in the supreme court of the state of montana case...
TRANSCRIPT
IN THE SUPREME COURT OF THE STATE OF MONTANA
CASE NO. DA 14-0632
KENT D. ROOSE,
Plaintiff and Appellee,
Vs.
LINCOLN COUNTY EMPLOYEE GROUP
HEALTH BENEFIT MANAGEMENT SERVICES
INC.; JOINT POWERS TRUST; JOHN DOES 1-50; and JOHN DOES 51-100,
Defendants and Appellants.
______________________________________________________________________________
BRIEF OF AMICUS CURIAE
MONTANA DEFENSE TRIAL LAWYERS ASSOCIATION
On Appeal from the First Judicial District Court, Lewis and Clark County, Montana
Cause No. BDV-2009-878
Honorable Jeffrey M. Sherlock
David C. Clukey
James M. Duncan
CROWLEY FLECK PLLP
TransWestern Plaza II
490 N. 31st Street
P.O. Box 2529
Billings, MT 59103
(406) 252-3441
Attorneys for Montana
Defense Lawyers Association
Erik Thueson
Erik Thueson Law Office
213 5th
Avenue
Helena, Montana 59601
William R. Bieler
Burk, Lee and Bieler, PLLC
P.O. Box 1350
216 Main Avenue North
Choteau, Montana 59422
Attorneys for Kent D. Roose
Bradley J. Luck
Robert C. Lukes
Megan L. Dishong
GARLINGTON, LOHN &
ROBINSON, PLLP
350 Ryman Street
P.O. Box 7909
Missoula, MT 59807-7909
Attorneys for Defendants
Employee Benefit
Management Services, Inc.,
and Joint Powers Trust
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES ....................................................................................................... ii
STATUTES AND RULES .......................................................................................................... iv
OTHER AUTHORITIES ........................................................................................................... iv
INTRODUCTION .......................................................................................................................... 1
ARGUMENT .................................................................................................................................. 2
I. Numerosity May Not Be Established Through the Court's Rule 23(c)(2) Notice Powers ................................................................................................................................ 2
A. Rule 23(c)2)(A Notice is to Protect Due Process Rights In Extraordinary Circumstances ............................................................................................................... 2
1. The Purpose of23(c)(2)(A) Notice is to Protect the 23(b)(2) Class in Extraordinary Circumstances ....................................................................................... 5
2. The Purpose of23(c)(2)(A) Notice is to Protect 23(b)(2) Class' Due Process Rights in Exceptional Circumstances ......................................................................... 5
B. Rule 23( c )2)(A) Notice May not Be used as a Discovery Substitute to Retroactively or Prospectively Establish Numerosity or Future Claims ............................................. 8
1. Rule 23( c )(2)(A) Notice is Not a Discovery Substitute to Establish Numerosity ................................................................................................................... 8
2. Rule 23( c) (2)(A) Notice is Not to Retroactively or Prospectively Satisfy Numerosity or Springboard Future Claims ................................................................. 12
II. The District Court's Order Risks the Due Process Rights of Potentially Liable Non-Parties ................................................................................................................................. l4
III. The Juridical Links Doctrine Does Not Permit the District Court's Injunction Against
Non Parties Nor Joining Them To This Suite .................................................................... 16
CONCLUSION ............................................................................................................................ 18
CERTIFICATE OF COMPLIANCE ........................................................................................ 20
CERTIFICATE OF SERVICE .................................................................................................. 21
TABLE OF AUTHORITIES Page(s)
Akerman v. Oryx Commc 'ns, Inc., 609 F. Supp. 363 (1984), 810 F.2d 336 (1987) ....................................................................... 16
Alexander v. Aero Lodge No. 735 565 F.2d 1364 (1977) ................................................................................................................ 6
Allstate Ins. Co., 400 F.3d. 505 (2005) ................................................................................................................. 3
Amchem Products, Inc. v. Windsor, 521 U.S. 591, 117 S.Ct 2231 (1997) ....................................................................................... 11
Baltrusch v. Baltrusch 2003 MT 357,319 Mont. 23, 83 P.3d 256 .............................................................................. 14
Barahona-Gomez v. Reno 167 F.3d 1228 (1999) ............................................................................................................. 5, 7
Barker v. FSC Sec. Corp., 133 F.R.D. 54 (1989) .............................................................................................................. 18
Brown v. Kelly, 609 F.3d 467 (2010) ................................................................................................................ 15
Cady v. Anthem Blue Cross Life & Health Ins. Co., 583 F. Supp. 2d 1102 (2008) .................................................................................................. 17
Chipman v. Nw. Healthcare Corp. 2012 MT 242, 366 Mont. 450, 288 P.3d 193 .......................................................... 9, 15, 16, 17
Diaz v. Blue Cross and Blue Shield of Montana 2011 MT 322, 363 Mont. 151, 257 P.3d 75 .............................................................................. 9
