class action issues in retiree health care litigation under erisa

Class Action Issues in Retiree Health Care Litigation Under ERISA and Section 301

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© American Bar Association http://www.bna.com/bnabooks/ababna/annual/99/annual48.pdf

CLASS ACTION ISSUES IN RETIREE HEALTH CARE LITIGATION UNDER ERISA

AND SECTION 301

Roger J. McClowKlimist, McKnight, Sale, McClow & Canzano, P.C.Southfield, Michigan

INTRODUCTION

The requirements of Rule 23(a) and (b) are designed to ensure that a proposed class has

“sufficient unity so that absent class members can be fairly bound by decisions of class

representatives.” Amchem Products, Inc. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231, 2248, 138

L.Ed.2d 689 (1997). This paper analyzes those requirements and other selected issues in the context

of retiree health care litigation.

I. RULE 23(A) STANDARDS

Rule 23(a) of the Federal Rules of Civil Procedure contains four prerequisites to a class

action:

One or more members of a class may sue or be sued as representative parties onbehalf of all only if (1) the class is so numerous that joinder of all members isimpracticable, (2) there are questions of law or fact common to the class, (3) theclaims or defenses of the representative parties are typical of the claims or defensesof the class, and (4) the representative parties will fairly and adequately protect theinterests of the class.

A. Numerosity

The numerosity requirement of Rule 23(a) requires that joinder be impracticable, but this does

not mean "impossible." The requirement is satisfied by showing that joinder would be difficult or

inconvenient. Advertising Specialty National Association v. F.T.C., 238 F.2d 108, 119 (1st Cir.

1956); Rodriguez by Rodriguez v. Berrybrook Farms, Inc., 672 F. Supp. 1009, 1013 (W.D. Mich.


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1987); Allen v. Isaac, 99 F.R.D. 45, 53 (N.D. Ill. 1983); Goldstein v. North Jersey Trust Co., 39

F.R.D. 363, 367 (S.D. N.Y. 1966) ("the court concludes that the meaning to be ascribed to the word

'impracticable,' as used in Fed.R.Civ.P. 23(a)(3), should be 'impractical,' 'unwise' or 'imprudent' rather

than 'incapable of being performed' or 'infeasible.'").

No particular number has been set as the point at which the numerosity requirement is met.

See e.g. DeMarco v. Edens, 390 F.2d 836, 845 (2d Cir. 1968); Rodriguez by Rodriguez v.

Berrybrook Farms, Inc., 672 F. Supp. 1009, 1013 (W.D. Mich. 1987). In Smith v. General Motors

Corp., 14 F.E.P. Cases (BNA) 987, 991 (E.D. Mich. 1977), the court stated that thirty-five is often

the standard:

Although each case must be decided on its own facts, proposed classes with overthirty-five members have normally been certified providing that the other requirementsfor certification have been met.

14 F.E.P. Cases at 991. See also Weiss v. York Hospital, 745 F.2d 786, 808 (3d Cir. 1984) (92 class

members); Korn v. Franchard Corp., 456 F.2d 1206, 1209 (2d Cir. 1972) (70 claimants); UAW v.

Acme Precision Products, Inc., 515 F. Supp. 537, 540 (E.D. Mich. 1981) (78 class members);

Singleton v. Drew, 485 F. Supp. 1020 (E.D. Wis. 1980) (class of approximately 50 members);

Redhail v. Zablocki, 418 F. Supp. 1061 (E.D. Wis. 1976) (class of 72 members); Fidelis Corp. v.

Litton Industries, Inc., 293 F. Supp. 164 (S.D. N.Y. 1968) (35-70 claimants).

That the number is an approximation, rather than an exact figure, because plaintiffs do not

have the most current data, does not defeat certification. Evans v. U.S. Pipe & Foundry Co., 696

F.2d 925, 930 (11th Cir. 1983); Harris v. General Development Corp., 127 F.R.D. 655, 659 (N.D.

Ill. 1989); Rodriguez by Rodriguez v. Berrybrook Farms, Inc., 672 F. Supp. 1009, 1013 (W.D. Mich.

1987) (citing Evans); In re Consumers Power Company Securities Litigation, 105 F.R.D. 583, 601


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(E.D. Mich. 1985); Leist v. Shawano County, 91 F.R.D. 64, 67 (E.D. Wis. 1981). The numerosity

requirement is met even by a mere showing that it is reasonable to infer that a substantial number of

persons will be in the class. Senter v. General Motors Corp., 532 F.2d 511, 523 (6th Cir. 1976), cert.

denied, 429 U.S. 870 (1976); Golden v. Kelsey-Hayes, C.A. No. 93-74824 (E.D. Mich. February 23,

1995)(magistrate’s report and recommendation, adopted by Order of April 25, 1995)(inferring

substantial number of class members from company’s claim, in opposition to motion for preliminary

injunction, that it cost $160,000 per month to maintain health benefits for retiree class); Steelworkers

v. Connors Steel Co., 8 E.B.C. (BNA) 1719 (N.D. Ala. 1987) (Class of approximately 200 retirees

claiming rights to continuous benefits certified where joinder of all members was found to be

impracticable).

In NL Industries, Inc. v. UAW, C.A. No. 87-1292, (W.D.N.Y. May 11, 1989), the district

court noted that joinder in retiree health care cases is more impracticable because retirees are “free

to enjoy their retirement anywhere in the country or, for that matter, the world.” The court also

noted that, because it was a retiree class, the number of claimants would fluctuate (actually, decrease)

over time. It determined that, with a class of about 1300, the likelihood that the class would ever

become so small that it would no longer be considered “so numerous that joinder is impracticable”

was minimal.

In Bittinger v. Tecumseh Products Co., 123 F.2d 877, 884 n.1 (6th Cir. 1997), the court

stated that to conclude that a class of 1100 satisfied the numerosity requirement “is to state the

obvious.” The court characterized as frivolous the company’s contention that the retirees’ failure to

address the issue of whether joinder of all members was impracticable precluded class certification.


1 These categories included retirees; employees who terminated after age 65 with insufficientservice to qualify for a pension; employees on long term disability; surviving spouses of deceasedactive employees; surviving spouses of retirees, etc.

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1. Subclasses and Numerosity

Rule 23(c)(4)(B) provides that “a class may be divided into subclasses and each subclass

treated as a class, and the provisions of this rule shall then be construed and applied accordingly.”

In the Golden v. Kelsey-Hayes retiree health care litigation, there were over three thousand class

members, but they came from seven different plants with six separate, but similar collective bargaining

agreements negotiated generally every three years since retiree health care benefits were negotiated

in 1965. The company argued that there should be separate subclasses for each location and for each

of seven types of “beneficiary,”1 and that each subclass had to meet the numerosity requirement. The

magistrate disagreed, stating that he was not recommending the creation of subclasses but even if he

were, the numerosity requirement had been met. As to this, he cited I Newberg on Class Actions, (3d

ed.), Section 3.09: “if the subclass members are also members of the larger, already certified class,

they may not be required to satisfy independently the numerosity requirement.” Golden v. Kelsey-

Hayes, C.A. No. 93-74824 (E.D. Mich. February 23, 1995). The district court rejected the

company’s objections, adopted the magistrates’s recommendation and certified a single class. (Order

of April 25, 1995).

