The Ninth Circuit has made it substantially easier to certify a class action that seeks injunctive and monetary relief under Rule 23(b)(2), and courts are applying this new standard to certify class actions in consumer cases. Find out what you can do to protect against class actions brought under this new standard.
By its terms, Rule 23(b)(2) permits a court to certify claims “for injunctive or corresponding declaratory relief.” The rule traditionally has been used in civil rights and discrimination cases where the primary goal of the litigation is to end or modify a broadly applied policy or institutional practice.
To certify a class under Rule 23(b)(2), the plaintiff does not have show “predominance” or “superiority” – the elements defendants typically focus on to defeat class certification. A Rule 23(b)(2) class also does not require notice to class members.
Although the text of the rule is limited to cases seeking injunctive or declaratory relief, some courts have relied on an Advisory Committee Note to hold that courts may rely on Rule 23(b)(2) to certify some classes seeking money. Until recently, courts generally limited this exception to cases seeking “incidental” damages, defined as monetary relief that flows directly from liability, to the class as a whole, on the claims forming the basis for injunctive or declaratory relief. See, e.g., Allison v. Citgo Petroleum Corp., 151 F.3d 402, 415 (5th Cir. 1998). The most frequent use of this exception has been in labor cases seeking back pay and other monetary relief flowing directly from the alleged violation.
The Recent Cases
In two recent decisions, the Ninth Circuit has developed a new, broader standard that applies not only to labor and employment cases, but also consumer class actions and products cases.
In Dukes v. Walmart Stores, Inc., 603 F.3d 571 (9th Cir. 2010), the Ninth Circuit held that monetary claims can be certified under Rule 23(b)(2), provided the case does not seek monetary damages that are “superior in strength, influence or authority to injunctive and declaratory relief” being sought. Id. at 615. In other words, if the injunctive relief predominates or is at least of equal importance, the class may be certified under Rule 23(b)(2). To determine whether monetary damages predominate, Dukes instructs district courts to consider factors such as “whether the monetary relief sought determines the key procedures that will be used,” whether it “introduces new and significant legal and factual issues” or whether its size and nature raise “due process and manageability concerns.” Id. at 615-16.
In Wang v. Chinese Daily News, -- F.3d --, 2010 WL 3733568 (9th Cir. Sept. 27, 2010), the Ninth Circuit underscored the point made in Dukes. The court reiterated that Rule 23(b)(2) only requires that “claims for monetary relief not predominate over claims for injunctive relief.” Id. at *6. Because the plaintiffs were seeking to enjoin a set of longstanding employment practices and sought monetary relief for employees injured by those practices, the court held that the monetary claims did not predominate and certification under Rule 23(b)(2) was proper. Id. at **6-7.
Using Rule 23(b)(2) to Certify Consumer Class Action
A recent decision highlights the risk created by the new class certification standard set forth in Dukes and Wang. The case of In re Conseco Life Insurance Company Lifetrend Insurance Sales and Marketing Litigation, 2010 WL 3931096 (N.D. Cal. Oct. 6, 2010), is a classic consumer class action. Plaintiffs are challenging the defendant’s administration of insurance policies, claiming that attempts to collect premiums under the terms of the policy constitute breach of contract and fraud.
The court recently certified a nationwide class of policyholders, relying on the rule set forth in Dukes and Wang that a Rule 23(b)(2) class may be certified unless the monetary relief predominates over injunctive relief or declaratory relief. In a notably brief discussion, the court concluded that the request for damages was “minor” in comparison to the injunctive and declaratory relief sought, making certification under Rule 23(b)(2) proper. The court thus declined to address superiority and predominance arguments, as these requirements did not apply to a Rule 23(b)(2) certification.
What You Can Do About It
You can do at least two things to protect against class actions brought under this new standard.
First, if faced with a request for certification under Rule 23(b)(2), seek a stay of the case or ask the court to defer the class certification motion. The Supreme Court is considering whether to grant certiorari in Dukes and may soon decide whether this new certification standard will stand.
Second, although not always possible, consider whether you can reduce the value of the injunctive relief sought by making prospective changes to meet the demands of the lawsuit. This strategy may allow you to argue that the injunctive relief is moot and of no value.