Source: http://openjurist.org/print/570927
Timestamp: 2014-03-08 03:50:26
Document Index: 509214436

Matched Legal Cases: ['§ 1292', '§ 1981', 'art, 255', 'art, 255', '§ 1763', 'art, 255', '§ 1981', '§ 1981', '§ 1981', '§ 1982', '§ 1983', '§ 1981', 'art, 255']

445 F3d 311 Rose Belle Thorn v. Jefferson-pilot Life Insurance Company
445 F3d 311 Rose Belle Thorn v. Jefferson-pilot Life Insurance Company 445 F.3d 311
Rose Belle Thorn; Rosa M. Thorn, Individually and as Personal Representatives of the Estate of Leroy Thorn, Deceased; Robert Pugh; Evelyn D. Pugh, on behalf of themselves and on behalf of all others similarly situated, Plaintiffs-Appellants,v.JEFFERSON-PILOT LIFE INSURANCE COMPANY, as successor of Pilot Life Insurance Company, Defendant-Appellee.American Council of Life Insurers, Amicus Supporting Appellee.
No. 05-1162.
Corrected Opinion Filed March 9, 2006.
ARGUED: Sanford Svetcov, Lerach, Coughlin, Stoia, Geller, Rudman & Robbins, L.L.P., San Francisco, California, for Appellants. James F. Jorden, Jorden Burt, L.L.P., Washington, DC, for Appellee. ON BRIEF: Andrew S. Friedman, Wendy J. Harrison, Bonnett, Fairbourn, Friedman & Balint, P.C., Phoenix, Arizona; William M. Audet, Michael McShane, Alexander, Hawes & Audet, L.L.P., San Francisco, California; W. Christian Hoyer, Christa L. Collins, James, Hoyer, Newcomer & Smiljanich, P.A., Tampa, Florida; John J. Stoia, Jr., Alreen Haeggquist, Lerach, Coughlin, Stoia, Geller, Rudman & Robbins, L.L.P., San Francisco, California; Charles Mathis, Mathis, Adams & Tate, P.C., Atlanta, Georgia; Barry A. Weprin, Brad N. Friedman, Milberg, Weiss, Bershad & Schulman, L.L.P., New York, New York; Christopher A. Seeger, David R. Buchanan, Seeger, Weiss, L.L.P., New York, New York; Herman Watson, Jr., Rebekah Keith McKinney, Watson, Jimmerson, Givhan, Martin & McKinney, P.C., Huntsville, Alabama; T. English McCutchen, William E. Hopkins, Jr., McCutchen, Blanton, Johnson & Barnette, L.L.P., Columbia, South Carolina; Ronald R. Parry, David Futscher, Parry, Deering, Futscher & Sparks, P.S.C., Covington, Kentucky; J.P. Strom, Jr., Mario A. Pacella, Strom & Young, L.L.C., Columbia, South Carolina; Joe R. Whatley, Whatley, Drake, L.L.C., Birmingham, Alabama, for Appellants. Brent O.E. Clinkscale, Jacquelyn D. Austin, Womble, Carlyle, Sandridge & Rice, P.L.L.C., Greenville, South Carolina; Debbie W. Harden, Womble, Carlyle, Sandridge & Rice, P.L.L.C., Charlotte, North Carolina; Waldemar J. Pflepsen, Jr., Stephen H. Goldberg, Jorden Burt, L.L.P., Washington, DC, for Appellee. Victoria E. Fimea, American Council of Life Insurers, Washington, DC; Evan M. Tager, Craig W. Canetti, Mayer, Brown, Rowe & Maw, L.L.P., Washington, DC for Amicus Supporting Appellee.
Affirmed and remanded by published opinion. Judge WILLIAMS wrote the majority opinion, in which Judge DEVER concurred. Judge MICHAEL wrote a separate dissenting opinion.
