Article by Jeffrey H. Dasteel and Ronda McKaig
Rule 23(b)(2) of the Federal Rules of Civil Procedure provides for a mandatory, no opt-out class when “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.” Rule 23(b)(2) makes no mention of money damages, and the United States Supreme Court has stated there “is at least a substantial possibility” that a Rule 23(b)(2) class can only include claims for injunctive relief and related declaratory relief, and not claims for money damages.
In contrast to Rule 23(b)(2)'s express limitation to classes seeking injunctive or declaratory relief, Rule 23(b)(3) contains no limitation on the form of relief sought and thus includes claims for money damages. Moreover, unlike Rule 23(b)(2), which does not permit class members to opt out, opt-out rights are mandatory for Rule 23(b)(3) classes. Rule 23's analytical framework appears to create a clear division between the subsections so that Rule 23(b)(2) applies to claims for declaratory and injunctive relief, while Rule 23(b)(3) includes claims for money damages. Despite this clear division, and notwithstanding the Supreme Court's statement that there is at least a substantial possibility that money damages cannot be included in Rule 23(b)(2) classes, federal appellate and district courts (picking up on some ambiguous language in the Advisory Committee Notes accompanying Rule 23(b)(2)), have permitted damages claims to be certified under Rule 23(b)(2) as long as the claims for injunctive or declaratory relief “predominate” over the claims for damages.
These courts part company on what it means for injunctive and corresponding declaratory relief to predominate over damages. A majority of circuits addressing the issue determine predominance by requiring damages to be “incidental” to injunctive or declaratory relief, meaning that damages must flow from the injunctive relief and be capable of objective calculation without resolution of issues peculiar to particular class members. Under this standard, there should be no individualized issues either for injunctive relief or damages. Although any form of money damages as part of a (b)(2) class is inconsistent with Rule 23(b)(2)'s analytical framework, the “incidental damages” standard of predominance at least limits individualized issues, even if it does not solve the due process concerns implicated by the no-opt-out provisions of subdivision (b)(2).
In contrast, the United States Courts of Appeals for the Second and Ninth Circuits use a subjective, ad hoc standard that focuses instead on whether the plaintiffs' subjective purpose for bringing the action for injunctive or declaratory relief predominates over their claims for damages. When applying the subjective standard of predominance, if a court determines that plaintiffs' predominant goal in bringing the litigation is to obtain the requested injunctive or declaratory relief, then both incidental and nonincidental damages can be included in a Rule 23(b)(2) class. Nonincidental damages frequently require determinations of individualized issues, which, in turn, raise due process and manageability concerns typically arising outside the scope of a typical Rule 23(b)(2) class.
This Article questions the use of the subjective, ad hoc predominance standard to permit nonincidental damages to be included in a Rule 23(b)(2) class and concludes that the subjective, ad hoc standard destroys the analytical framework of Rule 23. Potential class treatment of claims for nonincidental damages should be analyzed under Rule 23(b)(3), so that a court can be assured that common issues predominate, the class is manageable, and the due process rights of the litigants are expressly protected. Requiring damages claims to be analyzed under Rule 23(b)(3) does not prevent a court, in appropriate cases, from certifying a hybrid class so that claims for injunctive relief are analyzed under Rule 23(b)(2) and claims for damages are analyzed under Rule 23(b)(3).
About the Author
Jeffrey H. Dasteel. Partner, Skadden, Arps, Slate, Meagher & Flom, Los Angeles.
Ronda McKaig. Associate, Skadden, Arps, Slate, Meagher & Flom, Los Angeles.
Citation
80 Tul. L. Rev. 1881 (2006)