1

The Honorable Joan N. Ericksen, United States District Judge for the District

of Minnesota.

2

Northern was a Washington corporation that in 2002 merged with Reliastar

Life Insurance Company, which is based in Minneapolis, Minnesota. Pursuant to the

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 09-2843

___________

Jacqueline Avritt and Alan Avritt, *

on behalf of themselves and all *

others similarly situated, *

*

Appellants, * Appeal from the United States

* District Court for the

v. * District of Minnesota.

*

Reliastar Life Insurance Company, *

*

Appellee. *

___________

Submitted: May 11, 2010

Filed: August 12, 2010

___________

Before WOLLMAN, SMITH, and BENTON, Circuit Judges.

___________

WOLLMAN, Circuit Judge.

Jacqueline and Alan Avritt appeal from the district court’s1

 order denying class

certification for a group of California residents who purchased fixed deferred

retirement annuities from Northern Life Insurance Company (Northern)2

 between
terms of the merger, Reliastar assumed Northern’s liabilities and is therefore the

named defendant in this lawsuit. Throughout the opinion we refer to each entity as

appropriate to the context. 

-2-

1992 and 2002. The Avritts maintain that Northern engaged in unfair and deceptive

interest-crediting practices by systematically crediting higher interest to the most

recent deposits in its customers’ annuity accounts and crediting lower interest to older

deposits. The district court determined that class certification was not appropriate

because the plaintiffs’ claims involved a number of individual issues that could not

be resolved on a class-wide basis, including whether Northern misled the plaintiffs

about its interest-crediting practices and whether the plaintiffs relied upon any such

misrepresentations. Because we conclude that the district court did not abuse its

discretion in refusing to certify the class, we affirm.

I. Factual Background

Fixed deferred annuities are investment products that allow individuals to make

deposits into an account for a given period of time, earn interest on the accruing

balance, and later receive regular payments based on the money that has accumulated

in the account. The policies are structured so that the annuitant receives a guaranteed

minimum interest rate and the company issuing the policy retains discretion to credit

interest above that rate. The annuities present a tax advantage in that the money

invested is not taxed as income until it is withdrawn. Because of the tax advantage

and relative safety of the investment, some individuals use fixed deferred annuities to

augment their retirement savings. 

The Avritts are California residents who purchased fixed deferred annuities

from Northern. The gravamen of their complaint is that Northern engaged in a

misleading rate-setting practice, wherein the interest that it credited on recent deposits

was consistently higher than that which it credited on older deposits. They essentially

allege a bait-and-switch scheme which encouraged individuals to purchase Northern’s
-3-

annuities based on the false assumption that the initial, favorable interest rate would

be maintained over time. They also argue that Northern breached its contract by

failing to credit interest in the manner indicated in its policies. 

A. Northern’s Interest-Crediting Method

The relevant language in the annuity policies at issue here read as follows:

We guarantee an effective yearly interest rate of three percent (3%).

From time to time, interest greater than the guaranteed rate may be

credited in a way set by our Board of Directors. There may be more than

one interest rate in effect at any time.

The contracts also included two hypothetical illustrations that assume the annuitant

will receive only the minimum three percent interest.

Northern obtained its profit by maintaining a spread between the interest that

it earned on the money invested in its annuities and the interest, above the guaranteed

minimum, that it paid to its policyholders. Northern’s method of establishing the

spread involved distinguishing between recent deposits and older deposits. For newer

deposits, the spread between what Northern made on its investments and what it paid

to a policyholder was typically 1% to 1.25% narrower—in other words, Northern

made less profit. 

One way to understand this practice is to consider that each new deposit is

initially credited at an introductory rate and earns higher interest. Over time, however,

the introductory rate is eliminated so that the interest paid on the deposit reflects the

average spread differential targeted by Northern. The underlying practice at issue

here—that of paying a higher introductory rate on more recent deposits—is common

throughout the industry, and annuity buyers’ guides caution against purchasing an
-4-

annuity based solely on its introductory rate. The plaintiffs’ own expert testified that

there are plenty of companies that initially credit higher interest on deposits than they

can afford long-term, and “[i]f the policyholder knows that going in, that’s fine.”

Rather, as the plaintiffs’ expert sees it, the problem is whether there is “full

disclosure.” The record suggests that Northern had some concern about its obligation

to disclose its interest-crediting method to its customers, noting in a 1995 internal

memo that “[o]ur current approach of saying nothing is not acceptable in the long

run.” 

