Lead Opinion
ON PETITION FOR REHEARING
The petition for panel rehearing is DENIED, and no judge in regular active service having requested that the court be polled on rehearing en banc, the petition for rehearing en banc is DENIED. The opinion,
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In what may be the ultimate negative value class action lawsuit,
I.
This is a consolidаtion of civil rights actions against three life insurance companies: Monumental Life Insurance Company (“Monumental”), American National Insurance Company (“ANICO”), and Western and Southern Insurance Company (“Western and Southern”). Plaintiff policyowners, all of whom are black, allege that, for decades, defendants discriminated against them in the sale and administration of low-value life insurance policies, known as industrial life policies,
Plaintiffs allege two overtly discriminatory practices. First, they accuse defendants of placing blacks in industrial policies offering the same benefits as do pоlicies sold to whites, but at a higher premium (dual rates). Second, defendants allegedly placed blacks in specially-designed substandard industrial policies providing fewer or lower benefits than do comparable plans sold to whites (dual plans). These practices are memorialized in the insurer’s rate books and records, which explicitly distinguish dual rate and dual plan policies by race.
Defendants state that they issued “hundreds, perhaps thousands, of different industrial life insurance products” encompassing a countless variety of underwriting standards. It is undisputed that all companies that sold dual rate or dual plan policies have not done so since the early 1970’s. Also, as early as 1988, some insurers voluntarily adjusted premiums and/or death benefits to equalize the amount of coverage per premium dollar. Still, plaintiffs estimate that over 4.5 million of the 5.6 million industrial policies issued by defendants remain in-force; many other policies have been terminated, surrendered, or paid-up without remediation.
Plaintiffs sued for violations of 42 U.S.C. §§ 1981 and 1982, seeking (1) an injunction
Plaintiffs moved for certification of a class pursuant to rule 23(b)(2), requesting that class members be provided notice and opt-out rights. The district court denied certification, finding that plaintiffs’ claims for monetary relief predominate over their claims for injunctive relief, making rule 23(b)(2) certification inappropriate. The court also found that, given the large number of companies and policies involved, individualized hearings were necessary to determine damages and whether claims were barred by the statute of limitations. Defendants sought, and this court granted, interlocutory review pursuant to Fed. R.Civ.P. 23®.
II.
Defendants contend that class members cannot be readily identified by way of the class definition. A precise class definition is necessary to identify properly “those entitled to relief, those bound by the judgment, and those entitled to notice.” 5 James W. MooRE et al., MooRe’s Federal PRACTICE § 23.21[6], at 23-62.2 (3d ed.2003); see DeBremaecker v. Short,
Plaintiffs sought to certify a class comprised of “[a]ll African-Americans who own, or owned at the time of policy termination, an industrial life insurance policy that was issued as a substandard plan or at a substandard rate.” Defendants argue that the plain language of that definition does not comport with the class plaintiffs seek to certify. As we have noted, before moving for certification plaintiffs had included not only blacks who had purchased dual rate or dual plan policies, but also blacks who allegedly were forced into substandard plans, or forced to pay substandard rates, through the use of non-racial underwriting factors.
In their motion for certifiсation, plaintiffs narrowed the class, stating that “[t]he proposed class does not include those who may have been subjected to covert socioeconomic forms of racial discrimination.” Plaintiffs specified that “the term ‘substandard’ applies to overt race-distinct dual premiums and plans, not to policies called substandard because of other factors such as socio-economic underwriting.”
We agree with defendants’ observation that, as written, the class definition includes all blacks who paid substandard
Holding plaintiffs to the plain language of the class definition would be overly formalistic. In the first place, the district court, in denying certification, apparently did not consider the pretextual claims as part of the proposed class. Though referring to the “mass of policies involved” and the “differing underwriting practices among some 280 companies,” the court stated that in calculating damages, individualized hearings were necessary to account for the idiosyncracies of each policy. At no point did the court suggest that individualized hearings were necessary to determine liability, as would be necessary if pretextual underwriting claims were part of the class.
Second, holding plaintiffs to the plain language of their definition would ignore the ongoing refinement and give-and-take inherent in class action litigation, particularly in the formation of a workable class definition. District courts are permitted to limit or modify class definitions to provide the necessary precision.
