action”).

(e) It is not the district court’s burden to correct the deficiencies of Plaintiff’s certification motion. E.g., Hawkins v. Comparet v. Cassani, 251 F.3d 1230, 1238 (9th Cir. 1999)(noting that the district court “is not to bear the burden of constructing subclasses or otherwise correcting Rule 23(a) problems.”). Similarly, it is not necessarily the responsibility of the district court to cure deficiencies in the class definition. Lundquist v. Security Pacific Automotive Fin. Servs. Corp., 993 F.2d 11, 14-15 (2d Cir. 1993)(district court did not abuse its discretion in refusing to modify class definition, “the district court’s refusal to shoulder what, in the final analysis, is plaintiff’s burden [to craft an appropriate class definition] cannot be regarded in this case as an abuse of discretion”); Abrams v. Interco Inc., 719 F.2d 23, 31 (2d Cir. 1983)(district court not required “to exercise its own ingenuity to devise a manageable class” when the class proposed by plaintiffs was inappropriate).

(f) The sufficiency of a class motion should be decided at the time of the motion, not at some unstated point in the future. Zinser v. Accufix Research Inst., 253 F.3d 1180, 1192 n.8 (9th Cir. 2001).

(g) A vague proffer on the Rule 23 issues may warrant refusal of the class motion. E.g., Craft v. Heckler, No. CV-84-93-M-CLL, 1986


WL 98569, at * 5 (D. Mt. July 28, 1986)(denying certification given vague and conclusory nature of plaintiff’s proof).

C. Relationship to the merits

1. For purposes of considering a class certification motion, the substantive allegations of the complaint are presumed to be true, and it is further assumed that cognizable claims are stated. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 178 (1974); Shields v. Local 705, Int’l Bhd. of Teamsters, No. 96 C 1928, 1996 WL 616548, at *2 (N.D. Ill. Oct. 23, 1996) (same). See also Hudson, 90 F.3d at 457 (“We stress initially that the merits of the plaintiffs’ claims are not before us.”). In other words, courts must not “confus[e] evidence . . . on the merits with the altogether different question of whether there are facts alleged which would justify the case going to trial as a class action.” Fuller v. Fruehauf Trailer Corp., 168 F.R.D. 588, 595 n.11 (E.D. Mich. 1996).

2. Nevertheless, the certification analysis may require some inquiry beyond the pleadings. E.g., Coopers & Lybrand v. Livesay, 437 U.S. 463, 469 n.12 (1978) (“Evaluation of many of the questions entering into determination of class action questions is intimately involved with the merits of the claims.”); Hudson v. Delta Air Lines, Inc., 90 F.3d 451, 457 (11th Cir. 1996) (“[E]vidence relevant to the commonality requirement is often intertwined with the merits. Accordingly, it sometimes is necessary to probe behind the pleadings before coming to rest on the certification question.”) (citations omitted), cert. denied, 519 U.S. 1149 (1997). See also Hanon v. Dataproducts Corp., 976 F.2d 497, 509 (9th Cir. 1992) (District Court is “at liberty to consider evidence which goes to the requirements of Rule 23 even though the evidence may also relate to the underlying merits of the case.”); Daly v. Harris, No. 01-00458, 2002 WL 1889720, at * 3 (D. Haw. Apr. 25, 2002)(Ruling on class motion, court must “consider the nature and range of proof necessary to establish those allegations [in the Complaint], determine as best able the future course of the litigation and then determine if the requirements are met.”); White v. Sundstrand Corp., No. 98-50070, 1999 WL 787455, at *3 (N.D. Ill. Sept. 30, 1999) (“A class determination generally involves both factual and legal issues, and may require a probing behind the pleadings to determine whether the interests of absent parties are fairly encompassed within the named party’s claim.”); Brooks v. Educators Mut. Life Ins. Co., No. 00-CU-3860, 2002 WL 262111, at *3 (E.D. Pa. Feb. 13, 2002) (“where plaintiffs’ claims involve complex questions of fact and law, however, it may be necessary for a court to delve beyond the pleadings to determine whether the requirements for class certification are satisfied.”) (quoting Newton, 259 F.3d at 166-67); Vengurlekar v. Silverline Technologies, Ltd., No. 02 Civ. 7724 SAS, 2003 WL 22801757, at * 2 (S.D.N.Y. Nov. 24, 2003 (“[T]he decision whether to certify a class ‘may involve some considerations related to the factual and legal issues that comprise the


plaintiff’s cause of action.’”). Indeed, the “boundary between the determination of a class and the merits of the claim may not always be easily discernible.” Diehl v. Twin Disc., Inc., No. 94 C 50031, 1995 U.S. Dist. LEXIS 7569, at *3 (N.D. Ill. May 30, 1995).

(a) The Advisory Committee note to the December 1, 2003 amendments to Rule 23 arguably allows some inquiry into the merits prior to certification. See infra at 55-56.

(b) Other courts demand an exacting analysis of the merits. E.g., Szabo v. Bridgeport Machs., Inc., No. 01-8003, 2001 U.S. App. LEXIS 8474, at *8 (7th Cir. May 4, 2001) (“The proposition that a district judge must accept all of the complaint’s allegation when deciding whether to certify a class can not be found in Rule 23 and has nothing to recommend it.”); Johnston v. HBO Film Mgmt., Inc., 265 F.3d 178, 189 (3rd Cir. 2001) (“not only was it appropriate but also necessary, for the district court to examine the factual record underlying plaintiffs’ allegation in making its certification decision”) (citing Szabo). See also Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 172 (3d Cir. 2001) (“To determine whether the claims alleged by the putative class meet the requirements for class certification, we must first examine the underlying cause of action . . . .”).

(c) One district court in the Third Circuit seemingly rejected Johnston but held that a court should “thoroughly examine” plaintiffs’ “factual and legal allegations.” Mulder v. PCS Health Systems, Inc., 216 F.R.D. 307 (D.N.J. 2003).

(d) One court found a middle ground. Flanagan v. Allstate Ins. Co., No. 01 C 1541, 2004 WL 1403817, at * 2 (N.D. Ill. June 22, 2004)(“For purposes of this motion the court accepts the allegations of the Complaint as true, though it may probe the evidence, if necessary, to determine whether class certification is appropriate.”).

(e) Common sense dictates, however, that where a claim would clearly not survive a dispositive motion, certification may not be appropriate. E.g., Clarke v. Ford Motor Co., 228 F.R.D. 631, 637 (D. Wis. 2005) (class decertified where summary judgment granted in favor of defendant on representative plaintiff’s claims); Gillis v. Hoechst Celanese Corp., No. 90-5542, 1992 WL 68333, at *4 (E.D. Pa. Apr. 1, 1992) (“Since neither [class representative] has a claim to bring, neither can represent a class of those who do.”), vacated in part on other grounds, 4 F.3d 1137 (3d Cir. 1993), cert. denied, 511 U.S. 1004 and 511 U.S. 1031 (1994). See also Tootle v. Arinc, Inc., 222 F.R.D. 88, 92 (D. Md. 2004)(“A class cannot be


certified if the named plaintiff has failed to state a claim upon which relief can be granted.”); Sprague, 1998 U.S. App. LEXIS 84, at *18 (“The plaintiffs have no basis for complaining of a refusal to certify a proposed class where the representatives of the class cannot prevail on the merits . . . .”); Mira v. Nuclear Measurements Corp., 107 F.3d 466, 475 (7th Cir. 1997) (“Because Mira’s breach of fiduciary duty and RICO claims are so lacking in merit, we see no need to remand this case based solely on the improper timing of the district court’s class certification ruling.”); Matthews v. Sears Pension Plan, No. 95 C 1988, 1996 WL 199746, at *4 (N.D. Ill. Apr. 23, 1996) (“[A] claim lacking merit disqualifies a named plaintiff as a proper class representative.”).

(f) “While a court should not reach the case’s merits, the court must understand the facts, claims, defenses, and substantive law to make a meaningful certification decision.” Ogden v. Americredit Corp., 2005 WL 56696, at * 2 (N.D. Tex. Jan. 5, 2005).

3. A dispositive motion may precede the certification analysis. “[A] district court is not required to determine whether a complaint could be properly maintained as [a] class action before ruling on the merits of the case.” Armbruster v. K-H Corp., 206 F. Supp. 2d 870, 873 n.1 (E.D. Mich. 2002). Again, recent amendments to Rule 23 allow the district court discretion in determining the timing of certification. See infra at 56.

4. Consistent with the express language of Rule 23(c)(1), a court may later revisit a certification order to modify or vacate the grant of certification. E.g., In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 792 n.14 (3d Cir.), cert. denied, 516 U.S. 824 (1995) (all certification orders are conditional until the entry of judgment); Castano v. Am. Tobacco Co., 84 F.3d 734, 741 (5th Cir. 1996) (“The purpose of conditional certification is to preserve the Court’s power to resolve certification in those cases wherein the magnitude or complexity of the litigation may reveal problems not theretofore apparent.”) (quoting In re Hotel Tel. Charges, 500 F.2d 86, 90 (9th Cir. 1974)); Thomas v. SmithKline Beecham Corp., 201 F.R.D. 386, 390 (E.D. Pa. 2001) (“The court has the discretion and the duty to reassess a class certification decision as the litigation proceeds.”); Walsh, 162 F.R.D. at 448 (“Obviously the decision that the requirements of Rules 23(a)(3) and (4) class action determination are met here is not embedded in stone. This Court’s decision may be modified at a later time.”); In re Unisys Corp. Retiree Medical Benefits Litig., No. 969, 2003 WL 252106, at * 2 (E.D. Pa. Feb. 4, 2003) (“Under Rule 23 the district court is charged with the duty of monitoring its class decisions in light of the evidentiary development of the case.”) (quoting Richardson v. Byrd, 709 F.2d 1016, 1019 (5th Cir. 1983)).


5. “Affirmative defenses should [also] be considered in making class certification decisions.” Dunnigan v. Metropolitan Life Ins. Co., 214 F.R.D. 125, 134-35 (S.D.N.Y. 2003); Broussard v. Meincke Discount Muffler Shops, Inc., 155 F.3d 331, 342 (4th Cir. 1998)(“When the defendant’s affirmative defenses . . . may depend on facts peculiar to each Plaintiff’s case, class certification is erroneous.”).

6. Although Rule 23 neither discusses nor imposes explicit requirements on the definition of a class, a requested class must be sufficiently definite to enable the Court to evaluate the propriety of certification. In re: Monumental Life Ins. Co., No. 02-30540, 2003 U.S. App. LEXIS 16610, at * 6 (5th Cir. Aug. 13, 2003)(“A precise class definition is necessary to identify properly ‘those entitled to relief, those bound by the judgment, and those entitled to notice.”); Dunnigan v. Metropolitan Life Ins. Co., 214 F.R.D. 125, 135 (S.D.N.Y. 2003)(“While ‘Rule 23(a) does not expressly require that a class be definite in order to be certified, a requirement that there be an identifiable class has been implied by the courts.”); Buford v. H&R Block, Inc., 168 F.R.D. 340, 346 (S.D. Ga. 1996) (describing class definition as an “implicit requirement which must be met before a Rule 23 analysis can be undertaken by the district court”), aff’d, 117 F.3d 1433 (11th Cir. 1997). See also Vaszlavik v. Storage Tech. Corp., No. 95-B-2525, 1997 WL 749519, at *9 (D. Colo. Nov. 26, 1997) (Adequate definition “is the most basic consideration of all and the one that unifies and relates the narrower, more technical requirements of class certification.”). The other obvious purpose of the class definition is to enable the court to determine whether an individual is a member of the class. See Forman v. Data Transfer, Inc., 164 F.R.D. 400, 403 (E.D. Pa. 1995). Aside from the specific requirements of Rule 23, the class definition must be sufficiently definite so as not to be overly broad. Mueller v. CBS, Inc., 200 F.R.D. 227, 233 (W.D. Pa. 2001); Holmes v. Pension Plan of Bethlehem Steel Corp., No. 98-1241, 1999 WL 554591, at *3 (E.D. Pa. June 30, 1999). Moreover, courts have refused to certify a class where “determining membership in the class would essentially require a mini-hearing on the merits of each case.” Id. See also Adair v. Johnston, 221 F.R.D. 573, 578 (M.D. Ala. 2004)(“When individualized fact finding and litigation would be necessary in order to identify class members, class certification is inappropriate.”).

(a) A class should not include time-barred claims. Page v. Pension Benefit Guar. Corp., 130 F.R.D. 510, 513 (D.D.C. 1990) (holding that “the scope of the putative class is defined in part by the statute of limitations, which will set the backward cut-off date for membership”); Patterson v. Alaska Airlines, Inc., 756 F. Supp. 476, 478 (W.D. Wash. 1990) (“Plaintiffs cannot expect to participate in a class action suit in any capacity when these claims are time-barred.”).


(b) A class definition should not be “fail-safe,” i.e., the definition should not work to permit plaintiffs to sue again should the defendant prevail on the merits. Flanagan v. Allstate Ins. Co., 2004 WL 2584809, at * 2 (N.D. Ill. Nov. 12, 2004).

7. Rule 23 has been construed to require specific findings by the district court on the requisites to certification. Bradford v. AGCO Corp., 187 F.R.D. 600, 604 (W.D. Mo. 1999).

8. The fact that a class is certified for settlement purposes does not relax the requirements of Rule 23. Amchem, 521 U.S. at 622 (Federal courts . . . lack authority to substitute for Rule 23’s certification criteria a standard never adopted – that if a settlement is ‘fair,’ then certification is proper.”).

D. 23(a)(1) – Numerosity

1. Not surprisingly, given the number of participants typically covered under a benefits plan, numerosity rarely stands as an obstacle to class certification in an ERISA suit. Rule 23(a)(1) states that “[o]ne or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable.” Id.

2. There is no precise formula for determining whether the numerosity requirement of Rule 23(a) is satisfied, and courts, at times, will excuse plaintiffs from proving numerosity with precision. Cf. Gaspar v. Linvatec Corp., 167 F.R.D. 51, 56 (N.D. Ill. 1996) (“The court is not limited to considering merely the number of potential class members, but may make common-sense assumptions that support a finding of numerosity.”). See also Bregettsy, 1999 WL 965682, at *3 (“Plaintiff need not specify the exact number of class members so long as he provides a good faith estimate.”); LaFlamme v. Carpenters Local No. 730 Pension Plan, 212 F.R.D. 448, 452 (N.D.N.Y. 2003)(“Plaintiff need not even precisely quantify the prospective class so long as he reasonably estimates the number therein”). However, “[p]laintiffs’ good faith estimate cannot be a mere speculation.” Burke v. Local 710 Pension Plan, No. 98 C 3723, 2000 U.S. Dist. LEXIS 5875, at *7 (N.D. Ill. Mar. 28, 2000). Indeed, “a plaintiff cannot satisfy the numerosity requirement without showing that some other person beside himself is similarly situated.” Id. at *8.

(a) A court presented with a challenge to numerosity may consider a number of factors:

[C]ourts . . . have considered (1) judicial economy arising from the avoidance of a multiplicity of actions, (2) the geographic dispersion of class members, (3) the financial resources of class


members, (4) the ability of claimants to institute individual lawsuits, (5) the amount of each member’s individual claim and (6) requests for prospective injunctive relief that would affect future class members.

Giullari v. Niagara Falls Mem’l Med. Ctr., No. 96-CV-0271E, 1997 WL 65862, at *2 (W.D.N.Y. Feb. 5, 1997).

3. While the plaintiff need not plead the number of class members with precision, “conclusory allegations that joinder is impracticable and speculation as to class size are not sufficient.” Shields, 1996 WL 616548, at * 3. No single factor is controlling and “[t]he ultimate issue, of course, is whether joinder is impracticable.” Id. Moreover, and not surprisingly, one plaintiff does not a class make. Id. (“[A] plaintiff cannot satisfy the numerosity requirement without showing that some other person besides himself is similarly situated.”).

