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Complex Litigation: Courts Are Closing The Door to the Expanding Availability of Class Status

Recent rulings in New Jersey state and federal courts suggest that Federal Rule of Civil Procedure 23 (b)(2) will not provide an easier route to class action status than Fed. R. Civ. P. 23(b)(3). These courts are enforcing express and implied limits to the availability of (b)(2) certification.

Substantive and practical impediments exist to certification under Fed. R. Civ. P. 23(b)(3) and its state court counterpart, Rule 4:32-1(b)(3). Notice to prospective class members can be costly. Providing them an opportunity to opt out or to participate with their own counsel can complicate prosecution of a class action and render it less attractive to class counsel.

For these and other reasons, class action advocates often seek certification under Fed. R. Civ. P. 23 (b)(2). Unlike (b)(3), notice to class members is not required for a (b)(2) class, and there is no right to opt out.

Moreover, certification under (b)(2)'s express terms appears to be straightforward with the terms satisfied if the defendant's challenged conduct applies class-wide and if injunctive relief is sought. But appearances can be deceiving.

The express limit of (b)(2) is the nature of the relief sought. If money is in reality the remedy sought, courts will see through what are frequently transparent efforts to characterize suits for money damages as suits for injunctive relief with incidental monetary awards.

Moreover, courts are testing proposed (b)(2) classes for "cohesiveness," a requirement not expressly stated in the rule for (b)(2) classes, but one which incorporates the stringent analysis previously reserved for consideration of (b)(3)'s requirement that common issues predominate.

Money Damages

One formidable hurdle to (b)(2) certification focuses on whether the subsection is properly invoked in light of the nature of the relief sought. An action is maintainable as a class action under Fed.R. Civ. P. 23 (b)(2) or the state court rule, R. 4:32-1 (b)(2), if in addition to satisfying subsection (a)'s general prerequisites of numerosity, commonality, typicality and adequacy of representation,

[T]he party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole.

The text of (b)(2) makes clear that it is intended for matters where injunctive or declaratory relief is sought. Class action advocates have tried to push open the door to obtain other forms of relief under (b)(2) by reliance on the Advisory Committee Note to the 1966 revisions to Rule 23. That note states that (b)(2) "does not extend to cases in which the appropriate final relief relates exclusively or predominately to money damages."

By negative implication, they argue, money damages may be sought so long as they are not the exclusive or predominate remedy. In Allison v. Citgo Petroleum Corp., 151 F. 3d 402 (5th Cir. 1998), and Reap v. Continental Cas. Co., 199 F.R.D.536 (D.N.J. 2001), for instance, (b)(2) classes were allowed to proceed because the monetary awards were incidental to a primary claim for injunctive relief.

But that door may be closing as courts reject an interpretation of (b)(2) that would stretch its availability by a facile or conclusory characterization of the relief sought.

In Re: Mercedes Benz Antitrust Litigation, 2003 U.S. Dist. LEXIS 2989 (D.N.J. Feb. 19, 2003), is illustrative of cases where plaintiffs' efforts to invoke (b)(2) have been rebuffed.

The plaintiffs in Mercedes Benz alleged an illegal horizontal price-fixing conspiracy among the automaker's national distributor, local dealers in the New York metropolitan area and an accountant. They brought suit on behalf of a proposed class defined as purchasers of Mercedes Benz vehicles in the relevant geographic area during the seven-year period of the alleged conspiracy.

The prayer for relief included a request for an injunction to prevent the continuation of the conspiracy. The plaintiffs sought (b)(2) certification arguing that the defendants had acted on grounds generally applicable to the class and that final injunctive relief for the class as a whole was sought, precisely as prescribed by the language of (b)(2).

The court made short work of the argument. While reciting that a (b)(2) class might be certified where money damages are incidental or ancillary to injunctive relief, the "realities of the litigation" before the court plainly indicated that the plaintiffs' claims against the conspirators were primarily for money damages. Any prospective harm to be prevented by a declaration of illegal activity by the alleged conspirators and for injunctive relief against continuation of the conspiracy was merely speculative.

