The Federal Class Action Practice Manual

Chapter 4: Rule 23(b) Alternative Grounds for Certification

[§20] Class May be Certified Pursuant to One or More Grounds

Rule 23(b) provides three alternative grounds which support certification of a class. Certification may be made under one or more provisions. If none of the alternative grounds of Rule 23(b) are applicable, certification must be denied. See, e.g., Horowitz v Pownall, 105 F.R.D. 615, 618 (D Md 1985). Further, an order to certify a class "may be conditional and may be altered or amended before the decision on the merits." Fed. R. Civ. P. 23(c)(1). Under this rule, district courts will reassess their rulings regularly as the case develops. Kuehner v. Heckler, 778 F.2d 152, 163 (3d Cir. 1985).

[§20.1] Public Policy Favors Liberal Interpretation of Rule 23

Rule 23(b) should be applied with a liberal rather than a restrictive interpretation. In re Sumitomo Copper Litig., 182 F.R.D. 85 (S.D.N.Y. 1998); Korn v. Franchard Corp., 456 F.2d 1206, 1208-1209 (2d Cir. 1972); Green v. Wolf Corp., 406 F.2d 291, 298, 301 (2d Cir. 1958), cert. denied sub nom. Troster, Singer & Co. v. Green, 395 U.S. 977, 23 L. Ed. 2d 766, 89 S. Ct. 2131 (1969). "If there is to be an error made, let it be in favor and not against the maintenance of the class action, for it is always subject to modification should later developments during the course of the trial so require." Green v. Wolf, 406 F.2d 298 (quoting Esplin v. Hirschi, 402 F.2d 94 (10th Cir. 1968), cert. denied, 394 U.S. 928, 22 L. Ed. 2d 459, 89 S. Ct. 1194 (1969). Courts have consistently noted that important public policy benefits arise from class action certification in an appropriate case. In re Sumitomo Copper Litig., 182 F.R.D. 85 - 87 (S.D.N.Y. 1998).

[§21] Rule 23(b)(1)

An action may qualify under Rule 23(b)(1), the first of three alternative grounds, "if individual adjudication of the controversy would prejudice either the party opposing the class (b)(1)(A), or the class members themselves, (b)(1)(B)." Zimmerman v Bell, 800 F.2d 386, 389 (4th Cir. 1986); Int’l. Woodworkers of America, AFL-CIO v Chesapeake Bay Plywood Corp., 659 F.2d 1259, 1269 (4th Cir. 1981). Thus, certification pursuant to Rule 23(b)(1) may be appropriate if a defendant might be faced with inconsistent orders of conduct if the actions were to proceed in separate, individual suits.

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[§22] Rule 23(b)(1)(A) "Inconsistent or Varying Adjudications"

Rule 23 (b)(1)(A) provides a class may be maintained if: [The prerequisites of subdivision (a) are satisfied, and in addition:] The prosecution of separate actions by or against individual members of the class would create the risk of inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class . . .

Courts have commented that (b)(1)(A) applies largely to lawsuits seeking declaratory or injunctive relief against the party opposing the class. Contrary rulings by different courts could create a situation where a party may be ordered to engage in irreconcilable conduct. See Nat’l. Treasury Employees Union v Reagan, 509 F. Supp 1337 (DDC 1981). Thus, if a situation should arise in which different results in separate actions would result in the opposing parties’ inability to pursue a clear course of conduct, certification under Rule 23(b)(1)(A) may be appropriate. United Brotherhood of Carpenters and Joiners of America Local 899 v Phoenix Associates, Inc., 152 F.R.D. 518, 523 (SD W Va 1994).

In a similar manner, if inconsistent declarations of liability could result from separate actions, certification of a class may be appropriate. However, the mere fact that some plaintiffs may prevail and some lose in separate lawsuits does not justify 23(b)(1)(A) certification. See In re Bendictin Products Liab. Litig., 749 F.2d 300 (6th Cir. 1994) A request for money damages generally does not subject the party opposing the class to incompatible standards of conduct. Zimmerman v Bell, 800 F.2d 386, 389 (4th Cir. 1986).

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[§23] Rule 23(b)(1)(B) "Limited Fund Situations"

Rule 23(b)(1)(B) provides: The prerequisites of subdivision (a) are satisfied, and in addition: The prosecution of separate actions by or against individual members of the class would create the risk of . . . adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests . . .

