United States Court of Appeals

Fifth Circuit



## FILED

April 2, 2004

Charles R. Fulbruge III

Clerk 

## In the 

# United States Court of Appeals

for the Fifth Circuit

_______________



### m 02-30540

_______________

I N THE M ATTER OF :



### M ONUMENTAL 

### L IFE 

### I NSURANCE 

### C OMPANY



### , I NDUSTRIAL 

### L IFE 

### I NSURANCE 

### L ITIGATION



### .

M ATTIE 

### B RATCHER



### , ET AL



### .,

Plaintiffs,



### M ATTIE 

### B RATCHER 

### ; J OHN 

### B RATCHER 

### ;

C AROLINE 

### B ROWN



### ,

ON B EHALF OF H ERSELF AND A LL O THERS S IMILARLY S ITUATED ;



### M ARY 

### S UE 

### T RUESDALE 

### ;

M AXINE 

### C ASH



### ,

ON B EHALF OF H ERSELF AND A LL O THERS S IMILARLY S ITUATED ;



### M ILDRED 

### B UFORD



### , A LSO K NOWN AS M ILDRED G AMLIN

,

ON B EHALF OF H ERSELF AND A LL O THERS S IMILARLY S ITUATED

,



### Plaintiffs-Appellants,

VERSUS



### N ATIONAL 

### S TANDARD 

### L IFE 

### I NSURANCE 

### C OMPANY



### , ET AL



### .,

Defendants,



### M ONUMENTAL 

### L IFE 

### I NSURANCE 

### C OMPANY



### ,

Defendant-Appellee.2 * * * * * * * * * * * * * * * * * * * * * * * * *

I N THE M ATTER OF :



### U NITRIN



### , I NC



### ., I NDUSTRIAL 

### L IFE 

### I NSURANCE 

### L ITIGATION



### .

R OSIE 

### L

EE 

### C OTHRAN



### , ET AL



### .,

Plaintiffs,



### E LIZABETH 

### W ALKER



### ,

Plaintiff-Appellee,

VERSUS



### S ECURITY 

### I NDUSTRIAL 

### I NSURANCE 

### C OMPANY



### , ET AL



### .,

Defendants,



### M ONUMENTAL 

### L IFE 

### I NSURANCE 

### C OMPANY



### ,

Defendant-Appellee.3 * * * * * * * * * * * * * * * * * * * * * * * * *

I N THE M ATTER OF :



### A MERICAN 

### N ATIONAL 

### I NSURANCE 

### C OMPANY



### , I NDUSTRIAL 

### L IFE 

### I NSURANCE 

### L ITIGATION



### .

R OSE 

### M ARY 

### R OACH



### ,

ON B EHALF OF H ERSELF AND A LL O THERS S IMILARLY S ITUATED

,



### Plaintiff-Appellant,

VERSUS



### A MERICAN 

### N ATIONAL 

### I NSURANCE 

### C OMPANY



### ,

Defendant-Appellee.4 * * * * * * * * * * * * * * * * * * * * * * * * *

I N THE M ATTER OF :



### W ESTERN 

### & S OUTHERN 

### L IFE 

### I NSURANCE 

### C O



### ., I NDUSTRIAL 

### L IFE 

### I NSURANCE 

### L ITIGATION



### .

J OSEPH 

### B ELL



### , ETC



### ., ET AL



### .,

Plaintiffs,



### J OSEPH 

### B ELL



### ,

I NDIVIDUALLY AND ON B EHALF OF O THERS S IMILARLY S ITUATED ;



### W ILLA 

### E LLIS



### , D OCTOR 

### ;

T HELMA 

### W ALKER 

### O ATIS



### ,

ON B EHALF OF T HEMSELVES AND A LL O THERS S IMILARLY S ITUATED ;



### A LMA 

### H YDE



### ,

Plaintiffs-Appellants,

VERSUS



### W ESTERN 

### & S OUTHERN 

### L IFE 

### I NSURANCE 

### C OMPANY



### ,

Defendant-Appellee.

_______________________________

Appeal from the United States District Court

for the Eastern District of Louisiana

MDL Docket No. 1371,

Consolidated with No. 1391 and No. 1395

_________________________5

ON PETITION FOR REHEARING

(Opinion Aug. 13, 2003, 343 F.3d 331)

Before S MITH , D ENNIS , and C LEMENT

, Circuit Judges.

J ERRY E. S MITH , Circuit Judge:

The petition for panel rehearing is

DENIED, and no judge in regular a ctive service having requested that the court be polled

on rehearing en banc, the petition for rehearing

en banc is DENIED. The opinion, 343 F.3d

3 31 (5th Cir. 2003), is withdrawn for the

limit ed purpose of making minor adjustments

in the analyses contained in parts III.A, III.B,

and V. Although by far the greater portion of

the opinion remains intact, we now issue a new

opinion, as follows:

* * * * * * * * * * *

In what may be the ultimate negative value

class action lawsui

t

, 1 plaint iffs challenge defendants’ alleged practice of paying lower benefits and charging higher premiums to blacks in

the sale o f low-value life insurance. The district court denied plaint iffs’ motion to certify

a class pursuant to F E D

. R. C IV

. P. 23(b)(2),

f inding, inter alia

, that the majority of cl ass

members wou ld not benefit from injunctive

relief. Based primarily on A llison v. Citgo

Petroleum Co.

, 151 F.3d 402 (5th Cir. 1998), we reverse and remand.

I.

This is a consolidation of civil rights actions

against three life insurance companies: Monumental Life Insurance Company (“Monumental”), American National Insurance Company

(“ANICO”), and Western and Southern Insuranc e Company (“Western and Southern”).