Under the circumstances, (b)(2) certification was rejected. In connection with its (b)(2) analysis, the court did not take into consideration the plaintiffs' argument that money damages could be readily calculated on the basis of a mathematical formula. The mere fact that the plaintiffs' goal was a monetary remedy was reason enough for the court to reject (b)(2) certification.

A month earlier, the Third U.S. Circuit Court of Appeals reached the same result regarding a proposed (b)(2) class in an employment discrimination action brought under Title VII of the Civil Rights Act of 1964 and 42 U.S.C. §1981 - not only because the relief sought was monetary but also because awards would have to be determined individually.

In Barabin v. Aramark Corp., 2003 U.S. App. LEXIS 3532 (3d Cir. Jan. 24, 2003), the purported class consisted of all African American employees of the Presbyterian Medical Center in Philadelphia who alleged they suffered from a pattern and practice of harassment and unjustified disciplinary action at the hands of Caucasian supervisors. The plaintiffs sought certification under both subsection (b)(2) and subsection (b)(3). Both efforts were rejected.

Employment class actions had been described as the "illustrative" (b)(2) class actions by the 1966 Advisory Committee Notes, which cited a long list of civil rights cases "where a party is charged with discriminating unlawfully against a class." While back pay was available as a remedy at the time of the 1966 rule amendments, the Civil Rights Act of 1991 effected a watershed change by making available compensatory and punitive damages.

Barabin's rejection of class status is notable precisely because prior to 1991 - when remedies were limited to equitable ones - employment actions had been seen as the archetypical (b)(2) matters.

The district court in Barabin had rejected (b)(2) certification. It concluded the primary relief sought by the class was monetary damages, to be computed individually, rather than "on the basis of an objective, uniform calculation or in an amount which naturally flows from an entitlement to a declaration or injunction against further harm." 210 F.R.D. 152 (E.D. Pa. 2002).

The Third Circuit agreed with the lower court, and in the process lent its support to an earlier articulation of the test for a bona fide (b)(2) class action.

As stated by the Fifth Circuit in Allison, a claim for money damages is primary unless it is merely incidental to a claim for injunctive relief. A practical test is employed to determine whether a monetary remedy is primary or incidental to injunctive relief: What would the court have to do to make awards to individual members of the class?

The Allison court noted that if class members, upon establishing a right to injunctive relief, would automatically be entitled to damages in an amount readily computed by objective standards, damages are incidental. On the other hand, if individual hearings and assessment of intangible, subjective differences would be necessary to determine entitlement and the amount of damages, then money damages are primary and (b)(2) certification is inappropriate.

Allison's rationale goes directly to the aspects of (b)(2) certification that make it appealing to plaintiffs - the absence of either a notice requirement or opt-out rights. As the court stated:

The underlying premise of the (b)(2) class - that its members suffer from a common injury properly addressed by class-wide relief - "begins to break down when the class seeks to recover back pay or other forms of monetary relief to be allocated based on individual injuries." Eubanks v. Billington, 324 U.S.App.D.C. 41, 100 F.3d 87, 95 (D.C.Cir. 1997). Thus, as claims for individually based money damages begin to predominate, the presumption of cohesiveness decreases while the need for enhanced procedural safeguards to protect the individual rights of class members increases, see id.; Johnson v. General Motors, 598 F.2d 432, 437-38 (5th Cir. 1979), thereby making class certification under (b)(2) less appropriate.

The Third Circuit in Barabin agreed, noting that where the awarding of money damages requires examination of individual claims, cohesion is lacking.

Significantly, the Barabin court also rejected the plaintiffs' attempt to achieve (b)(3) certification. Where the alleged wrongs suffered by the proposed class members were unique, as were their injuries, each proposed class member's case had to be assessed on an individual basis. Handling the matter on a class basis would not provide a superior method of case resolution. No (b)(3) class was available in these circumstances.