The named plaintiffs (Appellants) in this case filed an individual and class-action complaint against Jefferson-Pilot Life Insurance Company on behalf of themselves and approximately 1.4 million African-American policyholders. The complaint alleged that Jefferson-Pilot's corporate predecessors discriminated against the class members in violation of federal law by charging them higher premiums than whites for similar insurance policies. The district court denied certification under Fed.R.Civ.P. 23(b)(3), finding that because it could not resolve Jefferson-Pilot's statute of limitations defense on a class-wide basis, issues common to the class did not predominate over individual ones. The district court also denied certification under Fed.R.Civ.P. 23(b)(2), finding that Appellants' requested remedy was merely a predicate for monetary damages. Appellants moved for an immediate interlocutory appeal under Fed.R.Civ.P. 23(f) and 28 U.S.C.A. § 1292(e) (West Supp. 2005), which we accepted under Fed. R.App. P. 5.
We hold that Appellants bear the burden of proving compliance with Rule 23 and that the district court did not clearly err in finding that Jefferson-Pilot's statute of limitations defense did not present common issues that could be resolved on a class-wide basis. We also hold that the district court correctly held certification was improper under Rule 23(b)(2) because Appellants' requested relief was not predominantly injunctive or declaratory in nature. We therefore affirm and remand for further proceedings on Appellants' individual claims.
The parties agree on most of the facts relevant to this appeal. From 1911 to 1973, Jefferson-Pilot Insurance Company's corporate predecessors (collectively Jefferson-Pilot) issued approximately 1.4 million industrial life insurance policies1 to African-Americans in North Carolina, South Carolina, Georgia, and Virginia. Jefferson-Pilot admits that it charged African-American policyholders higher premiums than it charged white policyholders for policies with similar benefits. Jefferson-Pilot contends, however, that its "dual-rate"2 policies were not the product of racial animus. Instead, it argues that the price difference was nothing more than a wise business decision based on mortality tables showing that African-Americans had shorter life expectancies and were thus higher life-insurance risks than similarly situated whites.3
Jefferson-Pilot stopped issuing industrial life insurance policies altogether in 1973, but continued to collect premiums on the dual-rate policies that were still in effect at that time. In 1988, Jefferson-Pilot adjusted the race-based premiums on all active policies according to blended mortality tables, which were not based on race. Even after this adjustment, however, African-American policyholders still paid more than whites for similar benefits because whites' premiums had been determined according to mortality tables for whites only. In 2000, about the time the instant action was filed,4 Jefferson-Pilot declared that all still-active industrial insurance policies, whether owned by African-Americans or whites, were "paid up"; i.e., that no further premiums would be charged on the policies. At that time, only approximately 45,000 of the 1.4 million dual-rate policies issued to African-Americans were still in effect.5
In September 2000, Appellants Rose Belle Thorn, Rosa M. Thorn, Robert Pugh, and Evelyn D. Pugh — four African-Americans insured under a Jefferson-Pilot industrial life insurance policy — filed a class-action complaint against Jefferson-Pilot alleging that its dual-rate policies violated 42 U.S.C.A. §§ 1981 (West 2003) (granting equal rights to "make and enforce contracts" without regard to race) and 1982 (West 2003) (granting equal rights to "inherit, purchase, lease, sell, hold, and convey real and personal property" without regard to race).6 The complaint also alleged that Jefferson-Pilot took steps to conceal these practices from its policyholders, such as instructing its agents not to disclose the race-based premium disparities. The complaint sought, inter alia, an injunction prohibiting Jefferson-Pilot from collecting any future premiums on its dual-rate policies, restitution for the difference in premium payments made by African-American and white policyholders, punitive damages, and attorney's fees. In its answer, Jefferson-Pilot, inter alia, denied that it took steps to conceal its dual-rate practices, denied that Appellants were entitled to relief, and raised a statute of limitations defense.