B. Commonality

The commonality element of Rule 23(a) requires that class members have either questions of

law or fact in common, but its does not require both, and it does not require that all questions of law

or fact be common. Fallick v. Nationwide Mutual Ins. Co., 162 F.3d 410 (6th Cir. 1998)(class


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representative does not have to be a participant in every plan affected by challenged employer

conduct); Bittinger v. Tecumseh Products Co., 123 F.3d 877, 884 (6th Cir. 1997) (common question

of whether the original collective bargaining agreement guaranteed lifetime benefits is sufficient).

Forbish v. J. C. Penny Co., 994 F.2d 1101, 1106 (5th Cir. 1993)(commonality test is met when there

is at least one issue whose resolution will affect all or a significant number of putative class members);

Cox v. American Cast Iron Pipe Co., 784 F.2d 1546, 1557 (11th Cir. 1986), cert. denied, 479 U.S.

883 (1986); Weiss v. York Hospital, 745 F.2d 786, 809 (3d Cir. 1984), cert. denied, 470 U.S. 1060

(1985); Johnson v. American Credit Co. of Georgia, 581 F.2d 526, 532 (5th Cir. 1978); Harris v.

General Development Corp., 127 F.R.D. at 660; Rodriguez by Rodriguez v. Berrybrook Farms, Inc.,

672 F. Supp. at 1015; Knisley v. Bowman, 656 F. Supp. 1540, 1543 (W.D. Mich. 1987); Allen v.

Isaac, 99 F.R.D. at 54 ("Not all factual or legal questions raised in the lawsuit need be common so

long as a single issue is common to all class members."); Markewich v. Ersek, 98 F.R.D. 9, 10 (S.D.

N.Y. 1982); Leist v. Shawano County, 91 F.R.D. at 67; Dura-Bilt Corp. v. Chase Manhattan Corp.,

89 F.R.D. 87, 93 (S.D. N.Y. 1981) ("Rule 23(a)(2) requires only that questions of law or fact be

shared by the prospective class, although not all questions of law or fact raised need be common";

"[The Rule] does not require that all questions of law or fact be common; it only requires that the

common questions predominate over individual questions."); Smith v. General Motors Corp., 14

F.E.P. Cases at 991-992 ("Factual identity between the plaintiff's claims and those of the class he

seeks to represent is not necessary." (quoting Senter)).

Where declaratory or injunctive relief common to all class members is sought, the

commonality requirement is satisfied. Inmates of the Attica Correctional Facility v. Rockefeller, 453

F.2d 12, 24 (2d Cir. 1971). See also Leist v. Shawano County, 91 F.R.D. at 67 ("Although factual


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differences may exist among class members regarding eligibility or amount of assistance," a question

of law was common to the class, which was sufficient for certification).

Courts have consistently recognized that claims by retirees relating to retiree health insurance

are appropriate for class action treatment under Rule 23, especially when those health care benefits

arise from a collective bargaining agreement. Fox v. Massey-Ferguson, 172 F.R.D. 410 (E.D. Mich.

1995); Golden v. Kelsey-Hayes, C.A. No. 93-74824 (E.D. Mich. April 25, 1995); Beach v. Wyman-

Gordon Co., C.A. No. 93-CV-71822 (E.D. Mich. Jan. 31, 1994); McGlothlin v. Connors, 15 E.B.C.

1321 (W.D. Va. 1992); Hazel v. Lynch Corp., IP 84-1352C (S.D. Ind. 1990); NL Industries, Inc. v.

UAW, C.A. No. 87-1292 (W.D.N.Y. May 11, 1989); Steelworkers v. Connors Steel Co., 8 E.B.C.

1719 (N.D. Ala. 1987); Bower v. Bunker Hill Co., 114 F.R.D. 587, 592-94 (E.D. Wash. 1986);

Musto v. American General Corp., 615 F. Supp. 1483, 1493 (D.C. Tenn. 1985), reversed on other

grounds, 861 F.2d 897 (6th Cir. 1988); Mamula v. Satralloy, Inc., 578 F. Supp. 563, 570-71 (S.D.

Ohio 1983). See also Senn v. United Dominion Industries, Inc., 951 F.2d 806, 811 (7th Cir. 1992);

McClendon v. Continental Group, Inc., 113 F.R.D. 39 (D. N.J. 1986); Buchholtz v. Swift Co., 62

F.R.D. 581, 596 (D. Minn. 1973) (suit by former employees for benefits under a collective bargaining

agreement proper for class certification).

Classes of salaried retirees have also been certified in health care litigation cases, although,

lacking a collective bargaining agreement as the source of health care benefits, the considerations are

somewhat different. A leading case on class certification in an ERISA retiree health care action is

Sprague v. General Motors Corp., 133 F.3d 388 (6th Cir.)(en banc), cert. denied, ___ U.S. ____,

118 S.Ct.2312, 141 L.Ed.2d 170 (1998). This lawsuit was brought by 114 salaried retirees on behalf

of 34,000 general and 50,000 early retirees. The district court dismissed the case as to the general


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retirees before it reached the certification issue, ruling that the underlying plan documents did not

provide for vested health care benefits. It then certified a class of early retirees whose claims were

based on bilateral contract and estoppel theories. The court of appeals reversed on the merits as to

the general retirees, holding that at least some of the summary plan descriptions were ambiguous. It

directed the district court to address class certification of general retirees on remand. Sprague v.

General Motors Corp., 92 F.3d 1425 (6th Cir. 1996). The Sixth Circuit reheard the case en banc

and vacated the panel decision, holding that the plan documents unambiguously reserved the

company’s right to modify or terminate benefits. It affirmed the district court’s decision not to certify

the class of general retirees because, by the time the court ruled on class certification, the common

issues which had pertained to all class members had been disposed of by the district court’s decision

that the company had unambiguously reserved the right to terminate the plan. The en banc court then

reversed the district court’s certification with respect to the early retiree class, holding that the

bilateral contract and estoppel theories were fact specific and not susceptible to class-wide treatment.

According to the court, given the myriad variations in the statements made to retirees and in the form

and nature of the bilateral contracts, “plaintiffs’ claims clearly lacked commonality.” 133 F.3d 398.

See also Jensen v. SIPCO, Inc., 38 F.3d 945, 953 (8th Cir. 1994) (estoppel must be applied with

factual precision and is not suitable for class-wide relief).

Curiously, the Sixth Circuit then addressed the merits of the legal claims of the 114 named

class plaintiffs and dismissed them all on common grounds. The court held that the alleged bilateral

contracts were not plan documents under ERISA and did not purport to modify plan documents. It

also held that the plan documents, being unambiguous, could not be modified by oral representations.

133 F.3d at 402-404. Judge Merritt, dissenting in part, stated that the named plaintiffs should not


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be summarily thrown out of court merely because the class action failed. 133 F.3d at 408. Certainly,

if the court could dismiss 114 claims summarily, on a common legal ground, without addressing the

merits of the individual claims, it seems curious to deny certification. Apparently, there are 84,000

General Motors retirees (less 114) who still have a viable claim for health care benefits in another

circuit, dependent in large part on whether another court would read the plan documents to be as

ambiguous as the original panel and the en banc dissent found them. The decision of the majority in

Sprague leaves the clear possibility of “inconsistent or varying applications with respect to individual

members of the class.” Rule 23(b)(1)(A).