Lack of Cohesion

In New Jersey, cohesiveness has been discussed not only in connection with determining whether a remedy is appropriately sought in a (b)(2) class, but also when evaluating the proofs on liability, in the absence of a claim for money damages.

In Goasdone v. American Cyanamid Corp., et al., 354 N.J. Super. 519 (Law Div. 2002), the court denied certification of a proposed (b)(2) medical monitoring class action on just this basis. Goasdone is the first known decision by a New Jersey court to hold that a "multiplicity of individual issues" among the members of a proposed class barred both (b)(3) and (b)(2) certification.

In so concluding, the court adopted the reasoning of the Third Circuit in Barnes v. American Tobacco Co., 161 F.3d 127 (3d Cir. 1998). The cohesiveness analysis used by the Goasdone court in significant respect mirrors the predominance standard applied to (b)(3) classes, and joins a growing trend.

The named plaintiff in Goasdone sought to represent a group of former employees at a long-closed dye printing plant in Paterson called Allied Textile Printers. The plaintiff claimed that the class members' exposure to so-called benzidine congener dyes (those manufactured using the intermediates benzidine, o-tolidine or o-dianisidine) while working at Allied put them at increased risk for bladder cancer and other serious illnesses.

The suit was brought by Goasdone against some of the dye manufacturers for the purpose of establishing a medical monitoring program to screen for bladder cancer.

To prevail on a medical monitoring claim in New Jersey, a plaintiff must prove that he was directly exposed to the toxic substance in question and must reasonably show that medical monitoring "is required because the exposure caused a distinctive increased risk of future injury, and would require a course of medical monitoring independent of any other that the plaintiff would otherwise have to undergo." See Theer v. Phillip Carey Co., 133 N.J. 610 (1993).

As the Court noted in Ayers v. Township of Jackson, 106 N.J. 557 (1987), the analysis necessarily requires consideration of the significance and extent of exposure; the toxicity of the substance to which the plaintiff was exposed; the seriousness of the disease at issue; the relative increase in the chance of the onset of the disease as a result of the exposure; and the value of early diagnosis. See generally, "Medical-Surveillance Issues Perplex Courts Fifteen Years After Ayers," 170 N.J.L.J. 819, Dec. 9, 2002.

In Goasdone, although the complaint had requested the establishment of a medical monitoring program, its prayer for relief also sought compensatory and punitive damages. When (b)(2) certification was challenged on that basis, the plaintiff stipulated he would be "willing to fashion the remedy to meet the requirements that (b)(2) relief be injunctive."

Thus, the court was positioned to look beyond the threshold issue of whether the relief that the plaintiff sought was primarily injunctive in nature (to address whether the presence of significant individual issues alone could defeat (b)(2) certification).

Goasdone was nearly four years old at the time of the motion for class certification. As a result, the record was well developed with respect to a number of facts that underscored the difficulty that would attend any attempt at collective adjudication of the claims, including:

  • Class members' work experience at Allied. Class members worked at a variety of jobs at Allied, involving different degrees of potential exposure or potentially no exposure at all. The kinds of dyes used over the years changed in composition and form. Benzidine was discontinued by the early 1970s, and over time liquid dyes replaced powders.
  • Class members' work experiences outside of Allied. The workers in Paterson's dye industry were transient, often working at many different plants over the course of their careers. As a result, the potential was great that any given Allied employee had other relevant exposures from non-Allied jobs.
  • Class members' individual health histories. Since smoking was recognized as a leading cause of bladder cancer, it became apparent that each member of the proposed class would have to be examined on the issue of whether they had been smokers.
  • Product identification problems. There were more than 20 dye manufacturers in the years that Allied was in business. Collectively, they sold literally hundreds of different dyes. Of the three former Allied employees who could be found and deposed in the case (including the plaintiff), only one was able to identify a handful of dyes with which he allegedly worked while at Allied.