Diaz v. State, 2013 MT 219,317 Mont. 214, 308 P.3d 38 ............................................................................ 15
EEOC v. General Tel. Co. of Northwest, Inc. 599 F.2d 322 (1979) ............................................................................................................... 4, 6
Eisen v. Carlisle and Jacquelin 417 U.S. 156, 94 S.Ct 2140 (1974) ........................................................................................... 8
ii
Endo v. Albetine, 147 F.R.D. 164 (1993) ............................................................................................................ 16
Ferguson v. Safeco Ins. Co. of Am, 2008 MT 109,342 Mont. 380, 180 P.3d 1164 ........................................................................ 15
Gen. Tel. Co. ofSw. v. Falcon 457 U.S. 147 (1982) .................................................................................................................. 9
Gurmakin v. Costanzo, 636 F.2d 1132 (1980) .............................................................................................................. 11
Henry v. Circus Circus Casinos, Inc., 223 F.R.D. 541 (2004) ............................................................................................................ 17
Henson v. E. Lincoln Twp., 814 F.2d 410 (1987) ................................................................................................................ 16
Joerger v. Reiner 2005 MT 155, 327 Mont. 424, 114 P.3d 1028 ........................................................................ 14
Jamie S. v. Milwaukee Pub. Schol, 668 F.3d 481 (2012) ................................................................................................................ 13
Jones v. NovaStar Financial, Inc. 257 F.R.D. 181 (2009) .............................................................................................................. 7
Marcus v. BMW of North America, LLC, 687 F.3d 583 (2012) ............................................................................................................ 9, 11
McKesson HBOC, Inc. Securities Litigation, 126 F. Supp. 2d 1239 (2000) .................................................................................................. 12
Murer v. Montana State Comp. Mut. Ins. Fund, 257 Mont. 434, 849 P.2d 1036 (1993) .............................................................................. 15, 16
Neese v. Lithia Chrysler Jeep of Anchorage, Inc., 210 P.3d 1213 (2009) .............................................................................................................. 17
Oppenheimer Fund, Inc. v Sanders 437 U.S. 340, 98 S.Ct 2380 (1978) ........................................................................................... 8
Phillip Petroleum Co. v. Shutts 472 U.S. 797, 105 S.Ct. 2965 (1985) ........................................................................................ 6
iii
Randall v. Rolls-Royce Corp. 637 F.3d 818 (2001) ............................................................................................................... 4, 8
Richards v. Delta Air Lines, Inc., 453 F.3d 525 (2006) ................................................................................................................ 12
Sangwin v. State, 2013 MT 373, 373 Mont. 131, 315 P.3d 279 ......................................................................... 3, 9
Sperry Rand Corp. v. Larson 554 F.2d 868 (1977) .............................................................................................................. 6, 7
Stewart v. Bureaus Inv. Grp. No. I, LLC, 24 F. Supp. 3d. 1142 (2014) ................................................................................................... 18
S-W Co. v. Schwenk, 173 Mont. 481,568 P.2d 145 (1977) ...................................................................................... 14
TCI Cablevision of Dallas, Inc. v. Owens, 8 S.W.3d 837 (2000) ............................................................................................................... 18
Wal-Mart Stores, Inc. v. Dukes, --- U.S. ---, 131 S. Ct. 2541 (20 11 ) ................................................................................. 3, 4, 6, 8, 9
Warnack v. Coneen Family Trust, 266 Mont. 203,879 P.d 2 715 (1994) ..................................................................................... 14
STATUTES AND RULES
Mont. R. Civ. P. 23(a) ........................................................................................................ 1 passim
Mont. R. Civ. P. 23(b)(2) ................................................................................................... 1 passim
Mont. R. Civ. P. 23(b)(3) ................................................................................................... 2passim
Mont. R. Civ. P. 23(c)(2)(A) .............................................................................................. 1 passim
OTHER AUTHORITIES
Manual for Complex Litigation, Fourth § 21.311 ..................................................................................... 6, 7
Rubenstein, Newberg on Class Actions§ 8:3 (5th ed.) ............................................................................. 5, 6
Wright, Federal Practices & Procedures, 7AA Fed. Prac. & Proc. Civ. § 1786 (3d ed.) .......................................................................................................................................... 3, 6
iv
INTRODUCTION
As part of its Order on Motions for Summary Judgment and Class
Certification, dated September 22, 2014, the District Court improperly ordered the
defendants to mail notice to potential class members in order to determine whether
any members have any claims against the defendants. The District Court reasoned
that due process required notice be sent to all potential members of the class. This
reasoning misconstrues Rule 23(b )(2) class actions and 23( c )(2)(A) notice powers.
