Plea v. Phoenix ( 2021 )

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
PHOENIX LAW ENFORCEMENT ASSOCIATION, et al.,
Plaintiffs/Appellees,
v.
CITY OF PHOENIX, Defendant/Appellant.
No. 1 CA-CV 19-0813
FILED 4-22-2021
Appeal from the Superior Court in Maricopa County
No. CV2014-008711, CV2014-009114, CV2015-007714
(Consolidated)
The Honorable Sherry K. Stephens, Judge
AFFIRMED IN PART; VACATED IN PART
COUNSEL
Napier, Coury & Baillie, P.C., Phoenix
By Michael Napier, Eric Wilson, Cassidy Bacon
Counsel for Plaintiffs/Appellees PLEA, Barry Jacobs, Earle Akre, Robert Ramsey,
Rick Flum
Yen Pilch & Landeen, P.C., Phoenix
By Caroline A. Pilch, Robert E. Yen, Michael Pang
Counsel for Plaintiffs/Appellees Theresa Clark, et al.
Sherman & Howard L.L.C., Phoenix
By John Alan Doran, Matthew A. Hesketh, Lindsay H.S. Hesketh
Counsel for Defendant/Appellant
MEMORANDUM DECISION
Presiding Judge Samuel A. Thumma delivered the decision of the Court, in
which Judge D. Steven Williams and Judge David D. Weinzweig joined.
T H U M M A, Judge:
¶1 The City of Phoenix challenges orders certifying as class
actions claims asserted by plaintiffs Phoenix Law Enforcement Association
(PLEA), et al., and plaintiffs Theresa Clark, et al. For the reasons below, the
orders are affirmed as to certification of both the PLEA class and the Clark
class under Arizona Rule of Civil Procedure 23(b)(2) (2021),1 and of the
PLEA class under Rule 23(b)(3), but the certifications of both classes under
Rule 23(b)(1)(B) are vacated.
FACTS AND PROCEDURAL HISTORY
¶2 City police officers are members of Arizona’s Public Safety
Personnel Retirement System (PSPRS). Under PSPRS, benefits are based on
the employee’s “average monthly benefit compensation.” The “average
monthly benefit compensation” is calculated using the monthly “base
salary” paid over the consecutive three-year period that yields the highest
average salary. Ariz. Rev. Stat. (A.R.S.) § 38-842(7)(a), (12).
¶3 City police officers who have not yet been promoted to the
rank of sergeant are members of PLEA. Sergeants and lieutenants are
members of the Phoenix Police Sergeants and Lieutenants Association
(PPSLA). The City collectively bargains with PLEA and PPSLA about the
terms of employment under Arizona’s meet and confer ordinances.
Phoenix City Code §§ 2-209 to -222; §§ 2-223 to -235. Under those
ordinances, the City must meet every two years with PLEA and PPSLA to
negotiate new terms of employment. If agreements are reached, they are
1Absent material revisions after the relevant dates, statutes and rules cited
refer to the current version unless otherwise indicated.
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memorialized in collective bargaining agreements: a Memorandum of
Understanding (MOU) for PLEA and a Memorandum of Agreement
(MOA) for PPSLA (collectively, MOUs and MOAs are referred to here as
Collective Bargaining Agreements, or CBAs). If, however, the parties
cannot agree, the City Council or City Manager imposes terms of
employment based on “the interest of the public employees, public
employer, and the public.” Phoenix City Code §§ 2-219(K)(3); -233(B).
¶4 Starting in 1988, the MOUs contained provisions that allowed
employees to increase (sometimes called “spike”) their pension benefits by
converting vacation time, sick time and uniform allowances into additional
base salary. An employee could elect to participate in any or all of these
wage enhancement provisions by submitting an election form. If an
employee made such an election, the increased base salary would be used
to calculate retirement benefits under PSPRS, typically leading to a larger
pension benefit. These provisions were renewed in each subsequent MOU
starting in 1988. The MOAs had similar provisions starting in 1990.
¶5 In 2014, the City informed PLEA and PPSLA that, given fiscal
issues, it would not agree to renew the wage enhancement provisions in the
new CBAs. The parties did not reach new agreements and no MOU or MOA
was signed. As a result, the City imposed terms of employment that did not
include wage enhancement provisions for 2014–2016.
¶6 PLEA, representative members and several individuals (the
PLEA plaintiffs) sued the City in June 2014 challenging the removal of the
wage enhancement provisions and seeking declaratory and injunctive
relief. In July 2014, PPSLA members, individually and as class
representatives (the Clark plaintiffs), sued the City making similar claims
and seeking similar relief. In 2015, the Clark plaintiffs filed a separate
complaint adding claims for promissory estoppel and failure to pay wages.
By mid-2016, all three cases were consolidated into this case.