This rule establishing 'limited fund' classes 'is intended to apply "when claims are made by numerous persons against a fund insufficient to satisfy all claims." County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295, 1303 (2d Cir. 1990) (quoting Advisory Committee Notes to Fed. R. Civ. P. 23(b)(1)(B)). Rule 23(b)(1)(B) is designed to preserve the limited fund for the entire class against the individual claims of class members, which claims might otherwise exhaust the limited fund and thereby leave subsequent plaintiffs with no remedy. Id. at 1303; see also In re Drexel Burnham Lambert Group, Inc., 960 F.2d 285, 292 (2d Cir. 1992)("Some members . . . might attempt to maintain costly individual actions in the hope . . . that their claims are more meritorious than the claims of other class members. A mandatory class action under Rule 23(b)(1)(B) is thus necessary ... to prevent claimants with such motivations from unfairly diminishing the eventual recovery of class members."); In re Joint Eastern and Southern District Asbestos Litigation, 982 F.2d 721, 736-37 (2d Cir. 1992), modified, 993 F.2d 7 (2d Cir. 1993) ... (limited fund class appropriate when "recoveries of early successful claimants . . . would . . . preclude later claimants . . ." from recovering); In re Diamond Shamrock Chemicals Co., 725 F.2d 858, 862 (2d Cir. 1984); James William Moore et al., Moore's Federal Practice 23.42[2][a] (3d ed. 1998); Herbert B. Newberg & Alba Conte, 1 Newberg on Class Actions 4.09 (3d ed. 1992).

Class certification under Rule 23(b)(1)(B) results in a so-called "mandatory" class. Rule 23(b)(1)(B) does not provide class members with an automatic right to opt out of the class. In re School Asbestos Litig, 789 F.2d 996, 1002 (3d Cir. 1986), cert denied, 479 U.S. 852, 107 S.Ct 182, 93 L.Ed 2d 117 (1986), and cert denied, 471 U.S. 915, 107 S.Ct 318, 93 L.Ed 2d 291 (1986). The Second Circuit has, however, recognized that the district courts have discretion to allow plaintiffs to opt out of Rule 23(b)(1)(B) classes pursuant to their power under Rule 23(d)(5) to render appropriate orders in the conduct class actions. A district court's discretion in the regard is carefully circumscribed.

Thus, if adjudications with respect to individual members of the class would as a practical matter be dispositive of the interests of other members not parties to the adjudications or substantially impede or impair their interests, certification under Rule 23(b)(1)(B) may be appropriate. Cf. In re Catawba Indian Tribe, 973 F.2d 1133 (4th Cir. 1992). As to aggregate claims in excess of a fixed sum of money, a (b)(1)(B) class action is commonly utilized to avoid an unfair preference for the early claimants at the expense of later claimants. With respect to an insolvent entity, bankruptcy should be the normal source of protection to creditors to assure a fair and orderly distribution of assets. In re Joint Eastern and Southern Dist. Asbestos Litig, 982 F.2d 721, 735 (2d Cir. 1992).

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[§24] Rule 23(b)(2) "Injunctive or Declaratory Relief"

Rule 23(b)(2) provides that certification may be appropriate if: [T]he prerequisites of subdivision (a) are satisfied, and in addition . . . "the 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." Subsection (b)(2) class actions are "limited to those class actions seeking primarily injunctive or corresponding declaratory relief." Barnes v. The American Tobacco Company, 161 F.3d 127 (3rd Cir. 1998) citing Conte, 1 Newberg on Class Actions 3d 4.11. See also, Zimmerman v Bell, 800 F.2d 386, 389 (4th Cir. 1986); Paxman v Campbell, 612 F.2d 848, 854 (4th Cir. 1980) cert denied, 449 U.S. 1129, 101 S.Ct 951, 67 L.Ed 2d 117 (1981); Lukenas v Bryce’s Mountain Resort, Inc., 538 F.2d 594, 595 (4th Cir. 1976). A class certified under Rule 23(b)(2) may recover monetary relief in addition to declaratory and injunctive relief, "at least where the monetary relief does not predominate." Eubanks v. Billington, 110 F.3d 87, 92 (D.C. Cir. 1997); see also Advisory Comm. Note to Fed. R. Civ. P. 23(b)(2) (noting that 23(b)(2) "does not extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages.").