(a) The defendant’s superior access to information bearing upon numerosity may warrant a conditional finding that the requisite number of class members has been established. E.g., Magliulo v. Metro. Life Ins. Co., 208 F.R.D. 55, 59 (S.D.N.Y. 2002) (denying defendant’s motion to dismiss and allowing plaintiff to conduct discovery as to the number and identity of similarly situated persons where means to identify such persons were in defendant’s possession, and where plaintiff had sufficiently alleged other elements required for class certification); Medicare Beneficiaries’ Defense Fund v. Empire Blue Cross Blue Shield, 938 F. Supp. 1131, 1142 (E.D.N.Y. 1996). Moreover, “where the numerosity question is a close one, a balance should be struck in favor of a finding of numerosity.” Specialty Cabinets & Fixtures, Inc. v Am. Equitable Life Ins. Co., 14 Employee Benefits Cas. (BNA) 1757, 1759 (S.D. Ga. 1991).

(b) A court may refuse to speculate on the numerosity issue. Sanft v. Winnebago Indus., Inc., 216 F.R.D. 453, 459 (N.D. Iowa 2003)(Court refuses to take judicial notice of claimed fact that employees would not join lawsuit because they feared retribution if they joined the suit, to support claim to numerosity. “The court is unaware of any federal appellate decision mandating that the court take judicial notice of such a fact and the court’s own research has not disclosed any authorities requiring such a presumption.”).

(c) “The central issue is the practicality of joining all the interested parties in a single suit.” Flanagan v. Allstate Ins. Co., No. 01 C 1541, 2004 WL 1403817, at * 2 (N.D. Ill. June 22, 2004). Finding of numerosity also warranted where “a class members’ ability to


pursue a claim individually may be curtailed due to the likely imbalance between the costs of litigation and the potential award.” Id. at * 3.

E. 23(a)(2) – Commonality

1. Plaintiffs must first establish a common question of law or fact, perhaps a fiduciary decision applied to all plan participants, a statute or regulation circumscribing conduct related to all participants, a plan document with uniform application, or a representation made to members of the putative class.

(a) Courts have noted that there is substantial room for differing perceptions as to the interrelationship between commonality, typicality, and adequacy of representation under Rule 23(a). See, e.g., Weiss v. York Hosp., 745 F.2d 786, 809 n.36 (3d Cir. 1984), cert. denied, 470 U.S. 1060 (1985). In that regard, the Supreme Court has similarly held that the “commonality and typicality requirements of Rule 23(a) tend to merge” and that these requirements “also tend to merge with the adequacy-of-representation requirement.” Falcon, 457 U.S. at 157 n.13. See also Amchem, 521 U.S. at 626 n.20 (same); Banyai v. Mazur, 205 F.R.D. 160, 163 (S.D.N.Y. 2002) (“Commonality is the underpinning of the class action device in that it permits economical litigation by saving the resources of both the court and the parties.”); Haley v. Medtronic, Inc., 169 F.R.D. 643, 648 (C.D. Cal. 1996)(“Class certification is proper only where the common issues of law or fact are of sufficient importance to the case that the Court is convinced that the most efficient method of determining the rights of the parties is through a class action.”); Krueger, 163 F.R.D. at 438 (Commonality and typicality both serve as “guideposts for determining whether . . . the class claims are so interrelated that the interests of the class members will be firmly and adequately protected.”) (quoting Falcon, 457 U.S. at 157 n.13).

(b) Courts have variously described the commonality analysis:

Where the party opposing the class has engaged in some course of conduct that affects a group of persons and gives rise to a cause of action, one or more of the elements of that cause of action will be common to all of the persons affected.

Rodriguez v. Berrybrook Farms, Inc., 672 F. Supp. 1009, 1015 (W.D. Mich. 1987). See also Gaspar, 167 F.R.D. at 57 (“A common nucleus of operative fact is usually enough to satisfy the


commonality requirement of Rule 23(a)(2).”). In that regard, “[a] common nucleus of operative fact is usually found where the defendant has engaged in some standardized conduct toward the proposed class members.” Burke, 2000 U.S. Dist. LEXIS 5875, at * 9 (N.D. Ill. Mar. 28, 2000). See also LaFlamme v. Carpenters Local No. 730 Pension Plan, 212 F.R.D. 448, 453 (N.D.N.Y. 2003)(finding of commonality where “the fact remains that whether any recovery can be had at all for any putative class member is completely dependent on one ultimate legal issue – whether the freezing rule places defendants in violation of the minimal accrual of standards set forth in ERISA.”). But see Holmes, 1999 WL 554591, at *6 (“Generalized allegations of commonality are not permissible.”).

(c) “Court has described this [commonality] requirement as a low hurdle to surmount . . . .” Flanagan v. Allstate Ins. Co., No. 01 C 1541, 2004 WL 1403817, at * 3 (N.D. Ill. June 22, 2004).

(d) Nevertheless, the Sixth Circuit demands a relatively high showing:

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

Sprague, 1998 U.S. App. LEXIS 84, at *19. See also Kennedy v. United Healthcare of Ohio, Inc., 206 F.R.D. 191, 196 (S.D. Ohio 2002) (“Not every common question satisfies the commonality requirement: at some point of generality and abstraction almost any set of claims exhibits commonality.”); Vengurlekar v. Silverline Technologies, Ltd., No. 02 Civ. 7724 SAS, 2003 WL 22801757, at * 3 (S.D.N.Y. Nov. 24, 2003)(“The critical inquiry is whether the common questions are at the ‘core’ of the cause of action alleged.”).

(e) In any event, “[t]he interests and claims of the various plaintiffs need not be identical.” Forbush v. J.C. Penney Co., Inc. Pension Plan, 17 Employee Benefits Cases (BNA) 1070, 1073 (5th Cir. 1993); Reese v. CNH America LLC, 227 F.R.D. 483, 487 (E.D. Mich. 2005); Wilson v. United Int’l Investigative Servs. 401(k) Sav. Plan, No. 01-CV-6126, 2002 WL 734339 (E.D. Pa. Apr. 23, 2002). In other words, and again, the threshold for a finding of commonality is not particularly high. Id. See also Kennedy, 206 F.R.D.at 196 (“… a single issue common to all members of the class satisfies the [commonality] requirement.”); Becher, 164


F.R.D. at 148 (The standard for meeting the Rule 23(a)(2) prerequisite is qualitative rather than quantitative – that is, there need only be a single issue common to all members of the class.”). See also Brooks, 2002 WL 262111, at *4 (“The fact that this case involves a single claim under ERISA . . . also supports a finding that the commonality prerequisite is satisfied. Unlike a diversity-based class action, where a court must apply varying state laws for class members from different states. Uniform federal law will apply to all class members hereof.”).

(i) While individual questions may not preclude a finding of commonality, they may later require separate hearings to adjudicate the class members’ claims (after resolution of the common claims). E.g., Doe v. Guardian Life Ins. Co. of Am., 145 F.R.D. 466 (N.D. Ill. 1992).

(f) Nevertheless, “[i]t plainly begs the question to contend that commonality is satisfied simply by a ‘common’ question whether each class member is entitled to prevail under the legal theories pleaded in a complaint.” Fuller, 168 F.R.D. at 596. See also Bethlehem Steel, 1999 WL 554591, at *6 (“Commonality will not be found where the alleged common issues can only be resolved by making factual determinations that will be different for each class member.”); Fotta v. Trustees of the United Mine Workers of Am., 319 F.3d 612, 619 (3d Cir. 2003)(“Because both liability and the appropriate remedy must be determined for each Plaintiff, no common issue of law or fact exist.”).

2. Individualized issues surrounding damages owing will rarely preclude a finding of commonality. Medicare Beneficiaries’ Defense Fund, 938 F. Supp. at 1147; Health Plan of the Upper Ohio Valley, Inc. v. DeGarmo, No. 5:93CV7, 1996 WL 780508, at *5 (N.D.W.V. Oct. 28, 1996); Bower v. Bunker Hill Co., 114 F.R.D. 587, 594 (E.D. Wash. 1986). See also White, 1999 WL 787455, at *5 (“That there might be a need for an individual calculation of damages as to particular members of the class does not defeat commonality or typicality, nor does the factual variations as to particular pension benefits.”). But see Bethlehem Steel, 1999 WL 554591, at *7 (award of interest discretionary in nature and, as such, certification of such claims not proper). See also Fotta v. Trustees of United Mine Workers of Am., 319 F.3d 612 (3d Cir. 2003)(same).

3. A common problem arising in ERISA class litigation involves the issue whether disparate representations made regarding benefits, whether oral or written, should preclude a finding of commonality.


(a) There is no uniform rule applicable to all cases. Cases finding commonality despite an arguable lack of uniformity in the representations made to participants include Fruehauf:

Defendant points out that the various named Plaintiffs retired under the terms of different SERPs or SPDs; thus, there is no single document that contains all of the alleged promises upon which Plaintiffs base their claims. The Court finds, however, that these multiple sources do not defeat commonality under Rule 23(a). Rather, “[f]actual identity between the plaintiff’s claims and those of the class he seeks to represent is not necessary.” Common questions are present across varying materials so long as “the information supplied to [Defendant’s retirees] was consistent on key points.”

168 F.R.D. at 588 (citations omitted). See also Nelson v. IPALCO Enterprises, Inc., No. IP02-477CHK, 2003 WL 23101792, at * 5 (S.D. Ind. Sept. 30, 2003)(“In this case, by contrast, at least at this preliminary stage, the ‘total mix’ of the evidence available to the court on the promotion claim demonstrates that the relevant representations were distributed or made available on a class-wide basis.”); Bradford, 187 F.R.D. at 604 (“Defendant claims that individual issues of reliance prohibit certification. Even if this Court were to accept the defendant’s argument, certification is still acceptable due to the similarities previously orated by this Court.”); In re Ikon Office Solutions, Inc., 191 F.R.D. 457, 464 (E.D. Pa. 2000)(“While the decisions as to whether to hold Ikon stock may ultimately be individualized, only one common issue of law or fact must exist to satisfy the commonality requirement of Rule 23. In this case, common questions include whether the defendants acted as fiduciaries, what communications they made to plan participants and beneficiaries, and whether those communications contained material misrepresentations.”).

(b) Disparate factual circumstances may preclude certification. Sprague, 1998 U.S. App. LEXIS 84, at *23 (“Because each plaintiff’s claim depended upon facts and circumstances peculiar to that plaintiff, class-wide relief was not appropriate.”). See also Fisher v. J.P. Morgan Chase & Co., No. 03 Civ. 3252 (SHS), 2005 WL 2063813, at *7 (S.D.N.Y. Aug. 26, 2005) (Certification denied where there may be “highly specific, individualized fact issues relating to whether or not each plaintiff is entitled to the vaguely requested equitable relief”); Hudson, 90 F.3d at 457 (Plaintiffs’ need to show proof of reliance upon misrepresentation precludes


certification. “This sort of decision would necessarily have been highly individualized for each potential retiree.”); Flanagan v. Allstate Ins. Co., No. 01 C 1541, 2004 WL 1403817, at * 6 (N.D. Ill. June 22, 2004)(individualized proof required for fiduciary misrepresentation claims preclude finding of commonality); Gessell v. Commonwealth Edison Co., No. 02-3071, 2003 WL 22006300, at * 5 (C.D. Ill. Aug. 18, 2003)(no finding of commonality where plaintiffs rely solely on oral statements – “The degree to which an employee relied on these statements, as opposed to other factors personal to him, in making his decision would vary significantly from person to person.”); Walther v. Pension Plan for Salaried Employees of Dayton-Walther Corp., 880 F. Supp. 1170, 1178 (S.D. Ohio 1994) (finding commonality requirement not satisfied “[i]n the absence of at least one common written document distributed to all members of the class.”); Devine v. Combustion Eng’g, Inc., 760 F. Supp. 989, 995 (D. Conn. 1991) (Class certification inappropriate in ERISA action where “plaintiffs have failed to show that the same promise was made to every member of the purported class. Under the circumstances, certification of the putative class is inappropriate for failure to satisfy the ‘commonality’ requirement of Rule 23(a)(2).”); Johnston, 265 F.3d at 190 (addressing RICO claims – “it has become well-settled that, as a general rule, an action based substantially on oral rather than written communication is inappropriate for treatment as a class action.”); Renton v. Kaiser Found. Health Plan Inc., No. COO-5370RJB, 2001 WL 1218773, at *3 (W.D. Wash. Sept. 24, 2001) (disparities in disclosures and governing legal obligations preclude certification of nationwide class of HMO members claiming fiduciary breaches stemming from alleged failure to disclose limitations on coverage); Diehl, 1995 U.S. Dist. LEXIS 7569, at *20 (No finding of commonality possible where “the communications occurred at the retirees exit interviews, presumably at least 120 separate oral communications over an eighteen year period.”); Gibbons v. Interbank, 208 F.R.D. 278, 287 (N.D. Cal. 2002)(certification improper where “plaintiff makes no showing as to whether other class members received and/or signed the additional documents referenced above.”); Polich v. Burlington Northern, Inc., 116 F.R.D. 258, 262 (D. Mont. 1987)(no finding of commonality possible where court would need to determine “whether each affected employee was aware of any of the alleged promises” and the “extent each affected employee relied on such representations”); In re Managed Care Litig., 209 F.R.D. 678, 691 (S.D. Fla. 2002)(“Plaintiffs are asking this court to presume that the only relevant information to each Plaintiff’s health care decision was the written, uniform documents. However, the non-uniform oral representations may have had an


impact on each Plaintiff’s decision.”). Cf. Moore v. PaineWebber, Inc., 306 F.3d 1247, 1255 (2d Cir. 2002)(“Only if class members received materially uniform misrepresentations can generalized proof be used to establish any element of the fraud.”).

(c) Although plaintiff’s claim was largely grounded upon alleged omissions, “[t]he court nonetheless would need to evaluate any oral representations made to class members attending these meetings which could vary significantly.” Tootle v. Arinc, Inc., 222 F.R.D. 88, 96 (D. Md. 2004). Indeed, omission claims “should require some showing of causation or detrimental reliance, necessitating individualized proof.” Id. at 97.

(d) Federal securities law and common law fraud principles, sometimes excusing or deferring the need for proof of reliance, are arguably of little utility when considering the certification of ERISA claims. Thomas v. Aris Corp., No. 4:CV-02-1455, 2003 WL 23096038, at * 4 (M.D. Pa. Nov. 17, 2003)(“a plan participant’s detrimental reliance upon the representation or omission of a fiduciary may not be presumed”); Retired Chicago Police Ass’n v. City of Chicago, 7 F.3d 584, 597 n.17 (7th Cir. 1993). See also In re Unisys Corp. Retiree Medical Benefits Litig., No. 969, 2003 WL 252106, at * 5 (E.D. Pa. Feb. 4, 2003) (“Where a presumption of reliance and loss [is] not available … it could be necessary for each plaintiff to prove the essential elements of the cause of action and … class action [status] would be unsuitable.”) (quoting In re Linerboard Antitrust Litig., 305 F.3d 145, 156 (3rd Cir. 2002)); Peachin v. Aetna Life Ins. Co., No. 92 C 2739, 1996 U.S. Dist. LEXIS 558, at *14 (N.D. Ill. Jan. 19, 1996) (“Peachin’s use of securities fraud cases to support the notion that common questions predominate over individual questions of reliance is misplaced.”); In re Ikon, MDL No. 1318, 2002 U.S. Dist. LEXIS 14683, at * 49 (E.D. Pa. Aug. 9, 2002)(“With respect to the claims of misrepresentations or omissions, if fiduciary status was established plaintiffs then would be required to show that any misrepresentations as to the prudence of investing in Ikon stock were ‘material,’ and that plaintiffs detrimentally relied on that misrepresentation in making investment decisions.”).

(e) At least for one court, “while individual issues are, without question, a factor that a court must consider in deciding whether or not to certify a class, they are more appropriately addressed under the stricter 23(b)(3) predominance requirement.” Brooks, 2002 WL 262111, at *4.