Plaintiff policyowners, all of whom are black,

allege that, for decades, defenda nt s discriminated against them in the sale and administration of low-value life insurance policies,

known as industrial life p o licies, 2 that have

face amounts of $2000 o r less and require

small weekly or monthly premiums. Defendants comprise over 280 companies that issued

industrial life policies over a fift y- to sixty-fiveyear period. 3

Plaintiffs allege two overtly discriminatory

practices. First, they accuse defendants of

placing blacks in industrial policies offering the

same benefits as do policies sold to whites, but

at a higher premium (dual rates). Second,

defendants allegedly placed blacks in speciallydesigned substandard industrial poli cies providing fewer or lower benefits than do com1 A “negati ve value”suit is one in which class

mem ber s’ claims “would be uneconomical to litigate individually.” Phillips Petroleum v. Shutts

, 472 U.S. 797, 809 (1985); s ee also Castano v.

Am. Tobacco Co.

, 84 F.3d 734, 748 (5th Cir.

1996). 2 Defendants defend this practice on the basis

that (1) the race-distinct pricing was justified;

(2) the practice was approved by regulators; (3) the

racially discriminatory policies were no more profitable than were those sold to whites; and (4) some

of the discriminatory policies were remediated.

3 Over the years, defendants have acquired other

insurance companies and thereby assumed blocks

of in-force insurance policies issued by them.

Monumental currently administers policies issued

by 200 different co mpanies, while Western and

Southern administers policies issue d by approximately 80 companies. ANICO has assumed an indeterminate number of in-force policies.6

parable plans sol d to whites (dual plans).

These practices ar e memorialized in the ins urer’s rate books and records, which explicitly distinguish dual rate and dual plan policies

by race. 4 Although, before filing their motion

for class certification, plaint iffs challenged the

insurers’ a l leged practice of charging blacks

substandar d premiums because of non-racial

underwriting factors, such as mental condition,

occupati on, socioeconomic status, educational

level, living conditions, and personal ha b its,

plaint iffs no longer complain of such pretextual

underwriting procedures.

Defendants state that they issued “hundr eds, perhaps thousands, of different industrial life insur ance products” encompassing a

countless variety of underwriting standards. It

is undisputed that all companies that sold dual

rate o r dual plan policies have not done so

since the early 1970’s. Also, as early as 1988,

some insurers voluntarily adjusted pr emiums

and/or death benefits to equalize the amount of

coverage per premium dollar. Still, plaintiffs

estimate that over 4.5 millio n of the 5.6 millio n

industrial policies issued by defendants remain

in-force; many other policies have been terminated, surrendered, or paid-up w ithout remediation. 5 Defendants’ expert estimates that the

ratio of terminated policies to outstanding policies is approximately five to one, meaning that

slightly more than one million policies remain

in-force. Plaint iffs sued for violations of 42 U.S.C.

§§ 1981 and 1982, seeking (1) an inj uncti on

prohibiting t he collection of discriminatory

premiums, (2) reformation of policies to equalize benefits, and (3) restitution of past premium overcharges or benefit underpayments.

Pursuant to 28 U.S.C. § 1407, the J udicial

Panel for Multidistrict Litigation (“MDL”)

consolidated the ac t io ns against Monumental

and transferred them to the Eastern District of

Louisiana for pretrial proceedings. Later, the

MDL Pa nel t o ok the same action with the

cases against ANICO and Western and Southern.

Plaintiffs moved for certification of a class

pursuant to rule 23(b)(2), requesting that class

me mbers be provided notice and opt-out

rights. The district court denied certification,

finding that plaintiffs’ claims for monetary relief predominate over the ir claims for injunctive relief, making rule 23(b)(2) certification

inappropriate. The court also found that, given the large number of companies and policies

involved, individualized hearings were necessary to determine damages and whether claims

were barred by the statute of limitations. Defendants sought, and this court granted, interl ocutory review pursuant to F ED

. R. C I V

. P.

23(f).

II.

Defendants contend that class mem bers

cannot be readily identified by way of the class

definition. A precise class definition is necessary to identify prope rly “those entitled to

relief, those bound by the judgment, and those

entitled to notice.” 5 J AMES W. M OORE ET

AL

., M OORE ’ S F EDERAL P RACTICE § 23.21[6],

at 23-62.2 (3d ed. 2003); see DeBremaecker

v. Short

, 433 F.2d 733, 734 (5th Cir. 1970).

Some courts have stated t hat a precise class

definition is not as critical where certification 4 A s an example, a 1962 ANICO rate book

shows that, for a twent y-year-old black, a $500

“20 Pay Life” indust r ial policy charged a weekly

premium of $0.41, while a twenty-year-o l d white

paid only $0.32.

5 Plaintiffs allege that Monumental has not adjusted any of its dual r ate or dual plan policies.

ANICO adjusted one of it s four discriminatory

“Standard No. 3 plans.7

of a class for injunctive or declaratory relief is

sought under rule 23(b)(2). 6 Where notice and

opt-out ri ghts are requested, however, a precise class definition becomes just as important

as in the rule 23(b)(3) context.

Plaint iffs sought to certify a class comprised

of “[a] l l African-Americans who own, or

o wned at the time of policy termination, an

industrial life insurance policy that was issued

as a su bst andard plan or at a substandard

rate.” Defendants argue that the plain language of that definition does not comport with

the class plaintiffs seek to certify. As we have

noted, before moving for certification plaint iffs

had included not only blacks who had purchased dual rate or dual plan policies, but also

blacks who a llegedly were forced into substandard plans, or forced to pay subs tandard

rates, through the use of non-racial underwriting factors.

