IN RE: VALERIE R. WHITE, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, ET AL.
No. 22-8001
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
April 4, 2023
Argued November 15, 2022
On Petition for Permission to Appeal Pursuant to
Stephen R. Bruce argued the cause and filed the briefs for petitioners.
Jonathan K. Youngwood argued the cause and filed the brief for respondents.
Before: SRINIVASAN, Chief Judge, MILLETT, Circuit Judge, and EDWARDS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge MILLETT.
White now seeks permission under
I
A
B
Valerie White is a former Hilton employee who alleges that Hilton wrongfully denied her vested retirement benefits. Specifically, White argues that both the Employee Retirement Income Security Act of 1974 (ERISA),
Eva Juneau is a former Hilton employee who spent some of her employment years at what Hilton terms a non-participating Hilton property, which is an affiliated business where employment does not count toward a Hilton retirement plan. Juneau only qualifies for vested retirement benefits if Hilton counts service at its non-participating properties, which Juneau argues Hilton is bound to do by both ERISA and precedent.
Peter Betancourt is the son of Pedro Betancourt, who worked for Hilton for more than 30 years, but died without ever receiving retirement benefits from the company. This is because Hilton only recognized that it owed Pedro Betancourt retirement benefits when it was forced to review its records as part of a separate class action lawsuit against it. By that time, both Pedro and his wife, Peter Betancourt‘s mother, had passed. Still, when Peter Betancourt pursued a vesting claim on behalf of his late father, Hilton denied it because Peter was neither a beneficiary nor the surviving spouse of a beneficiary. Peter Betancourt asserts that denial violated ERISA.
White, Juneau, and Betancourt (collectively, White) brought this putative class action under ERISA challenging Hilton‘s denials of retirement benefits to themselves
In September 2018, the district court summarily denied without prejudice White‘s initial motion to certify a class action pending its disposition of White‘s motion to amend the complaint because any amendment could affect the contours of a class certification order. Order at 2-3, White v. Hilton Hotels Ret. Plan, No. 16-00856 (D.D.C. Sept. 28, 2018). The district court ultimately denied the motion to amend, but it granted White‘s request for leave to file a renewed motion for certification.
White then filed a renewed motion for class certification under
[A]ny and all persons who:
(a) Are former or current employees of Hilton Worldwide, Inc. or Hilton Hotels Corp., or the surviving spouses or beneficiaries of former Hilton employees;
(b) Submitted a claim for vested retirement benefits from Hilton under the claim procedures ordered by the District Court and the Court of Appeals in Kifafi, et al., v. Hilton Hotels Retirement Plan, et al., C.A. 98-1517; and
(c) Have vested rights to retirement benefits that have been denied by the Hilton Defendants‘:
(1) [u]se of fractional years of vesting service under an elapsed time method to count periods of employment before 1976 with no resolution of whether the fractions constitute a year of service under ERISA;
(2) [r]efusal to count non-participating service for vesting purposes notwithstanding that the service was with the employer under ERISA § 3(5), that the Hilton Defendants counted service at the same Hilton Properties in Kifafi and represented to this Court and the D.C. Circuit in Kifafi that Hilton had counted non-participating service with Hilton for vesting, and that the records requested and received from Defendants do not identify any non-participating property that is also not a Related Company; and
(3) [d]enial of retroactive/back retirement benefit payments to heirs and estates on the sole basis that the claimants are not the surviving spouse of deceased vested participants.
Proposed Order on Class Certification, White v. Hilton Hotels Ret. Plan, No. 16-00856 (D.D.C. Jan. 31, 2020).
The district court declined to certify that class, but expressly did so without prejudice to a renewed motion to certify. The chief flaw identified by the district court was that the class definition was impermissibly fail-safe[.] White v. Hilton Hotels Ret. Plan, No. 16-00856, 2020 WL 5946066, at *3 (D.D.C. Oct. 7, 2020) (hereinafter White I). In particular, the court objected to language that defined the class as those individuals who have vested rights to retirement benefits that have been denied, given that whether retirement rights had vested was an issue to be resolved in the case. Id.