¶7 In October 2018, the Clark plaintiffs moved for class
certification. See Ariz. R. Civ. P. 23. As discussed below, the motion by the
Clark plaintiffs sought class certification under Rule 23(b)(1)(B) and (2). In
January 2019, the PLEA plaintiffs moved for class certification under Rule
23(b)(1)(B) and (3). The PLEA plaintiffs and the Clark plaintiffs each sought
certification of three sub-classes: employees who elected to participate in
the wage enhancement provisions before July 1, 2014 and who stopped
receiving the additional salary, and two classes of employees who had not
yet begun receiving the benefits.
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¶8 The City opposed both motions. During the pendency of the
motions, the City also moved for judgment on the pleadings. The court
denied in part and granted in part the motion for judgment on the
pleadings, barring any claim for relief “unless a plaintiff was approved and
participating in the wage enhancement program on or before July 1, 2014.”
¶9 After significant briefing and argument, the superior court
granted the motions for class certification. The court found there are about
700 class members — nearly 500 in the PLEA Class and more than 200 in
the Clark Class. The questions of law and fact common to the class members
identified by the court “relate to whether there is a contract between [the
City] and those participating in the wage enhancement program . . . and if
[the City] must fulfill its obligations to the plaintiffs.” The court found the
claims by the class representatives are typical of claims by the class and the
representatives are adequate. See Ariz. R. Civ. P. 23(a). The court found the
PLEA Class met the requirements of Rule 23(b)(1)(B), (b)(2), and (b)(3), and
the Clark Class met the requirements of Rule 23(b)(1)(B) and (b)(2).
¶10 Based on these findings, the court certified two classes: (1) a
class of PLEA members, consisting of Phoenix Police Department Unit IV
officers who, as of June 30, 2014, satisfied the requirements of, and elected
to participate in, at least one wage enhancement provision (the PLEA
Class); and (2) a class of PPLSA members, consisting of Phoenix Police
Department sergeants and lieutenants who, as of June 30, 2014, satisfied the
requirements of, and elected to participate in, at least one wage
enhancement provision (the Clark Class). This court has jurisdiction over
the City’s timely appeal challenging the class certifications pursuant to
A.R.S. § 12-1873(A). Ariz. R. Civ. P. 23(f); Brumett v. MGA Home Healthcare,
LLC, 240 Ariz. 420, 432 ¶ 22 (App. 2016).
DISCUSSION
¶11 Class actions are governed by Arizona Rule of Civil
Procedure 23, which is nearly identical to its federal counterpart. The
prerequisites for a class action are listed in Rule 23(a) while the types of
permissible class actions are listed in Rule 23(b). “Plaintiffs seeking class
certification must meet all the requirements of Rule 23(a) and at least one of
the requirements of Rule 23(b).” Ferrara v. 21st Century N. Am. Ins. Co., 245
Ariz. 377, 380 ¶ 6 (App. 2018). Given the similarity of the rules, cases
construing Federal Rule of Civil Procedure 23 are instructive in construing
Arizona’s Rule 23. Id. at ¶ 6 n.2 (citation omitted).
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¶12 “‘The issue of whether a suit should be allowed to proceed as
a class action is left to the trial court’s discretion and, absent an abuse of
discretion, we will not interfere with the decision of the trial court.’” Id. at
¶ 6 (quoting Godbey v. Roosevelt Sch. Dist. No. 66, 131 Ariz. 13, 16 (App.
1981)). As stated by the Ninth Circuit, “noticeably more deference” is given
to the grant of class certification than to a denial. Abdullah v. U.S. Sec. Assocs.,
Inc., 731 F.3d 952, 956 (9th Cir. 2013). “Matters of statutory construction and
interpretation are questions of law, which we review de novo. In general,
the factual considerations inherent in the decision to grant or deny class
certification are left to the trial judge’s discretion and will not be set aside
absent an abuse of that discretion.” Ariz. Dep’t of Rev. v. Dougherty, 200 Ariz.
515, 517 ¶ 7 (2001) (citation omitted).
I. The Record Provides a Proper Basis Supporting the Findings that
the Rule 23(a) Prerequisites Were Met.
¶13 Rule 23(a) prerequisites are: (1) numerosity; (2) commonality;
(3) typicality and (4) representativeness. Ariz. R. Civ. P. 23(a). Although the
City does not challenge numerosity, it challenges, in various ways, whether
the court properly found the other prerequisites were met, including
whether there is a genuine dispute about wage enhancement presenting a
common question of law or fact. The court addresses those issues in turn.
A. The Court Properly Determined the Proposed Classes Met
the Commonality Requirement.
¶14 The “commonality” prerequisite “requires simply that there
exist questions of law or fact common to the class.” Ferrara, 245 Ariz. at 380
¶ 10 (quoting Lennon v. First Nat’l Bank of Ariz., 21 Ariz. App. 306, 309
(1974)). “What matters to class certification . . . [is] the capacity of a
classwide proceeding to generate common answers apt to drive the
resolution of the litigation.” Ferrara, 245 Ariz. at 381 ¶ 10 (quoting Wal-Mart
Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011)).
