Lemon v. International Union of Operating Engineers, Local No. 139 , 216 F.3d 577 ( 2000 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 99-4101
Jeff Lemon, Karen Meyer, John Duncan,
Odell Williams, Virgil Eiland, Pat Haynes,
Craig Anderson, Shirley Nyman and
Franklin Edmonds,
Plaintiffs-Appellees,
v.
International Union of Operating Engineers,
Local No. 139, AFL-CIO,
Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 97 C 0857--John W. Reynolds, Judge.
Argued April 12, 2000--Decided June 9, 2000
Before Cudahy, Coffey and Kanne, Circuit Judges.
Kanne, Circuit Judge. The district court,
deciding class certification in this Title VII
class action without the benefit of Jefferson v.
Ingersoll International Inc., 195 F.3d 894 (7th
Cir. 1999), held that the requested equitable
relief predominated the requested monetary relief
and certified the class under Rule 23(b)(2). We
vacate the district court’s certification of the
class under Rule 23(b)(2) because the request for
money damages was not incidental and remand for
further consideration of class certification
under Jefferson and this opinion.
I. History
International Union of Operating Engineers Local
139 ("Local 139" or the "Local") represents
heavy-equipment operators in Wisconsin and
administers an employment referral hall through
which its members can find work. Members of Local
139 in search of employment may fill out data
cards listing their qualifications and place
themselves on the referral hall’s "out-of-work
list." Contractors seeking heavy-equipment
operators in Wisconsin regularly contact Local
139, and the Local matches those contractors with
members on the out-of-work list qualified to
handle the jobs. According to the Local, the
referral hall doles out work assignments to
registered operators according to their
qualifications, geographic proximity and ordinal
seniority on the out-of-work list.
The named plaintiffs are members of the Local
who sought work through the referral hall and
claim that Local 139 intentionally discriminated
against them as racial minority members and women
by diverting work opportunities to white males.
On August 12, 1997, they filed a class-action
lawsuit on behalf of all minority and female
members of Local 139, alleging that Local 139
violated Title VII of the Civil Rights Act, 42
U.S.C. sec.sec. 2000e to 2000e-17, by operating
the referral system in an intentionally
discriminatory manner. The plaintiffs sought a
jury trial for declaratory and injunctive relief,
as well as compensatory and punitive damages. In
support of their claim, the plaintiffs planned to
introduce testimony from witnesses who observed
discriminatory conduct by Local 139 officials.
Namely, the plaintiffs intended to offer the
testimony of Dale Miller, the current president
of the Local, who told the EEOC that the former
business manager of the Local, Donald Shaw, was
racist and manipulated the referral system to
pass over minorities and women. In addition, the
plaintiffs promised to adduce statistical
evidence demonstrating that the Local’s low
hiring, placement and referral rates for women
and minorities could not have occurred as a
result of chance.
On June 1, 1998, the plaintiffs moved under
Rules 23(b)(2) and 23(b)(3) of the Federal Rules
of Civil Procedure to certify a class of more
than 400 minority and female members against whom
Local 139 allegedly discriminated in its
operation of the referral system. Magistrate
Judge Patricia Gorence recommended certification
of the class under Rule 23(b)(2) and mentioned in
passing that "the plaintiffs [also] have
satisfied the criteria of Rule 23(b)(3)." On
September 24, 1999, the district court adopted
the magistrate’s recommendation and certified the
class under Rule 23(b)(2) to proceed with its
Title VII claims. The court designated Jeff
Lemon, Karen Meyer, John Duncan, Odell Williams,
Pat Haynes, Craig Anderson, Shirley Nyman and
Franklin Edmonds as class representatives. Local
139 then filed an interlocutory appeal to
challenge certification of the plaintiff class.
II. Analysis
Rule 23(b)(2) declares that class certification
under that subsection is appropriate 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." Fed. R. Civ. P.
23(b)(2). The Rule itself is silent regarding
whether Rule 23(b)(2) certification is
permissible when, as in this case, the plaintiffs
request monetary damages as well as "final
injunctive relief or corresponding declaratory
relief." However, the advisory note to Rule
23(b)(2) explains that the subsection "does not
extend to cases in which the appropriate final
relief relates exclusively or predominantly to
money damages." Fed. R. Civ. P. 23(b)(2) advisory
committee’s note.