The district court afforded White a final opportunity to renew [the] motion for class certification in a manner that would cure the fail-safe problem in the class definition. White I, 2020 WL 5946066, at *1. The court also discussed additional impediments
White then filed an amended motion to certify. That motion edited the class definition to include individuals who:
(a) Are former or current employees of Hilton Worldwide, Inc. or Hilton Hotels Corp., or the surviving spouses or beneficiaries of former Hilton employees;
(b) Submitted a claim for vested retirement benefits from Hilton under the claim procedures ordered by the District Court and the Court of Appeals in Kifafi, et al. v. Hilton Hotels Retirement Plan, et al., C.A. 98-1517; and
(c) Have been denied vested rights to retirement benefits that have been denied by the Hilton Defendants‘:
(1) [u]se of fractional years of vesting service under an elapsed time method to count periods of employment before 1976 with no resolution of whether fractions constitute a year of service under ERISA;
(2) [r]efusal to count non-participating service for vesting purposes notwithstanding that the service was with the ‘employer’ under ERISA § 3(5) a hotel property that Hilton operated under a management agreement, that the Hilton Defendants counted service at the same Hilton Properties in Kifafi and represented to this Court and the D.C. Circuit in Kifafi that Hilton had counted non-participating service with Hilton for vesting, and that the records requested and received from Defendants [do] not identify any non-participating property that is also not a Related Company; and
(3) [d]enial of retroactive/back retirement benefit payments to heirs and estates on the sole basis that the claimants are not the surviving spouse of deceased vested participants.
White II, 2022 WL 1050570, at *2-3.
The district court denied White‘s motion to certify on the ground that the proposed class definition remained impermissibly fail-safe. White II, 2022 WL 1050570, at *4. The court added that other
Fourteen days after the denial of class certification, White filed with this court a petition under
II
The district court had jurisdiction under
III
At the outset, we must determine whether entertaining this interlocutory
Once a timely request for review is filed, the court of appeals may exercise its discretion to hear the appeal on the basis of any consideration that the court of appeals finds persuasive.
This court adopted a framework for analyzing such requests in In re Lorazepam & Clorazepate Antitrust Litig., 289 F.3d 98 (D.C. Cir. 2002). There, we emphasized that interlocutory appeals are generally disfavored as ‘disruptive, time-consuming, and expensive’ for both the parties and the courts, and expressed concern that an overly generous approach could lead to micromanagement of complex class actions as they evolve in the district court and inhibition of the district court‘s willingness to revise the class certification for fear of triggering another round of appellate review. Id. at 105 (quoting Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 294 (1st Cir. 2000)).
Given those concerns, this court ruled that
Because the
A
White‘s petition for review was timely. The district court entered its order denying class certification with prejudice on March 22, 2022, and White filed the petition for review on April 5, 2022, squarely within the fourteen-day time limit set by
To be sure, the district court had entered two earlier orders denying class certification without prejudice. See Order at 3, White v. Hilton Hotels Ret. Plan, No. 16-00856 (D.D.C. Sept. 28, 2018); White I, 2020 WL 5946066. But the district court was explicit in those orders that it had not yet conclusively resolved the class certification question. The first order simply recognized that a ruling on class certification would put the cart before the horse as the court had not yet ruled on a pending motion to amend the complaint. Order at 2-3, White v. Hilton Hotels Ret. Plan, No. 16-00856 (D.D.C. Sept. 28, 2018).
In both instances, the district court made clear that it was not yet done deciding the class certification question, and that it wished to afford White a fair opportunity to formulate a class definition that could pass
Hilton nonetheless argues that the petition was untimely. It reasons that the final March 22 order denying certification left class action status unchanged from what was determined by [the] prior order of October 7, 2020, and that [a] later order that does not change the status quo will not revive the [fourteen]-day time limit. Hilton Br. 17-19 (citing In re DC Water & Sewer Auth., 561 F.3d 494, 496 (D.C. Cir. 2009)); see generally Strange on Behalf of Strange v. Islamic Republic of Iran, Interest Section, 964 F.3d 1190, 1196-1197, 1202 (D.C. Cir. 2020) (for a
But the status quo did change between the October 2020 and March 2022 orders. The district court had not decided in its October order that a class could not be certified or that the problems with White‘s proposed class definition could not be cured. It ruled in that order only that the definition of the class needed to be adjusted and some other concerns addressed before a class could be certified. In the district court‘s words, the order afforded White a final opportunity to renew [the] motion for class certification. White I, 2020 WL 5946066, at *1. So no definitive decision on class certification was made until the final order on March 22, 2022. That is a material difference.