The (b)(2) class "serves most frequently as the vehicle for civil rights actions an other institutional reform cases that receive class action treatment." Baby Neal v. Casey, 43 F.3d 48, 58 - 59 (3rd Cir. 1994). Indeed, (b)(2) was "designed for civil rights cases seeking broad declaratory or injunctive relief for a numerous and often unascertainable or amorphous class of persons." Barnes v. The American Tobacco Company, 161 F.3d 127 (3rd Cir. 1998) citing Conte, 1 Newberg on Class Actions 3d 4.11. See also, Walters v. Reno, 145 F.3d 1032, 1047 (9th Cir. 1998)("As the Advisory Committee Notes explain, 23(b)(2) was adopted in order to permit the prosecution of civil rights actions.") Thus, in the context of civil rights litigation seeking declaratory relief for violation of constitutional rights, Rule 23(b)(2) actions have been held to be particularly appropriate. Johns v DeLeonardis, 145 F.R.D. 480, 484 (ND Ill 1992). On the other hand, "A claim is not ripe for adjudication if it rests upon 'contingent future events that may not occur as anticipated, or indeed may not occur at all.'" Texas v. United States, 523 U.S. 296, 118 S. Ct. 1257, 1259, 140 L. Ed. 2d 406 (1998) (quoting Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 581, 87 L. Ed. 2d 409, 105 S. Ct. 3325 (1985) (internal quotation omitted)).

Section (b)(2) was discussed in Wetzel v. Liberty Mutual Insurance Co., 508 F.2d 239 (3d Cir.) cert. denied, 421 U.S. 1011, 44 L. Ed. 2d 679, 95 S. Ct. 2415 (1975). The Court noted that "by its very nature, a (b)(2) class must be cohesive as to those claims tried in the class action." Id. at 248. "The very nature of a (b)(2) class is that it is homogeneous without any conflicting interests between the members of the class." Id. at 256. Because a (b)(2) class must be homogeneous and cohesive, a class can be certified under subsection (b)(2) only where the defendant has acted in the same way toward all members of the class, or has acted on grounds applicable to all members of the class.

Some circuit courts have stated (b)(2) certification is not appropriate in a defendant class. For instance, the Fourth Circuit has opined that defendant class actions are not properly certifiable under Rule 23(b)(2). Paxman v Campbell, 612 F.2d 848, 854 (4th Cir. 1980), cert denied, 449 U.S. 1129, 101 S.Ct 951, 67 L.Ed 2d 117 (1981).

Generally, in cases wherein certification is sought pursuant to Rule 23(b)(2), the defendant has engaged in past or continuing conduct applicable to the class. The action for an injunction seeks to maintain the status quo or to require remedial action as a result of the conduct in question.

For example, while certifying a 23(b)(2) class in a dispute arising from charges posted to AT&T calling cards, the court noted that the claims alleged by the named plaintiffs would "resemble those of others who succumbed to the allegedly fraudulent campaign." Gleb v Amer. Tel. & Tel. Co., 150 F.R.D. 76, 77 fn. 3 (SDNY 1993). Thus, there was a pattern of activity with respect to the class.

In Greenway v. Information Dynamics, Inc., 399 F. Supp. 1092 (D. Ariz. 1974), aff'd, 524 F.2d 1145 (9th Cir. 1975), plaintiffs claimed that the defendant's practice of distributing to subscribers a list of persons whose checks had been returned by their banks without payment violated the Fair Credit Reporting Act. A class was certified consisting of all persons whose names appeared on the lists collected and disseminated by the defendant. All the class members in Greenway were being treated in the same way by the defendant, and if the defendant's practice of distributing such lists was illegal, all class members were entitled to relief.

In a number of cases, Rule (b)(2) or (b)(3) has also been held to permit actions to proceed for medical monitoring in toxic tort cases. See, e.g., Simmons v. Pacor, Inc., 543 Pa. 664, 674 A.2d 232 (Pa. 1996)(plaintiffs with asbestos related asymptomatic pleural thickening permitted to recover for medical monitoring under state rules); Gibbs v. E.I. Dupont de Nemours & Co., 876 F.Supp 475 (WDNY 1995)(exposure to chemicals); Yslava v. Hughes Aircraft Co., 845 F. Supp. 705, 713 ( D. Ariz 1993)(class alleging long-term exposure to contaminated ground water certified); Boggs v. Divested Atomic Corp., 141 F.R.D. 58, 67 (SD Ohio 1991)(long term exposure to radioactive materials and hazardous waste); Day v. NLO, Inc., 811 F. Supp 1271, 1274 (SD Ohio 1992) (certifying radioactive exposure class), and later proceedings, Day v. NLO, Inc., 144 F.R.D. 330 (SD Ohio 1992), rev'd on other grounds, 5 F.3d 154 (6th Cir. 1993). See also, Bourgeois v. A. P. Green Indus., 716 So.2d 355 (La. 1998); Potter v. Firestone Tire & Rubber Co., 863 P.2d 795 (Cal. 1993); Hansen v. Mountain Fuel Supply Co., 858 P.2d 970 (Utah 1993); Ayers v. Township of Jackson, 106 N.J. 557, 525 A.2d 287 (1987); Fried v. Sungard Recovery Serv., Inc., 925 F. Supp. 372 (ED Pa. 1996); In re Paoli Railroad Yard PCB Litig., 916 F.2d 829 (3d Cir. 1990 and later proceedings, 35 F.3d 717 (3d Cir. 1994).

