July 24, 2009
On July 23, 2009, in an opinion authored by Chief Judge Anthony Scirica and joined by Judge Marjorie Rendell and Justice Sandra Day O’Connor (Ret.), the United States Court of Appeals for the Third Circuit issued a seminal decision regarding class certification pursuant to Rule 23(b)(2) and employment cases generally. Hohider v. United Parcel Service, Inc., No. 07-4588 (3d Cir. Jul. 23, 2009), available at http://www.ca3.uscourts.gov/opinarch/074588p.pdf. In Hohider, the Third Circuit reversed a district court order certifying the largest class in the history of the Americans with Disabilities Act. Gibson Dunn briefed and argued the case before the Third Circuit.
This appeal involved an order certifying a nationwide class of all current and former employees of United Parcel Service, Inc. who took medical leave and were allegedly deterred from returning to work. Plaintiffs alleged, among other things, that UPS had violated the Americans With Disabilities Act (ADA) by enacting a "100% healed policy" in which employees were not permitted to work following an injury without a full medical release. The United States District Court for the Western District of Pennsylvania certified the class in July 2007. At the time, plaintiffs claimed that "this is the largest employee class-action against an employer ever certified under Title I of the ADA," estimating that the class ranged between 36,000 and 50,000 plaintiffs. James, Judge Certifies Huge Class in ADA Suit, Employment Law 360 (July 31, 2007).
In certifying such a large class of individuals with various injuries, qualifications, and work positions, the district court had utilized the "Teamsters framework," a two-stage method of proof promulgated by the Supreme Court for adjudicating certain Title VII pattern-or-practice claims. The district court reasoned that it could apply Teamsters to an ADA case so that plaintiffs would not have to prove qualification or disability at the liability stage. Therefore, the district court found that plaintiffs’ allegations–that the company had a policy in violation of the ADA (the alleged "100% healed" policy)–were sufficient to certify the class, and the individualized issues of qualification and disability status could be handled in the second phase of the litigation.
UPS sought, and the Third Circuit granted, interlocutory review of the certification order under Federal Rule 23(f). After briefing and argument, the Third Circuit reversed the certification order in a comprehensive 87-page precedential opinion. In a case of first impression, the Third Circuit rejected the application of the Teamsters framework to a class certified under the Americans with Disabilities Act, finding that importing a procedural framework from Title VII notwithstanding the manifest differences between that statute and the ADA was error. Moreover, using the Teamsters framework to relieve the class members of their statutory obligation to establish their own disability and qualification or the employer’s failure to make reasonable accommodations was error as well. Finally, the district court erred in certifying a nationwide class comprising "potentially 36,290 class members, although there could be more or less than that number," without finding that the three named plaintiffs had established that they were disabled or otherwise qualified as required to bring suit under the ADA.
Explained the Third Circuit, "adopting the Teamsters method of proof to adjudicate plaintiffs’ claims does not obviate the need to consider the ADA’s statutory elements." Indeed, "establishing the unlawful discrimination alleged by plaintiffs would require determining whether class members are ‘qualified’ under the ADA"–an assessment encompassing inquiries the lower court had acknowledged to be too individualized and divergent with respect to this class to warrant certification under Rule 23(a) and (b)(2). Neither calling the plaintiffs’ case a "pattern or practice" challenge, nor invoking the Teamsters framework, held the Court, satisfied the requirements of Rule 23. Thus, the Third Circuit found that because the statutorily required inquiry into qualification is incompatible with the requirements of Rule 23, and because plaintiffs could not adjudicate their claims and requested relief without it, the class could not be certified.
Thus, the Hohider decision confirms that the mere fact that a class action is brought pursuant to a civil rights statute does not automatically make the case appropriate for Rule 23(b)(2) certification. Instead, the Third Circuit found that when inherently individualized claims, such as an ADA failure-to-accommodate claim, require sufficiently individual determinations at the liability stage that they lack cohesion and are not brought on "grounds generally applicable to the class," a class should not be certified. While the Court’s decision leaves open the question whether any ADA failure-to-accommodate claim can be brought on a classwide basis, it suggests, at minimum, that absent limiting or unifying criteria for the class the individualized nature of these claims prevents class-based adjudication.