Northern’s annuities were marketed by a sales force that included thousands of

independent insurance agents who were aware of the various interest rates that

Northern credited on deposits. These agents were not required to follow any

particular sales script when they sold Northern’s annuities and were free to answer any

questions that customers had about the product. Although the 1995 internal memo

suggests that the sales agents initially may not have known that the different interest

rates reflected Northern’s practice of offering higher rates on more recent deposits,

Northern’s Vice President of Sales, Steve Barron, testified that the practice was

disclosed in sales meetings at some point. Baron also testified that the sales agents

were told that they might want to consider discussing Northern’s interest-crediting

methods with customers. Brad Corbin, who began as an independent agent with

Northern in 1992 and eventually became head of the company’s sales department,

testified that in discussions with customers, sales agents would sometimes compare

Northern’s approach of subsidizing new money rates to another company’s use of an

explicit first year bonus. According to Corbin, prospective customers would

frequently ask about bonuses, and sales agents would explain that Northern’s implicit

bonus was advantageous because it was eliminated over a longer period of time. 

There is some evidence that Northern’s interest-crediting practice was

inadequately disclosed in the mandatory filings that the company was required to

submit to regulatory agencies. Northern was obligated to inform state regulators of
-5-

the method through which it determined the non-guaranteed interest payable to its

policyholders. According to the plaintiffs’ experts, Northern inaccurately

characterized its interest-crediting method as being entirely dependent on the

performance of the underlying investments, omitting the fact that it lowered interest

rates on old funds to recoup its initial subsidy of newer deposits. In 2005, state

regulators began an investigation of Northern’s interest-crediting practices, but no

final determination has yet been made about the legality of the company’s conduct.

 

B. The Avritts’ Annuity Purchases

Alan Avritt purchased his annuity in 1992 with the help of a financial advisor.

He did not receive any sales materials from Northern and he did not compare

Northern’s interest rates with those of other annuity providers or the market in

general. The financial advisor who spoke with Alan Avritt told him that Northern was

a good company and that the annuity would provide a good rate of return. Alan Avritt

did not undertake any independent investigation before making the decision to

purchase the product. After his purchase, he made monthly deposits into the annuity

for the next fourteen years. 

The interest that Northern paid on Alan Avritt’s deposits varied over the life of

the policy but was at all times greater than three percent, often ranging between five

and six percent. From 1992 until 1997, Alan Avritt received account statements

indicating the interest that was being credited to his account. The statements showed

that he was receiving different interest rates on recent deposits than he was on older

deposits, with deposits made during the current year generally credited a higher rate

than those made in previous years. The reason for the difference, however, was not

explained. Beginning in 1997, Northern changed the format of its account statements

so that the different rates were not apparent to policyholders.
-6-

Jacqueline Avritt periodically reviewed Alan Avritt’s account statements to see

how the investment was performing. In 1999, she purchased her own fixed deferred

annuity from Northern through a financial advisor. She did not receive any brochures

or sales materials and did not compare Northern’s interest rates with those of other

annuity providers. Jacqueline Avritt could not remember the interest rate quoted to

her at the time of her purchase but remembered thinking that it was good, and she

believed her financial advisor’s advice that Northern would pay a good rate.

Following her purchase of the annuity, Jacqueline Avritt made monthly deposits for

a number of years. The interest credited to her deposits varied but was at all times

greater than the guaranteed minimum of three percent.

C. Procedural History

The Avritts sued Reliastar in 2006, alleging, among other things, breach of

contract, breach of the implied covenant of good faith and fair dealing, unjust

enrichment, violation of the Washington Consumer Protection Act, and violation of

the California Unfair Competition Law. After denying Reliastar’s motion to dismiss,

the district court considered the Avritts’ motion for class certification. The district

court assumed without deciding that the Avritts could satisfy the initial requirements

for class certification in Federal Rule of Civil Procedure 23(a). The district court,

however, rejected the Avritts’ contention that they could satisfy the additional

requirements in Rule 23(b)(2) or 23(b)(3). The court concluded that the Avritts’ focus

on monetary damages precluded Rule 23(b)(2) certification on the basis that injunctive

or declaratory relief was appropriate to the class as a whole. It then considered the

nature of each of the Avritts’ claims and determined that they had failed to establish

that common questions predominated over individual issues, as required for

certification under Rule 23(b)(3). In particular, the court found that the express terms

of the annuity contract did not obligate Northern to credit non-guaranteed interest in

any particular manner and that establishing Reliastar’s liability would thus require

evidence of how its product was marketed to each purchaser.
-7-

After class certification was denied, the Avritts conceded that they could not

meet the amount in controversy requirement to sustain diversity jurisdiction,

whereupon the district court dismissed the case for lack of subject matter jurisdiction.