4. Subclasses may be used to remedy commonality problems. The Court in In re Unisys Corp. Retiree Medical Benefits Litig., MDL No. 969, 1994 WL 284079 (E.D. Pa. June 23, 1994), aff’d, 57 F.3d 1255 (3d Cir. 1995), cert. denied, 517 U.S. 1103 (1996), confronted with a variety of oral representations made to participants, and the related issues of detrimental reliance, held that certification may not be appropriate. Nevertheless, “[b]ecause some plaintiffs have stronger cases than others based upon their specific inquiries and the information given them personally, the court finds that subclasses, and possibly even individual hearings, will be necessary to adjudicate these claims.” Id. at *27. See also Reese, 227 F.R.D. at 488 (“If the Court ultimately determines that [certain plaintiffs claims rights to health care benefits did not vest], it may create subclasses at that time.”); Feret v. CoreStates Fin. Corp., No. 97-6759, 1998 WL 512933, at *9 (E.D. Pa. Aug. 18, 1998) (“If some employees have stronger cases than others (i.e. because they made specific inquiries and received additional misrepresentations specific to them), the court can always divide the class into additional subclasses.”).

(a) The relatively relaxed approach of Feret and Unisys has been specifically rejected in some courts. Gessell v. Consolidated Edison Co., No. 02-3071, 2003 WL 22006300 (C.D. Ill. Aug. 18, 2003).

5. Bifurcation may be yet another tool for addressing commonality concerns. Thomas, 201 F.R.D. at 393 (“Even where facts unique to each plaintiff may be relevant, a class may still be certified, but later bifurcated.”).

6. After the Ninth Circuit’s ruling in Vizcaino v. Microsoft Corp., 97 F.3d 1187 (9th Cir. 1996), granting certain acknowledged “common law” employees participant status, courts have disagreed on whether such claims merit class certification. Compare Rumpke v. Rumpke Container Serv. Inc., 105 F.R.D. 204 (S.D. Ohio 2001) (refusing certification) with Thomas, 201 F.R.D. 386.

F. 23(a)(3) – Typicality

1. Related to commonality is typicality, an inquiry into whether the claims of the class representatives are typical of the claims or defenses of the class. A finding of typicality will often follow a finding of commonality. Joncek v. Local 714 Int’l Bhd. of Teamsters Health & Welfare Fund, No. 98-4302, 1999 WL 755051, at *4 (N.D. Ill. Sept. 3, 1999) (“Because commonality and typicality are closely related, a finding of one often results in a finding of the other.”). But see Piazza v. Ebsco Indus., Inc., 273 F.3d 1341, 1346 (11th Cir. 2001) (“Traditionally, commonality refers to the group characteristics of the class as a whole, while typicality refers to the individual characteristics of the named plaintiff in relation to the class.”); Bunnion, 1998 U.S. Dist. LEXIS 7727, at *11-12 (“Commonality


concerns the nature of the proposed class while typicality concerns the sufficiency of the named plaintiffs.”); Gessell v. Commonwealth Edison Co., No. 02-3071, 2003 WL 22006300, at * 7 (C.D. Ill. Aug. 18, 2003)(“While the typicality and commonality standards are similar, satisfying the commonality requirement does not guarantee that a party has satisfied the typicality requirement.”).

(a) “Typicality determines whether a sufficient relationship exists between the injury to the named plaintiff and the conduct affecting the class, so that the court may properly attribute a collective nature to the challenged conduct . . . . A necessary consequence of the typicality requirement is that the representative’s interests will be aligned with those of the represented group, and in pursuing his own claims, the named plaintiff will also advance the interest of the class members . . . . The premise of the typicality requirement is simply stated: as goes the claim of the named plaintiff, so go the claims of the class.” Sprague, 1998 U.S. App. LEXIS 84, at *24-25; Holmes, 1999 WL 554591, at *8 (same). See also Gessell v. Commonwealth Edison Co., No. 02-3071, 2003 WL 22006300, at * 7 (C.D. Ill. Aug. 18, 2003)(“Plaintiffs have satisfied the typicality requirement if the named plaintiff who proves his own claim would also prove the claim of the entire class.”); White, 1999 WL 787455, at *3 (“A claim is typical if it arises from the same event or practice or course of conduct that gives rise to the claims of other class members and his or her claims are based on the same legal theory.”); Walsh, 162 F.R.D. at 445 (“In practice, the typicality requirement is said to limit the class claims to those fairly encompassed by or interrelated with the named plaintiffs’ claims.”); Spencer v. Central States, S.E. & S.W. Areas Pension Fund, 778 F. Supp. 985, 990 (N.D. Ill. 1991) (“If defendants’ course of conduct gives rise to the claims of all class members, and defendants have not taken any action unique to the named plaintiffs, then the representatives claims are typical.”); Diehl, 1995 U.S. Dist. LEXIS 7569, at *10-11 (“[T]he representative’s claims must have the same essential characteristics as the claims of the class at large.”). But see Coffin v. Bowater Inc., 228 F.R.D. 397, 409 (D. Me. 2005) (finding representative plaintiffs claims not typical of claims of putative class where ultimate liability for an alleged course of conduct must be resolved based on individualized issues of reliance); Owen v. Regence Bluecross Blueshield of Utah and the Regence Group, No. 2:03-CV-01137PGC, 2005 WL 2057718, at *5 (D. Utah April 19, 2005) (same); Mueller v. CBS, Inc., 200 F.R.D. at 237 (typicality not found given differences in participants’ temporal distance to vesting).


(i) Not surprisingly, “merely pointing to common issues of law is insufficient to meet the typicality requirement when the facts required to prove the claims are markedly different between class members.” Spencer, 778 F. Supp. at 990.

(b) The typicality requirement “arises out of due process concerns that absent plaintiffs have adequate representation before being bound by a judgment.” Western States Wholesale, Inc. v. Synthetic Indus., 206 F.R.D. 271, 277 (C.D. Cal. 2002).

2. Mindful of the relationship between the subsections of Rule 23(a), the prevalence of oral representations can create obstacles to a finding of typicality:

Because the oral representations allegedly were communicated to 27 different groups of Kroger employees, the substance and presentation of which most likely varied from group to group, we can only conclude that plaintiffs’ claims do not “arise from the same event or practice or course of conduct that gave rise to the claims of the other class members.” . . . In such a case where an action is based substantially on oral rather than written communications, as in the instant case, treatment as a class action is generally inappropriate.

Spencer, 778 F. Supp. at 991 (citation omitted). See also Gessell, 2003 WL 22006300, at * 8 (“While ComEd officials might have made similar statements, there is no evidence that there was a ‘standardized’ oral misrepresentation made by ComEd officials. Therefore, Plaintiffs have not satisfied the typicality prerequisite for class certification.”).

3. Nevertheless, “[m]inor conflicts . . . do not make a plaintiff’s claims atypical; it is when the conflict goes to the very subject matter of the litigation that the conflict will defeat the claim of representative status.” Walsh, 162 F.R.D. at 445. See also Forbush, 17 Employee Benefits Cas. (BNA) at 1074 (“It is true that much of the putative class is covered by plans other than the one applicable to Forbush, but Forbush has framed her challenge in terms of Penney’s general practice of overestimating social security benefits. Her claim is therefore typical and thus provides no basis for suspecting that she will not adequately represent the interests of the class.”). Moreover, in some instances, defendants cannot argue that typicality is lacking where their actions gave rise to the typicality challenge. Walsh, 162 F.R.D. at 446 (“The effects of defendants’ own actions do not, in this case, make the members’ ERISA claims atypical.”); LaFata v. Raytheon Co., 207 F.R.D. 35, 42 (E.D. Pa. 2002) (“Factual differences will not render a claim atypical if the claim arises from the


same event or practice or course of conduct that gives rise to the claims of the class members, and if it is based on the same legal theory.”)(quotations omitted)); Smith v. United Healthcare Servs., Inc., No. 00-1163, 2002 WL 192565, at *3 (D. Minn. Feb. 5, 2002) (“A strong similarity of legal theories satisfies the typicality requirement even if substantial factual differences exist.”).

4. There is a constitutional dimension to the typicality inquiry. According to the Supreme Court, “a class representative must be part of the class and ‘possess the same interest and suffer the same injury’ as the class members.” Amchem, 521 U.S. at 625-26. See also Kane v. United Indep. Union Welfare Fund, No: 97-1505, 1997 U.S. Dist. LEXIS 10534, at *8 (E.D. Pa. Feb. 24, 1998) (same). Stated conversely, “[p]laintiff . . . cannot in a class action represent any rights of others which go beyond their own. They can only give to others through representation the benefit of such rights as they are able to establish in their own situation.” Weiner v. Bank of King of Prussia, 358 F. Supp. 684, 695 (E.D. Pa. 1973). See also Joncek, 1999 WL 755051, at *2 (“In addition to establishing the prerequisites set out in Rule 23, plaintiffs must establish that they have ‘standing’ to bring a suit by showing that they are members of the class they purport to represent.”); Hodgers-Durgin v. Del La Vina, 199 F.3d 1037, 1045 (9th Cir. 1999)(“Unless the named plaintiffs are themselves entitled to seek injunctive relief, they may not represent a class seeking that relief.”).

5. Moreover, “[i]f the named representative has suffered no injury in fact relative to the class claims, the named representative may lack standing because of the Article III case or controversy requirement.” Scott, 601 F.2d at 85 n.19. Simply stated, “[a] plaintiff must be a member of the class she seeks to represent.” Martin v. Easton Publ’g Co., 73 F.R.D. 678, 683 (E.D. Pa. 1977). See also McFarland v. Yegen, 12 Employee Benefits Cas. (BNA) 1067, 1075 (D.N.J. 1989) (“It is not enough that the conduct of which plaintiff complains injures someone. Rather, the plaintiff must show that he is within the class of persons who will be concretely affected.”); Hassine v. Jeffes, 846 F.2d 169, 177 (3d Cir. 1988) (“Typicality entails an inquiry whether the named plaintiff’s individual circumstances are markedly different or . . . the legal theory upon which the claims are based differs from that upon which the claims of other class members will perforce be based.”). Indeed:

[w]hile Congress may, by legislation, expand standing to the full extent permitted by Article III, thus permitting litigation by one who otherwise would be barred by prudential standing rules, it may not abrogate the Article III threshold requirement that plaintiff must have suffered a distinct and palpable injury to himself that is likely to be redressed if the requested relief is granted.


McFarland, 12 Employee Benefits Cas. (BNA) at 1075.

6. “To the extent that there are differences among the claims of class members that implicate typicality, a court may create subclasses.” Brooks, 2002 WL 262111, at *5.

7. A statute of limitations defense against the claims of the punitive class representative may preclude a finding of typicality. Access Now, Inc. v. Walt Disney World Co., 203 F.R.D. 529, 531 n.3 (M.D. Fla. 2001) (“The possibility of a statute of limitations defense against a named plaintiff is relevant to the typicality inquiry the Court performs in the class certification analysis. Specifically, typicality of claims between the named plaintiff and the proposed class may not be present if a named plaintiff is subject to a unique defense, such as statute of limitations.”); Patterson v. Alaska Airlines, Inc., 756 F.Supp. 476, 478 (W.D. Wash. 1990) (“Plaintiff cannot expect to participate in a class action suit in any capacity when their claims are time-barred.”).

8. Standing concerns do not necessarily preclude a participant Plaintiff from representing a class including plans administered by the same entity, but sponsored by other employers. Mulder v. PCS Health Systems, Inc., 216 F.R.D. 307 (D.N.J. 2003).

9. Court will decertify class where representative plaintiffs’ claims of liability are dismissed on summary judgment in favor of defendants and, therefore, representative plaintiffs’ claims are no longer typical of claims of class members. Clarke, 228 F.R.D. at 637.

G. 23(a)(4) – Adequacy of representation

1. Introduction

(a) According to Rule 23(a)(4), “[o]ne or more members of a class may sue or be sued as representative parties on behalf of all only if . . . (4) the representative parties will fairly and adequately protect the interests of the class.” Id. Because a class action judgment binds the members of the class, the adequacy of representation requirement insures that, prior to the entry of the judgment, the class members’ due process rights are protected. Cf. Caranci v. Blue Cross & Blue Shield of R.I., No. 96-275L, 1999 WL 766974, at *14 (D.R.I. Aug. 19, 1999) (“In a class action suit, the qualifications of counsel are held to a heightened standard in order to protect the interests of the absent class members.”). See also Ogden v. Americredit Corp., 2005 WL 56696, at * 3 (N.D. Tex. Jan. 5, 2005)(“Because absent class members are conclusively bound by any judgment in any class action brought on


their behalf, the court must be especially vigilant in ensuring that the due process rights of all class members are safeguarded through adequate representation at all times.”).

(b) Stated differently, because the claims of the class will likely rise or fall with those of the class representatives, the Court must determine that the class representatives can fairly and adequately protect the claims of the absent class members. Cf. White, 1999 WL 787455, at *3 (Adequacy of representation composed of two parts “(1) the adequacy of the named plaintiffs’ counsel; and (2) the adequacy of representation provided in protecting the different, separate and distinct interests of the class members.”). See also In re Managed Care Litig., 209 F.R.D. 678, 682 (S.D. Fla. 2002)(“Consideration is given to (i) whether Plaintiff’s counsel are qualified, experienced and generally able to conduct the proposed litigation; and (ii) whether the named Plaintiff has interests antagonistic to those of the rest of the class.”). According to the Supreme Court, “[t]he adequacy inquiry under Rule 23(a)(4) serves to uncover conflicts of interest between named parties and the class they seek to represent.” Amchem, 521 U.S. at 625. See also Diehl, 1995 U.S. Dist. LEXIS 7569, at *13 (“The test for determining adequacy of representation is composed of two parts. First, the named plaintiff must have a sufficient interest in the outcome of the case in order to ensure vigorous advocacy while having no interests antagonistic to the interests of the class. Second, counsel for the named plaintiff must be competent.”); Thomas, 201 F.R.D. at 396 (“The adequacy of representation inquiry has two components designed to ensure that the absent class members’ interests are fully pursued.”); Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998).

(i) According to the Seventh Circuit, this requirement is comprised of two parts: “the adequacy of the named plaintiff’s counsel, and the adequacy of representation provided in protecting the different, separate, and distinct interest[s] of the class members.” Retired Chicago Police Ass’n, 7 F.3d at 598.

(c) Courts recognize that the class suit is managed largely by class counsel and typically refuse attacks on the personal shortcomings of the individual class representatives. Rankin v. Rots, 220 F.R.D. 511, 521 (D. Mich. 2004)(“[I]t is inappropriate to attack the adequacy of a class representative simply based on the representative’s ignorance of the underlying facts.”); Spann v. AOL Time Warner, Inc., No. 02-Civ. 8238-DLC, 2003 WL 23010137, at * 11 (S.D.N.Y. Dec. 24, 2003)(“The Supreme Court has ‘expressly disapproved’ of ‘attacks on the adequacy of a class


representative based on the representative’s ignorance.” Plaintiffs are entitled to rely on the ‘expertise of counsel.’”); Medicare Beneficiaries’ Defense Fund, 938 F. Supp. at 1144 (“In complex cases such as this one, named plaintiffs are not required to have expert knowledge of all of the details of the case . . . and a great deal of reliance on the expertise of counsel is to be expected.”). See also In re Managed Care Litig., 209 F.R.D. 678, 685 (S.D. Fla. 2002)(class representatives’ lack of knowledge regarding procedural posture of lawsuit is “a common and expected lack of knowledge [that] does not render them inadequate representatives”); Bradford, 187 F.R.D. at 605 (“[T]his Court would be shocked if a representative plaintiff in an ERISA and LMRA case took an active role in the preparation of the case.”); Gillis, 1992 WL 68333, at *7 (Rejecting defendants’ argument that class representative’s hesitancy to sue makes him inadequate. “A person need not jump at the chance to enter a lawsuit to become a suitable named plaintiff. In fact, a careful and thoughtful named plaintiff is probably far more valuable to the class than an impulsive one.”); Koch v. Dwyer, No. 98 Civ. 5519, 2001 WL 289972, at *4 (S.D.N.Y. Mar. 23, 2001) (“[T]he Supreme Court has expressly disapproved of attacks on the adequacy of a class representative based on the representative’s ignorance.”); Mueller, 200 F.R.D. at 239 (“Rule 23(a)(4) does not require that the class representative be the best possible representative, but simply one who will pursue resolution of the controversy in the interests of the class and actively protect his legal interests.”). But see Ogden, 2005 WL 56696, at * 4 (“While Ogden cannot be expected to know all of the legal minutia involved in litigating her case, she should at least have an understanding of why all of the individuals or companies are defendants other than her general knowledge that a bad business deal occurred.”); Caranci, 1999 WL 766974, at *18 (“Because [plaintiff] was unfamiliar with these basic concepts, concepts central to the present action, the court cannot find that she is able to bear the responsibility of fairly and adequately representing the class.”); Flanagan v. Allstate Ins. Co., No. 01 C 1541, 2004 WL 1403817, at * 8 (N.D. Ill. June 22, 2004)(“The court should assume itself that plaintiff has some commitment to the case, so that the representative is not a fictive concept.”).