The District Court misapplied Rule 23(a) prerequisites, 23(b )(2) purposes, and
23(c)(2)(A) notice powers. The District Court's order, if upheld, would grant
convenience to plaintiffs at the expense of procedural fairness to defendants.
The District Court also ordered Lincoln County, Employee Benefit
Management Services, Inc. (EBMS), and Joint Powers Trust (JPT) to process past
claims without applying a certain policy exclusion. Defendant JPT has contracted
with approximately 7 4 different government entities during the relevant time
period. Defendant EBMS contracted to administer claims for at least 15
government entities during that time. These government entities retain ultimate
responsibility for the payment of claims. Many of these entities no longer do
business with JPT or EBMS. Mr. Roose has no claim against any government
entity other than Lincoln County. Thus, the District Court's order improperly
creates liability for unnamed parties with no connection to the litigation.
1
ARGUMENT
I. NUMEROSITY MAY NOT BE ESTABLISHED THROUGH THE COURT'S RULE 23(c)(2) NOTICE POWERS
Rule 23( c )(2)(A) notice exists for limited and exceptional circumstances;
(A) where there is an extraordinary need to protect the class, (B) where there are
serious issues regarding class representation, or (C) where there is an important
need to monitor the litigation. None of these well-settled reasons for requiring
23(c)(2)(A) notice are present in this case. Allowing parties to use the court's
notice powers absent such reasons would incentivize their use as a substitute to
discovery to retroactively and prospectively satisfy 23(a) numerosity, and to
springboard future claims. These improper uses create issues of basic fairness and
due process.
A. Rule 23(c)(2)(A) Notice is to Protect Due Process Rights in Extraordinary Circumstances
The District Court appears to conflate the due process protections afforded
to 23(b)(3) classes with those concerned with 23(b)(2). This confusion leads the
District Court to erroneously conclude that class members needed notice of
"remedies available to them." Roose v. Lincoln County Employee Group Health
Plan, No. BVD-2009-878, Order on Motions for Summary Judgment and Class
Certification, p. 12 (Mont. 1st Judicial Dist. Sept. 22, 2014) (herein after
"Certification Order").
2
23(b )(2) class actions are for final injunctive or declaratory relief. Mont. R.
Civ. P. 23(b )(2). Injunctive and declaratory relief in class actions or individual
suits have the same effect. In re Allstate Ins. Co., 400 F.3d 505, 506 (7th Cir. 2005)
("declaratory or injunctive relief will usually have the same effect on all members
of the class as individual suits would.")1; Wright, Federal Practices & Procedures,
7 AA Fed. Prac. & Proc. Civ. § 1786 (3d ed.) ("in many instances each member
would be affected as a practical matter by a judgment obtained by another member
if individual actions were instituted"). Therefore, the District Court's injunction
and declaratory relief affects policy provisions and class members regardless of
whether the class certified or notice is sent.
Unlike a 23(b )(3) class, membership in a 23(b )(2) class is automatic and
mandatory. Wal-MartStores, Inc. v. Dukes,--- U.S.---, 131 S. Ct. 2541,2558
2011 ). Directly on point here, the 7th Circuit has held that where an insurer is
"enjoined from issuing a particular type of insurance policy, there wouldn't be any
purpose in allowing individual members of the class to opt out and seek their own
injunction. They would all sink or swim together." Allstate, supra, 400 F.3d at 506.
1 "Because the Montana version of Rule 23 is identical to the corresponding federal rule, federal authority on the issue of class certification is instructive." Sangwin v. State, 2013 MT 373, ~ 13, 373 Mont. 131, 315 P.3d 279.
3
The U.S. Supreme Court has declared that 23(b )(2) classes do "not authorize
class certification when each class member would be entitled to an individualized
award of monetary damages." Dukes, supra, 131 S. Ct. at 2557. The 7th Circuit
found that monetary relief is only appropriate for a 23(b )(2) class where it is
"merely incidental to the grant of injunctive or declarative relief' and may be
applied "mechanically." Randall v. Rolls-Royce Corp., 637 F.3d 818, 825 (7th Cir.
2011). Thus, certification under 23(b)(2) is improper where individualized hearings
must be held to determine how much each claimant would be entitled to recover.
!d. at 826 (finding that the appropriate course is such situations is to seek
certification under 23(b)(3) which is primarily for recovery of monetary damages).
Any injunction that would then require a multitude of individual hearings is not
truly "final" as required by 23(b )(2). Id?