II. Analysis

We review a district court’s denial of class certification for abuse of discretion.

Petrovic v. Amoco Oil Co., 200 F.3d 1140, 1145 (8th Cir. 1999). Federal Rule of

Civil Procedure 23(a) sets out four threshold requirements that must be met before a

plaintiff may file a lawsuit on behalf of a class of persons. Once those prerequisites

have been met, the plaintiff must also establish that the class fits within one of three

types of class actions listed in Rule 23(b). Like the district court, we will assume that

the Avritts could satisfy the prerequisites of Rule 23(a) and will focus our attention

on their arguments that the class should be certified under Rule 23(b)(2) or 23(b)(3).

A. Rule 23(b)(3)’s Requirement of Common Questions of Law or Fact

Under Rule 23(b)(3), the district court may certify a class action if it “finds that

the questions of law or fact common to class members predominate over any questions

affecting only individual members, and that a class action is superior to other available

methods for fairly and efficiently adjudicating the controversy.” “The Rule 23(b)(3)

predominance inquiry tests whether proposed classes are sufficiently cohesive to

warrant adjudication by representation.” Amchem Prods., Inc. v. Windsor, 521 U.S.

591, 623 (1997). At the core of Rule 23(b)(3)’s predominance requirement is the

issue of whether the defendant’s liability to all plaintiffs may be established with

common evidence. See Blades v. Monsanto Co., 400 F.3d 562, 566 (8th Cir. 2005).

“If, to make a prima facie showing on a given question, the members of a proposed

class will need to present evidence that varies from member to member, then it is an

individual question.” Id. “If the same evidence will suffice for each member to make
3

The district court determined that Washington law applied to the Avritts’

common law claims, and neither party has challenged the court’s finding on appeal.

-8-

a prima facie showing, then it becomes a common question.” Id. In making its

determination, the district court must undertake a “rigorous analysis” that includes

examination of what the parties would be required to prove at trial. See Elizabeth M.

v. Montenez, 458 F.3d 779, 786 (8th Cir. 2006). The court may also be called upon

to “resolve disputes concerning the factual setting of the case.” Blades, 400 F.3d at

575. As explained below, we conclude that the district court did not abuse its

discretion in finding that the Avritts’ theories of liability could not be supported solely

with reference to class-wide proof.3

1. Breach of Contract

The Avritts first claim that Northern breached the express terms of its annuity

contracts by failing to adhere to its promise to credit non-guaranteed interest “in a way

set by our Board of Directors.” The Avritts argue that Northern violated this

contractual language in two respects: first, by failing to credit non-guaranteed interest

in a single “way” and instead treating newer deposits differently than older deposits;

and second, by failing to have its board of directors “set” the way that non-guaranteed

interest would be credited. In support of the latter argument, the Avritts cite portions

of the record in which a witness for Northern testified that the board reviewed and

approved interest rate recommendations made by the company’s actuaries. The

Avritts apparently conclude that this description of the board’s actions does not

amount to “setting” the interest rate. They further contend that Northern’s express

breach of contract establishes its liability to the entire class, and they fault the district

court for giving their breach of contract claims minimal consideration in its order

denying class certification.
4

In support of their contention that extrinsic evidence of individual intent would

be irrelevant to their express breach of contract claims, the Avritts cite several cases

holding that Washington courts follow the objective manifestation theory of contracts.