C. Typicality

The typicality requirement of Rule 23(a)(3) is satisfied where the representative is a member

of the class and shares at least a common element of fact or law with other class members. Senter

v. General Motors Corp., 532 F.2d 511, 525 (6th Cir. 1976); Eisen v. Carlisle & Jacquelin, 391 F.2d

555, 562 (2d Cir. 1968), vacated and remanded on other grounds, 417 U.S. 156 (1974); Smith v.

General Motors Corp., 14 F.E.P. Cases at 992.

As Judge Hart of the Northern District of Illinois has explained, "[t]ypicality does not require

that the claims or defenses of the class representative be identical or perfectly coextensive with the

claims or defenses of the members; substantial similarity is satisfactory. Allen v. Isaac, 99 F.R.D. at

54. See also Frankford Hospital v. Blue Cross of Greater Philadelphia, 67 F.R.D. 643 (E.D. Pa.

1975); De la Fuente v. Stokely-Van Camp, Inc., 713 F.2d 225, 232 (7th Cir. 1983) (similarity of legal

theory may control even in the face of differences of fact); Majeski v. Balcor Entertainment Co., 134

F.R.D. 240, 244-46 (E.D. Wis. 1991) ("Typicality . . . does not require the named plaintiff to be in


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the identical situation as every member of the class."); Coleman v. McLaren, 98 F.R.D. 638, 654

(N.D. Ill. 1983).

Moreover, where individual plaintiffs, like the other members of the proposed class, seek

damages for the financial losses resulting from refusal of a defendant to honor an agreement for

lifetime insurance benefits, there will be differences in the actual dollar loss each might suffer in

damages, such factual differences do not defeat the typicality requirement. Eisen v. Carlisle &

Jacquelin, 391 F.2d 555, 562 (2d Cir. 1968). In the past, district courts have held that there is

sufficient typicality if the representative and class claims stem from the same event or are based on

the same legal theory. McGlothlin v. Connors, 15 E.B.C. 1327 (W.D. Va. 1992); Mersay v. First

Republic Corp. of America, 43 F.R.D. 465, 468-69 (S.D. N.Y. 1968).

In Bittinger v. Tecumseh Products Co., 123 F.3d 877, 884 (6th Cir. 1997), the court held that

the class representative’s claims were typical of the class even though the plaintiffs relied on oral

representations, there were defenses that applied only to some class members and the injuries varied

from class member to class member. As to the oral representation, the court noted that they appeared

to follow a pattern and were made by largely the same people. As to the varying defenses and

injuries, the court concluded that those issues could be dealt with through methods other than denial

of class certification and at a latter stage of the proceedings.

In Golden v. Kelsey-Hayes, No. C.A. 93-74824 (E.D. Mich. February 23, 1995)

(magistrate’s report and recommendation, adopted by order of April 25, 1995), the magistrate found

the typicality element to be satisfied, as to the contract and estoppel count, because the named class

representatives and all of the proposed class members were claiming that the company had no right

to unilaterally change retirement health benefits obtained through collective bargaining.


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In Fox v. Massey-Ferguson, 172 F.R.D. 653 (E.D. Mich. 1995), the court held that the fact

that damages may vary between the claimants does not defeat a finding of typicality.

In Sprague v General Motors, the Sixth Circuit held that the early retiree class failed the

typicality test as well as the commonality test. Citing In re American Medical Systems, Inc., 75 F.3d

1069 (6th Cir. 1996), and Retired Chicago Police Assn v Chicago, 7 F.3d 584 (7th Cir. 1993), the

court stated that, in pursuing their own claims, the named plaintiffs could not advance the interests

of the entire class because each claim depended on each person’s particular interaction with GM and

these, according to the court, varied from person to person. 133 F.3d at 399. The court noted that

the district court had taken testimony from more than three hundred class members in order to obtain

a representative sample of the representations and communications made by GM. This necessity

made class action relief improper.

D. Adequacy of Representation

The adequacy of class representation is measured by: (1) the qualifications of Plaintiffs'

attorneys; and (2) the extent to which Plaintiffs' interests may be antagonistic to those of the class.

Susman v. Lincoln American Corp., 561 F.2d 86, 90 (7th Cir. 1977); Hoxworth v. Blinder, Robinson

& Co., Inc., 980 F.2d 912, 923 (3d Cir. 1992); Senter v. General Motors Corp., 532 F.2d 511, 524-

25 (6th Cir. 1976)(representatives must have common interests with unnamed members and it must

appear that the representatives will vigorously prosecute the interests of the class through qualified

counsel); Wetzel v. Liberty Mutual Insurance Company, 508 F.2d 239, 247 (3d Cir. 1975), cert.

denied., 421 U.S. 1011 (1975); Eisen v. Carlisle & Jacquelin, 391 F.2d 555, 562 (2d Cir. 1968);

Majeski v. Balcor Entertainment Co., 134 F.R.D. at 248; Kaplan v. Pomerantz, 131 F.R.D. 118, 121

(N.D. Ill. 1990); Hazel v. Lynch Corp., IP 84-1352C (S.D. Ind. 1990); Rodriguez by Rodriguez v.


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Berrybrook Farms, Inc., 672 F. Supp. at 1017; Allen v. Isaac, 99 F.R.D. at 55.

Quantitative factors, such as the number of representatives or the relative amount of their

claims are inappropriate considerations under Rule 23(a)(4). In the absence of conflicts which go

to the subject matter of the lawsuit, class certification is appropriate. Eisen v. Carlisle & Jacquelin,

391 F.2d 555, 563 (2d Cir. 1968). See also Berman v. Narragansett Racing Association, 414 F.2d

311 (5th Cir. 1969), cert. denied, 396 U.S. 1037 (1970). The burden is on the defendant "to establish

inadequate representation." McGlothlin v. Connors, 15 E.B.C. 1321, 1327 (W.D. Va. 1992), citing

Haywood v. Barnes, 109 F.R.D. 568, 579 (E.D. N.C. 1986).

1. Adequacy of Counsel

As long as the plaintiffs' attorney is "qualified, experienced, and generally able to conduct

the proposed litigation," he or she meets the standards for certification as class counsel. Susman v.

Lincoln American Corp., 561 F.2d 86, 90 (7th Cir. 1977).

In Hazel v. Lynch Corp., IP 84-1352C (S.D. Ind. 1990), the court addressed the issue of

whether the UAW's payment of class counsel's fees, the UAW's ongoing relationship with class

counsel and the UAW's own potential liability disqualified counsel from representing a class of

retirees suing for health care benefits. In reaching its determination that the UAW-paid class counsel

was a qualified representative for the class, the court explained:

In addition to McClendon's [v. Continental Group, Inc., 113 F.R.D.39 (D.N.J. 1986)] persuasiveness, a variety of factors in this case leadme to conclude that plaintiffs' counsel, being union lawyers, are veryfamiliar with cases of this sort. The experience that counsel bringsinto the litigation was gained by repeatedly representing the UAW,other unions, and their rank and file in cases similar to this one. If thiscourt were to force plaintiffs' counsel from the case at this point,


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plaintiffs would be unlikely to find replacement counsel (especiallycounsel as skilled and well-versed in the facts of this case as currentcounsel).