The Hohider decision also speaks to the limits of Rule 23(b)(2) certification. Rule 23(b)(2), by its terms, authorizes a class action if "the party opposing the class has acted 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." In addressing the monetary relief sought by the putative plaintiff class–including punitive and compensatory damages, and backpay–the Third Circuit joined other courts of appeals in barring Rule 23(b)(2) certification in cases in which substantial monetary relief is sought. Importantly, in questions not previously considered in that Circuit, the Hohider court confirmed that compensatory and punitive damages cannot be obtained on a classwide basis under Rule 23(b)(2). Similarly, with respect to backpay claims, the Court held that it is error to fail to treat such claims as monetary relief at the class certification stage in determining whether monetary relief predominates. The Third Circuit did not decide whether courts may sever damages claims from injunctive claims in order to maintain a Rule 23(b)(2) class, instead finding that the district court did not engage in a rigorous analysis before its decision to sever. Thus, the question whether merely pleading such damages claims bars certification under Rule 23(b)(2) remains unresolved. But, explained the Court, in addition to potentially being inconsistent with Rule 23(b)(2), such claims raise significant Seventh Amendment concerns–particularly if they are later abandoned or severed in pursuit of certification. In future cases, these concerns, as well as those regarding the grave due process problems inherent in the certification of a mandatory no-opt-out class seeking compensatory and punitive damages, should provide compelling grounds for district courts to deny motions for class certification.
The Hohider court also rejected the district court’s attempt to delay resolution of this Rule 23(b)(2) inquiry. Under the 2003 amendments to Rule 23, such decisions cannot be held to some indeterminate future date: a trial court must "make a definitive determination that the requirements of Rule 23 have been met before certifying a class." While courts retain discretion under Rule 23(c)(1) to alter or amend a certification order before final judgment, it is not sufficient to assume that the requirements of Rule 23 are met–in this case, that plaintiffs’ claim for backpay did not bar Rule 23(b)(2) certification because it was "potentially incidental" to the injunctive or declaratory relief sought–and grant certification on the condition that it later proves to be so. Rather, a district court must determine at the time of certification that the case as a whole conforms with the requirements of Rule 23, including Rule 23(b)(2)’s monetary-predominance standard.
For the same reasons, explained the Court, a workable trial plan must be adopted that explains how classwide proof will be offered. Thus, like the Third Circuit’s Hydrogen Peroxide decision, Hohider confirms that federal appellate courts are increasingly focused on whether a case is manageable not only through discovery or liability, but throughout any damages phase–from class certification to judgment. Where putative class action plaintiffs bring claims for which individual determinations regarding entitlement to relief must be made, explained the Hohider court, those plaintiffs must explain to the trial court the precise nature of proof that will be adduced to demonstrate liability, and the means through which individualized defenses will be adjudicated. Similarly, where damages or monetary relief is to be awarded, plaintiffs bear the burden of showing how any individual entitlement to relief will be calculated and awarded at the certification stage.
Finally, the Third Circuit confirmed that in the Rule 23(b)(2) context, as in the Rule 23(b)(3) context, rigorous analysis of each of the Rule 23 elements is required at the class certification stage. Hohider is thus another important addition to the court of appeals decisions requiring courts to conduct a rigorous analysis of the Rule 23 factors at the class certification stage, including by resolving disputed factual questions and competing expert testimony. Along with the Third Circuit’s recent decision in In re Hydrogen Peroxide, and the Second Circuit’s decision in In re Initial Pub. Offerings Sec. Litig.–two cases in which Gibson Dunn also represented clients in successful Rule 23(f) appeals from certification orders–Hohider counsels strongly in favor of an early and aggressive defense strategy designed to marshal compelling fact evidence demonstrating that the Rule 23 factors cannot be met.
Gibson, Dunn & Crutcher’s Labor and Employment and Class Action and Complex Litigation Practice Groups are available to assist in addressing any questions you may have regarding Hohider. Please contact the Gibson Dunn attorney with whom you work, or any of the following:
Mark A. Perry – Washington, D.C. (202-887-3667, firstname.lastname@example.org)
Eugene Scalia - Washington, D.C. (202-955-8206, email@example.com)
Gail E. Lees – Los Angeles (213-229-7163, firstname.lastname@example.org)
Theodore J. Boutrous, Jr. – Los Angeles (213-229-7804, email@example.com)
Rachel S. Brass – San Francisco (415-393-8293, firstname.lastname@example.org)
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