In October 2003, Appellants moved under Fed.R.Civ.P. 23(b)(3) and 23(b)(2) to certify a class of "all African-Americans who [were insured by a race-based dual-rate] industrial life insurance policy that was issued [by Jefferson-Pilot]." (J.A. at 284.)7 Jefferson-Pilot opposed the motion. It argued, in pertinent part, that certification was improper under Rule 23(b)(3) because individual members of the class could have been exposed to sufficient information to give them either actual or constructive knowledge of its dual-rate practices outside of the limitations period. In Jefferson-Pilot's view, this fact required the district court to conduct individual hearings for each class member to determine when he or she learned of the dual-rate practices, a requirement that defeated the benefits of class certification. In support of this argument, Jefferson-Pilot submitted an expert report from Henry M. McKiven, a professor in the History Department at the University of South Alabama. In the report, Dr. McKiven detailed the news media's reports of race-based insurance practices over the course of the twentieth century, noted the objections to the practices raised in the African-American community, particularly by African-American church leaders, through the middle part of the century, and explained that a number of African-Americans formed their own insurance companies early in the century in an effort to offer an alternative to white-owned insurance companies' race-based practices. Dr. McKiven claimed that "based on these numerous sources of information, ... an African American living in the Southeast could have become aware" of insurance companies' dual-rate practices. (J.A. at 101.) Jefferson-Pilot also argued that certification was improper under Rule 23(b)(2) because Appellants sought primarily monetary relief.
Appellants argued that the district court could resolve Jefferson-Pilot's statute of limitations defense on a class-wide basis — i.e., without conducting individual hearings — because Jefferson-Pilot had not shown that any class member had actual knowledge of its dual-rate practices and because all of the class members would have been exposed to the same information that could have given them actual or constructive knowledge of the practices. In support of this argument, Appellants submitted an expert report from Robert J. Norrell, a professor in the history department at the University of Tennessee. Dr. Norrell claimed that although there had been some media reporting of the issue during the twentieth century, "the public, or the average citizen of the United States, including African-Americans, was not generally aware of [these] practices." (J.A. at 70.) Appellants also argued that certification was proper under Rule 23(b)(2) despite the fact they sought monetary relief, because the relief they sought was equitable, not legal, in nature.
In May 2004, the district court conducted an extensive hearing, most of which was devoted to whether the class should be certified. (J.A. at 126-275.) In December 2004, the district court denied the motion to certify by a thorough, well-written opinion. The district court noted that "[t]he claims at issue in this action relate to policies issued as early as 1911 and, at the latest, in 1973. The initial (and possibly only) actionable discrimination would, therefore, have occurred no later than the date of issuance of the policy, in other words, from twenty-seven to eighty-nine years before suit was instituted. This very significant period of time raised critical questions as to when the claim accrued." (J.A. at 296 (footnote and internal quotation marks omitted).) Focusing on this critical question, the district court found that the record was devoid of evidence that resolution of the issue could occur on a class-wide basis. (J.A. at 296, 298 ("[Jefferson-Pilot] has presented a strong prediction of evidence that there were numerous sources available during the relevant period which could have alerted class members to the fact that the practices now complained of were common in the industry, if not uniform among White-owned companies.... In light of the information which [Jefferson-Pilot] has shown was available, the court cannot assume that none of the members of the proposed class gained sufficient information to put them on inquiry notice at some point which would result in their claim being time barred.").) The district court held that this fact meant that Jefferson-Pilot was entitled to present evidence as to individual class members' actual or constructive knowledge, thereby rendering the class members' claims uncommon from one another and precluding certification under Rule 23(a). (J.A. at 298-300.) In the alternative, the district court held that certification was improper under Rule 23(b)(3) because individual hearings on the statute of limitations and the issue of damages were required, management of the class would be difficult due to the need for such individual hearings, and the class device was not superior to individual litigation. The district court also held, again in the alternative to the Rule 23(a) holding, that certification was improper under Rule 23(b)(2) because Appellants' requested injunctive and equitable relief was merely a predicate for money damages.