The Avritts’ argument, however, improperly conflates the distinct concepts of

subjective intent and extrinsic evidence. “The objective manifestation theory of

contracts . . . lays stress on the outward manifestation of assent made by each party to

the other” and accordingly imputes to each party “an intention corresponding to the

reasonable meaning of a person’s words and acts.” City of Everett v. Estate of

-9-

The district court’s skepticism toward the Avritts’ breach of contract claims was

well founded. As an initial matter, it is not clear that any members of the putative

class, let alone a substantial number of them, originally understood the contract

language in the manner that the Avritts now propose. The record indicates that the

Avritts themselves attached little significance to the phrase at issue. Their current

interpretation of Northern’s obligation to credit non-guaranteed interest “in a way set

by our Board of Directors” is at least subject to reasonable dispute. One reasonable

reading of that language is simply that Northern retained discretion over how it

credited non-guaranteed interest, not that it was required to use a single, uniform

formula for calculating all interest payments. Indeed, the very next sentence in the

contract notifies purchasers that “[t]here may be more than one interest rate in effect

at any time.” It is likewise unclear that the contract dictated any particular role for the

board of directors other than to ratify the company’s interest crediting method in some

manner. 

Assuming that the Avritts’ interpretation of the contract is plausible, however,

the existence of two or more reasonable interpretations opens the door for extrinsic

evidence about what each party intended when it entered the contract. See Brogan &

Anensen LLC v. Lamphiear, 202 P.3d 960, 961-62 (Wash. 2009) (per curiam)

(holding that extrinsic evidence is admissible to determine the contracting parties’

intent with respect to ambiguous contract terms); see also Schnall v. AT & T Wireless

Servs., Inc., 225 P.3d 929, 937 (Wash. 2010) (observing that Washington courts

permit the introduction of extrinsic evidence to interpret standardized contracts).4

 In
Sumstad, 631 P.2d 366, 367 (Wash. 1981). This principle establishes the standard by

which evidence of intent is analyzed; it does not prevent a court from using extrinsic

evidence to interpret an ambiguous contract, a practice endorsed in myriad

Washington contract cases. 

-10-

addition to extrinsic evidence about Northern’s intent, Reliastar would be entitled to

introduce evidence about how the contract was explained in various sales discussions

and whether each purchaser’s understanding of the contract was consistent with the

theory the Avritts now advance. Thus, Reliastar’s liability to the entire class for

breach of contract cannot be established with common evidence. 

 

As the district court recognized, an additional problem with the Avritts’ breach

of contract claim is the relationship between the alleged breach and the Avritts’ theory

of damages. The court determined that the Avritts’ articulation of damages rested

upon their belief that Northern should have adopted a particular approach to crediting

interest—for example, maintaining the initial, higher interest rate for all deposits.

Even if the Avritts’ interpretation of the contract language is correct, however, it does

not follow that Northern was contractually obligated to credit interest in the manner

that they have suggested. The Avritts insist that Northern’s board was required to set

interest in a single way for all deposits. But according to this interpretation, the board

still retained discretion to fix the interest rate for all funds at three percent or slightly

above, which would have actually been significantly lower than the rate that the

Avritts received. To establish any damages, the Avritts must additionally allege either

a duty not expressly delineated in the terms of the contract or some type of

misrepresentation upon which they relied. The district court thus properly concluded

that the true focus of the contract claims was not on the policy language itself but on

the Avritts’ allegation of an implied duty for Northern to act honestly and fairly in

establishing its rates. 

Accordingly, the district court did not abuse its discretion in holding that the

Avritts were not entitled to class certification on their breach of contract claims.
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2. Implied Covenant Claims

The Avritts next contend that Northern’s interest-crediting practices breached

the implied covenant of good faith and fair dealing and that the breach can be

established with evidence common to the entire class. They argue that although

Northern may have had discretion in determining how to credit non-guaranteed

interest, it was obligated to exercise that discretion honestly and fairly. The Avritts

maintain that Northern breached its duty by setting rates in a manner that

discriminated against older customers and misled prospective purchasers about the

nature of the product.

“All parties to a contract have duties of good faith and fair dealing.” City of

Woodinville v. Northshore United Church of Christ, 211 P.3d 406, 412 (Wash. 2009).

The duty of good faith and fair dealing, however, “arises only in connection with

terms agreed to by the parties,” and therefore does not create “a free-floating duty of

good faith unattached to the underlying legal document.” Badgett v. Security State

Bank, 807 P.2d 356, 360 (Wash. 1991). Applying these principles, the district court

correctly determined that evidence of the representations made to each purchaser and

the understanding that they attached to the contract would be essential to establishing

liability.