As another example of a (b)(2) action, in a suit for injunctive and declaratory relief, a public school teacher sought to halt the deduction of union fees from wages of nonunion teachers. Their claim was based on an alleged violation of their First and Fourteenth Amendment rights. Finding a pattern of activity applicable class wide, certification was granted. George v Baltimore City Public Schools, 117 F.R.D. 368, 372 (D Md 1987).

There is authority for permitting the award of monetary damages incidental to equitable relief in a Rule 23(b)(2) class. See Parker v Local Union 1466, United Steelworkers of America, 642 F.2d 104, 107 (5th Cir. 1981) (trial court did not err in awarding damages, because the terms of subsection 23(b)(2) do not preclude monetary relief). However, damages are permitted in such cases only when they award relief "incidental" to the primary claim for injunctive relief. See Probe v State Teachers’ Retirement Sys., 780 F.2d 776, 780 (9th Cir.), cert denied, 476 U.S. 1170 (1986); Robinson v Lorillard Corp., 444 F.2d 791, 801-02 (4th Cir. 1971), cert dismissed, 404 U.S. 1006, 92 S.Ct 573, 30 L.Ed 2d 655 (1972). Further, an attempt to obtain primarily legal damages may not be pursued under the guise of a claim for injunctive or declaratory relief. See Barnes v. The American Tobacco Company, 161 F.3d 127 (3rd Cir. 1998).

Rule 23(b)(2) actions are not "opt-out" classes and notice is not mandatory in such cases. If a case involving substantial compenstory damages is allowed to proceed under the guise of a (b)(2) class action, individual rights and protections are implicated.

[I]f the member has not been given the opportunity to opt out in a class action involving both important injunctive relief and damage claims, the member must have either minimum contacts with the forum or consent to jurisdiction in order to be enjoined by the district court that entertained the class action.
See also Brown v. Ticor Title Insurance Company, 982 F.2d 386, 392 (9th Cir. 1992) (holding that absent class members' money damage claims in a 23(b)(1) & (b)(2) class action in which court did not have personal jurisdiction over them and from which they not afforded opt-out right were not barred by res judicata), cert. dismissed, 114 S.Ct. 117 (1994).See also Brown v. Ticor Title Insurance Company, 982 F.2d 386, 392 (9th Cir. 1992) (holding that absent class members' money damage claims in a 23(b)(1) & (b)(2) class action in which court did not have personal jurisdiction over them and from which they not afforded opt-out right were not barred by res judicata), cert. dismissed, 114 S.Ct. 117 (1994).

When Rule 23 was amended in 1966, the Advisory Committee noted that this section "does not extend to cases in which the appropriate final relief relates exclusively or predominately to monetary relief." Horowitz v Pownall, 105 F.R.D. 615, 619 (D Md 1985). See also, Johnson v. General Motors, 598 F.2d 432, 437 (5th Cir. 1979).

As will be discussed below, common issues must predominate for class certification under Rule 23(b)(3); however, no such requirement exists under Rule 23(b)(2). Walters v. Reno, 145 F.3d 1032, 1047 (9th Cir. 1998). "It is sufficient if class members complain of a pattern or practice that is generally applicable to the class as a whole. Even if some class members have not been injured by the challenged practice, a class may nevertheless be appropriate." Id.

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[§25] Rule 23(b)(3) "Common Questions of Law or Fact"

Rule 23(b)(3) applies to actions known as "opt-out" classes and provides as follows: [T]he prerequisites of subdivision (a) are satisfied, and in addition . . . "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." 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." Adv. Comm. Notes, 28 U. S. C. App., p. 697.

The matters pertinent to the findings include:

  • the interest of members of the class in individually controlling the prosecution or defense of separate actions;
  • the extent and nature of any litigation concerning the controversy already commenced by or against members of the class;
  • the desirability or undesirability of concentrating the litigation of the claims in the particular forum;
  • the difficulties likely to be encountered from the management of a class action.