On appeal, Appellants argue that the district court misapplied Rule 23(a), 23(b)(3) and 23(b)(2) in denying their motion to certify. "A district court has broad discretion in deciding whether to certify a class." Lienhart v. Dryvit Sys., Inc., 255 F.3d 138, 146 (4th Cir.2001) (internal quotation marks omitted). "[P]laintiffs bear the burden ... of demonstrating satisfaction of the Rule 23 requirements and the district court is required to make findings on whether the plaintiffs carried their burden ...." Gariety v. Grant Thornton, LLP, 368 F.3d 356, 370 (4th Cir.2004). A district court per se abuses its discretion when it makes an error of law or clearly errs in its factual findings. See Lienhart, 255 F.3d at 146 (noting that the district court's discretion "must be exercised within the framework of Rule 23" (internal quotation marks omitted)); Lukenas v. Bryce's Mountain Resort, Inc., 538 F.2d 594, 598 n. 16 (4th Cir.1976) (noting that "where there is clear error," appellate court should upset the district court's exercise of its discretion on a motion for certification).
We first address Appellants' Rule 23(b)(3) arguments.
Appellants argue that the district court abused its discretion in denying the certification motion under Rule 23(b)(3) because Jefferson-Pilot failed to satisfy its burden of showing that its statute of limitations defense presented individual issues that could not be resolved on a class-wide basis. They argue in the alternative that even if they have the burden of proving that Jefferson-Pilot's statute of limitations defense presents common issues that can be resolved on a class-wide basis, they have satisfied that burden. Jefferson-Pilot argues that Appellants bear the burden of proving that its statute of limitations defense presents common issues and that the district court did not clearly err in finding that Appellants failed to satisfy this burden. Before addressing these arguments, we pause to set forth the legal landscape in which they arise.
The class-action device, which allows a representative party to prosecute his own claims and the claims of those who present similar issues, is an exception to the general rule that a party in federal court may vindicate only his own interests. See Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 156, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982). Chief among the justifications for this device is its efficiency: adjudication of a properly-constituted class action generally has res judicata effect and "saves the resources of both the courts and the parties by permitting an issue potentially affecting every [class member] to be litigated in an economical fashion." Califano v. Yamasaki, 442 U.S. 682, 701, 99 S.Ct. 2545, 61 L.Ed.2d 176 (1979). To ensure this benefit is realized, however, and to protect both the rights of the absent plaintiffs to present claims that are different from those common to the class and the right of the defendant to present facts or raise defenses that are particular to individual class members, district courts must conduct a "rigorous analysis" to ensure compliance with Rule 23, Falcon, 457 U.S. at 161, 102 S.Ct. 2364, paying "careful attention to the requirements of [that] Rule." E. Tex. Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 405, 97 S.Ct. 1891, 52 L.Ed.2d 453 (1977).8
To be certified, a proposed class must satisfy Rule 23(a) and one of the three sub-parts of Rule 23(b). Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 423 (4th Cir.2003). The requirements of Rule 23(a) are familiar: numerosity of parties, commonality of factual or legal issues, typicality of claims and defenses of class representatives, and adequacy of representation. Id. For purposes of this appeal, the most salient of these requirements is commonality. "Commonality requires that there are questions of law or fact common to the class." Lienhart, 255 F.3d at 146 (internal quotation marks omitted). A common question is one that can be resolved for each class member in a single hearing, such as the question of whether an employer engaged in a pattern and practice of unlawful discrimination against a class of its employees. See 7A Charles Allen Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1763 (3d ed.2005). A question is not common, by contrast, if its resolution "turns on a consideration of the individual circumstances of each class member." See id.