. . .Moreover, the UAW's status as a third party financier does not posea conflict of interest problem. On the contrary, it has permitted theplaintiff class to pursue this lawsuit. It is unlikely that the plaintiffswould be able to finance the costs of the suit on their own. TheUAW's potential liability to the plaintiff class is also not a valid reasonfor disqualification.

Hazel v. Lynch Corp., IP 84-1352C at 4-5. Accord White v. National Football League, 822 F. Supp.

1385, 1404 (D. Minn. 1993).

As the Hazel court recognized, if every union attorney were disqualified from representing

retirees in ERISA lawsuits, the retirees would certainly be assured of counsel with no familiarity of

the intricacies of collective bargaining agreements, pension plans, health insurance plans, ERISA

obligations and bargaining histories. The result -- unqualified attorneys for retirees -- is in the

interests of employers, but is clearly not in the interest of the class.

In Fox v. Massey-Ferguson, 172 F.R.D. 653 (E.D. Mich. 1995), counsel for Massey-

Ferguson claimed that the class should not be certified because the counsel for the class (McClow)

was “neither qualified to litigate the case nor free from a conflict of interest because of his long-

standing relationship to the UAW.” Defendant’s counsel also noted that the UAW was paying class

counsel’s fees and expenses and that Massey-Ferguson had added the UAW as a third party defendant

to the case based on an earlier release and covenant by the UAW not to sue Massey-Ferguson in

settlement of an earlier lawsuit. Massey-Ferguson claimed that this presented a difficult ethical issue

for class counsel because “every penny McClow wins for his clients, the temporary nominal class

members, will come out of the pocket of his long-term and real client, the UAW.” According to


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Massey-Ferguson, if the UAW decides that its interests are inimical to those of the class, it may stop

funding the suit or seek to influence class counsel in a manner that is unfavorable to the plaintiffs.

Fortunately, the court disagreed, noting that “there is every indication that McClow has vigorously

pursued this action.” It also noted that the company’s claim against the UAW had been dismissed

since it had filed its brief and, therefore, there is no possibility that the UAW would be required to

indemnify the company if the plaintiffs prevailed.

There is unquestionably a tension between a union’s duty to represent active bargaining unit

employees with respect to terms and conditions of employment which are mandatory subjects of

bargaining and the fact that a union has no statutory duty to represent employees who have already

retired. Chemical Workers v. Pittsburgh Plate Glass, 404 U.S. 157, 92 S.Ct. 383, 30 L.Ed. 2d 341

(1971). The danger of trying to please the active employees by maintaining their wages and benefits

at the expense of the retirees is present when there is an existing active work force and an existing

employer bargaining partner. See e.g. In re Century Brass Products, 795 F.2d 265 (2d Cir. 1986)

(conflict of interest precludes union from representing both active and retired employees in bargaining

during bankruptcy proceeding). The tension is less acute when the bargaining relationship no longer

exists. Any potential conflict will depend on the circumstances under which the modification or

termination of benefits occurs.

2. Adequacy of Named Representatives

The adequacy of class representative in retiree health insurance cases was addressed in

McGlothlin v. Connors, 15 E.B.C. 1321 (W.D. Va. 1992). There, an elderly widow was deemed an

adequate class representative. The court explained:


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The court is not unmindful that most, if not all, Plaintiffs are elderlyand likely to have varying degrees of health problems. Although Mrs.McGlothlin is in poor health, she presented herself to the court andtestified on her own behalf. She understood questions and gavecoherent answers. And, although she was unfamiliar with legalterminology, she attested to her signature on the affidavit and told ofthe events concerning how she became involved in the lawsuit. SeeHeastie v. Community Bank, 125 F.R.D. 669, 676 (N.D. Ill. 1989)(declaring that lack of sophistication does not necessarily render aclass representative inadequate). Further, Mrs. McGlothlin was ableto identify the attorney with whom she spoke at [the law firm]. Inshort, although Mrs. McGlothlin is quite feeble, the court determinesthat she is an adequate class representative.

15 E.B.C. at 1327-28.

In Fox v. Massey-Ferguson, 172 F.R.D. 653 (E.D. Mich. 1995), the company claimed that

two of the named class representatives were inadequate class representatives because they could not

identify any written statement of contract term which gave them a right to cost free lifetime health

care benefits. The court rejected this attack on class certification as well:

The law does not obligate the Plaintiffs to know every aspect of the law in orderto adequately represent a class. If such a requirement were imposed, all class actionswould require the retained counsel to serve as plaintiffs. Here Noe and Fox fullyunderstand the nature of their claims against Massey-Ferguson. It is their specificbelief that they are entitled to lifetime insurance benefits.

The court also stated that there was no indication that the plaintiffs were not, or would not

become, the vigorous representatives which the law requires, noting that they have a keen interest

in the outcome of the litigation.

The court finally rejected the company’s argument that the named plaintiffs were inadequate

because they could not individually or collectively afford the costs of litigation or an adverse

disposition of the litigation. The court stated that , if financially disadvantaged people are excluded


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as potential class representatives because of their economic circumstances, the “keen interest”

requirement would never be satisfied.

Other courts have held that the financial means of the class should not affect certification. The

court in Dirks v. Clayton Brokerage Co., 105 F.R.D. 125, 133 (D. Minn. 1985) noted that "courts

do not normally examine the financial responsibility of class representatives." The Dirks court cited

George v. Beneficial Finance Co., 81 F.R.D. 4, 7 (N.D. Tex. 1977) for the principle that where a

third party foundation was financing the suit, "plaintiffs with limited resources were nevertheless

adequate representatives . . . ." If the court is satisfied that funding for the case is secure, then the

poverty of the class members cannot affect the issue of class certification.

II. RULE 23(B) STANDARDS

A. Class Actions Maintainable Under Rule 23(b)

A proposed class action, having met the requirements of Rule 23(a), must then meet one of

the three criteria set out in Rule 23(b). Certification under Rule 23(b)(1) or (b)(2) is favored by the

courts. Mungin v. Florida East Coast Railway Co., 318 F. Supp. 720, 730 (M.D. Fla. 1970),

affirmed per curiam, 411 F.2d 728 (5th Cir. 1971), cert. denied, 404 U.S. 897 (1971). Retiree health

care cases fall naturally under both of these provisions, rather than under Rule 23(b)(3) which permits

a class member to opt out of the class action.

1. Rule 23(b)(1) – Danger of Inconsistent Adjudications/Practicably Dispositive

Rule 23(b)(1) provides that an action may be maintained as a class action if the above four

requirements of Rule 23(a) are met and if the prosecution of separate actions by or against individual

members of the class would create a risk of either one of the following:


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(A) inconsistent or varying adjudications with respect to individualmembers of the class which would establish incompatible standards ofconduct for the party opposing the class; or

(B) adjudications with respect to individual members of the class whichwould as a practical matter be dispositive of the interests of the othermembers not parties to the adjudications or substantially impair orimpede their ability to protect their interests.