[§25.1] Questions of Law or Fact Must Predominate

Section 23(b)(3) requires a court to determine whether questions of law or fact common to members of the class predominate over any questions affecting only individual members. Eisen v Carlisle & Jacquelin, 417 U.S. 156, 164, 94 S.Ct 2140, 40 L.Ed 2d 732 (1974); Marisol v. Giuliani, 126 F.3d 372, 376 (2d Cir. 1997)(per curiam); Simmons v Poe, 47 F.3d 1370, 1380 (4th Cir. 1995); Zimmerman v Bell, 800 F.2d 386, 389 (4th Cir. 1986). In assessing whether common question predominate, most courts have adopted a pragmatic approach, analyzing the basic elements of all civil claims, and emphasizing the efficiencies of class treatment, the significance of common question and whether class certification would result in the serious distortion of the lawsuit. See Windham v American Brands, Inc., 565 F.2d 59 (4th Cir. 1977) (en banc), cert denied 435 U.S. 968, 98 S.Ct 1605, 56 L.Ed 2d 58 (1978). If the liability issue is common to the class, common questions are held to predominate over individual ones. In re Kirschner Medical Corp Sec Litig, 139 F.R.D. 74, 80 (D Md 1991). As stated by the court in Dornberger v. Metropolitan Life Insurance Corp., 182 F.R.D. 72 (SDNY 1998):

Generally speaking, if the action complained of on behalf of the putative class members arises out of a single set of operative facts, then the commonality requirement will have been satisfied. If that common nucleus of operative facts forms the central issue in the case, even if individualized issues of proof are present, the predominance hurdle will have been cleared.

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[§25.2] Class Action Must be Superior to Other Methods

Further, Rule 23(b)(3), requires the district court determine that a "class action is superior to other available methods for the fair and efficient adjudication of the controversy." Where class members are likely to be sufficiently numerous and to possess relatively small claims unworthy of individual adjudication due to the amount in each one, the mechanism of the class action is deemed to be superior. Dornberger v. Metropolitan Life Insurance Corp., 182 F.R.D. 72 (SDNY 1998); Green v. Wolf Corp., 406 F.2d 291 (2d Cir. 1968). As stated by the court in Michael Walton v. Franklin Collection Agency, Inc., Case No. 1:98cv288-D-D, 2000 U.S. Dist. LEXIS 551 (ND Miss. January 11, 2000):

It is well established that class actions are often the superior form of adjudication when the claims of the individual class members are small. Amchem,521 U.S. at 616-17. Moreover, the Fifth Circuit has held that the "most compelling rationale for finding superiority in a class action" is the existence of a "negative value suit." Allison v. Citgo Petroleum Corp., 151 F.3d 402, 420 (5th Cir. 1998); Castano v. American Tobacco Co., 84 F.3d 734, 748 (5th Cir. 1996). A negative value suit is one in which the "stakes to each member are too slight [*22] to repay the cost of the suit." In re Rhone-Paulenc Rorer, Inc., 51 F.3d 1293, 1300 (7th Cir. 1995). The existence of such a suit in this case, with most class members having claims between fifty and two hundred dollars,supports the conclusion that a class action is superior to other available methods of adjudicating this controversy.
See also, In Re: Diet Drugs (PHENTERMINE, FENFLURAMINE, DEXFENFLURAMINE) Products Liability Litig., MDL NO. 1203, 2000 U.S. Dist. LEXIS 12275 *171 (E.D. Pa August 28, 2000).

The Fourth Circuit has indicated that "the difficulties likely to be encountered in the management of a class action" are to be considered in making findings on predominance and superiority. Windham v American Brands, Inc., 565 F.2d 59, 65 n.7 (4th Cir. 1977). A class action may be deemed to be unmanageable because of the complexities of proving individual injury and damages. Butt v Allegheny Pepsi-Cola Bottling Co., 116 F.R.D. 486, 493 (ED Va 1987). The appropriate standard to determine whether calculation of damages results in a lack of manageability was set forth in Windham v American Brands, Inc., 565 F.2d at 68 as follows:

[W]here the fact of injury and damage breaks down in what may be characterized as "virtually a mechanical task," "capable of mathematical or formula calculation," the existence of individualized claims for damages seems to offer no barrier to class certification on grounds of manageability. On the other hand, where the issue of damages and impact does not lend itself to such a mechanical calculation, but requires "separate ‘mini-trial’[s]" of an overwhelming large member of individual claims, courts have found that the "staggering problems of logistics" thus created "make the damage aspect of [the] case predominate," and render the case unmanageable as a class action.

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