Because the nature and remedy for a Rule 23(b )(2) class and a 23(b )(3) class
are fundamentally different, their respective notice requirements are also
fundamentally different. Unlike required notice under a 23(b )(3) class action,
notice under a 23(b)(2) class action is discretionary. Mont. R. Civ. P. 23(c)(2)(A);
EEOC v. General Tel. Co. of Northwest, Inc., 599 F.2d 322, 334 (9th Cir. 1979)
(finding that in 23(b )(2) classes "absent class members are not required to receive
2 Though beyond the scope of this Brief, it is important to note that certifying under 23(b )(2) was improper in this case for the reasons explained in Randall, supra, 237 F.3d 818 and Dukes, supra, 131 S. Ct. 2541.
4
notice or to have the opportunity to opt-out of the suit"). Though discretionary, the
"authority to direct notice to class members in a (b )(1) or (b )(2) class action should
be exercised with care." Rubenstein, Newberg on Class Actions§ 8:3 (5th ed.)
(quoting Fed. R. Civ. p. 23 advisory committee's notes (2003)). Therefore, notice
in a 23(b )(2) class is only necessary and proper in limited situations.
1. The Purpose of23(c)(2)(A) Notice is to Protect the 23(b)(2) Class in Extraordinary Circumstances
Courts are normally unwilling grant notice to 23(b )(2) classes unless there
are extraordinary facts and circumstances that necessitate the court's protective
power. For example, in Barahona-Gomez v. Reno, 167 F.3d 1228, (9th Cir. 1999),
there was pending litigation regarding the immigration status of thousands of
illegal aliens. The 9th Circuit reasoned that absent class members needed notice of
the pending litigation in order to "prevent the irreparable harm of an erroneous
deportation." Id. at 1236. In the present case, there is no similar extraordinary
circumstance that would require the court to send notice to absent class members.
Instead, the District Court ruled that an insurance policy provision must be
changed to comply with state law. That determination will affect all applicable
class policies, but the determination does not endanger the rights of absent class
members.
5
2. The Purpose of 23(c)(2)(A) Notice is to Protect 23(b)(2) Class' Due Process Rights in Exceptional Circumstances
In addition to the above, most courts will not grant notice to 23(b )(2) classes
unless there are "exceptional circumstances where due process concerns argue in
favor of it." Rubenstein, Newberg on Class Actions§ 8:3 (5th ed.). Due process
concerns for 23(b )(2) and 23(b )(3) are different. Because membership in a 23(b )(3)
class is not mandatory but the ruling is binding on all class members, due process
requires that class members be provided notice and an opportunity to opt out.
Phillip Petroleum Co. v. Shutts, 472 U.S. 797, 812, 105 S.Ct. 2965; Dukes, supra,
131 S.Ct. at 2559. Because membership in a 23(b)(2) class is mandatory, the
purpose of providing notice to a Rule 23(b)(2) class "really serves only to allow
those members the opportunity to decide if they want to intervene or to monitor the
representation of their rights." Wright, Federal Practices & Procedures, 7AA Fed.
Prac. & Proc. Civ. § 1786 (3d ed.); Manual for Complex Litigation, Fourth
§21.311(stating that notice for a 23(b )(2) class "serves limited but important
interests, such as monitoring the conduct of the action").
Because there is no opportunity to opt out, courts have held that due process
concerns in 23(b )(2) class actions are satisfied if class representation is adequate.
See EEOC, supra., 599 F.2d at 334; Alexander v. Aero Lodge No. 735, 565 F.2d
1364, 1374 (6th Cir. 1977). Therefore, notice would only be needed to protect due
process when there are questions concerning the class representative, or where
6
there is a need to monitor the representative's handling of the litigation. Sperry
Rand Corp. v. Larson, 554 F.2d 868 (8th Cir. 1977); Manual for Complex
Litigation, Fourth §21.311.
Even when the above concerns are present, notice serves no due process
purpose if given after a substantive decision has been made by the court. Parties
have no opportunity to intervene or monitor unless notice is provided before the
court makes substantive decisions. See e.g. Jones v. NovaStar Financial, Inc., 257
F.R.D. 181, 194 (W.D. Mo. 2009); Barahona-Gomez, supra, 167 F.3d 1228.3
In the present case, the substantive decision regarding the lawfulness of the
policy provision in question has already been determined by the District Court.
Therefore, there is no need for absent class members, if any, to be notified of
pending litigation in order to protect their due process rights.
The District Court appears to confuse 23(b )(3) and 23(b )(2) due process
when it orders notice to be sent in accordance with 23(b )(3) requirements. In so
doing, the District Court essentially recognizes that the primary issue is really
monetary damages stemming from potential individual claims - not the injunctive
3 In 23(b )(3) class actions, members may opt even after a court has made a substantive decision and then seek their own remedy. In 23(b )(2) class actions, there is no opportunity to opt out before or after the litigation, so to protect any due process rights, members must be given the opportunity to intervene before substantive decisions have been made by the court.