Absent class certification, the danger of inconsistent or varying adjudications is a real danger

in retiree health care cases, especially when the retirees are scattered throughout the country. A

prime example of this is the Massey-Ferguson salaried health care litigation. In 1988, a group of

salaried retirees sued Varity, the parent of Massey-Ferguson, Inc, in Iowa, claiming that they had

been wrongfully induced to transfer to Massey Combines Corporation (MCC), which they claimed

Varity had established knowing it would fail, for the express purpose of eliminating much of its retiree

health care liability. After MCC went bankrupt as expected, the retirees sued. There were three

separate groups involved, a class of retirees from MCC, a class of terminated MCC employees and

ten individuals who had retired before MCC was formed. The latter ten individuals did not seek class

certification. Howe v. Varity, 36 F.3d 746 (8th Cir. 1994), modified, 41 F.3d 1263 (1994), affirmed,

516 U.S. 489, 116 S.Ct. 1065, 134 L. Ed.2d 130 (1996). The retirees claimed a breach of the

company’s fiduciary duty under ERISA and that the summary plan description, entitled “You and

Massey-Ferguson,” promised them lifetime health care benefits.

The Eighth Circuit held that the health care “plan” and “You and Massey Ferguson”

unambiguously did not provide for lifetime health care benefits, and dismissed that claim. It held,

however, that the defendants had breached their fiduciary duty to the MCC class and ordered those


17


retirees to be returned to the existing Massey-Ferguson salaried health care plan. The Supreme Court

granted certiorari on the fiduciary duty issue only and affirmed.

In the meantime, on January 1, 1994, Massey-Ferguson substantially reduced the health care

benefits it provided to its remaining salaried retirees. Four non-MCC salaried retirees sued on behalf

of a class of retirees, excluding those who had been named in the Howe litigation. The plaintiffs again

relied on the promises made in “You and Massey-Ferguson.” Unlike in the Fox case, and even

though the same allegedly incompetent counsel represented the salaried class, Massey-Ferguson

stipulated to class certification, apparently because it assumed that the court would follow the Howe

decision. In fact, the court declined the defendant’s invitation to follow Howe, stating: “There is

nothing in this record or within the opinion of the Eighth Circuit Court of Appeal which supports

such a narrow interpretation of this language.” The court found the conclusion that the language of

the “plan” and “You and Massey-Ferguson” was ambiguous was “inescapable.” Colby v. Massey-

Ferguson, C.A. No. 94-71698 (E.D. Mich. January 10, 1996). The case was subsequently settled

with the implementation of a substantially improved Modified Health Care plan.

Absent class certification, a company such as Massey-Ferguson could be required to maintain

insurance for some retirees and not for others, or at different levels, even though it might well be

prohibited by ERISA from treating retirees differently from one another. This is the result Rule

23(b)(1) is intended to avoid. Reynolds v. National Football League, 584 F.2d 280 (8th Cir. 1978);

Robertson v. National Basketball Association, 556 F.2d 682 (2d Cir. 1977); Fox v. Massey-

Ferguson, 172 F.R.D. 648 (E.D. Mich. 1995); Beach v. Wyman-Gordon Co., C.A. No. 93-CV-71822

(E.D. Mich. Jan. 31, 1994). Accordingly, certification of ERISA benefit class actions generally fall

naturally within Rule 23(b)(1)(A).


2See generally Ortiz v. Fibreboard Corp., No. 97-1704 (June 23, 1999), where the SupremeCourt addressed the limited fund theory under Rule 23(b)(1)(B) and its application to mass tortlitigation.

18


Because retiree health care benefits are generally not funded, but paid from operating

expenses, the limited fund theory under Rule 23(b)(1)(B) is generally not relevant.2 That theory

would be relevant when retiree health care obligations were litigated in bankruptcy, as they were

when, for example, Allis-Chalmers, Farley, Inc. and Century Brass, Inc. sought Chapter 11

protection.

2. Rule 23(b)(2) – Actions Generally Applicable to Class

Rule 23(b)(2) permits class certification when the party opposing the class has acted or

refused to act on grounds generally applicable to the class, making final injunctive relief or

corresponding declaratory relief appropriate with respect to the class as a whole. The test of

subsection (b)(2) rests upon defendant's conduct being applicable to the class as a whole. Davis v.

Weir, 497 F.2d 139 (5th Cir. 1974); Allen v. Isaac, 99 F.R.D. at 56. In retiree health care cases, it

is the employer’s single act of reducing or terminating health care benefits which is the crux of the

litigation. The relief most generally sought is declaratory relief that the benefits are, in fact, lifetime

and injunctive relief requiring the company to maintain them at the status quo ante.

As noted in Allison decision, the Advisory Committee did not intend that class certification

under Rule 23(b)(2) extend to cases where the relief sought is exclusively or predominantly damages.

Allison v. CITGO Petroleum Corp., 151 F.3d 402, 411 (5th Cir. 1998). Unlike that Title VII action,

damages in retiree health care litigation generally flow directly from an initial, common breach. The

bulk of the damages for the breach -- alternate premium contributions, health care expenses, extra


19


deductible or co-insurance payments, etc .(which courts often erroneously refer to as “restitution,”) --

can be determined easily and by reference to objective standards. Courts have refuse to award

punitive or compensatory damages under either Section 301 of the National Labor Relations Act or

ERISA. See Howe v. Varity, 36 F.3d at 755-56. Whatever its merit, the rationale of the Fifth Circuit

in Allison for not certifying that Title VII case as a class action under Rule 23(b)(2) are not applicable

in retiree health care litigation.

If class members are entitled to continuing health care benefits under the collective bargaining

agreements and related benefit plans, then declaratory and injunctive relief requiring the company to

provide those benefits is relief that affects all members of the class. Steelworkers v. Connors Steel

Co., 8 E.B.C. 1719 (N.D. Ala. 1987). See Senter v. General Motors Corp., 532 F.2d 511, 525 (6th

Cir. 1976); McGlothlin v. Connors, 15 E.B.C. 1333 (W.D. Va. 1992); Rodriguez by Rodriguez v.

Berrybrook Farms, Inc., 672 F. Supp. at 1017-18; Mamula v. Satralloy, 578 F. Supp. 563 (S.D. Ohio

1983) (action seeking final injunctive relief by retirees and former employees for benefits appropriate

for class action certification under Rule 23(b)(2)); Leist v. Shawano County, 91 F.R.D. 64; Mungin

v. Florida East Coast Railway Co., 318 F. Supp. 720 (M.D. Fla. 1970), affirmed per curiam, 411

F.2d 728 (5th Cir. 1971), cert. denied, 404 U.S. 897 (1971).

III. Selected Class Action Issues

A. Section 23(c) -- Time For Filing Motion to Certify a Class

Rule 23(c)(1) provides that:

As soon as practicable after the commencement of an action brought as a class action,the court shall determine by order whether it is to be so maintained.


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Nevertheless, there is no set deadline for motions to certify a class under Rule 23(c).

Montelongo v. Meese, 803 F.2d 1341 (5th Cir. 1986). Mere delay in making a class certification does

not deprive a district court of the power to do so. Jimenez v. Weinberger, 523 F.2d 689, 699 (7th

Cir. 1975). Class actions can be certified at trial or after an appeal which reversed the original

disposition of the case. Jimenez v. Weinberger (after appeal); Marquez v. Kiley, 436 F. Supp. 100

(S.D.N.Y. 1977) (at trial). Courts have certified classes sua sponte, even though the class plaintiffs

never sought class certification. See e.g. Jenkins v. Massinger, 592 F. Supp. 480 (D.C. Md. 1984);

Berry v. School District of Benton Harbor, 442 F. Supp. 1280, 1287 (W.D. Mich. 1977). Early class

certification may be more critical in Rule 23(b)(3) class actions in order to provide unnamed class

members with a meaningful opportunity to request exclusion from the class. Jimenez v. Weinberger,

supra. A defendant can move to certify a plaintiff class. Muth v. Deckert, Price & Rhoades, 70

F.R.D. 602 (E.D. Pa. 1976).