(i) The burden is on the party opposing certification to show that the representation will be inadequate. Thomas, 201 F.R.D. at 396; Health Plan of the Upper Ohio Valley, 1996 WL 780508, at *3. “Once a class is certified, however, the Court has a duty to monitor the quality of the class representation to make certain that it remains adequate.” Id.


(ii) Problems related to the adequacy of representation must be something more than speculation on the part of defense counsel. Krueger, 163 F.R.D. at 443 (“Class certification should not be denied by speculative suggestions of potential conflicts.”). See also Kuck v. Berkey Photo, Inc., 81 F.R.D. 736, 740 (S.D.N.Y. 1979) (“[O]nly a conflict that goes to the very subject matter of the litigation will defeat a party’s claim of representative status.”).

(iii) “To judge the adequacy of representation, courts may consider the honesty and trustworthiness of the named plaintiff.” Savino v. Computer Credit, Inc., 164 F.3d 81, 87 (2d Cir. 1998); Josephat v. St. Croix Alumina, LLC, No. 1099 – 0036, 2000 WL 1679502, at * 7 (D.V.I. Aug. 7, 2000) (“If the credibility or honesty of the class representatives threatens to become a focus of the litigation, the class representatives will be inadequate representatives.”).

(iv) At least for one court, the adequacy of class counsel is determined by looking to the performance in that particular litigation, rather than to prior wins and losses. Caranci, 1999 WL 766974, at *14 (“The level of competence displayed by counsel’s performance in the present case should be the focus of the courts inquiry into the adequacy of counsel.”).

(v) “Lawsuits fueled by the spite or hostility of an unduly antagonistic litigant or by some other ulterior motive or irrational purpose unrelated to the claims alleged in the Complaint may also prevent class certification. Martinez v. Barasch, No. 01 Civ. 2289 (MBM), 2004 WL 1367445, at * 4 (S.D.N.Y. June 16, 2004). “In short, the class action device may not be used simply for the personal purposes of a named plaintiff.” Id. at * 5.

2. Conflicts

(a) The competing interests of the class representatives may impede the ability of the class representative to serve on behalf of others and, in turn, may defeat a motion for class certification. As the Supreme Court has explained, the potentially conflicting interests of class representatives may impair the due process rights of the absent class members; hence, these named plaintiffs may be inadequate:


a selection of representatives for purposes of litigation whose substantial interests are not necessarily or even probably the same as those whom they seek to represent, does not afford that protection to absent parties which due process requires.

Hansberry v. Lee, 311 U.S. 32, 45 (1940). In other words, “[a] class is not fairly and adequately represented if class members have antagonistic or conflicting claims.” Rosario v. Livaditis, 963 F.2d 1013, 1018 (7th Cir. 1992), cert. denied, 506 U.S. 1051 (1993). “The named parties must also be free from conflicts of interest with the class they seek to represent.” Mulder v. PCS Health Systems, Inc., 216 F.R.D. 307 (D.N.J. 2003).

(b) Courts have repeatedly found inadequate representation where, because of relationships with the defendant, the interests of the named class representative conflict with those of the putative class. The Court made such a determination in Retired Chicago Police Ass’n v. City of Chicago, 141 F.R.D. 477 (N.D. Ill. 1992), aff’d in part, rev’d in part on other grounds, 7 F.3d 584 (7th Cir. 1993). There, an association of retired police officers claimed that annuity fund trustees breached fiduciary duties owed to the funds, by approving the settlement of earlier litigation. The district court held that, because the Executive Secretary of the plaintiff-association was a member of the board of trustees of the defendant-funds at the time the previous litigation was settled, the named plaintiff was “plainly beset with a conflict of interest that . . . [might] hinder vigorous prosecution of the present action.” 141 F.R.D. at 477. Recognizing that tension existed between the previous action and the position in the current litigation, the Seventh Circuit affirmed the district court’s finding that the plaintiff-association was not an adequate class representative. Id. at 598-99. See also Aks v. Bennett, 150 F.R.D. 187, 191-92 (D. Kan. 1993) (“Because the plaintiffs are trustees as well as beneficiaries and participants, their interests may be antagonistic at times to the interests of those purported class members who are only participants and/or beneficiaries.”); Grace v. Perception Tech. Corp., 128 F.R.D. 165, 170 (D. Mass. 1989) (plaintiffs could not represent class where possibility existed that plaintiffs could be found liable to class); Tedesco v. Mishkin, 689 F. Supp. 1327, 1337-38 (S.D.N.Y. 1988) (named plaintiff who was also trustee was not adequate representative in securities fraud action where plaintiff-trustee’s inaction created potential basis for liability to class).


(c) The prospect of a conflict between present and former employees led the court in Gillis v. Hoechst Celanese Corp., No. 90-5542, 1992 WL 68333 (E.D. Pa. April 1, 1992), to conclude that certification on the plaintiffs’ proposed terms was not appropriate. The class representatives in Gillis, former employees of Hoechst Celanese, claimed an insufficient transfer of assets attendant to a spin-off of a defined benefit pension plan. Nevertheless, their proposed class definition included present employees at the company. The court limited the class to include only former employees:

The former Hoechst employees now at American Mirrex will be trying to pull as much cash as possible from the Hoechst pension fund, and at the same time, the present Hoechst employees will be seeking to preserve that fund. I conclude the resulting conflict of interest between the two classes would be insurmountable and [the class representatives] cannot represent both.

Id. at *3. See also Kane, 1997 U.S. Dist. LEXIS 10534, at *9 (“Even if plaintiffs join a current member of the Fund as a party-plaintiff, there would be a conflict of interest, because former members would be trying to obtain monetary damages from the Fund, but current members should be trying to protect the Fund’s assets.”). But see White, 1999 WL 787455, at *7 (No conflicts between present and former employees where “[i]t is in all the class members’ interest to prove a statutory violation and to obtain maximum relief.”); In re Amsted Indus., Inc. “ERISA” Litig., No. 01 C 2963, 2002 U.S. Dist. LEXIS 24144, at * 8 (N.D. Ill. Dec. 16, 2002)(“While Plaintiffs may have differing desires to the future financial stability of Amsted, their interests in this litigation are not in conflict. In filing this suit Plaintiffs seek to right alleged wrongs committed by the plan administrators in order to receive the full value of their retirement accounts.”).

(d) The possibility of the putative class representative’s liability for co-fiduciary breach under ERISA section 405, 29 U.S.C. § 1105(a), stands as an additional example of the types of obstacles that may preclude a plaintiff from acting as a class representative. Radell v. Towers Perrin, 172 F.R.D. 317 (N.D. Ill. 1997).

(e) A class composed of both union and non-union employees may be proper, notwithstanding the requirements of Rule 23(a)(4). Becher, 164 F.R.D. at 153.


(f) A plaintiff’s lack of a substantive claim may preclude a finding of adequacy under (a)(4). E.g., Lyons v. Georgia-Pacific Corp., 221 F.3d 1235, 1253 (11th Cir. 2000) (“We cannot expect [plaintiff] to prosecute with forthrightness and vigor those interests of other class members that he does share and in which he has no stake. Indifference as well as antagonism can undermine the adequacy of representation.”); Melong v. Micronesian Claims Comm’n, 643 F.2d 10, 15 (D.C. Cir. 1980) (“When the purported class representative . . . need not establish [a particular element of a claim] in his individual case, serious questions are raised concerning the typicality of the class representatives’ claims and the adequacy of his representation of other class members.”).

(g) “Plaintiffs whose claims are not subject to defenses based on their execution of General and Lump Sum Releases are not adequate representatives of individuals for whom the validity of these Releases may be a major focus of litigation.” Spann v. AOL Time Warner, Inc., No. 02-Civ. 8238, 2003 WL 23010137, at * 10 (S.D. N.Y. Dec. 24, 2003).

3. The unique defense doctrine

(a) The prospect of a defense unique to the class representative may impair that representative’s ability to prosecute the claims on behalf of a class, and may make that representative inadequate under Rule 23(a). E.g., Gary Plastic Packaging Corp. v. Merrill Lynch, 903 F.2d 176, 176 (2d Cir. 1990)(“Regardless of whether the issue is framed in terms of the typicality of the representative’s claim, or the adequacy of its representation, there is a danger that absent class members will suffer if their representative is preoccupied with defenses unique to it.”); Vengurlekar v. Silverline Technologies Ltd., 220 F.R.D. 222, 227 (S.D.N.Y. 2003)(“[C]lass certification is inappropriate where a putative class representative is subject to unique defenses which threaten to become the focus of the litigation.”); Rolex Employees Retirement Trust v. Mentor Graphics Corp., 136 F.R.D. 658, 663 (D. Or. 1991)(“A named Plaintiff is not a proper class representative if [he or she] is subject to unique defenses.”). Defendants need not show that these unique defenses will necessarily succeed, but rather that they will shape the focus of the litigation in a way that may harm class members and ultimately risk the class’ chance of recovery. Schaefer v. Overland Express Family of Funds, 169 F.R.D. 124, 129 (S.D. Cal. 1997). See also In re Independent Energy Holding PLC Sec. Litig., No. 00-C1U-6689, 2002 WL 1059086, at *4 (S.D.N.Y. May 28, 2002) (“[A] unique defense need not be proven in order to defeat class certification.”); Beck v. Status Game Corp., No. 89-CIV-2923, 1995 WL 422067, at *4 (S.D.N.Y. July 14,


1995) (“[I]t does not matter whether a unique defense ultimately will prove meritorious because the fact remains that [plaintiff] will be required to devote considerable time to rebut the unique defense.”); Kline v. Wolf, 702 F.2d 400, 403 (2d Cir. 1983)(affirming denial of class certification based on a ‘preliminary finding’ that plaintiff would be subject to a unique defense, holding “[a]t this preliminary stage, however, the court cannot be expected to make a final determination [regarding the validity of the unique defense] before trial. A preliminary finding is sufficient.”).

(b) Simply stated, plaintiff’s claim may be subject to a defense peculiar to his circumstances, raising the prospect that the class members may be shortchanged in terms of the representation they receive. McFarland, 12 Employee Benefits Cas. (BNA) at 1077 (“[W]here the unique defense is assertable against the named plaintiff, there is the danger that an ‘inordinate emphasis’ will be placed on those claims unique to the representative class.”). In other words, “‘[t]he purpose of these provisions is to protect the absent class members who will have their individual claims rise or fall with the presentation of the class representative and his counsel and thereby assure that a judgment against the class will not be subject to collateral attack.” Matthews, 1996 WL 199746, at *6. Simply stated, if the class representative’s claim is subject to a defense unique to him or her, continued prosecution of those claims, on a class-wide basis, may lead to an adverse judgment against that class representative, equally binding upon the members of the class (by operation of res judicata and the certification order). Cf. Holmes, 1999 WL 554591, at *9 (“A named plaintiff cannot be an adequate class representative where he ‘has different claims and/or circumstances than other members, thereby creating the possibility of a less then vigorous advancement of the case for all plaintiffs involved.’”). See also Walker v. Asea Brown Boveri, Inc. Cash Balance Pension Plan, 214 F.R.D. 58, 64 (D. Conn. 2003)(“Class certification is inappropriate where a putative class representative is subject to unique defenses which threaten to become the focus of the litigation.”).

(c) The unique defense doctrine has, at times, been analyzed under typicality principles. E.g., Rodger, 160 F.R.D. at 539 (“It is true that the typicality requirement may not be satisfied when a class representative is subject to a unique defense that could potentially dominate the litigation.”). See also Kane, 1998 WL 78 985, at *4 (“If, however, the proposed representatives present claims or defenses that are personal to them and likely to be a significant focus of the litigation, typicality has not been satisfied.”); Shields,


1996 WL 616548, at *4 (“‘[T]he presence of even an arguable defense peculiar to the named plaintiff class or a small subset of the plaintiff class may destroy the required typicality of the class as well as bring into question the adequacy of the named plaintiff’s representation.’”) (quoting J.H. Cohn & Co. v. Am. Appraisal Assocs., Inc., 628 F.2d 994, 999 (7th Cir. 1980); Burke, 2000 U.S. Dist. LEXIS 5875, at *12 (same); Spann v. AOL Time Warner, Inc., No. 02-Civ. 8238-DLC, 2003 WL 23010137, at * 6 (S.D.N.Y. Dec. 24, 2003)(“In assessing the typicality of the plaintiff’s claims, the court must pay special attention to unique defenses that are not shared by the class representatives and members of the class.”).

(d) Conversely, where the unique defense can be asserted against the class members, there is a danger that the class representative will not adequately protect the interests of the class:

there is no assurance that [the named plaintiff] will vigorously litigate those questions of law and fact which he need not address to prevail on his individual claim but which are essential to any recovery by the [proposed class members] . . . . Absent such assurance plaintiff cannot be considered an adequate class representative under Rule 23(a)(4).

Greeley v. KLM Royal Dutch Airlines, 85 F.R.D. 697 (S.D.N.Y. 1980).

(e) To some, however, the unique defense challenge to the adequacy of representation should only be sparingly applied. Shields, 1996 WL 616548, at *5 (“[I] is only when a unique defense will consume the merits of a case that a class should not be certified.”).

(f) A defense available to many or all of the putative class members is not, of course, a unique defense. LaFlamme v. Carpenters Local No. 730 Pension Plan, 212 F.R.D. 448, 454 (N.D.N.Y. 2003)(“As defendants make their arguments with respect to those two defenses in sweeping terms to many, if not all prospective class members, the position that typicality is not satisfied with respect to defenses faced by class members is untenable.”).

(g) Determining whether the putative class representative exhausted administrative remedies may potentially give rise to a unique defense precluding certification. Scott v. New York City District Council of Carpenters Pension Plan, 224 F.R.D. 353, 355 (S.D.N.Y. 2004).


4. Releases

(a) A repeated factual scenario in benefits class actions illustrates the application of the unique defense doctrine to the certification process. Often, plaintiffs’ class definition will seek to include participants who signed releases ostensibly forsaking the claims at issue. To prevail on behalf of all of the class members, the plaintiff will not only have to prove the merits of his claims but, also, that there was an infirmity such that the release does not bar the claims of some of the proposed class members. Alternatively, the putative class representative may have signed a release, whereas the proposed class members did not.

(i) E.g., McFarland, 12 Employee Benefits Cas. (BNA) at 1073 (Courts “have almost universally held that the existence of releases executed by putative class members but not by the plaintiffs creates serious typicality questions.”); Bublitz v. E. I. DuPont DeNemours & Co., 202 F.R.D. 251, 257 (S.D. Iowa 2001)(“Courts have been very reluctant to let class members who have executed waivers or releases to be represented by someone who has not executed the same.”); Theonen v. McNeil-Akron, Inc., 661 F. Supp. 1271, 1274 (N.D. Ohio 1986)(named plaintiffs could not satisfy typicality requirement because unlike the class members they did not sign an accord and satisfaction agreement); Matthews, 1996 WL 199746, at *6 (Putative class representative who executed release cannot represent class. “For this reason the court does not believe that Matthews, if he exercises the self interest that can rightfully be expected of him, can adequately represent the class.”). The issue is, at times, analyzed under typicality principles. E.g., Spann v. AOL Time Warner, Inc., No. 02-Civ. 8238-DLC, 2003 WL 23010137, at * 8 (S.D.N.Y. Dec. 24, 2003)(“Plaintiffs have not shown that their claims of a Class consisting of numerous members who signed General Releases, Lump Sum Releases, or both.”); Walker v. Asea Brown Boveri, Inc. Cash Balance Pension Plan, 214 F.R.D. 58, 66 (D. Conn. 2003)(Because named plaintiffs signed releases “court concludes that the named plaintiffs have not satisfied the typicality requirement because they are subject to unique defenses which threaten to become the focus of the litigation.”); Carlstrom v. DecisionOne Corp., No. CV-02-26-GF-SHE, 2003 WL 21803147, at * 2 (D. Mt. 2003)(“Here, some 98 percent of the proposed class members signed a release in exchange for separation pay. Carlstrom did not. Carlstrom’s position is plainly not comparable to the vast majority of proposed class members


who signed releases and received payment. Typicality is missing.”).