1. The Dispute Regarding Wage Enhancement Beyond
the Expiration of the CBAs.
¶15 Plaintiffs must affirmatively “prove that there are in fact . . .
common questions of law or fact.” Dukes, 564 U.S. at 350. In determining
whether the Rule 23 requirements are met, the court may consider any
“material sufficient to form a reasonable judgment on each [Rule 23(a)]
requirement.” Sali v. Corona Reg’l Med. Ctr., 909 F.3d 996, 1005 (9th Cir. 2018)
(quoting Blackie v. Barrack, 524 F.2d 891, 901 (9th Cir. 1975)).
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¶16 The parties disagree about whether the wage enhancement
provisions extended beyond the expiration of the CBAs. Plaintiffs allege
they do because each provision states that an election would continue for
three years with the option for another election after the initial three-year
period. Whether the provisions extend beyond the expiration is therefore a
question common to all proposed class members.
¶17 The City alleges that plaintiffs’ theory “necessarily calls into
question the personal intent of each Plaintiff and putative class member at
the time of making an election.” As a result, the City asserts plaintiffs failed
to submit sufficient evidence of commonality; specifically, whether each
plaintiff and putative class member reasonably intended and genuinely
believed that wage enhancement would survive beyond the expiration of
the 2012–2014 CBAs. But as discussed below, however, the intent of the
putative class member does not defeat or negate this common question.
2. Contract Claims Based on the CBAs.
¶18 The City argues that plaintiffs’ contract claims, based on
removal of the wage enhancement provisions from the CBAs, are not
common to the class. The City argues that whether there is a breach turns
on whether each individual plaintiff (1) interpreted the provisions to
convey a right that outlasted each CBA’s duration, and (2) intended to
accept a three-year offer of wage enhancement by submitting an election
form. The City argues this inquiry for each plaintiff negates any
commonality on the point.
¶19 A breach of contract claim requires a valid contract, its breach
and resulting damages. Thomas v. Montelucia Villas, LLC, 232 Ariz. 92, 96
¶ 16 (2013). A contract is not valid unless the parties “manifested assent or
intent to be bound.” Rogus v. Lords, 166 Ariz. 600, 602 (App. 1991) (citing
authority). Mutual assent turns on objective evidence, not a party’s
subjective intent. Muchesko v. Muchesko, 191 Ariz. 265, 270 (App. 1997).
¶20 The court’s ruling restricting class membership to only those
employees who were participating in the wage enhancement provisions
before July 1, 2014 negated potential commonality concerns. All class
members were receiving the additional salary that was then removed.
These class members assert a common breach of contract by alleging the
same breach of the CBAs.
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¶21 The superior court found the questions of fact common to the
classes “relate to whether there is a contract between [the City] and those
participating in the wage enhancement program . . . and if [the City] must
fulfill its obligations to the plaintiffs.” The City made the same offer to each
class member under the CBAs, and each class member accepted the offer in
the same manner: by submitting an election form to convert benefits to
additional salary. Submitting an election form is an objective manifestation
of assent to participate in the wage enhancement provisions. Whether an
employee subjectively believed the provisions would continue beyond the
expiration of the CBAs does not affect whether he or she objectively
manifested assent to the offer. Muchesko, 191 Ariz. at 270. The classes
certified were limited to individuals who submitted election forms. Thus,
the City has not shown the court erred in finding the contract claims based
on the CBAs shared this common question.
¶22 Turning to the election forms, breach of contract class actions
are not appropriate where the claims require examination of personalized
contract terms applicable to individual class members and the variations in
contract terms are material to the issue of breach. In re U.S. Foodservice Inc.
Pricing Litig., 729 F.3d 108, 124 (2d Cir. 2013). Still, when the contracts
“essentially all [say] the same thing,” class certification may be appropriate.
Id. Here, the City offered the same wage enhancement provisions to all
employees under the applicable CBA. It did not make unique, personalized
offers to each employee. Regardless of any differences between election
forms (or, as noted above, employee intent), each employee’s acceptance,
manifested through the election form, bound the City to the same wage
enhancement provisions of the CBAs. Thus, whether the City breached its
contractual obligations to employees that submitted election forms is a
common question.
3. Promissory Estoppel Claims.
¶23 The City argues the superior court erred in failing to grant its
motion for judgment on the pleadings to dismiss the plaintiffs’ promissory
estoppel claims. For their promissory estoppel claims, plaintiffs must
prove: (1) the City made a promise; (2) it was reasonably foreseeable to the
City that plaintiffs would rely on that promise; (3) plaintiffs justifiably
relied on the promise and (4) plaintiffs incurred loss or suffered detriment
as the result of such reliance. See Contempo Const. Co. v. Mountain States Tel.
& Tel. Co., 153 Ariz. 279, 282 (1987).