The Ninth Circuit recently held that Rule 23 does not permit modification of a class

certification after there is a decision on the merits of a case. Rule 23(c)(1) permits such an

amendment only “before the decision on the merits.” Vizcaino v. United States District Court for the

Western District of Washington, 173 F.3d 713 (9th Cir. 1999). Accord Scott v. City of Anniston, 682.

F.2d 1353 (11th Cir. 1983).

Failure to move for class certification within the time frame required by local rule does not

render counsel an inadequate representative. Price v. Cannon Mills, 13 F.R.D. 66 (M.D.N.C. 1986);

Robert Alan Ins. Agency v. Girard Bank, 107 F.R.D. 271 (E.D. Pa. 1985); Slanina v. William Penn

Parking Corp., 106 F.R.D. 419 (W.D. Pa. 1985). In Fox v. Massey-Ferguson, 172 F.R.D. 653 (E.D.

Mich. 1995), where no local rule established the time frame for certification, the defendant claimed


21


that plaintiffs’ eight month “delay” in moving for class certification demonstrated that class counsel

was inadequate. The court found that contention to be without merit.

B. Availability of Injunctive Relief Prior to Certification

Courts have routinely granted injunctive relief in retiree health care cases prior to class

certification. Golden v. Kelsey-Hayes, 854 F. Supp. 410 (E.D. Mich. 1994), affirmed, 73 F.3d 648

(6th Cir. 1996) Schalk v. Teledyne, Inc., 571 F. Supp. 1261, 1262 n.2 (W.D. Mich. 1990), affirmed,

948 F.2d 1290 (6th Cir 1991); Helwig v. Kelsey-Hayes, 857 F. Supp. 1168 (E.D. Mich. 1994),

affirmed, 93 F.3d 243 (6th Cir. 1995); Hinckley v. Kelsey-Hayes, 866 F. Supp. 1034 (E.D. Mich.

1994); UAW v. Roblin, C. A. No. K82-205 CA9 (W.D. Mich. July 30, 1982). Injunctive relief has

been granted prior to class certification in other situations as well. Lapeer County Medical Care

Facility v. Michigan, 765 F. Supp. 1291, 1301 (W.D. Mich. 1991); Robertson v. National Basketball

Ass'n, 389 F. Supp. 867 (S.D.N.Y. 1975).

Preliminary injunctive relief is appropriate prior to class certification precisely because

such relief is intended to be immediately available. To require class certification prior to entry of a

preliminary injunction would often divert scarce resources, which should be directed at the injunction,

to class certification. Such a requirement would reward dilatory tactics of the opposing party. In

Golden v. Kelsey-Hayes, for example, the company obtained five extensions to respond to Plaintiffs'

class certification motion. Its response was finally filed ten weeks after the motion and contained

numerous technical arguments in opposition to certification. On appeal, the company argued on

appeal that the district court erred in granting injunctive relief prior to class certification. The Sixth

Circuit refused to address the issue because it had not been raised before the lower court. In any


22


event, the district court had certified the class pending the appeal of the injunction and the Sixth

Circuit concluded that reaching the merits of the question would be largely academic. 73 F.3d at 658.

C. Defendant Classes

It has become a fairly standard practice for companies seeking to terminate retiree health care

benefits to file a declaratory action against the union or a retiree as a representative of the class of

retirees. In this way, the company, not the retirees or the union, can choose the venue of the action.

See e.g. NL Industries, Inc. v. UAW, C.A. No. 87-1292 (W.D.N.Y.); Farley, Inc. v. UAW and

Donald Paolucci, C.A. No. 90-6195 (E.D. Pa.); Navistar International Corp. v. Foster, C.A. No.

C 4913 (N.D. Ill); Pabst Brewing Co., Inc. v. Corrao, 161 F.3d 434 (7th Cir. 1998); Doehler-Jarvis,

Inc. v. Kopysteki, C.A. No. 99-2967 (E.D. Pa.).

There are several problems with this tactic. As noted above, suing the union does not

guarantee that any judgment would bind the retirees. The company’s choice of a defendant class

representative is especially problematic because it is the advocate of who will adequately represent

the class who is suing it. When retirees file a class action on behalf of their fellow employees, they

have already retained counsel who understands that his or her competence may be challenged. The

named plaintiffs have already indicated their desire to vigorously prosecute the action by the very fact

that they have chosen to act as class representatives. The same cannot be said of an individual who

is named as a defendant class representative by the company. That person has not decided to protect

the interests of the class – the job is thrust on him or her by the company. The person chosen by the

company will not have had the luxury of finding qualified counsel prior to the filing of the complaint.

The involuntary class representative will be required to find counsel under the pressure of the time


23


constraints to respond to the complaint or suffer possible default as to his or her claim. That person

probably will not have the resources and may not have the desire to be a class representative.

The Seventh Circuit has held that the due process rights of unnamed class members of a

defendant class are entitled to special solicitude. Pabst Brewing Co., Inc. v. Corrao, 161 F.3d 434,

439 (7th Cir. 1998); See also Henson v East Lincoln Township, 814 F.2d 410 (7th Cir. 1987).

Certifying a defendant class based on the adequacy of the representation of the class by a person

chosen by the company is hardly a means of insuring that a proposed class has “sufficient unity so that

absent class members can be fairly bound by decisions of class representatives.” Amchem Products,

Inc. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231, 2248, 138 L.Ed.2d 689 (1997).

Defendant classes cannot be certified under Rule 23(b)(2). Because it will invariably be the

alleged wrongdoer, the defendant, who has “acted on grounds generally applicable to the class,” Rule

23(b)(2) only contemplates plaintiff class actions. Pabst Brewing Co., Inc., 161 F.3d at 439; Henson,

814 F.2d at 414. Moreover, Rule 23(b)(2) presupposes that the wrongdoer and the party who

opposes the class are one and the same and contemplates injunctive relief against the party opposing

the class rather than against the party advocating the class. The Advisory Committee Notes to Rule

23(b)(2) make no reference to defendant class actions and specifically describe (b)(2) actions as

plaintiff class actions against a party which has done something injurious to the class as a whole.

When suing a defendant class of their retirees, companies often sue for a declaratory judgment

under Section 502 of ERISA that they are free to modify or terminate retiree health care benefits.

Section 502, however, only provides jurisdiction for suits by a plan participant or a plan beneficiary

to clarify or enforce their right to benefits. In Pabst Brewing Co., v. Corrao, 176 F.R.D. 552 (E.D.


24


Wis. 1997), the district court held that Pabst was neither. Relying on Franchise Tax Board v.

Construction Laborers Vacation Trust for Southern California, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.

420 (1983), the district court held that the Declaratory Judgment Act is procedural only and does not

alter the jurisdictional reach of ERISA. The court dismissed the declaratory judgment action for lack

of subject matter jurisdiction. It also rejected Pabst’s attempt to assert diversity jurisdiction on the

basis that Pabst had not alleged any cognizable claim under either state or federal law.. That ruling

was not appealed by Pabst, but it struck the Seventh Circuit that the district court’s decision could

more properly be characterized as one for failure to state a claim on which relief could be granted.

