Trio of New Class Certification Decisions in the Seventh Circuit
In the last few months, the U.S. Court of Appeals for the Seventh Circuit has issued three opinions on the topic of how trial courts should decide motions for class certification when some questions will require individualized proof. Judge Richard Posner authored all three opinions.
- On November 13, 2012, the Court of Appeals for the Seventh Circuit decided Butler v. Sears Roebuck & Co., 702 F.3d 359 (7th Cir. 2012), a consumer class action in which the plaintiff that alleged that Sears sold defective Kenmore washing machines. The Court of Appeals held that a class-wide trial could decide whether the machines were defective, which would determine liability on a class-wide basis. Even if separate non-class proceedings were needed to determine the damages suffered by each purchaser, Rule 23(b)(3) predominance was satisfied by the class-wide liability questions.
- On December 4, 2012, the Court of Appeals for the Seventh Circuit decided Johnson v. Meriter Health Svc. Employee Retirement Plan, 702 F.3d 364 (7th Cir. 2012), which was an ERISA class action that alleged that administrators of a retirement plan had used an improper method to calculate payouts to thousands of plan beneficiaries. The Court of Appeals ruled that the case could be certified under Rule 23(b)(2) to resolve whether the calculation method was improper and to order changes to the plan’s future payouts. As for past miscalculations in payouts, the case could then be decertified so that each class member could file an individual suit to recover his own amount due.
- And on February 4, 2013, the Court of Appeals decided Espenscheid v. DirectSat USA LLC, 2013 U.S. App. LEXIS 2409 (7th Cir. Feb. 4, 2013), a class action in which the plaintiff alleged he and 2,340 other technicians had worked hours off-the-clock, without pay, as part of their jobs at a satellite TV company. The Court of Appeals ruled that class certification was not possible, because (i) the plaintiffs were seeking only damages and were not seeking any class-wide declaration of rights or any class-wide injunction, (ii) the plaintiffs could not articulate a plan for how the case could be tried on a class-wide basis (despite repeated requests for a Trail Plan), and (iii) even under the plaintiff’s suggested approach, individual trials would be required to determine the liability issues and the damages for each of the 2,341 class members. Because too few issues in the case were triable on a class-wide basis, the class claims were decertified.
Several themes emerge from this trio of opinions.
- Some individual issues are permitted in class actions. So long as a class action trial could decide liability on a class-wide basis — or even better, a class trial could decide class-wide liability and a class-wide equitable remedy — individual damages issues will not preclude class certification.
- Averages cannot be used to paper over individualized variations in damages. In both Johnson and Espenscheid, the plaintiffs argued that average damages could be awarded to each class member. The Court of Appeals rejected averages as a substitute for individual damages findings. (Note: neither case resolved whether averages could be used to calculate a total amount of class-wide damages which would then be shared among the class members based on individualized proof.)
- A Trial Plan may be important to a class certification motion. All three cases (but especially Espenscheid) show that, at the time that class certification motion is to be decided, a plaintiff may need to articulate what questions are susceptible to resolution in a class-wide trial. At a class certification hearing, plaintiffs would be well-advised to be ready to answer what types of proof would be used to prove class-wide issues, because the Court may ask for a Trial Plan.
None of these three opinions breaks new ground. However, when read together, they give plaintiffs guidance on what types of claims are best suited to class certification in the Seventh Circuit, especially when the case involves some individualized proof.