7
reliefsought.4 Because due process in 23(b)(2) is only concerned with
representation and litigation monitoring and not monetary damages, the District
Court's decision in this regard was incorrect.
B. Rule 23(c)(2)(A) Notice May Not Be Used as a Discovery Substitute to Retroactively or Prospectively Establish Numerosity or Future Claims
1. Rule 23(c)(2)(A) Notice is Not a Discovery Substitute to Establish Numerosity
After years of discovery, Mr. Roose has failed to identify a single other
person similarly situated to himself. This failure is fatal to class certification.
However, the District Court certified the class and ordered the defendants to send
notice5 to determine whether there are others similarly situated to Mr. Roose. See
Certification Order, pp. 12-13. This approach changes 23(a) requirements from
prerequisites to proper certification into presumptions that will be tested after
notice is sent. This approach is improper and against the plain language of the rule.
It also fails to fairly balance judicial economy, convenience, and procedural
protections for defendants as intended by the drafters.
The U.S. Supreme Court has ruled that a party seeking certification "must be
prepared to prove that there are in fact sufficiently numerous parties ... . "Dukes,
4 Case certification under 23(b )(2) is thus inappropriate. Dukes, supra, 131 S. Ct. at 2557; Randall, supra, 637 F.3d at 825. 5 Absent specific exceptions, the plaintiff has the burden to provide, send, and pay for the notice. Eisen v. Carlisle and Jacquelin, 417 U.S. 156, 177-79, 94 S.Ct. 2140 (1974); Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 358-59, 98 S.Ct. 2380 (1978).
8
supra, 131 S. Ct. at 2551 (emphasis original). Relying on Dukes, this Court has
declared that "[a]ctual, not presumed, conformance with Rule 23(a) is
indispensible" and failure to "establish the requisite elements is fatal to class
certification." Sangwin v. State, 2013 MT 3 73, ~ 15, 3 73 Mont. 131, 315 P .3d
279. A class "may only be certified if the trial court is satisfied, after a rigorous
analysis, that the prerequisites of Rule 23(a) have been satisfied." Gen. Tel. Co. of
Sw. v. Falcon, 457 U.S. 147, 161 (1982) (emphasis added).
Mere speculation is not enough to establish numerosity. See Diaz v. Blue
Cross and Blue Shield of Montana, 2011 MT 322, ~ 27, 363 Mont. 151,257 P.3d
75 abrogated by Chipman v. Nw. Healthcare Corp., 2012 MT 242, ~ 35, 366 Mont.
450, 288 P.3d 193; Marcus v. BMW of North America, LLC, 687 F.3d 583, 596-97
(3rd Cir. 2012) (finding that though direct evidence of an exact number is not
required, plaintiff must at least show sufficient circumstantial evidence to allow a
trial court to make a factual finding as to numerosity). 6
6 Mr. Roose has presented only speculation to support his numerosity claim. See Transcript of Oral Argument at pp. 6, 22, Roose v. Lincoln County Employee Group Health Plan, No. BVD-2009-878 (Mont. 1st Judicial Dist. July 8, 2014) (hereinafter "Hearing Transcript") (stating that counsel "just can't believe Mr. Roose is the only one"); Plaintiffs Reply to Defendants' BriefRe: Certification, Roose v. Lincoln County Employee Group Health Plan, at p. 5, 7, 9, No. BVD-2009-878 (Mont. 1st Judicial Dist. May 14, 2014) (stating that "it seems highly unlikely" that Mr. Roose the only similarly situated person, that "there has to be thousands of people similarly situated").
9
This action is named a 23(b )(2) class action with 23( c )(2)(A) notice, but
appears to be an attempt to avoid discovery disputes. It is also appears to be an
attempt to retroactively establish numerosity for the injunctive class and
prospectively establish numerosity for a damages class, or to identify individual
damages claims. See Plaintiff Stipulation, pp. 3-4 (stating that the 23(b )(2) notice is
merely "a management tool to identify the existence of such a [restitution
damages] class").
Mr. Roose's counsel communicated the above when he requested the court
send notice as an attempted substitute for discovery. Mr. Roose's counsel stated
that notice can be sent to simply ask people if they have a claim and then "we don't
have to mess around with computer programs, and all of that stuff, and go on
infinitum on this discovery." Hearing Transcript, supra, p. 7. Indeed, Mr. Roose's
counsel stated that it "would seem to me we would cut to the chase, get rid of all of
these discovery disputes, and probably get it done a lot faster and cheaper than
going on for another five years." !d. at pp. 23-24.