161 F.3d at 438.

D. Discovery from Absent Class Members

Rule 23 does not address discovery from class members. Because absent class members are

not technically “parties” to the litigation, there is a question of whether absent class members are

subject to discovery, and if so, to what extent. The general rule is that discovery is allowed rarely

and only upon prior court approval and a strong showing of justification.

In Brennan v. Midwestern United Life Insurance Co., 450 F.2d 999 (7th Cir. 1971), the court

held that, while absent class members should not be required to submit to discovery as a matter of

course, trial courts have the power to authorize the use of Rules 33 and 34 discovery procedure if

they determine that justice required absent class members to furnish certain information. In Brennan,

the court affirmed dismissal of the claims of absent class members who had failed to respond to

discovery. First, however, it assured itself that the information sought was actually needed in

preparation for trial, was not being used to take unfair advantage of absent class members and those


25


absent class members had been fully informed of the discovery order and the possible consequence

of non-compliance.

In Clark v. Universal Builders, 501 F.2d 324 (7th Cir. 1974), the court revisited the issue.

It refused to uphold the lower court’s dismissal of class members who failed to respond to

interrogatories on the basis that the defendants had not met the burden of demonstrating that their

request was meritorious. The court identified four factors in determining whether absent class

members would be required to answer interrogatories. First, the interrogatory must not be designed

as a tactic to undue advantage of the class members or as a strategy to reduce their number. Second,

the interrogatory must be necessary from the stand point of the litigation. Third, absent class

members would not be required to answer questions that would require the assistance of technical

or legal advice in understanding the questions and formulating responses. Finally, the interrogatories

cannot seek information on matters already known to the defendants.

In Cox v. American Cast Iron Pipe Co., 74 F.2d 1546 (11th Cir. 1986), the Eleventh Circuit

criticized Brennan and found that it had been arguably narrowed by the subsequent decision of the

Seventh Circuit in Clark. The court concluded that the district court had erred in dismissing absent

class plaintiffs for non-compliance of its discovery order. It was convinced that the interrogatories

were improperly used as a strategy to reduce class size. It determined that the “necessity” of the

interrogatories was questionable since they were used in Stage One proceedings of a Title VII

proceeding where the focus is the broad pattern or practice, not the merits of individual claims. The

court concluded:


26


Individual discovery directed to passive class members would normally be appropriateonly at Stage Two of a Title VII suit, and then only rarely.

784 F.2d at 1556.

The court also declined to approve the use of the discovery sanction of dismissal against

passive class members in a class action suit even to the extent it may have been permitted by Brennan

and Clark. The court found that a discovery order threatening dismissal for non-compliance amounts

no more than a opt-in device which requires passive class members to take positive action to stay in

the suit.

In Cox, the district court had used the discovery sanction to reduce the class from 117 passive

class members to 47. After the discovery sanctions were applied, the court decertified the class for

insufficient numerosity. The Eleventh Circuit concluded that this was clear error.

In Clark v. Universal Builders, Inc., the Seventh Circuit stated that the burden confronting

the party seeking deposition testimony from absent class members is more severe than that imposed

when the request is for permission to serve interrogatories. 501 F.2d at 341. Accord Baldwin &

Flynn v. National Safety Association, 129 F.R.D. 598, 600 (N.D. Cal. 1993). In Krueger v. New

York Telephone Co., 163 F.R.D. 446 (S.D. NY 1995), an action under the ADEA and ERISA for

unlawful infringe of pension rights, the court permitted the depositions of 14 unnamed class plaintiffs

on the basis of criteria set forth in United States v. Trucking Employers, Inc., 72 F.R.D. 101, 104

(D.D.C. 1986). The proposed deponents had participated in evaluations and appraisals of other class

members and defendants claimed that those evaluation formed the basis of the alleged discriminatory

actions challenged by plaintiffs. The court also found that there was no meaningful evidence that the


27


defendants were attempting to harass the absent class members. Finally, the issues of liability on

which defendants seek to depose the absent class members was a class wide issue going to the heart

of plaintiffs’ claim. The intended deponents were “evaluatees whose observations and experience are

relevant” to a liability issue.

The court also permitted the defendants to serve interrogatories on all 162 class members in

the form of a questionnaire because it related to issues of individual damages. In part, the court relied

on the fact that there had been no bifurcation of liability and damage issues and there was an

outstanding discovery cut-off date which applied all discovery, including discovery related to

individual damage issues. The court did grant the plaintiffs’ motion for protective order against

particular interrogatories finding that they were overbroad and invasive.

In retiree health care litigation, the issues of liability and damages are often bifurcated for trial.

When, as is often the case, there are large numbers of retirees, the parties generally agree that there

is no reason to try damages until liability is determined. In such cases, discovery from individual class

members on liability issues should only be directed at those persons identified as having special

information or knowledge, such as members of the union bargaining committee who participated in

negotiations or union benefit representatives who participated in exit interviews. There may be more

justification for discovery of absent class members when there is an estoppel claim that relates to

liability of the employer as to individuals. Of course, the Sixth Circuit in Sprague would eliminate

that issue because it would eliminate class action treatment of such claims.


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E. The Doctrine of Res Judicata and Retiree Welfare Benefit Litigation

In Fox v. Massey-Ferguson, Massey-Ferguson had made some minor changes (which it called

enhancements) to its retiree health care plan in the late 1980's. The UAW sued on behalf of the

retirees, asking for a declaratory judgment that Massey-Ferguson was obligated to provide lifetime

health care benefits. This litigation was subsequently settled. Pursuant to the settlement agreement,

the UAW signed a release which contained a hold harmless clause. The action was dismissed with

prejudice.

Three years later, Massey Ferguson implemented massive cuts to the retiree health care plan.

The retirees sued for declaratory relief, injunctive relief and damages. Massey-Ferguson claimed that

the dismissal of the prior lawsuit with prejudice was res judicata because the UAW had sought the

same declaratory relief then.

The class representatives argued that the 1994 changes constituted an entirely different claim

which precluded the application of res judicata and, in any event, there was no privity between the

UAW and retirees. The retirees claimed that a fundamental principle of labor law, established in

Chemical Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157, 181 n. 20, 92 S.Ct. 383, 30 L.Ed.2d

341 (1971) is that “under established contract principles, vested retirement rights may not be altered

without the pensioner’s consent.” After that decision, courts have since then consistently held that

unions cannot bargain away retiree benefits that have already been vested in particular individuals.

UAW v. Yard-Man, 716 F.2d 1476 (6th Cir. 1983); Bokunewicz v. Purolator Products Inc., 907 F.2d

1396, 1401 (3d Cir. 1990) (once a benefit rights vested, company and union “were without power


29


to bargain” them away); Shatto v. Evans Products Co., 728 F.2d 1224, 1227 (9th Cir. 1984) (“while

established” that union has no authority to bargain away vested rights).

Massey-Ferguson relied on UAW v. Acme Precision Products, 515 F. Supp. 537, 540 (E.D.