Defendants also argue that the definition terms “own, or owned,” “industrial life insurance policy,” “substandard plan,” and “substandard rate” are ambiguous, further complicating identification of class members. This argument, too, is overly formalistic. See Forbush,
Plaintiffs’ filings in the district court clarified any ambiguities by stating that “the class is limited to industrial policies sold at a substandard (i.e., higher) rate for African-Americans and a lower rate for Caucasians, or as a substandard plan (i.e., a more costly plan) for African-Americans and a corresponding less expensive plan for Caucasians.” Plaintiffs define industrial life insurance policies as “(1) policies labeled as ‘industrial’ or (2) those policies with a face amount of less than $2,000.00 and weekly or monthly home premium collection.” Defendants were provided adequate notice and discovery by which to argue that the narrowed class cannot be certified pursuant to rule 23(b)(2).
III.
We review for abuse of discretion the denial of class certification. Jenkins v. Raymark Indus.,
All classes must satisfy the four baseline requirements of rule 23(a): numerosity,
A.
The court observed that “many” proposed class members — -those whose policies have lapsed, those whose policies have already been voluntarily adjusted by defendants, and thosе whose death benefits already have been paid — would not benefit from injunctive relief. The court concluded that “this is a case in which individuality overrides any bland group-think, and money becomes the prime goal ... not injunctive relief.” Rule 23(b)(2) certification is improper, the court held, where the class’s request for injunctive relief merely serves as a bootstrap for a claim of monetary damages.
In Allison, we carefully explained the statement in the advisory committee notes that rule 23(b)(2) certification “does not extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages.” Fed.R.Civ.P. 23 advisory committee notes (emphasis added).
Instead, Allison looked to the nature of the rule 23(b)(2) device in defining when monetary relief predominates. That rule’s focus on injunctive and declaratory relief presumes a class best described as a “homogenous and cohesive group with few conflicting interests among its members.” Id. at 413. Class certification centers on the defendants’ alleged unlawful conduct, not on individual injury. Once monetary damages enter the picture, however, class cohesiveness is generally lost, because “[mjonetary remedies are more often related directly to the disparate merits of individual claims.” Id. (citations omitted). Where the need to address the merits of
In Allison, therefore, we held, id. at 415, that monetary 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.”
Of course, certification undеr rule 23(b)(2) is appropriate only if members of the proposed class would benefit from the injunctive relief they request. The question whether the proposed class members are properly seeking such relief is antecedent to the question whether that relief would predominate over money damages.
In Bolin v. Sears Roebuck & Co.,
Here, by contrast, defendants’ and plaintiffs’ experts estimate that between one million and 4.5 million of 5.6 million issued policies remain in-force. Although the exact number of class members continuing to pay discriminatory premiums is unknown, the proportion is sufficient, absent contrary evidence from defendants, that the class as a whole is deemed properly to be seeking injunctive relief.
B.
Bolin reflects a concern that plaintiffs may attempt to “shoehorn damages actions into the Rule 23(b)(2) framework, depriving class members of notice and opt-out protections.”
As “fundamental requisites of the constitutional guarantees of procedural due process,” Bisen v. Carlisle & Jacquelin,
On the other hand, there is no absolute right of opt-out in a rule 23(b)(2) class, “even where monetary rеlief is sought and made available.” Penson,
Allison’s statement that monetary relief may predominate where notice and opt-out are necessary reflects only the inescapable fact that such safeguards are most appropriate where individual issues diminish class 'cohesiveness. Then, conflicts among class members and issues of adequate representation are most likely to surface. Rule 23(b)(3) is the default vehicle for certification, but only because notice and opt-out rights are mandatory components. A district court is empowered by rule 23(d)(2) to provide notice and opt-out for аny class action, so rule 23(b)(2) certification should not be denied on the mistaken assumption that a rule 23(b)(3) class is the only means by which to protect class members.
All of this further demonstrates the futility of the district court’s and dissent’s inquiry as to whether the “prime goal” of the class is injunctive or monetary relief. The rule 23(b)(2) predominance requirement, by focusing on uniform relief flowing from defendants’ liability, “serves ’ essentially the same functions as the procedural safeguards and efficiency and manageability standards mandated in (b)(3) class actions.” Allison,
IV.
Applying Allison’s predominance test, the district court determined that the requested monetary relief does not flow from liability to the class as a whole. The court stated that “many and a variety of hearings would be required to determined personalized harm to each individual plaintiff because of the mass of policies involved, differing underwriting practices among some 280 companies, differing built-in benefits, account dividends, and age at policy issuance.”
A.
Plaintiffs contend they seek equitable restitution in the form of a constructive trust for class members who no longer have in-force policies. By characterizing this relief as equitable, plaintiffs hope to demonstrate that that relief is inherently compatible with rule 23(b)(2) certification, thereby avoiding Allison’s monetary predominance inquiry. Defendants arguе that plaintiffs, who never used the term “constructive trust” in the district court, are trying to “re-package” their straightforward request for damages.