(A) The Sixth Circuit held that the possible execution of releases did not necessarily bar class certification, opining that sub-classes may be used to remedy any such problems. Bittinger, 1997 WL 460774, at *8.

(B) A dispute over the meaning or breadth of a release may spawn issues incompatible with class treatment. E.g., Ciarlante v. Brown & Williamson Tobacco Corp., No. 95-4646, 1995 WL 764579, at * 2 (E.D. Pa. Dec. 18, 1995)(“With respect to the employees who signed releases, however, the threshold issue of whether those releases should be declared invalid or rescinded would assume major importance. That issue is ill-suited to class treatment, since the state of mind of each individual signer would presumably need to be explored.”).

5. Failure to exhaust plan’s administrative remedies

(a) Failure to exhaust administrative remedies does not necessarily preclude certification. Thomas, 201 F.R.D. at 395 (“Given the defendants’ apparent uniform interpretation of the plan documents, requiring each of the proposed class members to exhaust his or her administrative remedies would be futile.”); Joncek, 1999 WL 755051, at *3; Bunnion, 1998 U.S. Dist. LEXIS 7727, at *2 (“Based upon the reasons given by the Plans for the denial of benefits, we find that requiring all members of the class to exhaust their administrative remedies would be futile.”). But see Hylaszek v. Aetna Life Ins. Co., No. 94-C-5961, 1998 WL381064, et * 3 (N.D. Ill. July 1, 1998) (“To proceed with the Rule 23(b)(3) class action, the court would first have to make an exhaustion determination for every member of the proposed class. Such an undertaking would be an immense task that would entail discovery briefing, and hearings on each individual claim. This case by case assessment would compromise the efficiency-enhancing purpose of Rule 23.”); Gosselink v. Am. Tel & Tel., Inc., 272 F.2d 722, 725 (5th Cir. 2001) (noting that the district court denied plaintiff’s motion for class certification, reasoning that the class lacked commonality because of plaintiff’s failure to show that each purported class member had exhausted his/her administrative remedies.); Burke, 2000 U.S. Dist. LEXIS, at *13; McDonald v. Prudential Ins. Co. of Am., No. 95-5186, 1999 WL 102796, at *5 (N.D. Ill. Feb. 19, 1999) (“[P]otential individual determinations regarding exhaustion of administrative remedies and standard of


review of plans factor against certification.”); Carlstrom v. DecisionOne Corp., No. CV-02-26-GF-SEH, 2003 WL 21803147 (D. Mt. 2003).

II. Class Actions Maintainable/Rule 23(b)

A. If the plaintiff satisfies the requisites to certification under Rule 23(a), the inquiry then turns to whether the claims fit within the categories of Rule 23(b). Cf. Bunnion, 1998 U.S. Dist. LEXIS 7727, at *9 (“In order to obtain class certification plaintiffs must meet the four requirements of Rule 23(a) of the Federal Rules of Civil Procedure and at least one part of Rule 23(b).”).

B. Given the broader res judicata effect of a judgment entered in a mandatory class action under Rule 23(b)(1) and/or (b)(2), e.g., Walsh v. Great Atlantic & Pacific Tea Co., 726 F.2d 956, 962-63 (3d Cir. 1983) (Rule 23(b)(1) and (b)(2) classes are cohesive in nature and exempted from pre-settlement mandatory notice requirements), and the excusal of the notice requirements, courts prefer certification under those mandatory provisions, rather than pursuant to Rule 23(b)(3):

[I]f an action can be maintained under (b)(1) and/or (b)(2), and also under (b)(3), the court should order that the suit be maintained as a class action under (b)(1) and/or (b)(2), rather than under (b)(3), so that the judgment will have res judicata effect as to all of the class (since no member has the right to opt out in a (b)(1) or (b)(2) suit), thereby furthering the policy underlying (b)(1) and (b)(2) class suits.

Schutte v. Maleski, No. 93-0961, 1993 WL 218898, at *11 (E.D. Pa. June 18, 1993) (internal quotations omitted). Similarly, and according to the Southern District of Georgia:

Most suits that qualify as class actions under Rule 23(b)(1) or (b)(2) will also qualify under the more comprehensive Rule 23(b)(3). Unlike members of subdivision (b)(1) or (b)(2) classes, members of Rule 23(b)(3) classes have an automatic right to opt out, that is, to exclude themselves from the binding effect of the judgment. Because of this additional burden on the parties, courts generally prefer to certify a class under Rule 23(b)(1) or (b)(2) if possible.

Specialty Cabinets & Fixtures, 14 Employee Benefits Cases (BNA) at 1760. See also McGlothlin v. Connors, 15 Employee Benefits Cas. (BNA) 1321, 1334 (W.D. Va. 1992) (“When both provisions apply [23(b)(2) and 23(b)(3)], the court should proceed under Rule 23(b)(2) so that all the class members will be bound.”).


1. “Because of ERISA’s distinctive ‘representative capacity’ and remedial provisions, ‘ERISA litigation of this nature presents a paradigmatic example of a (b)(1) class.’” In re Global Crossing Securities and ERISA Litig., 2004 WL 2724076, at * 16 (S.D.N.Y. Nov. 24, 2004).

2. Misrepresentation claims are not suitable for certification under (b)(1). In re Electronic Data Systems Corp. ERISA Litig., 224 F.R.D. 613, 628 (E.D. Tex. 2004).

C. 23(b)(1)(A) – Incompatible standards

1. This provision applies to those instances where a party owes duties towards numerous persons, and conflicting or varied adjudications in suits against these individuals might establish incompatible standards of conduct.

2. According to the Supreme Court, Rule 23(b)(1)(A) “‘takes in cases where the party is obliged by law to treat the members of the class alike (a utility acting toward customers; a government imposing a tax), or where the party must treat all alike as a matter of practical necessity (a riparian owner using water as against down river owners).” Amchem, 521 U.S. at 614. Moreover, “Rule 23(b)(1)(A) is satisfied only in the event inconsistent judgments in separate suits would trap the party opposing the class in the inescapable legal quagmire of not being able to comply with one judgment without violating the terms of another.” McBirney v. Autrey, 106 F.R.D. 240, 245 (N.D. Tex. 1985); Smith v. Brown & Williamson Tobacco Corp., 174 F.R.D. 90, 99 (W.D. Mo. 1997) (Rule 23(b)(1)(A) applies “where the nonclass party could be sued for different and incompatible affirmative relief.”).

3. Certification is not appropriate under (b)(1)(A) where money damages is the primary relief sought. E.g., In re Syncor ERISA Litigation, 227 F.R.D. 338, 346 (C.D. Cal. 2005) (certification under Rule 23(b)(1)(A) denied where relief sought was primarily monetary); Wilensky v. Olympic Airways, 73 F.R.D. 473, 477 (E.D. Pa. 1977)((b)(1)(A) “was not intended to authorize certification where a primary objective of the class action is money damages. In the present action the predominant relief sought is the recovery of money damages. Although the plaintiffs also request injunctive relief, the injunction is not their primary objective.”).

4. Rule 23(b)(1)(A) is useful in ERISA class action litigation. For example, the Court in Schutte v. Maleski, 1993 U.S. Dist. LEXIS 8332 (E.D. Pa. June 18, 1993), examining a certification motion attendant to a challenge to an amendment to an ERISA plan, deemed Rule 23(b)(1)(A) applicable:


In the case at bar, plaintiffs seek a declaration that Amendment 7 is invalid and that Amendments 5 and 6 remain in full force and effect. This declaration could potentially create conflicts for the defendants in the instance it was granted in some actions but denied in others. The differing outcomes would make it impossible for defendants to implement any one result because of the inherent conflict from disparate adjudications. This scenario epitomizes Rule 23(b)(1)(A)’s phrase “incompatible standards of conduct.”

Id. at *26. See also Baker v. Comprehensive Employee Solutions, et al., 227 F.R.D. 354, 360 (D. Utah 2005) (“The fiduciary duty at issue is owed to the entire class and separate actions would create the risk of establishing inconsistent standards under ERISA. Additionally, because the fund at issue may be limited beyond the potential damages of the class, class members each pursuing their own claims individually may exhaust the limited resources available and leave some potential class members with no remedy at all.); Becher, 164 F.R.D. at 153 (“Each case could conceivably result in different courts reaching conflicting decisions regarding not only the Plan’s interpretation but also the applicability of the various defenses the defendants seek to interpose.”); In re Amsted Indus., Inc. “ERISA” Litig., No. 01 C 2963, 2002 U.S. Dist. LEXIS 24144, at * 8 (N.D. Ill. Dec. 16, 2002)(granting certification under (b)(1)(A) “[b]ecause the rights of current employees will necessarily be adjudicated in this action, we find that the class action is the proper device to assure that all parties are fairly represented.”); In re CMS Energy ERISA Litig., 2004 WL 3094447, at * 6 (E.D. Mich. Dec. 27, 2004)(“Here . . . failure to certify could risk inconsistent rulings concerning fiduciary status of the defendants and materiality of alleged omissions.”).

5. Nevertheless, “[i]t is fundamental that adjudications cannot be regarded as inconsistent where the facts are distinguishable from individual to individual.” Peachin, 1996 U.S. Dist. LEXIS 558, at *16 . Thus, certification “under Rule 23(b)(1) should be confined to those cases where there are no, or few, individual questions.” Doe, 145 F.R.D. at 477. See also Bower, 114 F.R.D. at 595 ((23(b)(1)(A) certification inappropriate because “[a] judgment in favor of individual plaintiffs would only be inconsistent with a judgment against other defendants in that the defendants would be required to maintain insurance benefits for some plaintiffs and not for others.”); Jones v. American Gen. Life, 213 F.R.D. 689, 698 (S.D. Ga. 2002)(denying class certification of claims because “[a]ny individual finding of liability will only require that Defendants restore life insurance benefits due to that single plaintiff and would not require Defendants to act inconsistently with other judgments”); Nelson v.


IPALCO Enterprises, Inc., No. IP02-477CHK, 2003 WL 23101792, at * 10 (S.D. Ind. Sept. 30, 2003)(Certification under (b)(1) inappropriate where “[t]here are individual issues of reliance and causation, as well as some individual issues presented by affirmative defenses”).

6. To certify a class under (b)(1)(A), there must be proof of a likelihood of separate lawsuits. “In order to fall within Rule 23(b)(1)(A), there obviously must be a risk that separate actions will in fact be brought if a class action is not permitted. Otherwise, there is no danger that incompatible standards of conduct will be formulated by the courts.” Wright, Miller & Kane, Federal Practice and Procedure, §1773 (2d ed. 1986). See also Moore’s Federal Practice, § 23.41[1](party seeking certification under (b)(1)(A) must “establish that there is a realistic possibility that separate actions involving the same subject matter will be brought in the absence of a class action. The risk may not be merely hypothetical or speculative. A party’s request for certification will be denied if separate adjudications are unlikely.”).

7. “The fact that some plaintiffs may be successful in their suits against a defendant while others may not is clearly not a ground for invoking Rule 23(b)(1)(A).” In re Benedictin Prod. Liability Litig., 749 F.2d 300, 305 (6th Cir. 1984).

8. Where a defendant opposes class certification and assumes the risk of incompatible standards of conduct, certification may be inappropriate. In re Ford Motor Co. Ignition Switch Prod. Liab. Litig., 174 F.R.D. at 354 (“The fact that defendants are not seeking to invoke the protection of the rule [23(b)(1)(A)] further indicates that that provision is inapposite here.”).

9. Given uniform communications to participants and prospect of multiple lawsuits, certification of fiduciary breach claims challenging administration of 401(k) savings plan proper under (b)(1)(A) and (B). Rankin v. Rots, 220 F.R.D. 511, 523 (E.D. Mich. 2004).

D. 23(b)(1)(B) – Limited fund

1. According to the advisory committee notes to Rule 23(b)(1)(B), “[t]his clause takes in situations where the judgment in a nonclass action by or against an individual member of the class, while not technically concluding the other members, might do so as a practical matter.” Fed. R. Civ. P. 23 (1966 advisory committee note).

(a) Moreover, “Rule 23(b)(1)(B) includes, for example, ‘limited fund’ cases, instances in which numerous persons make claims against a fund insufficient to satisfy all claims.” Amchem, 521 U.S. at 614.


(b) “Rule 23(b)(1)(A) is assigned to prevent prejudice to the party opposing the class, and Rule 23(b)(1)(B) is designed to prevent prejudice to potential members of the class.” Thomas, 201 F.R.D. at 396.

(c) The possibility that an action will have precedential or stare decisis effect on later cases will not, however, satisfy Rule 23(b)(1)(B). In re Dennis Greenman Sec. Litig., 829 F.2d 1539, 1546 (11th Cir. 1987). See also Specialty Cabinets & Fixtures, 14 Employee Benefit Cas. (BNA) at 1761 (same); Nelson, 2003 WL 23101792, at * 11 (“Rule 23(b)(1)(B) does not apply merely because a decision in one case may establish a bad precedent for others in the class.”).

(i) A certain modicum of proof is needed prior to certification under 23(b)(1)(B). Ortiz, 119 S. Ct. 2295. “To obtain Rule 23(b)(1)(B) certification on the basis of a limited fund, a party must submit specific evidence showing that the fund may be depleted through individual litigation before all members’ claims can be satisfied.” Moore’s Federal Practice, § 23.42[2][c]; Cullen v. Whitman Med. Corp., 188 F.R.D. 226, 236 (E.D. Pa. 1999)(plaintiff must prove: that the defendants’ assets would be insufficient to meet plaintiffs’ claims; that the defendants will likely be rendered insolvent should plaintiffs prevail in their claims; and that there is a substantial probability of plaintiffs’ success in the suit). See also In re Dennis Greenman Sec. Litig., 829 F.R.D. 1539, 1546 (11th Cir. 1987)(reversing certification because district court “made no specific findings of the defendants’ financial status. Absent such findings the district court could not properly rely on this [limited fund] ground for certification”).

(d) Limited fund cases are not the only cases certified under this subsection. For example, a class may be certified under subsection (b)(1)(B) in “an action which charges a breach of trust by an indenture trustee or other fiduciary similarly affecting the members of a larger class of security holders or other beneficiaries, and which requires an accounting or like measures to restore the subject of the trust.” Ortiz, 119 S. Ct. at 2309 (quoting advisory committee notes). Moreover, “[a]nother type of fund case involved the adjudication of the rights of all participants in a fund in which the participants had common rights.” Id. at 2309 n.14.

(i) See also Bower, 114 F.R.D. at 595 ((23(b)(1)(B) strictly construed and applies only where separate actions


“inescapably will alter the substance of the rights of others having similar claims”).

(e) Certifying stock drop claims in In re CMS Energy ERISA Litig., 2004 WL 3094447, at * 5 (E.D. Mich. Dec. 27, 2004), court notes that plaintiff’s claims are brought on behalf of the plan demonstrating that the claims “‘as a practical matter’ would be ‘dispositive of the interests of the other members not parties to the adjudication.’”

2. A significant but often overlooked question regarding class actions certified under Rule 23(b)(1)(B) and 23(b)(2) is whether mandatory class actions that do not provide nonresident class members with the right to opt out are viable in light of the Supreme Court’s decision in Phillips Petroleum v. Shutts, 472 U.S. 797 (1985) (holding that state’s opt-out procedure, involving a descriptive notice sent by first-class mail to each class member and including an explanation of the opt-out right, comported with due process).