Perhaps the most telling explanation of Mr. Roose's position and the court's
error is identified in the following exchange:
THE COURT: So just to be clear, what you want me to do is to identify these folks ... and then tell them send a notice to all of those people? MR. THUESON: Yeah. Now, you can do it - - I think you're technically right. Calling in a class is the best way to do it, but I think
10
you do have authority, we could just do it by notice, and deal with the smaller classes as well .... THE COURT: Okay. MR. THUESON: But probably -- I think [sic] technically right, this should be -- should be a class, but I think the Court has broad authority under the notice provisions of Rule 23 to just do it by notice. THE COURT: Okay. MR. THUESON: And that would be the easiest way to do it. THE COURT: I'm always looking for the easiest way. MR. THUESON: Then we don't have to fight over certification requirements and everything.
Id. at pp. 48-49. This exchange illustrates an intent to avoid the rigorous analysis
required for 23(a) certification, and, instead, require the defendants to send notice
to retroactively and prospectively satisfy numerosity. This is the equivalent of
turning the plaintiffs burden of proof into a presumption of numerosity that the
defendant must rebut. This approach, if upheld, would improperly benefit plaintiff
classes by eliminating procedural safeguards.
The U.S. Supreme Court has declared that Rule 23 "as now composed sets
the requirements [the courts] are bound to enforce." Amchem Products, Inc. v.
Windsor, 521 U.S. 591, 620, 117 S.Ct. 2231 (1997). Courts are not to read the
requirements out of the rules. Marcus v. BMW of North America, LLC, 687 F.3d
583, 597 (3rd Cir. 2012); Gurmankin v. Costanzo, 636 F.2d 1132, 1135 (3rd Cir.
1980) (finding that Rule 23 "does not permit elimination of any of the four
prerequisites" ofRule 23 certification).
11
If the rule drafters wanted to allow notice to be sent in order to establish
Rule 23(a) prerequisites, the drafters would have provided an avenue to do so.
Instead, the drafters insisted that 23( c )(2)(A) notice can only be sent after there has
been proper certification. Also, if the rule drafters wanted discovery Rules 26-39
and their remedies to be superseded by Rule 23 notice, the drafters would have
fashioned the rule accordingly. The drafters did neither, and the District Court
should have declined the invitation to establish numerosity based on mere
speculation and assumed numerosity responses to come. It is the plaintiffs burden,
and the plaintiffs alone, to satisfy numerosity before certification.
2. Rule 23(c)(2)(A) Notice May Not Be Used to Retroactively or Prospectively Satisfy Numerosity or Springboard Future Claims.
By permitting the use of23(b)(2) notice absent the exceptional
circumstances discussed, supra, courts risk improper use of their notice powers.
For example, notice should not be used merely as a device for the solicitation of
claims. In re McKesson HBOC, Inc. Securities Litigation, 126 F. Supp. 2d 1239,
1243 (N.D. Cal. 2000) (relying on Rule 23 Advisory Committee notes).
Federal courts have recognized that it is improper to use disguised 23(b )(2)
classes as launching platform for individual claims or for 23(b )(3) class actions.
Richards v. Delta Air Lines, Inc., 453 F.3d 525, 530 (D.C. Cir. 2006) (finding that
"when the relief sought would simply serve as a foundation for a damages award,
or when the requested injunctive or declaratory relief merely attempts to frame a
12
damages claim, the class may not be certified pursuant to Rule 23(b )(2)"). Such
case structure uses 23(b)(2) superficially, and this "kind ofreliefwould be class
wide in name only" and does not "satisfy Rule 23(b )(2) if as a substantive matter
the relief sought would merely initiate a process through which highly
individualized determinations of liability and remedy are made. " Jamie S. v.
Milwaukee Pub. Sch., 668 F.3d 481, 499 (7th Cir. 2012).
In certification oral arguments, Mr. Roose's counsel stated that "all we have
to do is notify [the class members] ... and ask them, you know, has this ever come
up with you in the past?" Hearing Transcript, supra, pp. 40-41. Mr. Roose's
counsel stated several times that after notice responses came in, the class could
then be decertified. See id. at 22-23, 28. As in JaimeS, supra, class certification
here is in name only. This 23(b )(2) class exists to retroactively establish
numerosity, to prospectively establish numerosity for a (b )(3) class, or to identify
plaintiffs for individual suits. Once this class has served those purposes, it is Mr.
Roose's intention to decertify the class. This conduct is outside the purpose and
scope of the rule, and is an improper use of the court's notice powers and judicial
resources. The District Court's decision to support this plan was improper.