As discussed above, the contract itself does not expressly guarantee any amount

of interest above the three percent minimum. Whether Northern acted in bad faith by

emphasizing its non-guaranteed interest rate for new deposits and encouraging

purchasers to believe that the introductory rate was indicative of future rates is a

question closely tied to the circumstances of each individual plaintiff. If, for example,

a prospective purchaser had discussed the issue of bonuses with a sales agent and had

heard about Northern’s implicit bonus structure, the subsequent use of that practice

could hardly be considered bad faith with respect to that purchaser. Liability might

similarly be precluded in a scenario in which Northern had made no representations
-12-

about its rates other than what appeared in the contract, and a purchaser like

Jacqueline Avritt bought an annuity with full knowledge of the rates that Northern had

credited over an extended period of time. As we explained in our discussion of the

Avritts’ breach of contract claims, analyzing contractual duties arising from an

ambiguous document would likely require extrinsic evidence about the individual

intent of each policyholder. 

The Avritts cite several cases for the proposition that the extent of the duty of

good faith and fair dealing is defined by objectively reasonable conduct, but their

argument misses the point that what is objectively reasonable depends on the nature

and context of the parties’ bargain. For this reason, we are unpersuaded by the

holding of the Washington Court of Appeals in Curtis v. Northern Life Insurance Co.,

No. 61372-3-I, 2008 WL 4927365 (Wash. Ct. App. Nov. 17, 2008) (unpublished), a

parallel class action in Washington state court. The Curtis court held that a class

action could be certified on the plaintiffs’ identical claim that Northern breached its

duty of good faith and fair dealing, based on common evidence that Northern failed

adequately to disclose its interest-crediting practices in its regulatory filings. This

holding conflicts with established Washington law that identifies the contract itself as

the source of the duty. See Badgett, 807 P.2d at 361 (“The duty of good faith implied

in every contract does not exist apart from the terms of the agreement.”). Although

Northern’s compliance with regulatory requirements might be relevant to the issue of

whether the company’s conduct was objectively reasonable, the analysis of Northern’s

good faith duties cannot be divorced from the underlying contract and the company’s

relationship with each purchaser. The district court properly concluded that evidence

of the parties’ justified expectations would be required to establish a breach of the

duty of good faith and fair dealing. And those expectations are likely to vary among

members of the putative class based on, among other things, each purchaser’s

individual interaction with sales agents. Thus, the court did not abuse its discretion
5

Although the Avritts also raised a related claim of unjust enrichment, they have

acknowledged that this claim rests on the same basis as their other common law

claims. For the same reasons that we conclude that the district court did not abuse its

discretion in refusing to certify a class on those claims, we conclude that the district

court did not abuse its discretion in refusing to certify the Avritts’ unjust enrichment

claim.

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in determining that common questions did not predominate with respect to the

plaintiffs’ implied covenant claims and refusing to certify a class on this issue.5

3. Washington’s Consumer Protection Act

The district court also denied certification for the Avritts’ claim that Northern’s

actions violated the Washington Consumer Protection Act (WCPA), Wash. Rev. Code

Ann. § 19.86.020, which declares unlawful any “[u]nfair methods of competition and

unfair or deceptive acts or practices in the conduct of any trade or commerce.” We

conclude that the Avritts’ WCPA arguments are foreclosed by the Washington

Supreme Court’s recent holding in Schnall v. AT & T Wireless Services, Inc., 225

P.3d 929 (Wash. 2010), a case that was decided while the present case was on appeal.

In Schnall, the Washington Supreme Court considered the extraterritorial

application of the WCPA and determined that “[t]o state a [WCPA] claim a person

must show that the unfair or deceptive act affected the people of the state of

Washington.” Id. at 938. The court explained that WCPA actions, whether they are

pursued by the Washington Attorney General or a private citizen, may be brought only

on behalf of persons residing within the state. Id. at 938-39. The court’s analysis was

unaltered by the fact that the defendant corporation was based in Washington and

engaged in the disputed transactions within the state. See id. at 944-45 (Sanders, J.,

dissenting) (observing that the defendant was a Washington corporation and that

“[s]ignificant portions of each transaction occurred in Washington”).
-14-

The Avritts seek certification for a class of California residents who were

allegedly injured by the activities of a company that was then based in Washington.

Schnall makes clear that a WCPA claim cannot succeed in this context. Accordingly,

the district court did not abuse its discretion in denying class certification on this

claim. See Irving v. Dormire, 586 F.3d 645, 647 (8th Cir. 2009) (noting that we may

affirm the district court’s rulings on any basis supported by the record). 