Even more to the point, White changed the class definition after the October 2020 order. It was that new class definition that the district court considered and rejected for the first time in the March 2022 order of which White seeks review. And in denying that motion for class certification, the district court significantly changed the litigation status quo by definitively ending the prospect of class action status. In short, what matters is that, prior to the March 2022 order, the district court had not yet made up its mind whether a proper class could be certified in the case. In the March 2022 order, it confronted a new proposed class definition and, in rejecting it, the court closed the door on class certification.
Nothing in DC Water says otherwise. In DC Water, there was only one order ruling on class certification. See id. at 496. The defendant then moved for reconsideration, which the district court denied six months later. About seven months after the denial of the motion for reconsideration, the defendant filed a Motion to Clarify the Relevant Class Members for Notice Purposes. Id. at 495. The district court summarily denied this last motion, and that is the decision for which the defendant sought
In this case, by contrast, the March 2022 order was indisputably a denial of class certification within the plain meaning of
Reading
Think about it: Had White appealed after the first order denying certification, there would have been no reasoning by the district court for us to review and any ruling would have been hopelessly premature. Had White appealed after the second certification order, the district court‘s constructive efforts to work through the difficult class-certification questions and to fully consider the possible class definitions would have been derailed. Neither the text of
B
Timeliness is necessary for White to be eligible for interlocutory review, but it is not sufficient. This circuit also requires those seeking interlocutory review to demonstrate a persuasive reason for appellate intervention at this early juncture. Lorazepam, 289 F.3d at 102 (quoting
Turning to Lorazepam‘s traditional factors, White‘s petition falls squarely within the second category of generally appropriate interlocutory petitions: Whether the district court properly adopted a rule against fail-safe classes is an unsettled, recurring, and fundamental issue of law relating to class actions, important both to the specific litigation and generally, and one that is likely to evade end-of-the-case review. Lorazepam, 289 F.3d at 105.
To start, the question whether
And no less so to class action litigation in general. While this court has not yet considered the question, nine other federal
Our district courts appear to be divided on the issue as well. Compare White II, 2022 WL 1050570, at *4, with Ramirez v. United States Immigr. & Customs Enf‘t, 338 F. Supp. 3d 1, 49 (D.D.C. 2018) ([I]t is not clear why Defendants might be harmed or at all disadvantaged by Plaintiffs’ reliance on a fail-safe class definition[.]), and Afghan & Iraqi Allies Under Serious Threat Because of Their Faithful Service to the United States v. Pompeo, 334 F.R.D. 449, 464 (D.D.C. 2020) (rejecting defendant‘s fail-safe argument as strain of implied ascertainability requirement that this circuit has never addressed). Perhaps that is why the district court in this case expressed the view that the fail-safe issue is the kind of fundamental question of class action law that it would be appropriate and helpful for this court to address. See Order at 3, White v. Hilton Hotels Ret. Plan, No. 16-00856 (D.D.C. April 13, 2022).
In addition, the fail-safe question is likely to evade end-of-the-case review.