In connection with a (b)(3) class, in In re Cadillac V8-6-4 Class Action, 93 N.J. 412 (1983), the Supreme Court had ruled that "[i]n order to ascertain whether ... common questions predominate, [reviewing courts] must analyze the legal issues and the proofs needed to sustain them."

In ruling on the class certification motion in Goasdone, the court observed that "[t]he significance and extent of exposure to the products will have to be determined on an individual basis , since class members worked in the plant at different locations, at different times, for different lengths of time, and were exposed to different products in different forms." Given that analysis, it was clear that Goasdone would not satisfy (b)(3)'s requirement that common issues predominate among the members of the class.

The real question was whether such a wide array of individual issues also would preclude (b)(2) certification. A line of federal cases, as well as some state court decisions, stood for the proposition that the cohesiveness requirement of a (b)(2) class was similar to, if not the functional equivalent of, the predominance requirement for a (b)(3) class. See, for example, Thompson v. American Tobacco Company, 189 F.R.D. 544 (D. Minn. 1999), Dhamer v. Bristol-Myers Squibb Co., 183 F.R.D. 520 (N.D. Ill. 1998), and Barnes.

Indeed, as far back as 1976, one district court had found that (b)(2) certification required a particular "homogeneity" of claims among the members of the proposed class. See Santiago v. City of Philadelphia, 72 F.R.D. 619 (E.D. Pa. 1976).

Some courts that had considered the issue, including the Barnes court, had concluded that cases presenting numerous individual issues were even less suited for (b)(2) certification because, in contrast to (b)(3) classes, class members cannot opt out of a (b)(2) class.

Accordingly, as the Barnes court noted, certifying a (b)(2) class where significant individual issues were pervasive could result in unjustly binding "absent class members to a negative decision where the class representative's claims present different individual issues" than those of the absent class members.

Until Goasdone, however, no reported New Jersey state court decision had squarely addressed the issue. Judge Marina Corodemus, one of the more prolific authors of class certification decisions at the trial court level, had denied (b)(2) class certification in a number of cases.

In each such instance, however, Corodemus had found other grounds for rejecting the applications. See Avallone v. American Tobacco Company, et al., Law Division, Middlesex County, Docket No. L-4883-98MT (1999); Cosentino v. Philip Morris, et al., Law Division, Middlesex County, Docket No. L-5135-97 (1999); and In re Diet Drug Litigation, Law Division, Middlesex County, Diet Drug Cases, Case Code 240 (1998).

Relying on Barnes, the Goasdone court began by noting that courts have been reluctant to certify (b)(2) class actions where individual issues exist primarily for the following two reasons: (1) potential problems caused by the fact that members cannot opt out of a (b)(2) class; (2) prior decisions had cited the presence of individual issues as a factor that would render collective adjudication of the class members' claims unmanageable.

The court then analyzed the elements of a medical monitoring claim in New Jersey and concluded that the disposition of the claim would require the fact finder to resolve a number of individual issues, such as the extent of each class member's alleged exposure to a defendants' products and whether medical monitoring was reasonable for each class member based on the class member's unique medical history.

In addition, the court noted that the applicability of a possible statute of limitations defense to a particular class member's claim could have to be undertaken on a case-by-case basis. As a result, the court concluded that the proposed class lacked "the necessary degree of cohesiveness to warrant [(b)(2)] certification."

Perhaps it should not be surprising that Goasdone, Barabin, Mercedes Benz and the other cases discussed above denied (b)(2) certification. The rule's description of what makes a (b)(2) class is simple enough: (b)(2) is designed to address by injunctive relief conduct by a defendant that affects a class in a common way.

Characterizing the relief sought as injunctive, proposing a damage formula or challenging a course of defendant's conduct as having class-wide effect will not easily justify a (b)(2) class. Rather, courts will examine the reality of the litigation, the relief sought and the extent to which individualized determinations will be necessary.

If these cases signify anything, it is that (b)(2) certification will not easily be available in circumstances where adjudication requires consideration of individual issues on liability or money damages.

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