(a) At least two circuits have extended this reasoning to hybrid class actions involving claims for equitable and monetary relief, implying that mandatory class actions that do not give nonresidents the right to opt out may violate due process. Brown v. Ticor Title Ins. Co., 982 F.2d 386, 392 (9th Cir. 1992) (holding that representative of Arizona and Wisconsin classes of consumers would be denied minimal due process if his damage claims in connection with alleged antitrust violations by insurers were barred by res judicata, as representative had not been given opportunity to opt out of prior multidistrict class litigation involving the same parties, though representative would be bound by injunctive relief provided by prior settlement); In re Real Estate Title & Settlement Servs. Antitrust Litig., 869 F.2d 760 (3d Cir. 1989), cert. denied, 493 U.S. 821 (1989) (if a class member has not been afforded the opportunity to opt out in a class action involving monetary and equitable claims, the member must either have minimum contacts with the forum or consent to jurisdiction in order to be enjoined by the district court that entertained the class action).

(b) But see In re Asbestos Litig., 90 F.3d 963, 986 (5th Cir. 1996) (holding that the applicability of the Supreme Court’s decision in Shutts is limited to claims of known plaintiffs for predominantly monetary damages, and that neither minimum contacts nor consent to class action is required in equitable class actions), abrogated on other grounds by Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997).


(c) This issue is often overlooked because it is not raised by either of plaintiff or defense counsel, both of whom tend to prefer the manageability and definitive nature of mandatory class actions.

E. 23(b)(2) – Conduct applicable to class

1. As the rule makes certain, a class action is maintainable under subdivision (b)(2) only if two requirements are met: “(1) the opposing party’s conduct or refusal of act must be ‘generally applicable’ to the class and (2) final injunctive or corresponding declaratory relief must be requested for the class.” Fuller, 168 F.R.D. at 602.

2. “Injunctive or declaratory relief must be the predominant remedy requested for the class members.” White, 1999 WL 787455, at *6. See also Jefferson v. Ingersoll Int’l Inc., 195 F.3d 894, 898 (7th Cir. 1999)(permitting “certification of a class seeking compensatory or punitive damages under Rule 23(b)(2) is ‘permissible only when monetary relief is incidental to the equitable remedy.’”); Spann v. AOL Time Warner, Inc., No. 02-Civ. 8238-DLC, 2003 WL 23010137, at * 5 (S.D.N.Y. Dec. 24, 2003)(“When presented with a motion for class certification under Rule 23(b)(2) of a claim seeking injunctive relief and non-incidental money damages, a court must find that the ‘positive weight or value to the plaintiffs of the injunctive or declaratory relief sought is predominant’ and that class treatment would be efficient and manageable, thereby promoting judicial economy.”); Allison v. Citgo Petroleum, 151 F.3d 402, 415 (5th Cir. 1998)(certification denied where monetary relief was not “incidental to requested injunctive or declaratory relief”); Ticor Title Ins. Co. v. Brown, 511 U.S. 117, 121 (1994)(withdrawing grant of certiorari, court indicates (b)(2) certification may be per se impermissible when monetary damages are at stake).

(a) The Fifth Circuit later explained Allison thusly:

“[M]onetary relief to be viable in a Rule 23(b)(2) class, must ‘flow directly from liability to the class as a whole on the claims forming the basis of the injunctive or declaratory relief.’ Monetary relief must be incidental, meaning that it is ‘capable of computation by means of objective standards and not dependent in any significant way on the intangible, subjective differences of each class member’s circumstances.’”

In re: Monumental Life Ins. Co., No. 02-30540, 2003 U.S. App. LEXIS 16610, at * 14 (5th Cir. Aug. 13, 2003).


3. However, “[i]f a plaintiff seeks both monetary and injunctive relief, some courts have allowed damages to be adjudicated in a Rule 23(b)(2) action where damages are merely ancillary to the injunctive relief sought.” Shields, 1996 WL 616548, at *5. See also Fruehauf, 168 F.R.D. at 603 (plaintiffs primarily seeking declaration of entitlement to post-retirement medical benefits and, although they might be later reimbursed for premiums charged). When monetary relief predominates, certification is proper under (b)(3), not (b)(2). Mulder v. PCS Health Systems, Inc., 216 F.R.D. 307 (D.N.J. 2003).

(a) Questions of the predominance of common issues, manageability and judicial economy, arising under Rule 23(b)(3), have no place in the 23(b)(2) inquiry. Forbush, 17 Employee Benefits Cas. (BNA) at 1073.

4. While requests for a preliminary injunction alone might not be suitable for certification under Rule 23(b)(2), a prayer for declaratory relief may be sufficient “when as a practical matter it affords injunctive relief or serves as a basis for later injunctive relief.” McGlothin v. Connors, 15 Employee Benefits Cases (BNA) 1321, 1334 (D.W.V. 1992). See also Bower, 114 F.R.D. at 596 (class of pensioners, seeking a declaratory judgment that medical benefits established as part of retirement plan were vested benefits and therefore improperly terminated, was proper under Rule 23(b)(2)).

5. “[I]n a class action seeking injunctive relief under Rule 23(b)(2), not all the class members have to be aggrieved by or desire to challenge the defendant’s conduct, rather the defendant’s challenged conduct merely must be applicable to the entire class.” Diehl, 1995 U.S. Dist. LEXIS 7569, at *14. The Third Circuit has “committed to the district court the discretion to deny certification in Rule 23(b)(2) cases in the presence of “disparate factual circumstances.” In re Unisys Corp. Retiree Medical Benefits Litig., No. 969, 2003 WL 252106, at *3 (E.D. Pa. Feb. 4, 2003) (quoting Geraghty v. United States Sentencing Comm., 719 F.2d 1199, (205-06 (3d Cir. 1983)). See also In re Managed Care Litig., 209 F.R.D. 678, 686 (S.D. Fla. 2002)(“A Rule 23(b)(2) action cannot resolve individualized issues of fact, nor provide different types of relief required to redress individual injuries.”); Gessell v. Consolidated Edison Co., No. 02-3071, 2003 WL 22006300, at * 11 (C.D. Ill. Aug. 18, 2003)(While claim to enhanced retirement benefits might be classified as equitable, “determining the award of each individual class member would ‘require judicial inquiry into the particularized merits of each individual plaintiff’s claim.’ While such an inquiry is necessary, certification under Rule 23(b)(2) is improper.”).

6. The district court in Unisys de-certified fiduciary misrepresentation claims pursued under (b)(2) because: (i) whether those who make the supposed misstatements were, in fact, fiduciaries required individualized


determinations; (ii) the materiality of the alleged misrepresentations requires individual findings; (iii) “The Court will have to examine the specific decisions allegedly made by the individual retirees in order to determine whether each one is sufficient to establish detrimental reliance,” id. at *5; and (iv) individualized questions of the timeliness of each class member’s claims “further supports the need for decertification in this case.” Id. at *6.

7. The possibility that money damages may be part of the relief sought in a (b)(2) class may give rise to a need to give notice. Ortiz v. Fibreboard Corp., 527 U.S. 815, 846-47 (1999).

8. The Seventh Circuit, in Berger v. Xerox Corp. Retirement Income Guarantee Plan, No. 02-3674, 2003 U.S. App. LEXIS 15427 (7th Cir. Aug. 1, 2003), held that, although the plaintiff class may ultimately seek a monetary award, so long as a declaratory judgment is sought at the threshold, certification under (b)(2) is appropriate. Id. at * 19 (“But a declaratory judgment is normally a prelude to a request for other relief, whether injunctive or monetary, there is nothing suspicious about the characterization of the suit as one for declaratory relief.”). See also Flanagan v. Allstate Ins. Co., No. 01 C 1541, 2004 WL 1403817, at * 9 (N.D. Ill. June 22, 2004)(“A declaration that plaintiffs are eligible to participate in the severance plan is certainly a prelude to a request for monetary damages. However, it does not render the relief any less declaratory.”)(citing Berger).

9. “Where monetary relief would flow automatically to the class as a whole from a grant of equitable relief for breach of fiduciary duty, certification under Rule 23(b)(2) is appropriate.” In re Global Crossing Securities and ERISA Litig., 2004 WL 2724076, at * 16 (S.D.N.Y. Nov. 24, 2004).

F. 23(b)(3) – Opt-out classes

1. Introduction

(a) Under Rule 23(b)(3), a class that meets the requirements of Rule 23(a) may be certified if the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. That being said, the considerations unique to the (b)(3) inquiry may require a more exacting inquiry into the merits during the certification process. Coopers & Lybrand v. Livesay, 437 U.S. 463, 469 n.12 (1978)(“The more complex determinations required in Rule 23(b)(3) class actions entail even greater entanglement with the merits.”).


(b) Note that recent revisions to Rule 23, effective December 1, 2003, require that the certification order and the notice required in a Rule 23(b)(3) matter define or state “the class claims, issues or defenses.”

(c) Of particular additional significance is the fact that, when an action is certified under Rule 23(b)(3), class members are entitled to notice of the pendency of the action and may elect to “opt-out” of the class, and thereby not be bound by the judgment entered in the class action. Fed. R. Civ. P. 23(c)(2). Cf. White, 1999 WL 787455, at *6 (“Special notice provisions apply if a class is certified pursuant to subsection (b)(3).”). According to the Supreme Court:

In the 1996 class-action amendments, Rule 23(b)(3) . . . was “the most adventuresome innovation.” Rule 23(b)(3) added to the complex-litigation arsenal class actions for damages designed to secure judgments binding all class members save those who affirmatively elected to be excluded . . . . Framed for situations in which “class-action treatment is not as clearly called for” as it is in Rule 23(b)(1) and (b)(2) situations, Rule 23(b)(3) permits certification where class suit “may nevertheless be convenient and desirable.”

Amchem, 521 U.S. at 614-15 (citations omitted).

(d) While the commonality analysis of Rule 23(a)(2) is often considered in conjunction with Rule 23(b)(3), the two subsections of the Rule serve differing objectives. “Whereas (a)(2) addresses the issue of whether Rule 23 has any applicability at all to the law suit, (b)(3) addresses the issue of whether Rule 23 certification will have practical utility in the suit, considering the facts, substantive law, procedural due process, and fundamental fairness.” Doe, 145 F.R.D. at 475.

(e) At least according to one court, “[u]nder Rule 23(b)(3), the plaintiff bears the burden of establishing that damages could be measured in a class-wide basis.” In re Managed Care Litig., 209 F.R.D. 678, 683 (S.D. Fla. 2002).


2. Common issues must be predominant

(a) Some courts utilize a three part test to determine whether issues common to the class are predominant in the context of (b)(3) certification:

First, the court must look at the substantive elements of the cause of action. Second, the court should inquire into the proof necessary for each element. Finally, the court must consider the procedural devices and alternatives available for trying class actions.

Health Plan of the Upper Ohio Valley, 1996 WL 780508, at *3. See also McFarland, 12 Employee Benefits Cas. (BNA) at 1078 (Challenge regarding whether former participants and individuals who signed releases have standing to sue precludes finding of predominance. “The existence of a multitude of threshold factual inquiries mandates the conclusion that the individual issues with respect to these putative class members predominate over the common issues.”); Amchem, 521 U.S. at 623 (“The Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation.”); Doe, 145 F.R.D. at 475 (“Specifically, the predominance question under Rule 23(b)(3) requires the court to consider whether the group seeking class certification seeks to remedy a common legal grievance.”); McDonald v. Prudential Ins. Co., 1999 WL 102796, at *2 (“Common questions of law or fact will predominate when there is a common course of conduct that leads to injury of all the class members.”). “Considerable overlap exists between Rule 23(a)(2)’s commonality prerequisite and 23(a)(2) requires that common issues exist; Rule 23(b)(3) requires that they predominate.” Burke, 2000 U.S. Dist. LEXIS, at *17. According to the Southern District of New York, “[t]he predominance inquiry ‘tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation.’” Vengurlekar v. Silverline Technologies, Ltd., 220 F.R.D. 222, 228 (S.D.N.Y. 2003).

(b) The predominance standard of (b)(3) is more stringent and “requires a stronger showing by plaintiffs than the ‘commonality’ standard required by Rule 23(a).” In re Paxil Litig., 212 F.R.D. 539, 551 (C.D. Cal. 2003). See also Amchem, 521 U.S. at 623-24 (“The predominance criterion [of Rule 23(b)(3)] is far more demanding” than the Rule 23(a) commonality requirement); Dunnigan v. Metropolitan Life Ins. Co., 214 F.R.D. 125, 138 (S.D.N.Y. 2003)(“The 23(b)(3) predominance requirement is ‘more stringent’ and ‘far more demanding than’ the commonality


requirement of Rule 23(a).”); Spann v. AOL Time Warner, Inc., No. 02-Civ. 8238-DLC, 2003 WL 23010137, at * 6 (S.D.N.Y. Dec. 24, 2003)(“The Rule 23(b)(3) predominance inquiry is more demanding than the commonality determination required by Rule 23(a), as a Rule 23(b)(3) action is designed to ‘secure judgments binding all class members save those who affirmatively elect to be excluded and requires that courts look closely to ensure that the class action ‘will achieve economies of time, effort and expense, and promote . . . uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.”). Conclusory allegations are insufficient to satisfy this requirement. Martin v. Daliberg, Inc., 156 F.R.D. 207, 214 (N.D. Cal. 1994). As noted above, a demanding inquiry into the merits may be required. In re Methiomine Antitrust Litig., 206 F.R.D. 161, 163 (N.D. Cal. 2001) (“To determine whether common issue predominates, the Court must identify and analyze the questions presented by plaintiff’s antitrust claim.”).

(c) The Supreme Court has further held that, insofar as predominance is concerned, there is a need “for caution when individual stakes are high and disparities among class members great.” Amchem, 521 U.S. at 625. See also Peachin, 1996 U.S. Dist. LEXIS 558, at *14 (ERISA estoppel claims not properly certified under (b)(3), “[b]ecause individual questions of reliance predominate over the common question of Aetna’s duty under federal common law or ERISA, a class action would be neither a superior nor an efficient way to adjudicate the controversy.”).

(d) The Third Circuit recently held that individual questions of reliance preclude a finding of predominance, at least in the context of a RICO suit. Johnston, 265 F.3d at 194-95. See also LaFata, 207 F.R.D. at 44 (holding that common questions predominated plaintiffs’ ERISA claims, but did not predominate plaintiffs’ securities claims. “Where proof of the essential elements of such a claim requires individual treatment, class certification may be unsuitable.”); In re Managed Care Litig., 209 F.R.D. 678, 691 (S.D. Fla. 2002)(“Plaintiffs are asking this court to presume that the only relevant information to each Plaintiff’s health care decision was the written, uniform documents. However, the non-uniform oral representations may have had an impact on each Plaintiff’s decision.”). Moreover, “[i]f the main issue in a case requires the separate adjudication of each class member’s individual claim or defense, a Rule 23(b)(3) action would be inappropriate.” Zinner v. Occulix Research Inst., Inc., 253 F.3d 1180, 1189 (9th Cir. 2001). See also O’Connor v. Boeing N. Am.,


Inc., 197 F.R.D. 404, 413-14 (C.D. Cal. 2000) (rejecting class certification where individual issues relating to statute of limitations predominated over common issues); Gessell v. Commonwealth Edison Co., No. 02-3071, 2003 WL 22006300 at * 10 (C.D. Ill. Aug. 18, 2003)(Common questions do not predominate in fiduciary breach claims where “not all members of the putative class attended the same meetings, or heard the same presentations.”); Peterson v. American Tel. & Tel. Co., No. 99-4982, 2004 WL 190295, at * 13 (D.N.J. Jan. 9, 2004)(lack of predominance “is clearly highlighted by the differing forms of the alleged misrepresentation and the highly individualized issues of reliance”).

(e) “Because recovery on their Misrepresentation Claim requires individualized proof of materiality and reliance, the Court finds that individual issues will predominate and the claim is unsuited for class certification under Rule 23(b)(3).” In re Electronic Data Systems Corp. ERISA Litig., 224 F.R.D. 613, 630 (E.D. Tex. 2004). See also Burstein v. Retirement Account Plan for Employees of Allegheny, 2004 WL 2612162, at * 6 (E.D. Pa. Oct. 21, 2004)(“It is clear from the record that the representative plaintiffs received information from sources other than [defendant] upon which they may have detrimentally relied. We find, based on the record presented, issues common to the class do not predominate over the factual and legal issues of reliance affecting each individual member of the purported class.”).