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¶24 Procedurally, the City has not shown how this court, in
addressing class certification, has appellate jurisdiction to review the denial
of a motion for judgment on the pleadings. This court previously declined
jurisdiction over the City’s special action petition seeking to challenge that
ruling. Similarly, there was no appealable partial final judgment entered as
a result of the denial of the motion for judgment on the pleadings. See Ariz.
R. Civ. P. 54(b).
¶25 Substantively, in seeking judgment on the pleadings, the City
argued that Johnson International, Inc. v. City of Phoenix, 192 Ariz. 466 (App.
1998) barred promissory estoppel claims against the City. Along with
finding the plaintiffs properly alleged the elements of promissory estoppel,
the superior court found Johnson was distinguishable: “Unlike [Johnson], the
MOA and MOU complied with the city charter and were approved as
required.” Thus, even if this court had appellate jurisdiction to review the
ruling, the City has not shown the court erred in denying its motion for
judgment on the pleadings.
¶26 The superior court held “[t]he basis for the promissory
estoppel claim is found in documents which were common to all class
members.” The City made the same promise to each employee to enhance
wages under the CBAs, it was reasonably foreseeable that plaintiffs would
rely on that promise, plaintiffs relied by submitting election forms and have
incurred a loss. Thus, the City has not shown the court erred in finding there
are common questions of law or fact for the promissory estoppel claims.
4. Pension Clause and Contract Clause Claims.
¶27 Under the “Pension Clause” of Arizona’s Constitution,
“membership in a public retirement system is a contractual relationship
that is subject to article II, section 25,” and “[p]ublic retirement system
benefits shall not be diminished or impaired.” Ariz. Const. Art. 29, § 1(C).
Article II, § 25, known as the Contract Clause, states: “No bill of attainder,
ex-post-facto law, or law impairing the obligation of a contract, shall ever
be enacted.”
¶28 The City argues plaintiffs’ claims under the Pension and
Contract Clauses fail because their retirement benefits were not impaired.
Under Arizona law, however, a public employee’s pension benefits are
vested upon employment. Yeazell v. Copins, 98 Ariz. 109, 114–15 (1965).
“Once vested, those rights cannot be retroactively impaired by the public
employer.” Godbey, 131 Ariz. at 21 (citing Yeazell, 98 Ariz. 109; City of Phx. v.
Boerger, 5 Ariz. App. 445 (1967).
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¶29 The City argues these claims will “turn on a case-by-case
inquiry into whether putative class members reasonably intended and
genuinely believed that [wage enhancement] was a retirement benefit set
forth in CBAs.” But the issue is whether claims under the Pension and
Contract Clauses satisfy the commonality requirement. Such claims turn on
whether the Arizona Constitution’s protections extend to the class
members’ rights, not on whether class members subjectively and genuinely
believed they had those rights. Class members were employees
participating in the wage enhancement provisions. Plaintiffs allege that,
under Yeazell, the right to participate in the wage enhancement provisions
vested at the time of employment. The wage enhancement provisions of the
MOU were put in place starting in 1988, and in the MOA in 1990, with class
members identified as participating members as of June 30, 2014. On this
record, the City has not shown the court erred in certifying the class for
plaintiffs’ claims under the Pension and Contract Clauses.
5. The Wage Claim by the Clark Class.
¶30 Only the Clark Class asserts a wage claim. “[I]f an
employer . . . fails to pay wages due any employee, the employee may
recover in a civil action against an employer or former employer an amount
that is treble the amount of the unpaid wages.” A.R.S. § 23-355(A). “Wages”
means nondiscretionary compensation due to an employee in return for
labor or services rendered by an employee for which the employee has a
reasonable expectation to be paid. A.R.S. § 23-350(7). The City argues the
wage claim fails because the Clark plaintiffs were fully paid for all work. At
this stage of the case, however, the issue is whether this claim is common
to all the Clark class members, not the merits of the claim. Given this
common question, the City has not shown the court erred in finding the
necessary commonality was present for the wage claim by the Clark Class.
6. Individualized Affirmative Defenses Do Not
Preclude a Finding of Commonality.
¶31 The City argues that its affirmative defenses apply in varying
ways based on individual circumstances and cannot be decided on a class-
wide basis, thus precluding a finding of commonality. See In re Light
Cigarettes Mktg. Sales Pracs. Litig., 271 F.R.D. 402, 421 (D. Me. 2010). It is true
that individualized affirmative defenses may preclude class certification
under Rule 23(b)(3) if the individual affirmative defenses predominate over
the common questions of law or fact. Even then,
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When “one or more of the central issues in the
action are common to the class and can be said
to predominate, the action may be considered
proper under Rule 23(b)(3) even though other
important matters will have to be tried
separately, such as damages or some
affirmative defenses peculiar to some
individual class members.”
Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1045 (2016) (quoting 7AA C.
Wright, A. Miller & M. Kane, Federal Practice and Procedure § 1778, pp.