Equitable monetary relief is compatible with a rule 23(b)(2) class.
It would be mistaken tо presume that because backpay — a remedy readily calculable on a classwide basis — is compatible with a rule 23(b)(2) class, any other remedy designated as equitable may automatically piggyback a claim for injunctive relief. To be sure, equitable monetary remedies are less likely to predominate over a class’s claim for injunctive relief, but this has more to do with the uniform character of the relief rather than with its label. Therefore, rather than decide whether plaintiffs’ claim for restitution is legal or equitable in nature, we apply Allison and examine whether the claim predominates over the request for injunctive relief.
B.
This is not a case in which class members are entitled to a one-size-fits-all re
Plaintiffs propose using standardized formulas or restitution grids to calculate individual class members’ damages. Defendants counter that “thousands” of grids must be constructed to account for the myriad of policy variations. That may be so, but the monetary predominance test dоes not contain a sweat-of-the-brow exception. Rather, we are guided by its command that damage calculation “should neither introduce new and substantial legal or factual issues, nor entail complex individualized determinations.” Allison,
In the list of policy variables cited by defendants and the district court, none requires the gathering of subjective evidence.
We are well aware that, as Allison qualifies,
Finally, defendants’ records contain the information necessary to determine disparities between, on the one hand, dual rate and dual plan policies, and on the other hand, plans sold to whites. Damage calculations do not require the manipulation of data kept outside defendants’ normal course of business. Defendants’ complaints to the contrary are belied by the fact that, since 1988, many policies have been adjusted to account for racial disparity-
V.
As noted, defendants have not sold dual plan or dual rate policies since the 1970’s; some class members purchased their policies as far back as the 1940’s. The district court denied certification also on the basis that individualized hearings are necessary to determine expiration of the statute of limitations for particular sets of policies. The predominance of individual issues necessary to deсide an affirmative defense may preclude class certification. Castano,
Although, under §§ 1981 and 1982, state law governs the substantive limitations period, federal law determines when the period accrues. Perez v. Laredo Junior Coll.,
Doubtless most class members, the majority of whom are poor and uneducated, remain unaware of defendants’ discriminatory practices. Of the thirteen representative plaintiffs, defendants point to only one, Jo Ella Brown, whose claim may have expired because of actual knowledge of defendants’ practices.
To hold that each class member must be deposed as to precisely when, if at all, he learned of defendants’ practices would be tantamount to adopting a per se rule that civil rights cases involving deception or concealment cannot be certified outside a two- or three-year period.
Instead, defendants rely on a theory of constructive notice, arguing that widespread media reporting of the issue over the last several decades should have “excite[d] the inquiry of a reasonable person.” Conmar Corp. v. Mitsui & Co. (U.S.A.), Inc.,
Whether the media reports were sufficiently publicized so as to provide constructive notice is an issue reserved for the merits. Our analysis is limited to whether this issue is determinable on a classwide basis. Had defendants provided evidence — or even alleged — that media treatment of this issue was more prevalent in some regions of the country than in others, the district court’s observation that individualized hearings are required to determine the geographic reach of constructive notice might be sustainable.
The requirement of “widespread publicity,” McGovern,
The order denying class certification is REVERSED, and this matter is REMANDED for further proceedings consistent with this opinion. We express no view on the district court’s ultimate decision whether to certify in light of today’s opinion, nor do we opine on the ultimate merits of the substantive claims.
Notes
. A "negative value” suit is one in which class members' claims "would be uneconomical to litigate individually.” Phillips Petroleum v. Shutts,
. Defendants defend this practice on the basis that (1) the race-distinct pricing was justified; (2) the practice was approved by regulators; (3) the racially discriminatory policies were no more profitable than were those sold to whites; and (4) some of the discriminatory policies were remediated.
. Over the years, defendants have acquired other insurance companies and thereby assumed blocks of in-force insurance policies issued by them. Monumental currently administers policies issued by 200 different companies, while Western and Southern administers policies issued by approximately 80 companies. ANICO has assumed an indeterminate number of in-force policies.
. As an example, a 1962 ANICO rate book shows that, for a twenty-year-old black, a $500 "20 Pay Life” industrial policy charged a weekly premium of $0.41, while a twenty-year-old white paid only $0.32.
. Plaintiffs allege that Monumental has not adjusted any of its dual rate or dual plan policies. ANICO adjusted one of its four discriminatory "Standard No. 3 plans.”
. See Battle v. Commonwealth,
. See, e.g., Robidoux v. Celani,
. The district court noted that "oral argument unveiled serious adequacy of representation issues,” but did not rely on this basis in denying certification.