(f) Plaintiffs’ counsel, take heart. “[W]here common issues otherwise predominated, courts have usually certified Rule 23(b)(3) classes even though individual defenses were present in one or more affirmative defenses.” Smilow v. Southwestern Bell Mobile Systems, Inc., 323 F.3d 32, 39 (1st Cir. 2003).

3. Class action must be superior

(a) The superiority question under Rule 23(b)(3) requires the court to also consider whether a class action is superior to other methods of adjudication. To determine whether a class action is superior, courts look to:

(A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum;


[and] (D) the difficulties likely to be encountered in the management of a class action.

In re Simon II Litig., 208 F.R.D. 490, 492 (E.D.N.Y. 2002); see also McDonald, 1999 WL 102796, at *3 (same).

(b) Plaintiff seeking relief under this provision must prove that class adjudication is “superior to other methods because class wide separate adjudication of each class member’s individual claim or defense, a Rule 23(b)(3) action would be inappropriate.” Zinser v. Occulix Research Inst., Inc., 253 F.3d 1180, 1189 (9th Cir. 2001). See also O’Connor v. Boeing N. Am., Inc., 197 F.R.D. 404, 413-14 (C.D. Cal. 2000) (rejecting class certification where individual issues relating to statute of limitations predominated over common issues).

(c) “Courts are generally reluctant to deny class certification based on speculative problems with case management.” In re Managed Care Litig., 209 F.R.D. 678, 692 (S.D. Fla. 2002).

(d) In those instances where the class member’s circumstances would require extensive individualized litigation, certification under Rule 23(b)(3) may not be appropriate. Id. (“Having to rely on hearings and mini-trials, which necessarily entail additional discovery and possibly the bringing of various motions, to resolve numerous unique issues in this case hardly comports with Rule 23’s purpose.”). See also Johnston, 265 F.3d at 194-95 (affirming denial of class motion, citing inability to demonstrate superiority given individualized questions of reliance, holds that “[t]rial of this case would involve essentially countless mini-trials to determine what alleged misrepresentation was made to each individual plaintiff, whether that person relied upon the statement, and the applicability of any defenses.”); Managed Care, 209 F.R.D. at 692 (“But as a practical matter, the resolution of this overarching common issue breaks down into an unmanageable variety of individual legal and factual issues.”). But see Smilow v. Southwestern Bell Mobile Systems, Inc., 323 F.3d 32, 40 (1st Cir. 2003)(“Common issues predominate where individual factual determinations can be accomplished using computer records, clerical assistance, and objective criteria – thus rendering unnecessary an evidentiary hearing on each claim.”).

(e) Where individual defenses are involved, the first factor -- the interest of each member in individually controlling the prosecution of separate actions -- may weigh in favor of a denial of class status. E.g., Paxil, 212 F.R.D. at 551-52 (“Individuals . . . not subject to


unique defenses will not wish to be grouped with the remaining plaintiffs.”).

(f) The second factor, looking to the existence of already pending suits, “serves the purpose of assuring judicial economy and reducing the possibility of multiple lawsuits.” Zinger, 253 F.3d at 1191. The absence of pending litigation may preclude satisfaction of this element of (b)(3). E.g., Paxil, 212 F.R.D. at 551 (“The court is not persuaded that a denial of class certification will result in thousands of individual lawsuits bogging down the court system with thousands of cases being litigated across the states.”).

(g) The third factor looks to the many reasons why litigating a matter in a particular forum may be efficient. E.g., Haley v. Medtronic, Inc., 169 F.R.D. 643, 653 (C.D. Cal. 1996) (certification inappropriate “where potential plaintiffs are located across the country and where witnesses and the particular evidence will also be found across the country.”).

(h) As noted above, an abundance of individual issues may preclude satisfaction of the fourth factor, i.e., may present insurmountable difficulties in managing the class action. The Ninth Circuit has held that “when the complexities of class action treatment outweigh the benefits of considering common issues in one trial, class action treatment is not the superior method of adjudication.” Zinser, 253 F.3d at 1192. See also Polich v. Burlington N., Inc., 116 F.R.D. 258, 263 (D. Mont. 1987) (certification under (b)(3) inappropriate where “each class member’s claims ultimately depend upon the individual circumstances”); Spann v. AOL Time Warner, Inc., No. 02-Civ. 8238-DLC, 2003 WL 23010137, at * 12 (S.D.N.Y. Dec. 24, 2003)(refusing finding of superiority – “A class action is not suited to litigation so heavily dependent on questions requiring individualized proof.”).

III. Use of Subclasses – Bifurcation

A. Conflicts and discrepancies among the putative class claims need not necessarily defeat a class certification motion. Among other possible solutions, the court may segregate the class members into subclasses under Rule 23(c)(4):

A court may certify a class where the unnamed class plaintiffs, whose interests are antagonistic to other members of the class, are adequately represented by defendants in a class action . . . . In addition, the court may create subclasses or exclude a sub-group from the class definition. . . . [Moreover], the court can certify the class conditionally to provide time for disagreement among class


members to become clear, or the court can decertify a class if it becomes apparent that the representation is inadequate.

Becher, 164 F.R.D. at 152. See also Smilow v. Southwestern Bell Mobiel Systems, Inc., 323 F.3d 32, 40 (1st Cir. 2003)(Court “can place class members with potentially barred claims in a separate subclass . . . or exclude them from the class altogether.”); Bunnion, 1998 U.S. Dist. LEXIS 7727, at *19 (“A court may further subdivide a class into subclasses when necessary to compensate for individual issues.”); Walsh, 162 F.R.D. at 444 (“A district court should be satisfied at the outset of the case that certification is appropriate, but the court also has the ability to modify its decision by dismissing the class or creating subclasses.”).

B. The apparently conflicting need for class and individualized treatment of issues at trial can also be resolved by bifurcating for trial the common issues amenable to resolution on a class-wide basis from the issues that require individualized trials for each class member. Manual for Complex Litigation, Third § 21.632 (1995). Courts confronted with this issue have split the trial, “trying common issues in one proceeding and individual questions in a second.” 2 Newberg on Class Actions, §§ 9.53, 9-144, 9-152 (3d ed. 1992) (citing cases). See also Flanagan v. Allstate Ins. Co., 228 F.R.D. 617, 620 (N.D. Ill. 2005) (“. . . this class action will be bifurcated. We are setting aside the individualized issues of damages until after a determination of defendants’ liability.”); Coleman v. Pension Benefits Guar. Corp., 196 F.R.D. 193, 200 (D.D.C. 2000) (“While the court expresses no opinion at this time whether it will bifurcate this case, and if so, how it will manage the relief phase if that phase is reached, it finds the mere possibility that this case will require individualized benefit determinations insufficient to bar class certification.”); Sharp v. Coopers & Lybrand, 457 F. Supp. 879, 896 (E.D. Pa. 1978), aff’d, 649 F.2d 175, 192 (3d Cir. 1981), cert. denied, 455 U.S. 938 (1982) (bifurcating for trial in securities case issues common to the class from individual issues of reliance and damages).

1. Of course, if defendants prevail on the common issues, all class members are bound by the adverse judgment; if the class representatives prevail on the common questions, the remaining individual issues can then be tried separately. Newberg at § 9-145. Some courts have also suggested the use of a special master or magistrate to resolve individual issues. See, e.g., Caleb & Co. v. E.I. DuPont De Nemours & Co,, 110 F.R.D. 316, 321 (S.D.N.Y. 1986) (citing cases).

IV. Settlement

A. “No class action may be ‘dismissed or compromised without [court] approval,” preceded by notice to class members.” Amchem, 521 U.S. at 617. “Before approving a class action settlement, the Court must direct notice to all class members who would be bound by the class settlement, hold a hearing, and find


that the settlement is fair, adequate and reasonable.” Godshall v. The Franklin Mint Corp., 2004 WL 2745890, at * 3 (E.D. Pa. Dec. 1, 2004).

B. Recent amendments to Rule 23, effective December 1, 2003, make explicit the requirement that notice need only be given to those bound by and settlement or compromise, i.e., pre-certification settlements do not require court approval or notice to class members. Also, any “side agreements” must be disclosed, and “back-end opt-out” notices may be required as a pre-condition to approval of (b)(3) settlements. See infra at 57.

C. Settlements of class suits raise a number of unique problems. “In the class action area . . . courts have a special responsibility with respect to proposed settlements, in recognition that many persons interested in the suit may have had minimal involvement in the negotiations . . . and, in some cases, that the attorneys may be motivated by considerations other than the class’s best interests.” Anderson v. Torrington Co., 13 Employee Benefits Cas. (BNA) 1551, 1554 (N.D. Ind. 1991).

1. Reviewing such a settlement, the court determines whether the settlement is fair, reasonable and adequate. See also Collins v. Pension Benefits Guar. Corp., No. 88-3406 (AER), 1996 WL 335346, at *2 (D.D.C. June 7, 1996) (same). Id. “In making this determination, the court sits as a disinterested third party, [and as] a guardian of those not directly involved in the negotiations.” Id.

(a) Whether a settlement is fair, reasonable and adequate requires evaluation of a number of additional factors:

The factors which a district judge should consider are well established: the strength of the plaintiff’s case on the merits measured against the terms of the settlement; the complexity, length and expense of continued litigation; the degree of opposition to the settlement; the presence of collusion in gaining a settlement; the opinion of competent counsel as to the reasonableness of the settlement; and the stage of the proceeding and the amount of discovery completed.

Donovan v. Estate of Fitzsimmons, 778 F.2d 298, 308 (7th Cir. 1985). See also In re Enron Corp. Securities Derivative & ERISA Litigation, 228 F.R.D. 541, 554 (S.D. Tex. 2005) (setting forth Fifth Circuit’s six factor test); Godshall, 2004 WL 2745890, at * 3 (stating nine factor test). “The absence of any cash component has been ‘recognized as a prime indicator of suspect settlements.’” In re Ikon, MDL No. 1318, 2002 U.S. Dist. LEXIS 14683, at * 19 (E.D. Pa. Aug. 9, 2002).


(b) There is an additional area of inquiry prior to settlement. “[T]he court . . . must be satisfied that notice has been provided to all class members in accordance with the manner that the court has directed.” Int’l Union of Elec., Elec., Salaried, Mach., & Furniture Workers v. Unisys Corp., 858 F. Supp. 1243, 1264 (E.D.N.Y. 1994). “Rule 23(e)’s notice requirements are less specific than that of Rule 23(c)’s . . . .” In re Global Crossing Securities and ERISA Litig., 2004 WL 2724076, at * 9 (S.D.N.Y. Nov. 24, 2004).

2. While the strength of the plaintiffs’ case measured against the recovery provided in the settlement is the most important factor, the court must avoid a full-blown trial on the merits. Torrington, 13 Employee Benefits Cases (BNA) at 1555. But see In re Electronic Data Sys. Corp. ERISA Litigation, No. 6:03-MD-1512, 6:03-CV-126, 2005 WL 1875545, at *6 (E.D. Tex. June 30, 2005) (“In light of the de minimis settlement before the Court, it is therefore in the interests of justice to push forward in this dispute, so issues can be resolved by the Fifth Circuit and procedural clarity can be brought to ERISA litigation surrounding defined contribution plans.”).

3. Use of the popular 23(b)(3) “settlement only” class does not permit a relaxation of the threshold tests for certification. Amchem, 521 U.S. at 593-94 (“Federal courts, in any case, lack authority to substitute for Rule 23’s certification criteria a standard never adopted – that if a settlement is ‘fair,’ then certification is proper.”).

4. “Unlike ‘typical adversary litigation,’ where the Court sits ‘as an umpire,’ in this situation the Court ‘sits also as a guardian for class members who have not received a notice or who lack the intellectual or financial resources to press objections.’” Global Crossing, 2004 WL 2724076, at * 18, See also In re Electronic Data Sys. Corp. ERISA Litigation, 2005 WL 1875545, at *6 (in denying a proposed settlement, court stated that it “is of the opinion that [plaintiffs] would consider the risk of an adverse ruling by the Fifth Circuit a risk worth taking in comparison to the small benefit to be received from the settlement.”).

V. Notice

A. Proper notice, given at various crucial junctures in the life of a class action, is essential to the protection of the due process rights of class members. While pre-settlement notice is optional in a mandatory class action, i.e., those certified under Rules 23(b)(1) and 23(b)(2), pre and post-settlement notice is needed in 23(b)(3), or “opt-out” suits.

1. In other words, in those matters certified under (b)(3), putative class members must be apprised, by “the best notice practicable under the circumstances,” of their right to request exclusion from the class:


The notice shall advise each member that (A) the court will exclude the member from the class if the member so requests by a specified date; (B) the judgment, whether favorable or not, will include all members who do not request exclusion; and (c) any member who does not request exclusion may, if the member desires, enter an appearance through counsel.

Fed. R. Civ. P. 23(c)(2).

2. As to notice of settlement, “[i]n order to satisfy due process, notice to class members must be ‘reasonably calculated under all the circumstances, to apprise of the action and afford them an opportunity to present their objections.’” Ikon, 2002 U.S. Dist. LEXIS 14683, at * 23. See also Global Crossing, 2004 WL 2724076, at * 10.

3. The opt-out notice requirements of Rule 23(c)(2) have been described as particularly “stringent.” Walsh, 726 F.2d at 962. Pre-settlement notice in those matters certified under Rules (b)(1) and (b)(2), however, are “entirely discretionary with the trial court.” Id. Such notice, if any, is given under the strictures of Rule 23(d)(2).

4. Amendments to Rule 23 effective December 1, 2003 affords the district court discretion to require a “back-end opt-out” notice as a precondition to the approval of a settlement agreement. See infra at 57.

B. Notice of Settlement

1. Rule 23 makes notice of settlement mandatory for all types of class actions:

(e) Dismissal or compromise. A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such a manner as the court directs.

Fed. R. Civ. P. 23(e).

2. Although “Rule 23(c) directs the giving of notice, it leaves the form of the notice to the court’s discretion.” Navarro-Ayala v. Hernandez-Colon, 951 F.2d 1325, 1337 (1st Cir. 1991).

3. Notice of settlement need not be given to each individual class member. Gottleib v. Wiles, 11 F.3d 1004, 1013 (10th Cir. 1993) (“While Rule 23(c)(2) requires individual notice when the names of the individuals can be easily ascertained . . . there is no such rigid requirement under Rule 23(e).”). Moreover, “[t]he standard


for the settlement notice under Rule 23(e) is that it must ‘fairly apprise’ the class members of the terms of the proposed settlement and of their options.” Id. at 1013. See also Int’l Union of Elec., Elec., Salaried, Mach. & Furniture Workers, 858 F. Supp. at 1263 (“Due process does not require that a copy of the settlement agreement itself be attached to the notice. A general description of the settlement terms is sufficient.”).

4. For guidance on certifying claims only for settlement. See In re Prudential Ins. Co. of Am., 148 F.3d 283, 307-08 (3d Cir. 1998).

VI. Interlocutory appeals of certification orders

A. Rule 23(f)

1. Effective December 1, 1998, Rule 23 was amended to permit interlocutory appeals, “of an order of a district court granting or denying class certification,” if an application is made to the Court of Appeals within ten days of the entry of the order. The rule also expressly provides that such an appeal “does not stay proceedings in the district court unless the district court or the Court of Appeals so orders.” Fed. R. Civ. P. 23(f).

B. The accompanying Committee Note states that “the Court of Appeals is given unfettered discretion whether to permit the appeal, akin to the discretion exercised by the Supreme Court in acting on a petition for certiorari.”

C. No certification order by the district court is required, “and though the district court can assist the parties and Court of Appeals by offering advice on the desirability of appeal.”