4. California’s Unfair Competition Law

The Avritts contend that the district court abused its discretion in refusing to

certify a class action based upon violations of California’s Unfair Competition Law

(UCL), which prohibits “any unlawful, unfair or fraudulent business act or practice.”

Cal. Bus. & Prof. Code § 17200. The UCL is a broad statute that empowers California

citizens to act as private attorneys general and seek restitution from businesses that

engage in a wide range of improper or illegal activities. See id. § 17204. As

originally drafted, the UCL did not limit the filing of such lawsuits to individuals who

had actually been harmed by the disputed business practice, and consequently the law

became a font for abusive litigation. See In re Tobacco II Cases (Tobacco II), 207

P.3d 20, 31-32 (Cal. 2009). In order to curb the filing of frivolous lawsuits, the UCL

was amended by ballot measure in 2004, and the statute now provides that a litigant

has standing to file a lawsuit only if he or she has suffered injury as a result of the

disputed business practice. See id. at 25-28. 

The California Supreme Court recently considered the 2004 amendment and

held that the new statutory standing requirement applies solely to the class

representatives and not to all other class members. Id. at 25. In reaching its

conclusion, the court noted that prior to the 2004 amendment, California courts had

“repeatedly and consistently [held] that relief under the UCL is available without

individualized proof of deception, reliance, and injury.” Id. at 35. The Avritts argue

that they are entitled to class certification on their UCL claim because they can
-15-

establish that Northern’s interest-crediting practice was unlawful, unfair, or

fraudulent, and they maintain that in light of Tobacco II they are not required to

produce evidence of individual class members’ reliance or injury. 

We are unpersuaded, however, for several reasons. As an initial matter, it is not

clear that the California Supreme Court’s discussion of standing in Tobacco II was

meant to have any bearing on whether a plaintiff can satisfy the class certification

requirement that common questions of law or fact predominate. The California Court

of Appeals has interpreted Tobacco II as narrowly limited to the question of standing,

concluding that “[w]e see no language in Tobacco II which suggests to us that the

[California] Supreme Court intended our state’s trial courts to dispatch with an

examination of commonality when addressing a motion for class certification.”

Cohen v. DirectTV, Inc., 101 Cal. Rptr. 3d 37, 49 (Cal. Ct. App. 2009), review denied

(Feb. 10, 2010). Cohen went on to hold that the trial court properly refused to certify

a UCL claim where individual questions about each putative class member’s reliance

on allegedly false representations would eliminate commonality and make class

adjudication unmanageable. See id. But see In re Steroid Hormone Prod. Cases, 104

Cal. Rptr. 3d 329, 340 (Cal Ct. App. 2010), review denied (Apr. 14, 2010) (observing

that Cohen may be inconsistent with Tobacco II). Although the state of California’s

UCL jurisprudence is currently uncertain, there is reason to doubt that the holding in

Tobacco II goes as far as the Avritts suggest, eliminating any need to show that

unnamed class members relied on any misrepresentations or were actually injured.

Moreover, to the extent that Tobacco II holds that a single injured plaintiff may

bring a class action on behalf of a group of individuals who may not have had a cause

of action themselves, it is inconsistent with the doctrine of standing as applied by

federal courts. The “irreducible constitutional minimum of standing requires a

showing of injury in fact to the plaintiff that is fairly traceable to the challenged action

of the defendant, and likely to be redressed by a favorable decision.” Braden v. WalMart Stores, Inc., 588 F.3d 585, 591 (8th Cir. 2009) (internal quotations and alteration
-16-

omitted). The constitutional requirement of standing is equally applicable to class

actions. Sutton v. St. Jude Med. S.C., Inc., 419 F.3d 568, 570 (6th Cir. 2005).

Although federal courts “do not require that each member of a class submit evidence

of personal standing,” a class cannot be certified if it contains members who lack

standing. Denney v. Deutsche Bank AG, 443 F.3d 253, 263-64 (2d Cir. 2006). A

class “must therefore be defined in such a way that anyone within it would have

standing.” Id. at 264. Or, to put it another way, a named plaintiff cannot represent a

class of persons who lack the ability to bring a suit themselves. 