Mich. 1981), where the district court analogized the UAW’s position to that of a class representative

under Rules 23 and held that a judgment in such a case would be binding on retirees. The retirees

responded that Acme was decided before Yard-Man and, in any event, there had been no settlement,

dismissal or compromise of the retirees’ claim in Acme. If there had been, Rule 23(e) would have

required notice of the proposed dismissal or compromise to all members of the class and a judicial

determination that any settlement was fair and reasonable to the members of the class. United Black

Firefighters Association v. Akron, 976 F.2d 999, 1004 (6th Cir. 1992); Bailey v. Great Lakes

Canning, Inc., 908 F.2d 38, 42 (6th Cir. 1990). The retirees also argued that dismissal before class

certification would bind only the parties to the lawsuit, that is, the UAW, not any unnamed class

members. Harold Washington Party v. Cook County Democratic Party, 984 F.2d 875 (7th Cir.

1993); Colon v. Margiotta, 811 F.2d 698, 719 (2d Cir. 1987); Roman v. ESB, Inc., 550 F.2d 1343,

1355-56 (4th Cir. 1976). The district court agreed with the retirees that the doctrine of res judicata

did not apply.

In several cases where the UAW sued an employer after it modified or terminated health care

benefits, the cases were converted to class actions prior to settlement. In fact, Yard-Man was

eventually settled, after judgment and as a class action under Rule 23, after the company ran out of

money. In UAW v. Echlin, Inc., 670 F. Supp. 697 (E.D. Mich. 1986), the UAW and all of the

retirees and surviving spouses named individually as plaintiffs sued. After the case was settled during


30


trial, it was converted to a class action. Notice of settlement was given to the class and there was a

fairness hearing before a judgment was entered.

Another example of the interplay between res judicata and class certification is Bittinger v.

Tecumseh Products Co., 123 F.3d 877 (6th Cir. 1997). There, after the union declared it would not

represent the interest of the retirees, the company terminated retiree health care benefits at the

expiration of the collective bargaining agreement. The retirees then organized a non-profit

corporation for purposes of suing the company to restore health care benefits to approximately 1,200

hourly retirees. Three members of the organization sued as representatives of the class. The district

court granted the company’s motion for summary judgment and did not reach plaintiffs’ motion for

class certification.

Bittinger, who was not one the three plaintiffs in the original suit, brought a second action.

The district court granted his motion for class certification under Rule 23 and then granted the

company’s motion for summary judgment on grounds that the action was barred by the doctrine of

res judicata. The Sixth Circuit reversed, holding that even though Bittinger had financially supported

the originally lawsuit, there was no privity for purposes of res judicata. The court relied Richards

v. Jefferson County, 517 U.S. 793, 116 S.Ct. 1761, 135 L.Ed.2d 76 (1996) for its concept of privity,

which in turn relied on the Restatement (Second) of Judgment. Under Section 41 of the Restatement

(Second) Judgments, Section 41(1) (1990), one of the exceptions to the general rule that a person

not a party to an action can be bound is if he or she is represented by another party if that other party

is “[t]he representative of a class of persons similarly situated, designated as such with the approval

of the court, of which the person is a member.” (emphasis in Bittinger) 123 F.2d at 880. The Sixth


31


Circuit held that, even under the compelling facts of the case, there was no privity between Bittinger

and the plaintiffs in the original lawsuit because the class had never been certified there.

F. Statute of Limitations

The statute of limitations is tolled for absent members of the class for the period from the

filing of the class action complaint until the court denies class certification. Crown, Cork & Seal Co.,

Inc. v. Parker, 462 U.S. 345, 103 S.Ct. 2392, 76 L.Ed.2d 628 (1983); American Pipe &

Construction Co. v. Utah, 414 U.S. 538, 94 S.Ct. 756, 38 L.Ed. 2d 713 (1974). The initial denial

of class certification is the critical date, not the denial of a motion for reconsideration, final judgment

or the resolution of a possible appeal. Armstrong v. Maritn-Marietta Corp., 138 F.3d 1374 (11th

Cir. 1998). In a recent decision, the Seventh Circuit held that the rationale of these decisions was

that, until class certification is denied, absent class members are in exactly the same position vis a vis

the statute of limitations as the named plaintiffs. Hemenway v. Peabody Coal Co., 159 F.3d 255 (7th

Cir. 1998). In that diversity case, Indiana law had what is called a “journeys account statute” which

permitted plaintiffs to refile dismissed suits within three years in certain situations if their original suit

had been timely filed. The Seventh Circuit held that, in such a situation, the failure of a class action

for jurisdictional reasons must be treated like a failure for some other reason, such as numerosity or

typicality, and the statute of limitations as to absent class members would be tolled for the duration

of the dismissed lawsuit.

G. Appeal of Certification Orders

Rule 23(f), effective January 1, 1999, provides:

Appeals. A court of appeals may in its discretion permit an appeal from an


32


order of a district court granting or denying class action certification under this ruleif application is made to it within ten days after entry of the order. An appeal does notstay proceedings in the district court unless the district court or the court of appealsso orders.

Prior to Rule 23(f), orders certifying a class will be reviewed for abuse of discretion.

Shvartsman v. Appel, 138 F.3d 1196 (7th Cir. 1998); Sprague v. General Motors Corp., 133 F.3d

388, 397 (6th Cir. 1998). Under existing case law, a decision certifying a class will only be reversed

where a court certifies without "rigorous analysis" of the requirements of Rule 23. General Telephone

Co. v. Falcon, 457 U.S. 147, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982).

The new rule will have an impact on certification of retiree health care cases in a manner

disproportionate to the problem the change was intended to address. As discussed above, a retiree

health care action generally falls naturally within a Rule 23(b)(2) class. Except in estoppel only

actions like the final phase of Sprague, the class is attacking an employer’s single act (modification

or termination of benefits) on the basis of a single or a series of documents (such as collective

bargaining agreements, health care plans or summary plan descriptions). This kind of litigation is

vastly different than a mass tort or a Title VII pattern or practice case where individual class members

are treated differently over time or suffer varying injuries inflicted by different persons over a long

period. [See discussion of the possible impact of Rule 23(f) on Title VII discrimination litigation in

160 LRR (BNA) 57 (January 18, 1999)]. This distinction may well affect the exercise of the appellate

court’s discretion. But, the additional possibility for delay poses a particular problem in retiree health

cases where, by the very nature of class, time is not neutral. The existence of an interlocutory appeal

may simply be another arrow in the quiver of company attorneys, like those in Fox v. Massey-


33


Ferguson, who decide that time is on their side. In cases where magistrates make the initial decision,

such as Golden v. Kelsey-Hayes, the certification process may well result in three separate class

certification decisions before the case can proceed as a class action.

Rule 23(f) will be an incentive for class counsel to move for certification as soon as possible

and for courts to act as soon as possible. Although an appeal will not automatically stay proceedings,

class counsel will hardly be able to determine strategy or assess whether or how to proceed until the

certification issue is finally decided at the trial or appellate level.

Rule 23(f) may also cause courts to reconsider tolling principles. For instance, will the statute

of limitations be tolled only until the district court’s denial or, if that denial is appealed within ten

days, until the court of appeals’ denial of the interlocutory appeal? If a court of appeals permits an

appeal of a denial of a certification, it seems consistent with the rationale announced by the courts

to date that the statute be tolled until the court of appeals decides the merits of the district court’s

certification order.

class action issues in retiree health care litigation under erisa

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