123–24 (3d ed. 2005)) (footnotes omitted). Moreover, predominance under
Rule 23(b)(3) and commonality under Rule 23(a) are different inquiries. See
Ortiz v. Fibreboard Corp., 527 U.S. 815, 830–32 & n.12 (1999). The City cites
no authority, and this Court has found none, requiring commonality in
affirmative defenses to all class members in addressing the Rule 23(a)(2)
prerequisite of “questions of law or fact common to the class.” Here, the
court found that potential affirmative defenses do not defeat commonality
under Rule 23(a)(2). The City has shown no error in that determination.
7. Calculation of Damages Was Bifurcated and Does
Not Preclude a Finding of Commonality.
¶32 The City argues the need to individually calculate damages
precludes a finding of commonality. But the parties stipulated to bifurcate
trial, first addressing liability and then damages. See Ariz. R. Civ. P. 42(b).
Whether the method to calculate damages is common to the class is
therefore not at issue here. The court also found plaintiffs had established a
methodology to calculate or establish damages for the entire class. See
Comcast Corp. v. Behrend, 569 U.S. 27, 33–35 (2013). The City has not shown
the court erred in finding the method of calculating damages was sufficient
to permit commonality finding.
B. The Class Representatives’ Claims Are Typical of the Class.
¶33 A class can be certified if the claims or defenses of the
representative parties are typical of the claims or defenses of the class. Ariz.
R. Civ. P. 23(a)(3). The City argues the class representatives’ claims and
circumstances are not typical when compared to those of the class members.
The arguments provided by the City, however, largely repeat the
commonality arguments rejected above, which fare no better in assessing
typicality. The documents providing the basis for plaintiffs’ claims are the
same for the class representatives and class members, thereby meeting the
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typicality threshold. And the prerequisite is that class representatives’
claims “are typical of the claims . . . of the class,” not that they are identical.
Ariz. R. Civ. P. 23(a)(3).
¶34 Although formulations of typicality differ, it can be
characterized as addressing whether the interests of the representative are
not antagonistic to those of the absent class members. Godbey, 131 Ariz. at17 (citing Thomas v. Clarke, 54 F.R.D. 245 (D. Minn. 1971)). Here, the class
representatives seek to recover the value of the wage enhancement
provisions. The absent class members seek to do the same. Nor has the City
shown the class representatives are “preoccupied with defenses unique to”
them. Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992). On this
record, the City has not shown the court erred in finding the
representatives’ claims are typical under Rule 23(a)(3).
C. Plaintiffs Are Adequate Representatives of the Class.
¶35 The final prerequisite challenged by the City is finding that
“the representative parties will fairly and adequately protect the interests
of the class.” Ariz. R. Civ. P. 23(a)(4). Adequacy implicates commonality
and typicality, but “also factors in competency and conflicts of class
counsel.” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 626, n.20 (1997) (citing
Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157–58 n.13 (1982)).
¶36 The City’s arguments again largely repeat the commonality
arguments rejected above and fail for similar reasons. The City argues there
are potential “conflicts of interest between named parties and the class they
seek to represent.” Amchem, 521 U.S. at 625–26. But the conflict cited is that,
if the classes prevail, “[s]ome employees may not like” the possible remedy.
Potential dissatisfaction with an outcome is not a conflict of interest
addressed by Rule 23(a)(4).
¶37 The superior court found that plaintiffs are adequate
representatives because “[a]ll plaintiffs have suffered the same injuries by
virtue of the alleged breach of contract and elimination of the wage
enhancement program.” The court also found counsel for plaintiffs are
experienced in class action litigation and have special knowledge based on
previously representing class members. On this record, the City has not
shown the court erred in finding that the adequacy requirement was met.
II. Rule 23(b) — Types of Class Actions.
¶38 A class can be certified when it meets all the requirements of
Rule 23(a) and one of the requirements of Rule 23(b). See Ferrara, 245 Ariz.
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at 380 ¶ 6. The superior court certified the PLEA Class under Rule
23(b)(1)(B), (b)(2) and (b)(3) and the Clark Class under Rule 23(b)(1)(B) and
(b)(2). The City argues the classes could not be certified under any of these
subparts of Rule 23(b).
A. The Superior Court Did Not Err in Certifying the Classes
Under Rule 23(b)(2).
¶39 Under Rule 23(b)(2), a class action is authorized 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 for the class as a whole.” Ariz. R. Civ. P.
23(b)(2). The declaratory and injunctive relief sought by the classes are
paradigm class actions under Rule 23(b)(2).
¶40 The City argues that Rule 23(b)(2) does not allow class
certification for damages claims. That argument, however, does not address
the declaratory and injunctive relief sought. The City also argues that “a
single injunction or declaration is not feasible,” because there “are too many
material differences” among class members. But, again, a declaration of
what the MOU and MOA required and prohibited, and any resulting
injunctive relief, is the type of class action contemplated by Rule 23(b)(2).