D. According to the Third Circuit, there are “at least” three principles to guide the exercise of discretionary jurisdiction:

1. When denial of certification effectively terminates the litigation because the value of each plaintiff’s claim is outweighed by the costs of stand-alone litigation;

2. When class certification places inordinate or hydraulic pressure on defendants to settle, avoiding the risk, however small, of potentially ruinous liability; and

3. When an appeal implicates novel or unsettled questions of law. Newton, 259 F.3d 154.

E. The Second Circuit described the test as follows:

In line with our sister circuits, we hold that petitioners seeking leave to appeal pursuant to Rule 23(f) must demonstrate either (1) that the


certification order will effectively terminate the litigation and there has been a substantial showing that the district court’s decision is questionable, or (2) that the certification order implicates a legal question about which there is a compelling need for immediate resolution.

Sumitomo Copper v. Credit Lyonnais, 262 F.3d 134, 139 (2001). The Sumitomo Court further cautioned, insofar as the “death knell” standard of its analysis is concerned, the first prong of the Sumitomo inquiry, that a “reviewing court must be wary lest the mind hear a bell that is not tolling.” Id. 1. One suggested response to the plaintiffs’ “death knell” argument is that

the fact that ERISA provides for attorneys’ fees precludes a finding of death knell, as the statutory fee shifting provision provides ample incentive to press the claim to judgment. E.g., Andrews v. AT&T, 95 F.3d 1014, 1025 (11th Cir. 1996)(rejecting argument that a class action was the only feasible means to adjudicate small claims because “even small individual claims under RICO can be feasible given the possibility of the award of treble damages and attorneys’ fees to successful plaintiffs”); Castano v. American Tobacco Co., 84 F.3d 734, 748 (5th Cir. 1996)(“The expense of litigation does not necessarily turn this into a negative value suit, in part because the prevailing party may recover attorneys’ fees under [relevant] statutes.”).

F. Other courts of appeals have adopted a taxonomy based on these principles. In the first case examining the standards for interlocutory appeal, Blair v. Equifax Check Services, Inc., 181 F.3d 832, 833-36 (7th Cir. 1999), the Court of Appeals for the Seventh Circuit provided an in-depth description of the three examples mentioned above that would merit exercise of interlocutory review. Taking its cue from the Committee Note, the Court held that cases where certification tolled the “death knell” of litigation for plaintiffs or placed irresistible pressure to settle on defendants presented circumstances ripe for review. The Court also held that appeals which would help develop the law similarly invited the exercise of this review. In Waste Management Holdings, Inc. v. Mowbray, 209 F.3d 288, 292-95 (1st Cir. 2000), the Court of Appeals for the First Circuit largely adopted the Seventh Circuit’s methodology with one restriction. To prevent fecund legal minds from framing every legal issue as an important question of fundamental law, the Court narrowed this review to cases in which “an appeal will permit the resolution of an unsettled legal issue that is important to the particular litigation as well as important in itself and likely to escape effective review if left hanging until the end of the case.” Id. at 294. See also Smilow v. Southwestern Bell, 323 F.3d 32, 37 n. 4 (1st Cir. 2003)(“This court will normally grant Rule 23(f) review when a class certification ruling, apparently premised on an abuse of discretion by the district court, would have the practical effect of compelling a party to abandon a potentially meritorious claim.”). The Court of Appeals for the Eleventh Circuit discussed the standards for reviewing petitions in Prado-Steiman v. Bush, 221


F.3d 1266, 1271-77 (11th Cir. 2000). Adding other factors, the Court elaborated on the principles set forth previously by the Court of Appeals for the Seventh Circuit. In addition to those already mentioned, the Court looked into (1) whether the certification decision is likely dispositive of the litigation; (2) whether the certification involved a novel or unsettled legal question; (3) the strength of the district court’s reasoning; (4) the status of the case before the district court; and (5) the “likelihood that future events may make immediate appellate review more or less appropriate.” Id. at 1276. The Court of Appeals for the Fourth Circuit reviewed the standards for granting a motion under Fed. R. Civ. P. 23(f) and adopted the analysis enunciated in Prado-Steiman. Lienhart v. Dryvit Sys., Inc., No. 00-908, 2001 WL 715773, at *2-5 (4th Cir. June 26, 2001).

VII. Employer Stock

A. ESOPs. In re Amsted Indus., Inc. “ERISA” Litig., No. 01 C 2963, 2002 U.S. Dist. LEXIS 24144, at * 8 (N.D. Ill. Dec. 16, 2002)(granting certification under (b)(1)(A) “[b]ecause the rights of current employees will necessarily be adjudicated in this action, we find that the class action is the proper device to assure that all parties are fairly represented.”).

B. 401(k) Plans. Wiseman v. First Citizen’s Bank & Trust Co., 215 F.R.D. 507 (W.D.N.C. 2003). Refusing reconsideration of earlier opinion, 212 F.R.D. 482, court holds that individual causation requirement of fiduciary misrepresentation claim precludes certification even “[i]f the Plan at issue does not qualify as a 404(c) plan.” 215 F.R.D. at 510. See also Thomas v. Aris Corp., No. 4:CV-02-1455, 2003 WL 23096038, at * 5 (M.D. Pa. Nov. 17, 2003)(“Because it is “conceivable” that 404(c) “may be asserted,” no finding of typicality possible); Nelson v. IPALCO Enterprises, Inc., No. IP02-477CHK, 2003 WL 23101792, at * 5 (S.D. Ind. Sept. 30, 2003)(certifying fiduciary misrepresentation claims based on “total mix” of standardized documents.

1. Class certified. In re Ikon Office Solutions, Inc., 191 F.R.D. 457, 464 (E.D. Pa. 2000)(“While the decisions as to whether to hold Ikon stock may ultimately be individualized, only one common issue of law or fact must exist to satisfy the commonality requirement of Rule 23. In this case, common questions include whether the defendants acted as fiduciaries, what communications they made to plan participants and beneficiaries, and whether those communications contained material misrepresentations.”); Rankin v. Rots, 220 F.R.D. 511 (E.D. Mich. 2004)(Minimal commonality standard satisfied, quoting Ikon; typicality challenge refused because “[t]he fact that there may be individualized defenses does not necessarily defeat class certification when Rankin must still prove the same core issues of whether defendants acted as fiduciaries and whether they breached their fiduciary duties.”); In re CMS Energy ERISA Litig., 2004 WL 3094447, at * 3 (E.D. Mich. Dec. 27, 2004)(finding commonality, and distinguishing Wiseman, supra, because Plaintiffs contend that the “single overriding common issue is whether


CMS stock was an imprudent investment for the Plan”); In re Global Crossing Securities and ERISA Litig., 2004 WL 2724076 (S.D.N.Y. Nov. 24, 2004)(certifying settlement class and approving settlement); In re Electronic Data Systems Corp., 224 F.R.D. 613, 626 (E.D. Tex. 2004)(certifying class claim district court rejects possible application of 404(c) to 502(a)(2) claims – “To hold that the defense is applicable to claims brought on a plan’s behalf under ERISA section 502(a)(2) would be to hold that a plan, or the Labor Secretary, is subject to the individual defenses that the plan’s participants are subject to.”). However, misrepresentation claims cannot be certified because of individualized questions of materiality and reliance, and possible application of 404(c). Id. at 630. See also In re WorldCom ERISA Litig., 2004 WL 2211664 (S.D.N.Y. Oct. 4, 2004)(certifying stock drop claims under 23(b)(1)(B)).

2. Settlement. In re Electronic Data Sys. Corp. ERISA Litigation, 2005 WL 1875545, at * 6 (denying settlement where payout to individual plaintiffs was de minimis); In re Ikon Office Solutions, Inc., 209 F.R.D. 94 (E.D. Pa. 2002)(approving no cash to class settlement, where transfer restrictions on employer stock modified).

VIII. Claims Involving Managed Care

A. In re Managed Care Litig., 209 F.R.D. 678 (S.D. Fla. 2002). Patients and physicians brought claims against HMOs alleging violations of RICO and ERISA and sought certification of claims of some 145 million patients. Court certifies physician, or “provider” class, while denying certification to patient or “subscriber” class. As to subscribers, “[t]o the extent there are common issues of law and fact present in this case, they do not predominate, and this case, if treated as a class action, would not be manageable, as it includes 145 million members.” Id. at 697.

B. Mulder v. PCS Health Systems, Inc., 216 F.R.D. 307 (D.N.J. 2003). Court limits certification of claims challenging pharmaceutical benefits management services, including allegedly unlawful rebates and “kickbacks,” to participants in ERISA plans administered by the same administrator that contracted with Plaintiff’s employer.

IX. Cash Balance

A. Amara v. Cigna Corp., No. 3:01CV2361, 2002 U.S. Dist. LEXIS 25947 (D. Ct. Dec. 20, 2002). Certifying age discrimination claim. Motion to de-certify based on release denied. 2004 WL 2381733 (D. Ct. Oct. 13, 2004).

B. Berger v. Xerox Corp., No. 02-3674, 2003 U.S. App. LEXIS 15427 (7th Cir. 2003). Rejecting argument that relief sought not primarily equitable and should not be certified under (b)(2).


C. Tootle v. Arinc, Inc., 222 F.R.D. 88 (D. Md. 2004)(claim under 29 U.S.C. §1054(b)(1)(H)(I) claiming discriminating accrual formula could not be certified, because the claim was substantively meritless).

X. Amendments to Rule 23, effective Dec. 1, 2003

A. Effective Date

1. Amendments took effect on December 1, 2003.

2. Apply to cases already filed, unless district court in which case is pending concludes that application of a new rule in that particular case would not be feasible or would cause an injustice. See Supreme Court Order of March 27, 2003; 28 U.S.C. § 2074(a).

B. Rule 23(c)(1)(A) – timing of class motion

1. New rule relaxes slightly the strictures on the timing of class certification, requiring a certification decision “at an early practicable time,” rather than “[a]s soon as practicable.”

(a) Most courts decided the issue of class certification when they saw fit, subject, at times, to restrictions in local rules. E.g., E.D. Pa. L.R. 23.1(c)(requiring filing of class motion within 90 days of filing the complaint).

(b) New Rule allows district court some flexibility to first address merits, prior to certification. See Advisory Committee Note (“The party opposing the class may prefer to win dismissal or summary judgment as to the individual plaintiffs without certification and without binding the class that might have been certified.”).

2. Perhaps more importantly, Advisory Committee Note for the amended Rule addresses sometimes vexing question whether class certification may involve inquiry into the merits.

(a) More specifically, “discovery in aid of the certification decision often includes information required to identify the issues that actually will be presented at trial. In this sense it is appropriate to conduct controlled discovery into the ‘merits,’ limited to those aspects relevant to making the certification decision on an informed basis.”

(b) The Note further makes reference to the sometimes requirement that plaintiffs’ counsel submit a “trial plan” describing issues susceptible to class treatment.


(i) Language referring to a “trial plan” may encourage courts to be more rigorous in their analysis of certification motions.

3. One court had this to say on the issue. “Generally speaking, courts should address motions for class certification before ruling on dispositive motions.” Adair v. Johnston, 221 F.R.D. 573, 576 (M.D. Ala. 2004). “If a defendant wins on the liability issue before a class is certified, it is denied the binding effect of that ruling on the other potential class members, while if it loses on the liability issue, that holding will be binding on a class whose size is not yet known.”

C. Rule 23(c)(1)(B) and 23(c)(2)(B)

1. Changes in Rule 23(c)(1)(B) and (c)(2)(B) will require, respectively, that the certification order and the notice required under (b)(3) define or state “the class claims, issues or defenses.”

2. May impact class treatment of damage questions.

(a) As noted above, individualized questions related to damages will rarely preclude certification.

(b) Perhaps under the new Rule, question should no longer be whether individual issues of causation and damages preclude certification, but rather whether, if causation and damage issues are individualized, they can be included in the class order and notice as “class issues.”

(c) If judges are persuaded that new Rule requires parsing of class and non-class issues, many certification orders should logically be “partial” or “limited issue” certifications under 23(c)(4)(A).

(i) Possibility that such limited certification orders will preclude “common fund” fee awards.

D. Rule 23(c)(1)(C) – conditional certification

1. “The provision that a class certification ‘may be conditional’ is deleted. A court that is not satisfied that the requirements of Rule 23 have been met should refuse certification until they have been met.” See Advisory Committee Note.

E. Rule 23(e) – court approval of settlements

1. Prior Rule required court approval of any settlement of a “class action,” as well as notice of the proposed settlement.


(a) This language was generally construed as applicable to any action filed as a “class action,” without regard to whether class had been certified, or even whether a certification motion had been filed.

2. New Rule provides that the Court “must approve any settlement, voluntary dismissal or compromise of the claims, issues or defenses of a certified class.” Notice must be provided only to those who would be bound by any settlement or compromise. See Fed. R. Civ. P. 23(e)(1)(A) and (B). As such, pre-certification settlements do not require court approval or notice to class members under the new Rule.

3. Amended Rule now requires, in 23(e)(2), identification of any side agreement that may be reached in connection with a settlement requiring approval.

4. Also incorporates the “optional” version of the “back-end opt-out” provision, rather than the “mandatory” version that was circulated for comment. “In an action previously certified as a class action under Rule 23(b)(3), the Court may refuse to approve a settlement unless it affords a new opportunity to request exclusion to individual class members who had an earlier opportunity to request exclusion but did not do so.” Fed. R. Civ. P. 23(e)(3).

(a) Defendants settling a previously certified class action must be aware that the class may shrink if the Court insists on a back-end opt-out. Counsel should consider a “blow up” provision allowing defendant to terminate the settlement (or reduce the size of the settlement), if there are excessive opt-outs.

(b) As to whether such a second notice is appropriate: “Many factors may influence the court’s decision. Among these are changes in the information available to class members since expiration of the first opportunity to request exclusion, and the nature of the individual class members’ claims.” See Advisory Committee Note.

F. Rule 23(g) – selection of class counsel

1. Rule 23(g) is now the exclusive source of district court’s authority to appoint class counsel. Previously, authority to appoint counsel was gleaned from authority to appoint a class representative to proceed on a class basis under 23(a)(4).

2. The court is to consider: i) work counsel has done identifying/investigating the claims; ii) counsel’s experience and knowledge of the applicable law; iii) the resources available to counsel; and (iv) “any other matter pertinent to counsel’s ability to fairly and


adequately represent the interests of the class.” Fed. R. Civ. P. 23(g). The court may seek information on such issues as fees and costs. Id.

G. Rule 23(g)(1)(B) – relationship between plaintiffs’ counsel and class

1. Rule 23(g)(1)(B) provides that “[a]n attorney appointed to serve as class counsel must fairly and adequately represent the interests of the class.” Id.

(a) Advisory Committee contemplated a change to class counsel’s relationship with the class representative. “Appointment as class counsel means that the primary obligation of counsel is to the class rather than to any individual members of it. The class representatives do not have an unfettered right to ‘fire’ class counsel. In the same vein, the class representative cannot command class counsel to accept or reject a settlement proposal. To the contrary, class counsel must determine whether seeking the court’s approval of a settlement would be in the best interests of the class as a whole.”

(b) New Rule 23(g)(1)(B) may preclude unrealistic class representatives from holding settlement negotiations hostage, and may release defense counsel from any obligation to tailor settlement proposals to meet the unique demands of the class representative.

(c) Because Rule 23(g)(1)(B) compels class counsel to determine whether any proposed settlement “would be in the best interests of the class as a whole,” class counsel are arguably required to contemplate settlement proposals that fairly compensate a substantial portion of the class, even if such proposals do not fully compensate a minority of plaintiffs who claim to have suffered damages greater than the average class member.

H. Rule 23(h) – fee requests

1. By its terms incorporates the procedures of Rule 54(d)(2), but adds additional provisions to respond to unique fee concerns arising in the class action context.

2. Expressly limited to fee requests in an “action certified as a class action.”

3. Standing to object to motions for attorney fee awards is limited to the defendants, or class members from whom payment is sought. “Other parties – for example, nonsettling defendants – may not object because they lack a sufficient interest in the amount the court awards.” See Advisory Committee Note to Fed. R. Civ. P. 23(h)(2).


4. “This subdivision does not undertake to create new grounds for an award of attorneys’ fees or nontaxable costs.” Id. As to “common fund” fee awards, “[t]he rule does not attempt to resolve the question whether the lodestar or percentage approach should be viewed as preferable.” Id.

5. Through and including 8/31/05.

Documents

ERISA CLASS A - Morgan Lewis