As we noted earlier, prior to its amendment in 2004, the UCL allowed an

uninjured plaintiff to bring a lawsuit in the California courts as a private attorney

general. The mere existence of a state cause of action, however, did not provide the

plaintiff with standing to bring a lawsuit in federal court. See Lee v. Am. Nat’l Ins.

Co., 260 F.3d 997, 1001-02 (9th Cir. 2001) (holding that an uninjured plaintiff who

may have had a state cause of action under the UCL was “foreclosed from litigating

the same cause of action in federal court, [because] he cannot demonstrate the

requisite injury”); see also Nike, Inc. v. Kasky, 539 U.S. 654, 661-62 (2003) (Stevens,

J., concurring in dismissal of certiorari as improvidently granted) (observing that an

uninjured plaintiff lacked Article III standing to bring his UCL claim in federal court).

Under the California Supreme Court’s recent interpretation of the 2004 UCL

amendment, uninjured plaintiffs may be permitted to join a class action in state court,

provided that a lone representative has satisfied the statutory standing requirement

articulated in Tobacco II. But as the Tobacco II dissent pointed out, the court’s

expression of the UCL’s standing requirement diverged from federal jurisprudential

principles, see id. at 42-44 (Baxter, J., dissenting), which we are bound to follow. 

Finally, as the Avritts concede, even if it were not necessary to consider

individual evidence of the plaintiffs’ reliance and injury, a UCL claim cannot succeed

without common evidence of misconduct. Thus, to the extent that individual evidence

is necessary to show that Northern’s practices were actually unlawful, unfair, or
6

Because we conclude that the district court did not abuse its discretion in

determining that common questions of law and fact did not predominate with respect

to all of the Avritts’ claims, we need not review the court’s additional determination

that a class action would not be a superior method of adjudicating the controversy.

-17-

fraudulent, class certification is inappropriate. The district court concluded that

whatever prong of the UCL the Avritts based their claims upon, the allegedly

wrongful conduct primarily involved deception, misrepresentation, and false

regulatory filings. The district court determined that issues of individual reliance

would therefore be relevant to establishing liability. We agree.

The record indicates that Northern did not adopt a uniform approach with

respect to its representation of its interest-crediting policies. As detailed above,

Northern’s annuities were sold by thousands of independent agents who did not follow

a particular sales script when working with customers. All of the agents were aware

of the various interest rates that Northern credited for both newer and older deposits,

and the record suggests that at least some of the agents knew that the different rates

reflected the company’s practice of crediting higher interest to newer deposits. Sales

agents were also free to answer any questions that customers had about the product.

Further, the experience and sophistication of Northern’s customers varied, as

illustrated by the differences between the transactions of the two named plaintiffs in

this case. Alan Avritt purchased his annuity without investigating the product and

with little idea of what interest rate he would receive. Jacqueline Avritt, in contrast,

purchased her annuity after years of reviewing her husband’s policy statements and

tracking the performance of the investment. Given the varying experiences of each

of the members of the putative class, it is unlikely that any misconduct could be

uniformly established as to all purchasers. Accordingly, the district court did not

abuse its discretion in denying class certification on the Avritts’ UCL claim.6

 
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B. Rule 23(b)(2) and Injunctive or Declaratory Relief

The Avritts alternatively argue that even if class certification was inappropriate

under Rule 23(b)(3), the district court abused its discretion by failing to certify the

class under Rule 23(b)(2). Rule 23(b)(2) provides that a class may be maintained if

“the party opposing the class has acted or refused to act on grounds that apply

generally to the class, so that final injunctive relief or corresponding declaratory relief

is appropriate respecting the class as a whole.” The Avritts contend that their claims

are based on actions that Northern took that affected the entire class. They argue that

because injunctive or declaratory relief concerning Northern’s interest-crediting

practices would be appropriate as to all putative class members, the district court

should have certified the class under Rule 23(b)(2).

“Class certification under Rule 23(b)(2) is proper only when the primary relief

sought is declaratory or injunctive.” In re St. Jude Med., Inc., 425 F.3d 1116, 1121

(8th Cir. 2005). Although Rule 23(b)(2) does not refer to the predominance of

common questions, “class claims thereunder still must be cohesive.” Id. Indeed,

cohesiveness is even more important for a Rule 23(b)(2) class because, unlike Rule

23(b)(3), there is no provision for unnamed class members to opt out of the litigation.