¶41 The City next argues that the “requests for class-wide
declaratory and injunctive relief are moot.” This argument stems from the
thought that “[t]he only possible relief is fundamentally retrospective,
directed toward compensating putative class members for alleged past
harms, and the superior court erred by certifying a class to seek declaratory
or injunctive relief.” But litigation typically is retrospective, determining
whether compensation is owed for alleged past conduct and resulting harm
and, if so, determining the amount. A declaration of what the MOU and
MOA and election forms require or prohibit is but one step in that litigation.
Nor does the federal authority the City cites for this argument show
plaintiffs’ requested equitable relief is moot. See Daskalea v. Wash. Humane
Soc., 275 F.R.D. 346, 365–66 (D.D.C. 2011) (finding statutory amendments
precluded declaratory relief for future conduct and finding class
certification under Rule 23 (b)(1)(A), which is not at issue here, was
“inappropriate”); Vinole v. Countrywide Home Loans, Inc., 246 F.R.D. 637, 642
(S.D. Cal. 2007) (noting proposed class did not exclude individuals who
admittedly did not have valid claims and, in denying Rule 23(b)(3) class
certification, stating “if the Court were to certify this proposed class, it
would allow putative class members who, by their own admission do not
qualify for relief, to litigate inherently meritless claims through a
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representative action. This the Court declines to do.”). On this record, the
City has not shown the court erred in certifying the classes under Rule
23(b)(2).
B. The Superior Court Did Not Err in Certifying the PLEA
Class Under Rule 23(b)(3).
¶42 A class action is appropriate if common questions of law or
fact 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.” Ariz. R. Civ. P. 23(b)(3). Factors
relevant to the inquiry include interests of the class members in controlling
their individual claims; whether litigation addressing the issues has
“already begun by or against class members;” the interests in resolving “the
claims in the particular forum” and “likely difficulties in managing a class
action.” Ariz. R. Civ. P. 23(b)(3)(A)–(D). A class action is the superior
method of adjudicating the action if it would save time, effort, expense, and
promote the uniformity of decision for similarly situated individuals.
Amchem, 521 U.S. at 615.
¶43 As noted above, affirmative defenses are relevant to the
question of predominance for class certification purposes, and individual
affirmative defenses may defeat predominance. Brown v. Electrolux Home
Prods., Inc., 817 F.3d 1225, 1241 (11th Cir. 2016). The party raising the
affirmative defenses must show that such affirmative defenses render the
class unmanageable. See Garza v. Gama, 240 Ariz. 373, 375 (App. 2016).
¶44 Here, the superior court addressed each Rule 23(b)(3) factor
in its decision. Although the City argues “countless individual issues
predominate over any commonalities and class litigation is not superior,”
it has not shown the court erred in reaching a contrary conclusion. As to the
City’s affirmative defenses, the court did not find that potential affirmative
defenses will require individual resolution or that those potential defenses
prevent class certification. On this record, the City has not shown the court
erred in finding the PLEA plaintiffs satisfied the requirements under Rule
23(b)(3) or erred in certifying the PLEA Class under Rule 23(b)(3).
C. Class Certification Under Rule 23(b)(1)(B) Was Improper.
¶45 Under Rule 23(b)(1)(B), a class action is appropriate “if
prosecuting separate actions” by individual class members “would create a
risk of” adjudications “that, as a practical matter, would be dispositive of
the interests of the other members not parties to the individual
adjudications or would substantially impair or impede the other members’
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Decision of the Court
ability to protect their interests.” Ariz. R. Civ. P. 23(b)(1)(B). The City first
argues that the requested declaratory and injunctive relief would not
dispose of other class members’ interests, meaning Rule 23(b)(1)(B) does not
apply. To the contrary, the arguments about requested declaratory and
injunctive relief are obviated by the Rule 23(b)(2) analysis above.
¶46 The classic application of Rule 23(b)(1)(B), however, is a
“limited fund” case in which “numerous persons make claims against a
fund insufficient to satisfy all claims.” Amchem, 521 U.S. at 614. Rule
23(b)(1)(B), along with Rule 23(c)(2) (notice and opt out provisions),
“provides for certification of a class whose members have no right to
withdraw, when ‘the prosecution of separate actions . . . would create a risk’
of ‘adjudications with respect to individual members of the class which
would as a practical matter be dispositive of the interests of the other
members not parties to the adjudications or substantially impair or impede
their ability to protect their interests.’” Ortiz, 527 U.S. at 833. The City is
correct in arguing that this is not a limited fund case.
¶47 As noted by a widely followed class action treatise, Rule
23(b)(1)(B)
does not refer specifically to limited fund cases
but employs generic terms enabling
certification where individual adjudication
would dispose of or impair the rights of others.