13
II. THE DISTRICT COURT'S ORDER RISKS THE DUE PROCESS RIGHTS OF POTENTIALLY LIABLE NON-PARTIES
The District Court's overbroad grant of injunctive relief may deny unnamed
defendants' due process. Montana law recognizes the fundamental principle that
"it is only against a party to the action that a judgment can be taken ... the
judgment is not binding against a stranger to the action." Baltrusch v. Baltrusch,
2003 MT 357, ,-r 62,319 Mont. 23,83 P.3d 256 (quoting Warnackv. Coneen
Family Trust, 266 Mont. 203, 207, 879 P.2d 715, 718 (1994)). Due process
requires "a full opportunity to defend after proper service." Joerger v. Reiner,
2005 MT 155, ,-r 22, 327 Mont. 424, 114 P.3d 1028; see also S-W Co. v. Schwenk,
173 Mont. 481, 554, 568 P.2d 145, 149 (1977).
The District Court's order creates potential liability for parties that were
never named, joined, or otherwise included in the proceeding. While the District
Court insists that it "has no intention of affecting the rights of defendants not in
this case," the court's "Injunction Requiring Defendants to Process Claims"
ostensibly requires just that. Certification Order, pp. 7, 13. Defendants JPT and
EBMS are to "process all claims incurred in the past." ld. at p. 13. To comply, JPT
and EBMS would have to collect sums from potentially all governmental and non
governmental entities for which they processed claims within the last 8 years.
None of these entities, save Lincoln County, were properly joined in this action.
14
The District Court could not order these non parties to pay without denying them
due process. Requiring a named party to collect from non parties is no different.
The District Court's claim that the Montana Supreme Court has already
approved "this type of remedy" is erroneous. The District Court cited Diaz v.
State, 2013 MT 219, ,-r 26, 371 Mont. 214, 308 P.3d 38, reh'g denied (Sept. 17,
2013) and Ferguson v. Safeco Ins. Co. of Am., 2008 MT 109, ,-r 35, 342 Mont. 380,
180 P.3d 1164 abrogated by Chipman, supra, 2012 MT 242, to support that
proposition. The remedies in Diaz and Ferguson are inapplicable here. In those
cases, the defendants who ultimately paid were named defendants. They were
properly served and had a full opportunity to defend.
The context of a class action does not permit the sweeping remedy the
District Court ordered. The sole named plaintiff has no relationship with the vast
majority of potentially liable entities. "Generally, plaintiffs cannot bring a class
action against defendants with whom they have had no dealings." Chipman, supra,
2012 MT 242, ,-r 38. Likewise, the Montana Supreme Court "found no authority ...
which would permit an unknown number of class members, yet to be identified to
blindly sue an unknown number of defendants." Murer v. Montana State Comp.
Mut. Ins. Fund, 257 Mont. 434, 437, 849 P.2d 1036 (1993). 7 The Chipman court
7 Federal jurisprudence almost without exception forbids the use of a 23(b )(2) class action to create a class of defendants. Brown v. Kelly, 609 F.3d 467, 477 n. 8 (2d)
15
described two exceptions to this general rule that permitted a class action under the
facts of that case: "( 1) if the injuries suffered were the result of a conspiracy or
concerted scheme between the defendants; and (2) all defendants are juridically
related in a manner that suggests a single resolution of the dispute will be
expeditious." Chipman, supra, 2012 MT 242, ,-r 38. These exceptions, commonly
referred to as the "juridical link doctrine," do not apply in this case.
III. THE JURIDICAL LINKS DOCTRINE DOES NOT PERMIT THE DISTRICT COURT'S INJUNCTION AGAINST NON PARTIES NOR JOINING THEM TO THIS SUIT
The juridical link doctrine requires a relationship between defendants that
does not exist under these facts. A juridical link is described as "an important legal
relationship uniting the defendant[ s] ... and justifying class treatment." Endo v.
Albertine, 147 F.R.D. 164, 172 (N.D. Ill. 1993). "Partnership, joint enterprise,
control, conspiracy, and aiding and abetting all may serve as such a link."
Akerman v. Oryx Commc'ns, Inc., 609 F. Supp. 363, 375 (S.D.N.Y. 1984) aff'd in
relevant part, 810 F.2d 336 (2d Cir. 1987). As first applied in Montana in Murer,
the doctrine would allow plaintiffs to name as defendants "related instrumentalities
of a single state." Murer, supra, 257 Mont. at 439. The Montana Supreme Court
later noted in Chipman that federal case law had somewhat broadened the doctrine
beyond the facts of Murer. Chipman, supra, 2012 MT 242, ,-r 40. Corporate
Cir. 2010); see also Henson v. E. Lincoln Twp., 814 F.2d 410, 414 (7th Cir. 1987) ("Such an action creates ... severe problems of manageability and due process").
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structures analogous to "related instrumentalities of a single state" were also
sufficient juridical links. I d.