In their m

o tion for certification, plaint iffs

narrowed the class, stat ing that “[t]he proposed class does not include those who may

have been subjected to covert socio-economic

forms of racial discrimination.” Plaintiffs specified that “the term ‘substandard’ applies to

overt race- distinct dual premiums and plans, not to policies called substanda rd because of

other factors such as socio-economic underwriting.”

We agree with defendants’ observation

that, as written, the class definition includes all

b lacks who paid substandard rates or were

issued substandard plans. The definition

makes no distinction betwee n class members

who purchased dual rate or dual plan policies

and those forced into substandard rates or substandard plans through the use of pretextual

underwriting practices. In other words, one

must look to the certification motion for an

adequate description of the proposed class.

Holding plaint iffs

t o the plain language of

the class definition would be ov erly formalistic. In the first place, the district court, in denying certification, apparently did not consider

t he pretextual claims as part of the proposed

class. Though referring to the “mass o f policies involved” and the “differing underwriting

practices amon g some 280 companies,” the

court stated that in calculating damages, individualized hearings were necessary to account

for the idiosyncracies of each polic y. At no

point did the court suggest that individualized

hearings were necessary to determine liabilit y,

as would be necessary if pretextual underwriting claims were part of the class.

Second, holding plaint iffs to the plain language of their definition would ignore the ongoing refinement and give-and-take inherent in

class action litigation, particularly in t he formation of a workable class definition. District

courts are permitted to limit or modify class

definitions to provide the necessary precision. 7 6 See Battle v. Commonwealth , 629 F.2d 269,

271 n.1 (3d Cir. 1980) ( “Where . . . the class action seeks only injunctive or declaratory relief, for

which the notice provision of Fed. R. Civ. P. 23-

(c)(2) is not mandatory, the district court has even

greater freedom in both the timing and speci ficity

of its class definition.”); Rice v. City of Philadelphia

, 66 F.R.D. 17, 19 (E.D. Pa. 1974) (“[T]he

precise definition of the [(b)(2)] class is relatively

unimpo r tant. If relief is granted to the plaintiff

class, the defendants are legally obligated to comply, and it is usually unnecessary t o define with

precision the persons entitled to enforce compliance

. . . .”). 7 See, e.g.

, Robidoux v. Celani

, 987 F.2d 931,

937 (2d Cir. 1993) (“A court is not bound by the

(continued...)8

If the class is certified on remand, we trust that

t h e plaint iffs or district court will amend the

definition accordingly.

Defendants also argue t hat the definition

terms “own, or owned,” “industrial life insurance policy, ” “substandard plan,” and “substandard rate” are ambiguous, further complicating identification of class members. This

argument, too, is overly formalistic. S ee Forbush , 994 F.2d at 1105-06.

Plaint iffs’ filings in the district court clarified any ambiguities by stating that “the class

is limit ed to industrial policies sold at a substandard (i.e., higher) rate for African-Americans and a lower rate for Caucasi ans, or as a

substandard plan (i.e., a more costly plan) for

African-Americans and a corre s ponding less

expensive plan for Caucasians.” Plaintiffs define industrial life insurance policies as

“(1) policies labeled as ‘industrial’ or (2) those

policies with a face amou nt of less than

$2,000.00 and weekly or monthly home premium collection.” Defendants were provided

adequate notice and discovery by which to argue that the narrowed class cannot be certified

pursuant to rule 23(b)(2). III.

We review for abuse of discretion the denial

of class certification. J

enkins v. Raymark Indus.

, 782 F.2d 468, 471-7 2 (5th Ci r. 1986).

“Implicit in this deferential standard is a recognition of the essentially factual basis of the certification inquiry and of the district court’s inherent pow er to manage and control pending

litigation .” Allison

, 151 F.3d at 408. We revi ew de novo however, the question whether

the district court applied the correct legal standard. Forbush, 994 F.2d at 1104.

All classes must satisfy the four baseline requirements of rule 23(a): numerosity, commonality, typicality, and adequacy of representation. 8 F E D

. R. C IV

. P. 23(a). Assuming these

requirements are satisfied, a rule 23(b)(2) class

may be certified if “the party opposing the

class has acted or refused to act on grounds

generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the

class as a whole.” F E D

. R. C IV

. P. 23( b)(2).

Plaint iffs premise rule 23(b)(2) certification on

their request for an in

junction prohibiting the

further collection of discriminatory premiums.

A.

The court observed that “many” proposed

class members 

### SS

those whose po licies have

lapsed, those whose policies have already been

voluntarily adjusted by defend ants, and those

whose death benefits already have been

paid 

### SS would not benefit from injunctive relief.

The court concluded t hat “t his is a case in

which individuality overrides any bland groupthink, and money becomes the prime goal . . . 7 (...continued)

class defini tion proposed in the complaint and

s hould not dismiss the action simply because the

complaint seeks to define the class too broadly.”);

Harris v. Gen. Dev. Corp.

, 127 F.R.D. 6 55, 659

(N.D. Ill. 1989) (“[I] t is certainly within this

court’s discretion to limit or redefine the scope of

the class.”); Meyer v. Citizens & S. Nat’l Bank

, 106 F.R.D. 356, 360 (M.D. Ga. 1985) (“The

Court has discretion in ruling on a motion to certify

a class. This discretion extends to defining the

scope of the class.”) (citations omitted). 8 The district court noted that “oral argument

unveiled serious adequacy of repres entation issue s,” but did not rely on this basis in denying

certification.9

not injunctive relief.” Rule 23(b)(2) certification is improper, the court held, where the

class’s request f

o r injunctive relief merely

serves as a bo o tstrap for a claim of monetary

damages.