. Allison,
.But see Molski v. Gleich,
. The predomination requirement serves two basic purposes, namely the interests of class members who may wish to pursue monetary claims individually, and interests of judicial economy. Allison,
. Bolin,
. Allison,
. See Jefferson v. Ingersoll Int’l, Inc.,
. One of the dissent's two reasons for finding class certification inappropriate concerns our supposed "suggestion” that notice and opt-out rights are necessary. In Allison,
.Our view that the rule 23(b)(2) and (b)(3) devices may work in tandem is strengthened by the roots of subdivision (b)(2), which was added "to Rule 23 in 1966 primarily to facilitate the bringing of class actions in the civil rights area.” 7A Charles A. Wright et al„ Federal Practice and Procedure § 1775, at 470 (2d ed.1986). Before its adoption, the rules made no explicit reference to class actions involving injunctive or declaratory relief, and "there was some uncertainty whether a class action seeking one of those remedies was an
. See Allison,
. Had plaintiffs not limited their proposed class to dual rate and dual plan policies, individual hearings would be necessary to determine whether pretextual underwriting practices were used to force the respective class members into substandard plans. In that instance, we agree with the district court that the large number of defendants and underwriting practices would be relevant to finding the predominance of monetary damages.
. In this sense, the instant case is unlike O’Sullivan v. Countrywide Home Loans, Inc.,
.One is left wondering in what circumstances (if any) the dissent would permit monetary damages in a rule 23(b)(2) class. Remarkably, the dissent makes no attempt to explain its view that insurance policy factors such as premium rate, issue age, and benefits pаid are based on “intangible, subjective differences.” Allison,
. E.g., Harris v. Hegmann,
. The district court's reliance on Barnes v. Am. Tobacco Co.,
Dissenting Opinion
dissenting:
It is a factual determination that relief sought relates predominantly to money damages. Allison v. Citgo Petroleum Corp.,
The majority seems to muddle these distinct standards of review. The majority engages in de novo factfinding as it reviews the district court’s determination that the relief sought relates predominantly to money damages. The majority does so with regard to two of the district court’s findings: (1) that money damages do not flow from liability to the class as a whole; and (2) that a predominant proportion of the class does not seek injunctive relief. In setting aside these factuаl findings, the majority fails to show that the district court has committed clear error.
The majority acknowledges that “the district court determined that the requested monetary relief does not flow from liability to the class as a whole,” and further accedes that “it is arguable” that the damages calculations “involve[] the sort of complex data manipulations forbidden by Allison. ...” Nevertheless, the majority concludes that class certification is proper merely because “variables common to the class” exist. In effect, the majority identifies a reason supporting the district court opinion' — the appearance of complex damages calculations — and a reason contravening that opinion — the existence of variables common to the class. The majority then prоceeds to credit the latter reason as being more credible than the former. Yet although the majority does cite this reason for its factual determination, it fails to show that the district court’s finding rises to the level of clear error. Given the fact that the damages calculations appear complex, the alleged inconsistent reason does not imply 'that the court abused its discretion.
The second finding of fact that the majority reviews de novo concerns the proportion of injunctive-relief beneficiaries. The majority concludes that the proportion of injunctive-relief beneficiaries predominates the class. This is a necessary determination to grant certification under Rule 23(b)(2). See Bolin v. Sears, Roebuck & Co.,
Here, the Plaintiffs allege that the proportion of injunctive-relief beneficiaries constitutes over 80% of the class, whereas the Defendants assert that the proportion is only 18%. After conducting a hearing, the district court opined that the “true central relief sought by the plaintiffs [was] for monetary damages.”
Unlike the finding of the district court, the majority credits the Plaintiffs’ factual assertion. Were the majority to have credited only the Defendants’ estimate of 18%, it would not have been able to declare that “the proportion is sufficient”; it would
Furthermore, even if it were unclear whether the district court only сredited the Defendants’ factual assertion, this would be no cause for the majority to give weight to the Plaintiffs’ assertion. Because the underlying factual issue of proportionality is central to the ultimate question of fact, this Court should have at least remanded this case for clarification.of this proportionality issue. On remand, the district court could specify whether it in fact did credit the Plaintiffs’ assertion. A district court, rather than an appellate court, is the proper judicial forum to make findings of fact. The majority’s crediting of the Plaintiffs’ factual assertion regarding the proportion of injunctive-relief beneficiaries is unwarranted.
Under the applicable abuse-of-discretion standard, the majority’s determination that the Plaintiffs’ claims for money damages do not predominate is unjustified appellate factfinding. I respectfully dissent.