As we explained in Jefferson v. Ingersoll
International Inc., 195 F.3d 894, 896 (7th Cir.
1999), the problem is that Rule 23(b)(2) provides
for binding litigation on all class members
without guarantees of personal notice and the
opportunity to opt out of the suit. By virtue of
its requirement that the plaintiffs seek to
redress a common injury properly addressed by a
class-wide injunctive or declaratory remedy, Rule
23(b)(2) operates under the presumption that the
interests of the class members are cohesive and
homogeneous such that the case will not depend on
adjudication of facts particular to any subset of
the class nor require a remedy that
differentiates materially among class members. A
suit for money damages, even if the plaintiffs
seek uniform, class-wide equitable relief as
well, jeopardizes that presumption of cohesion
and homogeneity because individual claims for
compensatory or punitive damages typically
require judicial inquiry into the particularized
merits of each individual plaintiff’s claim.
Indeed, in recognition of the potential
divergence of interests within the class, each
class member in actions for money damages is
entitled as a matter of due process to personal
notice and an opportunity to opt out of the class
action. See Ortiz v. Fibreboard Corp., 527 U.S.
815, 119 S. Ct. 2295, 2314-15 (1999). Accordingly,
Rule 23(c)(2) guarantees those rights for each
member of a class certified under Rule 23(b)(3).
See Eisen v. Carlisle & Jacquelin, 417 U.S. 156,
173 (1974); Fed. R. Civ. P. 23(c)(2). However,
the Federal Rules of Civil Procedure do not
provide comparable procedural guarantees of those
rights for a class certified under subsections
(b)(1) or (b)(2), and as a result, Rule 23(b)(2)
certification does not ensure personal notice or
opportunity to opt out even if some or all the
plaintiffs pray for monetary damages. The
question therefore is whether the district court
abused its discretion in certifying a class under
Rule 23(b)(2), without notice or opportunity to
opt out, when the plaintiffs sought monetary
damages in addition to equitable relief.
In Jefferson, 195 F.3d at 898, we adopted the
Fifth Circuit’s reasoning on this point from
Allison v. Citgo Petroleum Corp., 151 F.3d 402
(5th Cir. 1998). Allison held that "nonequitable
monetary relief may be obtained in a class action
certified under Rule 23(b)(2) only if the
predominant relief sought is injunctive or
declaratory," Allison, 151 F.3d at 425, and
explained further that certification under Rule
23(b)(2), without notice or opportunity to opt
out, is impermissible unless the requested
monetary damages are "incidental" to requested
injunctive or declaratory relief. Id. at 415. The
court defined "incidental" as "damages that flow
directly from liability to the class as a whole
on the claims forming the basis of the injunctive
or declaratory relief." Id. Thus, incidental
damages do not depend "in any significant way on
the intangible, subjective differences of each
class member’s circumstances" and do not "require
additional hearings to resolve the disparate
merits of each individual’s case." Id.
Like the Allison plaintiffs, the plaintiffs here
sued for both equitable relief and monetary
damages to remedy alleged violations of Title
VII. Damages can be awarded only after proof of
discrimination and injury specific to the
individual plaintiff, see, e.g., Miller v.
American Family Mut. Ins. Co., 203 F.3d 997, 1005
(7th Cir. 2000), so deciding the damages claims
depends on an individualized analysis of each
class member’s circumstances and requires
additional hearings to resolve the disparate
merits of each individual’s case. See Allison,
151 F.3d at 417. Even if the plaintiffs prove
that Local 139 administered the referral hall in
a discriminatory manner and won injunctive and
declaratory relief on that ground, each
individual plaintiff pursuing damages claims
still would need to establish that Local 139’s
discrimination caused her personal injury and
would need to show the magnitude of injury to
determine compensatory damages. Similarly, to win
punitive damages, an individual plaintiff must
establish that the defendant possessed a reckless
indifference to the plaintiff’s federal rights--a
fact-specific inquiry into that plaintiff’s
circumstances. See Kolstad v. American Dental
Ass’n, 527 U.S. 526, 119 S. Ct. 2118 (1999). As
the Fifth Circuit found in Allison, the requested
monetary damages for the plaintiffs’ Title VII
claims were not incidental to the requested
injunctive and declaratory relief. Allison, 151
F.3d at 418; cf. Boughton v. Cotter Corp., 65
F.3d 823, 827 (10th Cir. 1995).