In Allison

, we carefully explained the statement in the advisory committee notes that rule

23(b)(2) certification “does not extend to cases in which the appropriat e final relief relates

exclusively or predominantly to money damages.” F E D

. R. C IV

. P. 23 advisory committee

notes (emphasis added). 9 A llison did not hold,

as the district court believed, that monetary relief predominates where it is the “prime goal”

or a mere bootstrap to injunctive relief. Instead, “determining whether one form of relief

actually pre do minates in some quantifiable

sense is a wasteful and impossible ta sk that

should be avoided.” A llison , 151 F.3d at 412

(citing 7A C HARLES A. W RIGHT ET AL

. , F ED

ERAL P RACTICE AND P ROCED URE § 1775, at

470 (2d ed. 1986)). In other words, certification does not hinge on the subjective intentions

of the class representatives and their counsel in

bringing suit. 10 Instead, Allison looked to the nature of the

rule 23(b)(2) device in defining when monetary

relief predominates. That rule’s focus on injunctive and declaratory relief presumes a class

best described as a “homogenous and cohesive

group with few conflicting interests among its

members.” I

d. at 413. Class cert ification

cen t ers on the defendants’ alleged unlawful

conduct, not on individual injury. Once monetary damages enter the picture, however, class

cohesiveness is generally lost, because

“[m]onetary remedies are mo re often related

directly to t h e disparate merits of individual

claims.” I

d. (citations omitted). Where the

need to address the merits of individual claims

requires separate he a rings, the efficiency

gained by class litigation is lost.

In Alli s on

, therefore, we held, id. at 415,

th at monetary relief, to be viable in a rule

23(b)(2) class, must “flow directly f rom

liabilit y to the class as a w hole o n the claims

forming the basis of the injunc tive or

declaratory relief.” Monetary relief must be

incidental, meaning that it is “capable of

computation by means of objective standards

and no t dependent in any significant way on

the intangible, subjecti v e differences of each

class member’s circ umstances.” 1 1 I d.

Additional hearings to resolve “t he disparate

merits of each individual’s case” should be

unnecessary. Id. 9 Allison, 151 F.3d a t 411-12 (“The Advisory

Committee Note s ma ke no effort to define or explain the concept. Interpreting the term literally,

predominant means ‘controlling, dominating, [or]

prevailing.’ But how that translates into a workable formula for comparing different types of remedies is not at all clear.”) (citation omitted).

10 But see Molski v. Gleich

, 318 F.3d 937, 950

(9th Cir. 2003) (expressly rejecting Allison and instead “focus[ing] on the language of Rule 23(b)(2)

and the intent of the plaintiffs in bringing the suit”);

Robinson v. Metro-North Commuter R.R. , 267

F.3d 147, 163-64 (2d Cir. 2001) (stating that rule

23 ( b)(2) certification is appropriate only where

“reasonable plaintiffs would bring the suit to obtain

(continued...) 10 (...continued)

the injunctive or declaratory relief sought” and “the

injunct i ve or declaratory relief sought would be

both reasonably necessary and approp riate were

the plaintiffs to succeed on the merits”).

11 The predomin a tion requirement serves two

basic purposes, namely the interests of class members who may wish to pursue monetary claims individually, and interests of judicial economy. A llison , 151 F.3d at 415.10

Of course, certification under rule 23(b)(2)

is appropriate only if members of the proposed

class would benefit from the injunctive relief

they request. The question whether the

proposed class members are properly seeking

such relief is antecedent to the question whether that reli ef would predominate over money

damages.

In Bolin v. Sears Roebuck & Co.

, 231 F.3d

970 (5th Cir. 2000), we considered a proposed

rule 23(b)(2) class o f one million consumers

who claimed to seek injunctive relief, alleging

that defendant had employed various unlawful

practices to coerce payment of otherwise-discharged pre-bankruptcy debt. Before applying

the Allison predominance test, howeve r, we

observed that “[m]ost of the class consi sts of

individuals who do not face further harm from

Sear’s [ sic ] actions.” I

d. at 978. Because only

a negligible proporti on of proposed class

members were properly seeking injunctive relief, we held t hat rule 23(b)(2) certification

was inappropriate.

Here, by contr ast, defendants’ and

plaint iffs’ experts e st imate that between one

millio n and 4.5 millio n of 5.6 mill io n issued

policies remain in-force. Although the exact

number of class membe rs continuing to pay

d iscriminatory premiums is unknown, th e

proporti on is su fficient, absent contrary

evidence from defendants, that the class as a

whole is deemed properly to be seeking injunctive relief.

B.

Bolin reflects a concern that plaint iffs may

attempt to “shoehorn damages actions into the

Rule 23(b)(2) framework, dep riving class members of notice and opt-out protections.” 12

Indeed, we suggested in Allison , 151 F.3d at

413, that m

o netary relief may predominate

“when its presence in the lit igation suggests

t hat the procedural safeguards of notice and

opt-out are necessary.” Defendants seize on

this point, arguing that plaint iffs ’ request for

notice and opt-out is a tacit admission that rule

23(b)(2 ) certification is inappropriate. This

ignores the discretion given a district court to

order notice and opt-out rights when certifying

a rule 23(b)(2) class. See F ED

. R. C IV

. P.

23(d)(2).

As “fundamental requisites of the

constitutional guarantees of procedural due

p r ocess,” Eisen v. Carlisle & Jacquelin

, 417

U.S. 156, 174 (1974), notice and opt-out are

mandatory for damage classes certified under

rule 23(b) (3). Though rule 23 does not

explicitly extend the se safeguards to rule

23(b)(2) classes, due process requires the

provision of notice where a rule 23(b)(2) class

seeks monetary damages. 13

On the other hand, there is no absolute

right of opt-out in a rule 23(b)(2) class, “even

where mone t ary relief is sought and made

12 Bolin

, 231 F.3d at 976; see also McManus v.