To start, if the case is required to go forward as an individual action and the named plaintiffs prevail, they will have little incentive to bear the risk and expense of appealing the class certification denial. Especially since—even if they win on the merits and even if they also then win an appeal of the class certification decision—they would face the risk that the district court would find that their already-resolved claims are not typical of the other putative class members’ or that they can no longer fairly and adequately represent the class given their different procedural posture. See
To be sure, we have held that a would-be class plaintiff who settles claims retains an interest in appealing a denial of class certification if an interest in spreading the costs of litigation remains. Richards, 453 F.3d at 529; see United States Parole Comm‘n v. Geraghty, 445 U.S. 388, 404-407 (1980). But that interest in shared expenses is a
Of course, it is not inconceivable that a hearty plaintiff would assume the risk and successfully hurdle all of those obstacles. But the question under Lorazepam is not whether end-of-case review is impossible, only whether it is not likely[.] 289 F.3d at 105.2
For similar reasons, if the named plaintiffs lost their claims on the merits in individual litigation, they would have to possess the resources to continue litigating and also win the merits question on appeal to have any prospect of having the class certification question also reviewed. Otherwise, a merits loss on appeal will make consideration of the class-certification question academic. Nor could they viably choose to appeal just the important and fundamental class-certification question because, with the adverse merits ruling unchallenged, then the law of the case or principles similar to collateral estoppel could (again) make the typicality and adequacy-of-representation factors daunting hurdles to their class action going forward, see
Nor, even assuming a defendant could challenge the class certification on appeal if liability is found, could we hold that an issue is subject to meaningful end-of-case review when only the defendant, and not the plaintiff, will be able to seek that review later. To be sure, it might be possible for unnamed class members to intervene and appeal the class-certification question. See In re Brewer, 863 F.3d 861, 868 (D.C. Cir. 2017). But Hilton has made no argument that intervention by absent class members is viable in this case. And even if there were reason to think intervention might occur, the nature of the fail-safe legal question at issue here is likely to evade meaningful end-of-case review anyhow.
The very character of the fail-safe legal question exists most critically at the early class-certification stage of a case. The crux of the fail-safe critique is that a proposed class definition impermissibly depends on a determination on the merits of the case, so that class membership cannot be effectively identified and represented until the litigation ends. For example, a class defined to include all those discriminated against illegally relies critically on a merits determination to set the contours of class membership. But at the class certification stage, a determination on the merits is far down the road, while the need to identify the class for procedural and substantive purposes is immediate. See, e.g.,
That presumably is why eight of the nine other circuits to have addressed the fail-safe issue—including the two circuits whose approach to
Finally, we note that the Lorazepam scenarios are neither rigid categories nor exhaustive of the situations for which
IV
We review class certification decisions for an abuse of discretion. Califano v. Yamasaki, 442 U.S. 682, 703 (1979); Garcia v. Johanns, 444 F.3d 625, 631 (D.C. Cir. 2006). A material error of law is always an abuse of discretion. Koon v. United States, 518 U.S. 81, 100 (1996) (A district court by
We hold that the court abused its discretion by denying the amended class certification motion based on a stand-alone and extra-textual rule against fail-safe classes, rather than applying the factors prescribed by
A
B
Courts have identified two main problems with certifying a so-called fail-safe class, the membership of which depends on the merits. First, if membership in a class depends on a final resolution of the merits, it is administratively difficult to determine class membership early on. See Jamie S. v. Milwaukee Pub. Schs., 668 F.3d 481, 492-497 (7th Cir. 2012). Second, if the only members of fail-safe classes are those who have viable claims on the merits, then class members either win or, by virtue of losing, are defined out of the class, escaping the bars of res judicata and collateral estoppel. See Young, 693 F.3d at 538. Heads they win; tails the defendant lose—at least, that is the concern.
To illustrate, for a class definition that encompasses all those whom Company X defrauded, the defrauded addendum makes the definition circular. That is, whether or not certain actions constitute fraud, a tortious activity for which Company X would be subject to liability, is just what the litigation is meant to find out. As for res judicata effect, if a defendant is found not to have defrauded anyone, then there would be no class members at all. Every erstwhile class member would, after the merits determination, become a stranger to the case who would not be bound by that litigation loss.
Those concerns are understandable. In practice, though, a fail-safe class definition is only truly troubling to the extent it hides some concrete defect with the class.
Start with
Similarly, a circular class definition could reveal the lack of a genuinely common issue of law or fact. See
Typicality too should be a hard hill to climb if the named plaintiffs might not be members of the class come final judgment. See
All that is to say that the protocol for determining if a class definition is proper is to apply the terms of
For those rare cases (if any) in which a truly fail-safe class hurdles all of
Or consider the class all associates employed by Law Firm Y from 2021 to 2023 who were denied their contractual bonus because Law Firm Y refused to credit pro bono hours. While the parties may litigate on the merits whether the associates had any contractual right to a bonus, any fail-safe issues at the certification stage could be addressed by simply rephrasing as a counterfactual—that is, who would have received their contractual bonus if Law Firm Y credited pro bono hours.
In summary, the textual requirements of
V
The district court in this case bypassed
So ordered.