The framers of the Rule identified exemplary
situations to which it is meant to apply,
including non-limited fund circumstances, such
as an action by policyholders against a fraternal
benefit association attacking a financial
reorganization of the society and an action by
shareholders to compel the declaration of a
dividend.
2 William B. Rubenstein, Newberg on Class Actions § 4:20 (5th ed. 2020)
(citations omitted) (Newberg). It does not appear these other “exemplary
situations” of when Rule 23(B)(1)(B) would apply have any application
here. Simply put, this is not a case in which “the shared character of rights
claimed or relief awarded entails that any individual adjudication by a class
member disposes of, or substantially affects, the interests of absent class
members.” Ortiz, 527 U.S. at 834.
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¶48 On appeal, plaintiffs offer no persuasive rationale for
certification under Rule 23(b)(1)(B). The Clark plaintiffs assert that the issue
of whether the additional salary payments are pensionable compensation
is a statutory question determined by the court. But they do not explain
how the resolution of that question, which they claim has already been
decided by the court, would support class certification under Rule
23(b)(1)(B). Nor have the Clark plaintiffs shown how the decision about
their breach of contract claims, “as a practical matter,” is “dispositive to the
interests of the other members not parties to the adjudications.” The PLEA
plaintiffs assert that “[a]ny determination that the MOUs or the Election
Forms were or were not breached is entirely dispositive of each class
members[‘] claim.” But that argument assumes a certified class, when the
issue presented here is whether a class properly could be certified under
Rule 23(b)(1)(B).
¶49 Even more significantly, plaintiffs offer no case law
supporting their assertion that class certification of this or a similar issue
would be proper under Rule 23(b)(1)(B). Newberg helps explain why Rule
23(b)(1)(B) is not applicable in this employment dispute:
Employment-related class actions are rarely
limited fund cases. Many discrimination cases
seek injunctive, not monetary, relief and
therefore fall outside the limited fund category.
Other discrimination cases, as well as wage and
hour cases, may seek monetary damages from
an employer, but rarely do the employer’s
assets constitute a limited fund, particularly
given the Supreme Court’s definition of
“limited fund” for certification purposes
[quoted] above. Moreover, under the Ortiz
requirements, the mere fact that one employee’s
claim may have precedential effects on similar
future claims is insufficient to establish that the
initial action is “dispositive of the interests” of
possible future litigants.
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7 Newberg, supra, § 23:28 (“Rule 23(b)(1)(B) employment class actions”)
(citations omitted). For these reasons, certifying the classes under Rule
23(b)(1)(B) was error and those portions of the court’s orders are vacated.2
III. The City Has Not Shown the Notice of Claim Issue Defeats Class
Certification.
¶50 The PLEA plaintiffs filed their initial complaint against the
City as a putative class action in June 2014. The Clark plaintiffs filed their
initial complaint against the City as a putative class action in July 2014. The
cases were consolidated later that month and the City filed answers in
August and September 2014. Substantial motion practice, briefing and
evidentiary hearings began almost immediately, including on plaintiffs’
request for temporary restraining orders and preliminary injunctions.
¶51 Nearly three and a half years later, in October 2017, the City
moved for judgment on the pleadings based on the PLEA plaintiffs’ failure
to serve a notice of claim. See A.R.S. § 12-821.01(A) (barring any claim not
filed within one hundred eighty days after the cause of action accrues). The
superior court denied the motion in February 2018, finding the City’s
conduct was a waiver and the City suffered no prejudice by the lack of
notice of claim. In its later class certification orders, the court again stated
that the City
was aware of the scope of the litigation from the
beginning. The Court’s prior analysis regarding
waiver still applies. Clark Plaintiff[s] filed a
Notice of Claim in 2015. The complaint filed by
the Clark Plaintiffs stated the action was
brought on behalf of all similarly situated
officers, sergeants, and lieutenants and thus
there is similarly no prejudice to [the City] as to
the Clark Plaintiffs’ failure to file a formal
Notice of Claim for a class.
2The Clark plaintiffs’ motion for class certification did not seek certification
under Rule 23(b)(3). Contrary to the Clark plaintiffs’ assertion at oral
argument on appeal, the superior court did not sua sponte certify the Clark
class under Rule 23(b)(3). Indeed, the Clark plaintiffs have not shown how
such a certification would be consistent with the City’s right to advance
notice and an opportunity to be heard. Mathews v. Eldridge, 424 U.S. 319, 333
(1976). Thus, this court rejects any suggestion that the court also certified
the Clark Class under Rule 23(b)(3).
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The City sought special action relief of that determination, and this court
declined jurisdiction. The City now claims class certification was improper
given its notice of claim defense.
¶52 The City has not shown that compliance with the notice of
claim statute defeats class certification here. The purpose of the notice of
claim statute “is to provide the government entity with an opportunity to
investigate the claim, assess its potential liability, reach a settlement prior
to litigation, budget and plan.” Havasupai Tribe of Havasupai Rsrv. v. Ariz.