Fleetwood Enters.

, 320 F.3d 545, 554 (5th Cir.

2003) (“[C[]lass members would potent ially receive a poor substitute for indivi dualized money

damages, without the corresponding noti ce and optout benefits of Rule 23(b)(3) . . . .”).

13 Allison

, 151 F.3d at 412 n.4 (citing Johnson

v. Gen. Motors Corp.

, 598 F.2d 432, 436-38 (5th

Cir. 1979)); Penson v. Terminal Transp. Co.

, 634

F.2d 989, 994 (5th

Cir. Unit B Jan. 1981). The

type of notice afforded to rule 23(b)(2) class members seeking monetary relief will n ot always be

“eq uivalent to that required in (b)(3) actions.”

Johnson , 598 F.2d at 438.11

available.” P enson

, 634 F.2d at 994; Kincade

v. Gen. Tire & Rubber Co.

, 635 F.2d 501,

605-07 (5th Cir. Jan. 1981). Under our precedent, should the class be certified on remand,

class members must be pro vided adequate

notice, and the distri ct court should consider

the possibility of opt-out rights. 14

A llison ’s statement that monetary relie f

may predominate where notice and opt-out are

necessary reflects only the inescapable fact that

such safeguards are most appropriate where

individual issues diminish class cohesiveness.

Then, conflicts among class members an d issues of adequate representation are most likely

to surface. Rule 23(b)(3) is the default vehicle

for certification, but only because notice and

opt-out rights are mandatory components. A

district court is empowered by rule 23(d)(2) to

provide notice and opt-out for any class

action, so rule 23(b)(2) certification should not

be denied on the mistaken assumption that a

rule 23(b)(3) class is the only means by which

to protect class members. 15 All of this further demonstrates the futility

of the district court’s and dissent’s inquiry as

to whether the “prime goal” of the class is injunctive or monetary relief. The rule 23(b)(2)

predominance requirement, by focusing on uniform relief flowing from defendants’ liabilit y,

“serves essentially the sa m e functions as the

procedural safeguards and efficiency and manageabilit y st andards mandated in (b)(3) class

actio ns.” A llison

, 151 F.3d at 414-15.

Therefore, to deny certification on t he basis

that the damage claims would be better

brought as a rule 23(b)(3) class serves no

function other than to e levate form over

substance. 16 Indeed, interest s o f judicial

economy are best served by resolving

14 See Jefferson v. Ingersoll Int’l, Inc. , 195

F.3d 894, 898 (7th Cir. 1999) (contemplating t h e

use of opt-out rights for a rule 23(b)(2) class); Eubank v. Billington

, 110 F.3d 87, 94 (D.C. Cir.

1997) (holding that the language of rule 23 is sufficiently flexible to afford district courts the

discretion to grant opt-out rights for rule 23(b)(2)

classes).

15 One of the dissent’s two reasons for finding

class certification inappropriate concerns our supposed “suggestion” that notice and opt-out rights

are necessary. In A llison

, 151 F.3d 414, however,

we explained that “[t]he fact that the predomination

requirement serves to pr otect the rights of class

members

. . . does not imply . . . that the

availability of monetary relief in a (b)(2) class

action depends solely or directly on whether class

(continued...) 15 (...continued)

members a r e entitled to notice or opt-out rights.”

As mentioned, this court’s precedent requires that

notice be provided wh ere a rule 23(b)(2) class

seeks damages, see sup ra note 13 and

accompanying text, so it is circular for the dissent

to argue notice as a basis for denying certification.

Our direction to the distric t court to consider the

possibility of opt-out rights speaks nothing as to

whether su ch r ights are necessary or even

desirable.

16 Our view that the rule 23(b)(2) and (b)(3)

devices may work in tandem is strengthened by the

roots of subdiv ision (b)(2), which was added “to

Rule 23 in 1966 primarily to facilitate the bringing

of class a ctions in the civil rights area.” 7A

C HARLES A. W RIGHT ET AL

., F EDERAL P RACTICE

AND P ROCEDURE § 1775, at 470 (2d ed. 1986 )

. Before its adoption, the rules mad e no explicit

r eference to class actions involving injunctive or

declaratory relief, and “there was some uncertainty

whe ther a class action seeking one of those

remedies was an appropriate device for vindicating

civil rights.” I

d. at 470-71. Rule 23(b)(2) was

adopted to facilitate the use of injunctive relief, not

to compartmentalize claims for damages under rule

23(b)(3).12

pla intiffs’ claims for injunctive and monetary

relief together.

IV.

Applying Allison ’s pre do minance test, the

district court det ermined that the requested

monetary relief does not flow from liability to

the class as a whole. The court stated that

“many and a variety of hearings would be required to determined personali zed harm to

each individual plaint iff because of the mass of

policies involved, differing underwriting practi ces among some 280 companies, differing

built-in benefits, account dividends, and age at

policy issuance.”

A.

Plaint iffs conte nd they seek equitable restitution in the form of a constructive trust for

class members who no longer have in-force

policies. By characterizing this relief as

equitable, plaintiffs hope to demonstrate that

that that rel

ief is inherently compatible with

rule 23(b)(2) certificat io n, thereby avoiding

Allison ’s monetary predominance inquir y . Defendants argue that plaintiffs, who never used

the term “constructiv e t rust” in the district

court, are trying t o “re-package” their

straightforward request for damages.