The district court found that Appellants' proposed class did not satisfy Rule 23(a). Because we base our decision on the district court's alternative holdings that certification was improper under Rules 23(b)(3) and 23(b)(2), we assume, without deciding, that Appellants satisfied Rule 23(a), and turn our attention to Rule 23(b)(3).9
Rule 23(b)(3) has two components: predominance and superiority. The predominance requirement is similar to but "more stringent" than the commonality requirement of Rule 23(a). Lienhart, 255 F.3d at 146 n. 4. Whereas commonality requires little more than the presence of common questions of law and fact, see id. at 146, Rule 23(b)(3) requires that "questions of law or fact common to the members of the class predominate over any questions affecting only individual members." Fed. R.Civ.P. 23(b)(3). The predominance requirement "tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation." Gariety, 368 F.3d at 362 (internal quotation marks omitted). The superiority requirement ensures that "a class action is superior to other available methods for the fair and efficient adjudication of the controversy." Fed.R.Civ.P. 23(b)(3). Among the factors a district court should consider in deciding whether a class action meets these two requirements are
At the class certification phase, the district court must take a "close look" at the facts relevant to the certification question and, if necessary, make specific findings on the propriety of certification. Gariety, 368 F.3d at 365 (internal quotations omitted). Such findings can be necessary even if the issues tend to overlap into the merits of the underlying case. Falcon, 457 U.S. at 160, 102 S.Ct. 2364 ("[S]ometimes it may be necessary for the [district] court to probe behind the pleadings before coming to rest on the certification question."); Gariety, 368 F.3d at 366 ("[W]hile an evaluation of the merits ... is not part of a Rule 23 analysis, the factors spelled out in Rule 23 must be addressed through findings, even if they overlap with issues on the merits."). The likelihood of the plaintiffs' success on the merits, however, is not relevant to the issue of whether certification is proper. See Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974); Gariety, 368 F.3d at 366.
Here, the district court found that Jefferson-Pilot's statute of limitations defense presented individual issues that could not be resolved on a class-wide basis, a fact that contributed to its conclusion that common issues did not predominate under Rule 23(b)(3). (J.A. at 292, 294-300.) We therefore turn our attention to the statute of limitations defense.
While Congress has not enacted a specific statute of limitations for §§ 1981 and 1982, we interpret these federal statutes to "borrow" the statute of limitations and equitable tolling rules applicable to the state cause of action that is most analogous to §§ 1981 and 1982. See Goodman v. Lukens Steel Co., 482 U.S. 656, 660, 107 S.Ct. 2617, 96 L.Ed.2d 572 (1987) ("Because § 1981, like [§ 1982 and 42 U.S.C. § 1983], does not contain a statute of limitations, federal courts should select the most appropriate or analogous state statute of limitations."); Wade v. Danek Med., Inc., 182 F.3d 281, 289 (4th Cir.1999) (holding that under a borrowed statute of limitations state rules of equitable tolling apply). The parties do not brief the various state causes of action from which we should borrow the federal statute of limitations, but the district court concluded, and the parties do not contest, that the statutes of limitations for the §§ 1981 and 1982 claims range from 2 to 6 years. For purposes of this appeal, we assume the district court's conclusion is correct.