Though it may have expanded, it appears no jurisdiction has ever broadened
the juridical links doctrine to provide relief from non parties.8 Regardless of how
EBMS' s relationship with its clients is characterized, the juridical links doctrine
cannot justify the District Court's order to process claims at the expense of non
parties. In other words, the doctrine does not provide plaintiffs license to sidestep
due process.
Furthermore, EBMS and the entities for which it processes claims are not
"juridically linked" as set out in Chipman and in other jurisdictions. The Chipman
court found juridical links where all of the named defendant entities were "owned
and controlled by a parent corporation." Chipman, supra, 2012 MT 242, ,-r 41. The
subsidiary entities implemented an identical program that affected the various
plaintiffs in the same way. Id. Other jurisdictions have likewise limited the
8 Mr. Roose may have elected not to join parties with which he had no dealings to avoid questions of standing. While Montana appears to employ the juridical link doctrine to standing issues (see Chipman), several 9th Circuit courts have concluded that the juridical link doctrine "should properly remain in the analysis of adequacy and typicality of plaintiffs for which it was originally conceived." Cady v. Anthem Blue Cross Life & Health Ins. Co., 583 F. Supp. 2d 1102, 1107 (N.D. Cal. 2008); Neese v. Lithia Chrysler Jeep of Anchorage, Inc., 210 P.3d 1213, 1222 (Alaska 2009) ("standing is an inherent prerequisite to the class certification inquiry"); Henry v. Circus Circus Casinos, Inc., 223 F.R.D. 541, 544 (D. Nev. 2004) ("A doctrine developed under Rule 23 based on judicial efficiency and expedience does not play a role in an Article III standing analysis").
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application of the juridical link doctrine to circumstances showing central control
or common ownership. See Barker v. FSC Sec. Corp., 133 F.R.D. 548, 553-54
(W.D. Ark. 1989) Guridicallink based on common ownership of defendant
companies); TCI Cablevision of Dallas, Inc. v. Owens, 8 S.W.3d 837, 843 (Tex.
App. 2000)(same); Stewart v. Bureaus Inv. Grp. No. 1, LLC, 24 F. Supp. 3d. 1142,
1156 (M.D. Ala. June 2, 2014)(same).
There does not appear to be any direct support for finding a juridical link
between a third party administrator and its clients. EBMS does not exercise any
degree of control over the entities it serves. There is no common ownership of the
non party entities. There is no legal relationship between the entities themselves
that would suggest joint liability. Thus, any attempt by Mr. Roose to join these
entities with which he has had no dealings would be impermissible.
CONCLUSION
The District Court improperly ordered Rule 23(b )(2) notice absent the
requisite exceptional circumstances. Ordering notice without such circumstances
eliminates procedural safeguards drafted to balance fairness to defendants with
convenience for plaintiffs and judicial economy. If courts are permitted to issue
notice is this manner, they risk the misuse of their notice powers.
Moreover, the District Court's order impermissibly creates potential liability
for unnamed parties. There is no juridical link between these implicated parties
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that would permit a plaintiff to join them to this suit. To hold these parties liable
under the court' s order would deny them due process. For the foregoing reasons,
this Court should reverse the District Court's application of Rule 23 and limit class
relief, if any, to named parties only.
DATED this 25th day of March, 2015.
CROWLEY FLECK PLLP
~ B DAVIDC.C~o/
JAMES M. DUNCAN Attorneys for Amicus Curiae Montana Defense Lawyers Association
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CERTIFICATE OF COMPLIANCE
I certify that, pursuant to Mont. R. App. P. 11 ( 4 ), this Amicus Curiae Brief is
proportionately spaced Times New Roman typeface of 14 points or more, and
contains 4,574 words as determined by the undersigned's word processing
program, excluding Certificate of Service and Certificate of Compliance.
CROWLEY FLECK PLLP
Attorneys for Amicus Curiae Montana Defense Lawyers Association
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CERTIFICATE OF SERVICE
The undersigned hereby certifies that on the zoiS day of March, 2015 a
copy of this Amicus Curiae Brief was served upon counsel in the manner detailed
below:
[X] U.S. Mail [ ] FedEx [ ] Hand-Delivery [ ] Facsimile
Erik Thueson Erik Thueson Law Office 213 5th Avenue Helena, Montana 59601
William R. Bieler Burk, Lee and Bieler, PLLC P.O. Box 1350 216 Main Avenue North Choteau, Montana 59422
Robert C. Lukes GARLINGTON, LOHN & ROBINSON, PLLP 350 Ryman Street P.O. Box 7909 Missoula, MT 59807-7909
CROWLEY FLECK PLLP
B~L~/ JAJ\1ES M. DUNCAN Attorneys for Amicus Curiae Montana Defense Lawyers Association
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