Equitable monetary relief is compatible wi th

a rule 23(b)(2) class. 17 Importantly, this pronouncement has been limit ed to the context of

title VII backpay, a remedy designated by statute as “equitable.” 42 U.S.C. § 2000e-5(g)(1);

Great-West Life &

Annuity Ins. Co. v. Knudson

, 534 U.S. 204, 218 n.4 (2002). Backpay

is therefore u nique in that it is “an integral

component of Tit le VII’s ‘make whole’

remedial scheme.” A llison

, 151 F.3d at 415;

see also Johnson v. Ga. Highw ay Express,

In c. , 417 F.2d 1122, 1125 (5th Cir. 1969).

Not coincidentally, as compared to compensatory damages, “calculation of back pay generally involves less complicated factual determinations and fewer individual issues.”

Col eman v. Gen. Motors Acceptance Corp.

, 296 F.3d 443, 449 (6th Cir. 2002). In A llison

, 151 F.3d at 415, we recognized that, f or thi s

reason, backpay generally does not

predominate over injunctive o r decl aratory

relief.

It would be mist aken to presume that because backpay 

### SS

a remedy r eadily calculable on

a classwide basis 

### S

S i s compatible with a rule

23(b)(2) class, any other remedy designated as

equitable may automatically piggyback a claim

for injunctive relief. To be sure, equit able

monetary remed ies are less likely to

predominate over a class’s claim for injunctive

relief, but this has more to do with the uniform

character of the relief rather than with its label.

Therefore, rather than decide whether

plaint iffs’ claim for restitut i on is legal or

equitable in nature, we apply Allison and ex

amine whether t he claim predominates over

the request for injunctive relief.

B.

Thi s is not a case in which class members

are entitled to a one-size-fits-all refund; 17 See All ison , 151 F.3d at 415-16 (“If the instant case involved only claims for equitable monetary relief, Pettway [ v. Am. Cast. Iron Pipe Co.

, 494 F.2d 211, 257 (5th Cir. 1974)] would control.

Pettway , however, did not address the availability

in (b)(2) class actions of other forms of monetary

relief, such as compensatory and punitive damages

. . . .”); Pet tway , 494 F.2d at 257 (“All that need

be determined is that conduct of the party opposing

the class is suc h as makes such equitable relief 17 (...continued)

appropriate.”).13

assuming liabilit

y is established, individual

damages will depend on the idiosyncracies of

the particular dual rate or dual plan policy.

For example, the age at which a class member

purchased a dual rate policy will have an impact on how long t he insured paid premiums

and consequently on the amount of damages.

Some po licies contain built-in benefits

covering occurrences outside of death, such as

loss of limb; others pay periodic dividends. As

we have obser ved, some defendants,

beginning in 1988, voluntarily adjusted

premiums and benefits for some poli cies sold

on a race-distinct basis.

Plaint iffs prop o se using standardized

formulas or restitution grids to calc ulate

individual class members’ damages.

Defendants counter that “thousands” of grids

must be constructed to account for the myriad

of policy variations. That may be so , but the

monetary predominance test does not contain

a sweat-of-th e-brow exception. Rather, we

are gu ided by its command that damage

calculation “should neither introduce new and

substan t ial legal or factual issues, nor entail

complex individualized determ i nati ons.”

Allison , 151 F.3d at 415.

In the list of policy vari ables cited by defendants and the district court, none requires

the gathering of subjective evidence. 18 This is

not, for example, like Allison , a title VII case in which class members’ claims fo r

compensatory and punitive damages

necessarily “implicate[] the subjective

differences of each plaint iff’s circumstances.”

Id. a t 417. Rather, assuming that unlawful

discrimination i s found, class members

automatically will be entitled to the difference

between what a black and a white paid for the

sam e po licy. Not coincidentally, such

damages flow from liabilit y in much the same

manner that an award of backpay results from

a find i ng of employment discrimination.

Pettway , 494 F.2d at 256-58.

We are well aware that, as Allison qualifies,

151 F.3d at 415, the calculati on of monetary

d a mages should not “entail complex individualized determinations.” Although it is arguable that the construction of thousands of

re st itution grids, though based on objective

data, involves the sort of complex data manipulations forbidden by Allison

, we read Allison

to the contrary. The policy variables are ident ifiable on a classwide basis and, when sorted,

are capable of determining damage s fo r individual policyowners; none of these variables is

unique t o particular plaintiffs. 1 9 The pre

18 Had plaintiffs not limited their proposed class

to dual rate and dual plan policies, individual hearings would be necessary to determine whether pretextual underwriti ng practices were used to force

the respective class members into substandard

pla ns. In that instance, we agree with the district

court that the large number of defendants and underwriting practices would be relevant to finding

the predominance of monetary damages. 19 In this sense, the instant case is unlike O’Sullivan v. Countrywide Home Loans, Inc.

, 319 F.3d

732, 744-45 (5th Cir. 2 0 03), in which we found

monetary damages predominant in a proposed rule

2 3(b)(3) class alleging violations of Te xas’s

statute prohibiting the unauthorized practice of

law. Non-lawyers were alleged to have used “legal

skill or knowledge” in the preparation of mortgage

closing d ocuments. Whether certain practices by

the non-lawyers violated the statute was

determinable on a class wide basis; we explained,

however, that monetary damages predominated,

because the extent of these practices varied by

transaction, and plaintiffs were entitled to a refund

o nly for those practices that violated the statu te.

(continued...)14

valence of variables common to the class

makes dam age computation “virtually a mechanical task.” A labama v. Blue Bird Body

Co.