Whether state or federal law supplies the length of the limitations period, federal law determines when the clock begins to run against that period, or, phrased technically, when the cause of action "accrues." Nasim v. Warden, Md. House of Corr., 64 F.3d 951, 955 (4th Cir.1995) (en banc). We have held that a cause of action accrues under a borrowed statute of limitations "either when the plaintiff has [actual] knowledge of his claim or when he [has constructive knowledge of his claim] — e.g., by the knowledge of the fact of injury and who caused it — to make reasonable inquiry and that inquiry would reveal the existence of a colorable claim." Id.; Brooks v. City of Winston-Salem, 85 F.3d 178, 181 (4th Cir.1996).10
Our circuit's accrual rule, which focuses on the contents of the plaintiff's mind, is not readily susceptible to class-wide determination. Examination of whether a particular plaintiff possessed sufficient information such that he knew or should have known about his cause of action will generally require individual examination of testimony from each particular plaintiff to determine what he knew and when he knew it. See Broussard v. Meineke Disc. Muffler Shops, Inc., 155 F.3d 331, 342 (4th Cir.1998) (noting, in holding that a state statute of limitations defense presented individual issues, that "[w]hether and when each [plaintiff] received, read, and understood [the information that could have alerted them to the existence of a cause of action] is crucial to whether their ... claim against [the defendant] is time-barred by [the] statute of limitations"). Indeed, in cases where the legal issue is similarly focused on the plaintiff's knowledge, such as the requirement that a plaintiff in a fraud claim reasonably rely on the defendant's representations, we have consistently held that individual hearings are required. See Gunnells, 348 F.3d at 435 (holding, in class action based on fraud, that "the reliance element of fraud and negligent misrepresentation claims [is] not readily susceptible to class-wide proof; rather, proof of reasonable reliance ... depends upon a fact-intensive inquiry into what information each [plaintiff] actually had" (internal quotation marks omitted)); Zimmerman v. Bell, 800 F.2d 386, 390 (4th Cir.1986) (denying class certification on fraud claims where "the extent of knowledge of the omitted factors or reliance on misrepresented fact will vary from shareholder to shareholder").
With this background in mind, we return to Appellants' arguments. Appellants first argue that Dr. McKiven's expert report failed to satisfy Jefferson-Pilot's burden of proving that its statute of limitations defense presents issues that must be decided on an individual basis. This argument, of course, assumes that Jefferson-Pilot bears such a burden. Our cases prove this assumption false; we have stressed in case after case that it is not the defendant who bears the burden of showing that the proposed class does not comply with Rule 23, but that it is the plaintiff who bears the burden of showing that the class does comply with Rule 23. Windham v. Am. Brands, Inc., 565 F.2d 59, 65 n. 6 (4th Cir.1977) (en banc) ("It is well-settled in this jurisdiction that the proponent of class certification has the burden of establishing the right to such certification under Rule 23."); Lienhart, 255 F.3d at 146 ("The party seeking class certification bears the burden of proof."); Gariety, 368 F.3d at 362 ("The plaintiffs who propose to represent the class bear the burden of demonstrating that the requirements of Rule 23 are satisfied."). It is not enough, therefore, for Appellants to argue that Jefferson-Pilot failed to show that its statute of limitations defense presents individual issues. Instead, the record must affirmatively reveal that resolution of the statute of limitations defense on its merits may be accomplished on a class-wide basis.
Seeking to avoid this conclusion, Appellants argue that because Jefferson-Pilot bears the burden of proving the merits of its statute of limitations defense, it should also bear the burden of demonstrating that resolution of that defense cannot occur on a class-wide basis. Even assuming that Jefferson-Pilot has the burden of proving its statute of limitations defense on the merits,11 we reject this argument. Our cases permit no exception to the rule that the plaintiff bears the burden of showing compliance with Rule 23. See Gunnells, 348 F.3d at 438 (failing to carve out exception to the rule that the plaintiff must show compliance with Rule 23 even though one of the individual issues that defeated certification was a statute of limitations defense); Broussard, 155 F.3d at 342 (same). Moreover, the standard justifications for allocating the burden of proving an affirmative defense to the defendant — efficiency and fairness — disappear when the thing to be proved is no longer the merit of the defense but compliance with Rule 23. See Campbell v. United States, 365 U.S. 85, 96, 81 S.Ct. 421, 5 L.Ed.2d 428 (1961) ("[T]he ordinary rule, based on considerations of fairness, does not place the burden upon a litigant of establishing facts peculiarly within the knowledge of his adversary."). There is no reason to believe that the defendant is any better suited than the named plaintiffs to prove whether an issue is common to the class simply because the defendant bears the burden of proving the merits of that issue. We therefore continue, as we must, to allocate to the plaintiff the burden of proving compliance with Rule 23.
Appellants next contend that even if they have the burden of proving that Jefferson-Pilot's statute of limitations defense presents common questions that can be resolved on a class-wide basis