Bd. of Regents, 220 Ariz. 214, 223 (App. 2008). The City points to no prejudice
or evidence showing the superior court erred in finding it was not
prejudiced by the PLEA plaintiffs’ failure to comply with the notice of claim
statute. Moreover, the Arizona Supreme Court has observed that notice of
claim requirements are subject to waiver. See Pritchard v. State, 163 Ariz. 427,
432 (1990). As the Arizona Supreme Court noted more recently, because the
City could “entirely avoid” litigation on the merits by promptly invoking a
notice of claim defense, “waiver of that defense should be found when the
defendant ‘has taken substantial action to litigate the merits of the claim
that would not have been necessary had the entity promptly raised the
defense.’” City of Phx. v. Fields, 219 Ariz. 568, 575 ¶ 30 (2009) (citation
omitted). Given the substantial litigation over nearly three and a half years
from the filing of the complaints (and the City’s answers) to when the City
filed the motion for judgment on the pleadings, the City has not shown how
any issue with the notice of claim statute defeats class certification.
IV. American Federation and Piccioli Do Not Alter the Analysis.
¶53 While this appeal was pending, the Arizona Supreme Court
issued two opinions addressing whether one-time payouts for benefits
constituted salary to calculate pension benefits. See Piccioli v. City of Phx.,
249 Ariz. 113 (2020); Am. Fed’n of State Cnty. & Mun. Emp. AFL-CIO Local
2384 v. City of Phx., 249 Ariz. 105 (2020). The City cites these cases for the
proposition that historical promises and practices do not lead to a vested
right to wage enhancement that was not in the pension plan. The issue in
this appeal, however, is limited to whether the superior court properly
certified the classes, whereas Piccioli and American Federation ruled on the
merits of those claims. Plaintiffs’ claims are therefore not barred by Piccioli
or American Federation.
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V. The Superior Court Conducted a Rigorous, Meaningful Analysis
of the Rule 23 Requirements.
¶54 The City asserts the superior court failed to undertake a
“rigorous and meaningful” analysis of the Rule 23 requirements. Dukes, 564
U.S. at 350–51 (2011). “[T]o satisfy the rigor requirement, a district court
must detail with specificity its reasons for certifying. It must explain and
apply the substantive law governing the plaintiffs’ claims to the relevant
facts and defenses, articulating why the issues are fit for classwide
resolution.” Chavez v. Plan Benefit Servs., Inc., 957 F.3d 542, 546 (5th Cir. 2020)
(citation omitted); see also Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581,
588 (9th Cir. 2012). The City asserts the court “did not meaningfully analyze
whether Plaintiffs presented evidence to satisfy Rule 23 . . . . Instead, the
court oversimplified the issues and analyzed the certification requirements
in cursory terms without discussing the specific factual details and legal
nuances of the claim.” The record, however, is to the contrary.
¶55 In addressing class certification, the superior court considered
hundreds of pages of briefs, filed over nearly a year, and heard oral
argument twice. Ultimately, the court’s rulings, spanning 30 pages, reflect
significant analysis of the facts and issues involved and provide detailed
legal analysis leading to the conclusions. The court delineated why the class
should be certified, including the approximate size of the classes, the
common questions of law and fact, and that “all plaintiffs have suffered the
same injuries by virtue of the alleged breach of contract and elimination of
the wage enhancement program.” The court relied on evidence
appropriately provided by the parties during the year-long briefing. On this
record, it cannot be said that the court failed to conduct a rigorous and
meaningful analysis of the Rule 23 requirements in certifying the classes.
Cf. Valentino v. Carter-Wallace, Inc., 97 F.3d 1227, 1234 (9th Cir. 1996) (finding
a certification order was “conclusory” when it merely reiterated Rule 23
requirements and where “the record simply does not reflect any basis for
us to conclude that some key requirements of Rule 23 have been satisfied”);
Chavez, 957 F.3d at 548 (vacating a class certification order when, among
other things, the court “[did] not identify the common question with any
specificity” and “analyze[d] it conclusionally”); see also 3 Newberg, supra, §
7:19 (citing cases).
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VI. Attorneys’ Fees and Costs on Appeal.
¶56 The City and the Clark plaintiffs request attorneys’ fees and
costs under A.R.S. §§ 12-341, -341.01, and -1840. In the court’s discretion,
the requests for fees are denied. The City, however, is awarded its taxable
costs on appeal against both the PLEA plaintiffs and the Clark plaintiffs,
contingent upon the City’s compliance with ARCAP 21.
CONCLUSION
¶57 The class certification orders are affirmed as to certification of
both the PLEA Class and the Clark Class under Arizona Rule of Civil
Procedure 23(b)(2) and of the PLEA Class under Rule 23(b)(3). The class
certification orders under Rule 23(b)(1)(B) are vacated as to both classes.
AMY M. WOOD • Clerk of the Court
FILED: AA
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