, 573 F.2d 309, 326-27 (5th Cir. 1978)

(quoting Windham v. Am . Brands, Inc. , 565

F.2d 59, 68 (4th Cir. 1977)). 20

Finally, defendants’ records contain the information necessary

t o determine disparities

between, on the one hand, dual rat e and dual

plan policies, and on the other hand, plans sold

to whites. Damage calculations do not require

the manipulation of dat a kept outsi de

defendants’ normal course of business.

Def endants’ complaints to the contrary are

belied by the f

act t hat, since 1988, many

policies have been adjusted to accoun t f or

racial disparity. V.

A s no t ed, defendants have not sold dual

plan or dua l rate policies since the 1970’s;

some class members purcha sed their policies

a s far back as the 1940’s. The district court

denied certification also on the basis that individualized hearings are necessary to determine

expiration of the statute of limitations for particular sets of policies. The predominance of

individual issues necessary to decide an affirmative defense may preclude class certification.

Castano

, 84 F.3d at 744. Limitations is an affirmative defense. F E D

. R. C IV

. P. 8(c);

2 J A MES W. M OORE ET AL

., M OORE ’ S

F EDERAL P RACTICE § 8.07[1], at 8-34 (3d ed.

2003).

Although, under §§ 1981 and 1982, state

law governs the substantive limitations period,

federa l law determines when the period

a ccrues. P erez v. Laredo Junior Coll.

, 706

F.2d 731, 733 (5th Cir. 1983). It commences

when the plaint iff either has actual knowledge

of the violation or has knowledge of facts that,

in the exercise of due diligence, would have

led to actual knowledge. 21 State law may

further toll the running of limitations. G artrell

v. Gaylor , 981 F.2d 254, 257 (5th Cir. 1993).

Doubtless most class members, the majority

o f whom are poor and uneducated, re main

unaware of

defendants’ discriminatory

practices. Of the thirteen representative

plaint iffs, defendants point to only one, Jo Ella

Brown, whose claim may have expired

because of actual knowle dge of defendants’

practices.

To hold that each class member must be de19 (...continued)

Therefore, each transaction had to be dissected to

determine the extent of liability and damages.

20 One is left wondering in what circumstances

(if any) t he dissent would permit monetary

damages in a rule 23(b)(2) class. Remarkably, the

d issent makes no attempt to explain its view that

insurance pol i cy factors such as premium rate,

issue age, and benefits paid are bas ed on

“intangible, subjecti ve differences.” A llison

, 151

F.3d at 415. Instead, A llison ’s statement that

damages be “capable of computation by means of

objective standards” is ideal for refund-type cases

such as this, in which damages are calculable using

factors developed and maintained in the course of

defend a nts’ business. I

d. The dissent evidently

would limit damages in rule 23(b)(2) classes to

instances in which there is no variance among the

“specific charac teristics of each policy and

policyholder,” a standard that necessarily would

require that each class members’ damages be

identical. It is safe to say that the dissent’s novel

approach is unsupported by caselaw. 21 E.g.

, Harris v. Hegmann

, 198 F.3d 153, 156-

57 (5th Cir. 1999); Jensen v. Snellings

, 841 F.2d

600, 606 (5th Cir. 1988).15

posed as to precisely when, if at all, he learned

of defendants’ practices would be tantamount

to adopting a per se rule that civil rights cases

invo lving deception or concealment cannot be

certified outside a two- or three-year period. 22

W aste Mgmt. Holdings, Inc.

, 208 F.3d 288

, 296 (1st Cir. 2000). Such a result would foreclose use of the class action device for a broad

subset of claims, a result inconsistent with the

efficien cy aims of rule 23. Though individual

class members whose claims are shown to fall

outside the relevant statute of limitations are

barred from recovery, this does not establish

that individual issues predominate, particularly

in the face of defendants’ common scheme of

fraudulent concealment.

Instead, defendants rely on a theory of constructive notice, arguing that widespread media reporting of the issue over the last several

decades should have “excite[d] the inquiry of

a reasonable person.” Conmar Corp. v. Mistui

& Co. (U. S.A.), Inc. , 858 F.2d 499, 504 (9th

Cir. 1998). Where events receive “widespread

publicity, pl aint iffs may be charged with

knowledge of their occurrence.” U nited Klans

of Am. v. McGovern , 621 F.2d 152, 154 (5th

Cir. 1980); In re Beef Antitrus t Indus. Litig.

, 600 F.2d 1148, 1170 (5th Cir. 1979). The district co urt believed constructive notice to be

an individual issue, or at least a regi o nal one,

stating that “whether a plaint iff in Michigan, as

compared to a plaint iff in Louisiana, had constructive notice, is a fact issue which needs to

be determined individually and not on a classwide basis.”

Whether the media reports were sufficiently

publicized so as to provide constructive notice

is anissue reserved for the merits. Our analysis is l

imit ed to whether this issue is

determi n able on a classwide basis. Had

defendants provided evidence 

### SS or even

al leged 

### S S that media treatment of this issue

was more prevalen t in some regions of the

country than in

others, the di stri ct court’s

observation that individualized hearings are

required to determine the geographic reach of

constructive notice might be sustainable.

The requirement of “widespread publicity,”

McGovern

, 621 F.2d at 154, sug gests,

however, that the appropriate frame of

reference is the national media market, at least

for is sues of national importance. Several

publications listed by defendants, including the

Washington Post

, the Wall Street Journal

, and

USA Today

, are available throughout the United States, and although many other

publications are local newspapers, that fact is

entirely consistent with national treatment of

the issue. Neither the district court nor

defendants gi

ve good reason for

geographically splicin g constructive notice.

W e therefore have no difficult y concludin g

t hat whether plaintiffs were provided

constructive notice is an issue that can be

decided on a classwide basis.