Id. Individuals comprising a Rule 23(b)(2) class are therefore “generally bound

together through preexisting or continuing legal relationships or by some significant

common trait such as race or gender.” Id. at 1122 (quoting Holmes v. Cont’l Can Co.,

706 F.2d 1144, 1155 n.8 (11th Cir. 1983)).

We conclude that the district court did not abuse its discretion in denying

certification under Rule 23(b)(2). As the district court pointed out in its order denying

class certification, plaintiffs’ counsel conceded that the case was primarily about

money damages, not injunctive relief. The Avritts seek to recover money that they

would have been paid if Northern had credited interest to their annuity accounts as

they thought proper. Nevertheless, they contend that certification under Rule 23(b)(2)
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is appropriate because they also seek a declaration that Northern’s interest-crediting

practices were improper and injunctive relief requiring Reliastar to use the same

factors in crediting interest to both new and old deposits. As we have explained,

however, Northern’s conduct cannot be evaluated without reference to the individual

circumstances of each plaintiff. Although the Avritts seek to frame their claims as

solely involving questions about the propriety of Northern’s interest-crediting

practices, this case is fundamentally about the plaintiffs’ allegations of non-disclosure

and deception. The plaintiffs’ own expert admitted as much when he testified that the

practice at issue would be unremarkable if it were fully disclosed.

The fact that the level of disclosure—as well as the extent of each individual’s

reliance—varied between plaintiffs makes this an inappropriate case for injunctive or

declaratory relief. It also distinguishes this case from other cases that the Avritts cite

to support certification under Rule 23(b)(2) when a plaintiff seeks injunctive or

declaratory relief as a precursor to money damages. In DeBoer v. Mellon Mortgage

Co., for example, we approved a class action settlement pursuant to Rule 23(b)(2)

where the plaintiffs were mortgagees seeking to enjoin a mortgage servicer from

requiring them to maintain unreasonably high balances in an escrow account. 64 F.3d

1171, 1175 (8th Cir. 1995). The practice at issue in DeBoer essentially allowed the

mortgage servicer to “receive[] an interest-free loan from the customer on the excess

amount” held in the escrow account. Id. at 1173. We held that certification was

appropriate under Rule 23(b)(2) because the class sought an injunction prohibiting the

over-escrowing practice, and we observed that our analysis was unchanged by the fact

that the class also incidentally sought money damages. Id. at 1175. In DeBoer,

however, the mortgage servicer’s liability to the class turned on a single question that

uniformly applied to all class members: whether the mortgage servicer was required

to use aggregate or individual-item accounting in determining the amount of money

to hold in an escrow account. See id. at 1173. Resolution of that question as to one

of the plaintiffs necessarily resolved the issue for the entire class. Class cohesiveness
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and the possibility of uniform resolution of the plaintiffs’ claims therefore justified

certification under Rule 23(b)(2). 

The Seventh Circuit reached a similar conclusion in a case involving former

employees challenging their company’s administration of a retirement benefit plan.

See Berger v. Xerox Ret. Income Guar. Plan, 338 F.3d 755 (7th Cir. 2003). The

plaintiffs sought “a declaration that Xerox’s method of computing the lump sums to

which withdrawing employees are entitled is unlawful.” Id. at 763. Resolution of the

plaintiffs’ claims required the court to determine only which of two methods of

computing lump sum payments was proper, a determination that necessarily applied

to all members of the class. See id. at 759-60. The court held that the plaintiffs’

pursuit of a declaratory judgment made class certification under Rule 23(b)(2)

appropriate, notwithstanding the fact that the plaintiffs also sought money damages.

As the court explained, “[t]he declaration established the right of each of the class

members, and the computation of the damages due each followed mechanically.” Id.

at 764. Thus, as in DeBoer, the central issue in Berger was one that could be decided

uniformly with respect to all plaintiffs.

 

 Because the claims of the putative class members in this case are not susceptible

to uniform resolution, Berger and DeBoer are inapposite. The district court properly

recognized that resolution of the plaintiffs’ claims would require numerous individual

determinations regarding Northern’s representations and each purchaser’s reliance,

and that the class was therefore not cohesive enough to satisfy Rule 23(b)(2).

Accordingly, the district court did not abuse its discretion in denying class

certification under that rule.

III. Conclusion

The judgment is affirmed. 

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