As a result, Jefferson instructs the district
court to consider three alternatives for handling
the case. Jefferson, 195 F.3d at 898-99. The
first option is certifying the class under Rule
23(b)(3) for all proceedings. See id. at 899.
Rule 23(b)(3) permits class certification when
"questions of law or fact common to the members
of the class predominate over any questions
affecting only individual members, and 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). In
this category of lawsuit, the class members may
seek either predominantly legal or equitable
remedies, but each member must share common
questions of law or fact with the rest of the
class, therefore making class-wide adjudication
of the common questions efficient compared to
repetitive individual litigation of the same
questions. In contrast to Rule 23(b)(2), however,
certification under Rule 23(b)(3) entails
mandatory personal notice and opportunity to opt
out for all class members, thereby satisfying the
due process concerns in Ortiz. See Fed. R. Civ.
P. 23(c)(2); see also Jefferson, 195 F.3d at 898.
The second option is divided certification. See
Jefferson, 195 F.3d at 898-99; Williams v.
Burlington Northern, Inc., 832 F.2d 100, 103 (7th
Cir. 1987); see also Eubanks v. Billington, 110
F.3d 87, 96 (D.C. Cir. 1997). The district court
could certify a Rule 23(b)(2) class for the
portion of the case addressing equitable relief
and a Rule 23(b)(3) class for the portion of the
case addressing damages. This avoids the due
process problems of certifying the entire case
under Rule 23(b)(2) by introducing the Rule
23(b)(3) protections of personal notice and
opportunity to opt out for the damages claims.
Since the Civil Rights Act of 1991 entitles the
parties to a jury trial on claims of intentional
discrimination, see 42 U.S.C. sec. 1981a, a
district court that proceeds with divided
certification must adjudicate the damages claims
first before a jury to preserve the Seventh
Amendment right to a jury trial, even if
adjudication of these claims decides the
equitable claims as well. See Dairy Queen, Inc.
v. Wood, 369 U.S. 469 (1962); Beacon Theatres,
Inc. v. Westover, 359 U.S. 500 (1959); Jefferson,
195 F.3d at 898.
The third option discussed in Jefferson is that
the district court might certify the class under
Rule 23(b)(2) for both monetary and equitable
remedies but exercise its plenary authority under
Rules 23(d)(2) and 23(d)(5) to provide all class
members with personal notice and opportunity to
opt out, as though the class was certified under
Rule 23(b)(3). Jefferson, 195 F.3d at 898; see
also Thomas v. Albrecht, 139 F.3d 227, 234 (D.C.
Cir. 1998); Eubanks, 110 F.3d at 94; County of
Suffolk v. Long Island Lighting Co., 907 F.2d
1295, 1304 (2d Cir. 1990); Holmes v. Continental
Can Co., 706 F.2d 1144, 1160 (11th Cir. 1983). In
fact, a district court handled a class certified
under Rule 23(b)(2) much this way in Williams. We
affirmed and held that the district court
provided opportunities to object that "were
tantamount to the protections envisioned by
Fed.R.Civ.P. 23(c)(2) [for classes certified
under subsection (b)(3)]." Williams, 832 F.2d at
104.
The district court abused its discretion because
it did not consider class certification either in
part or in full under Rule 23(b)(3), nor did the
court stipulate that it would provide the class
members with personal notice and opportunity to
opt out of the class action. The district court’s
treatment of the case is understandable because
Jefferson had not been decided at the time of the
district court’s consideration of class
certification. However, since the requested
monetary damages are not incidental to the
plaintiffs’ requested equitable relief, we Vacate
class certification under Rule 23(b)(2) and Remand
with directions to consider alternative class
certification under the options presented in this
opinion and Jefferson.