The order denying class certification is

REVERSED, and this matter is REMANDED 22 The district court’s reliance on Barnes v. Am.

Tobacco Co.

, 161 F.3d 127 (3d Cir. 1998), is misplaced. The proposed class, all smokers before age

nineteen, brought medical monitoring claim s

against defendant tobacco companies. The court,

id. at 149, determined that individual issues existed

as to the accrual of the statute of limitations, which

requir ed a determination for each plaintiff as to

when “he began smoking and how much he ha s

smoked since then.” By definition, the limitations

period had commenced for each and every class

member. Here, accrual of the statute of limitations

is premised on defendants’ common practice of

concealment, so a presumption of unawareness by

the plaintiff class is warranted.16

for further proceedings consist ent with this

op inion. We express no view on the district

court’s ultimate decision whether to certify in

light of today’s opinion, nor do we opine on

the ultimate merits of the substantive claims.

EDITH BROWN CLEMENT, Circuit Judge, dissenting:

It is a factual determination that relief sought relates predominantly to money damages. A llison

v. Citgo Petroleum Corp

., 151 F.3d 402, 408 (5th Cir. 1998). It is a legal conclusion that this factual

determination should control class certification. I d. The former factual determination is subject to a

review for abuse of discretion; the latter legal conclusion is subject to de novo review. I d. This Court

reviews de novo whether a district court has applied the correct factual examination to certify a class

under Rule 23(b)(2). See id. Upon concluding that the district court has applied the correct factual

examination, this Court reviews the factual findings of that examination for clear error.

The majority seems to muddle these distinct standards of review. The majority engages in d e novo

factfinding as it reviews the district court’s determination that the relief sought relates predominantly

to money damages. The majority does so with regard to two of the district court’s findings: (1) that

money damages do not flow from liabilit y to the cla ss as a who le; and (2) that a predominant

proporti on of the class does not seek injunctive relief. In setting aside these factual findings, the

majority fails to show that the district court has committed clear error.17

The majority acknowledges that “the district court determined that the requested monetary relief

does not flow from liabilit y to the class as a whole,” and further accedes that “it is arguable” that the

damages calculations “involve[] the sort of complex data manipulations forbidden by Allison

. . . .”

Nevertheless , t he majority concludes that class certification is proper merely because “variables

common to the class” exist. In effect, the majority identifies a reason supporting t he dist rict court

opinion—the ap pearance of complex damages calculations

— and a reason contravening that

opinion—the existence of variables common to the class. The majority then proceeds to credit the

latter reason as being more credible than the former. Yet although the majority does cite this reason

for its factual determination, it fails to show that the district court’s finding rises to the level of clear

error. Given the fact that the damages calculations appear complex, the alleged inconsistent reason

does not imply that the court abused its discretion.

The second finding of fact that the majority reviews de novo concerns the proporti on of injunctiverelief beneficiaries. The majority concludes t hat t he proportion of injunctive-relief beneficiaries

predominates the class. This is a necessary determination to grant certification under Rule 23(b)(2).

See Bolin v. Sears, Roebuck & Co.

, 231 F.3d 970, 978 (5th Cir. 2000) (denying certification because

“most of the class” consists of individuals wh o do not face further harm, and opining that because

those plaintiffs have nothing to gain from an injunction, “the definition of the class shows that most

of the plaint iffs are seeking only damages”); accord Majority Opinion,

__ F.3d

__ ,

__ (5th Cir. 2004)

(“Because only a negligible proportion of proposed class members were properly seeking injunctive

relief, we held [in Bolin ] that rule 23(b)(2) certification was inappropriate.”) (emphasis added). As

Bolin indicates, this factual “proportionality” determination can be dispositive.

Here, the Plaint iffs allege that the proporti on of injunctive-relief beneficiaries constitutes over 80%18

of the class, whereas the Defendants assert that the proport ion is only 18%. After conducting a

hearing, the district court opined that the “true central relief sought by the plaint iffs [was] for monetary

damages.” 208 F.R.D. 571, 574 (E.D. La. 2002). This finding implies that the district court

discredited the Plaint iffs’ factual assertion of 80%. Nothi ng i n the record intimates that the court

would have abused its discretion in only crediting the Defendants’ estimate.

Unlike the finding of the district court, the majority credits the Plaint iffs’ factual assertion. Were

the majority to have credited only the Defendants’ estimate of 18%, it would not have been able to

declare that “the proporti on is sufficie nt ”; it wo uld not have been able to determine that the relief

sought does not relate predominantly to money damages. To reach its ultimate finding of fact, then,

the majority is forced to give credence to the Plaintiffs’ assertion of injunctive-relief beneficiaries.

Notably, the majority fails to provide any stated reason for crediting the Plaintiffs’ assertion with as

much weight as it does the Defendants’. It fails to explain how the district court abused its discretion

on this issue.

Furthermore, even if it were unclear whether the district court only credited the Defendants’ factual

assertion, this would be no cause for the majority to give weight to the Plaint iffs’ assertion. Because

the underlying factual issue o f pro po rt io nality is central to the ultimate question of fact, this Court

should have at least remanded this case for clarification of this proportionality issue. On remand, the

district court could specify whether it in fact did credit the Plaint iffs’ assertion. A district court, rather

than an appellate court, is the proper judicial forum to make findings of fact. The majority’s crediting

o f the Plaintiffs’ factual assertion regarding the proportion of injunctive-relief beneficiaries is

unwarranted.

Under the applicable abuse-of-discretion standard, the majority’s determination that the Plaint iffs’19

claims for money damages do not predominate is unjustified appellate factfinding. I respectfully

dissent.