Edmundo Romberio v. UnumProvident Corporation

File Name: 09a0021n.06
Filed: January 12, 2009
NOT RECOMMENDED FOR PUBLICATION
No. 07-6404
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
EDMUNDO M. ROMBERIO, THERESA
KEIR, MICHELLE LYNN WASHINGTON,
KAREN M. GATELY, THOMAS ROCCO,
THOMAS P. DAVIS, and MARVINA
JENKINS, individually and on behalf of all
others similarly situated,
Plaintiffs-Appellees,
v. ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR THE
UNUMPROVIDENT CORPORATION, EASTERN DISTRICT OF TENNESSEE
ERISA Benefit Denial Actions, AT CHATTANOOGA
Defendant-Appellant.
/
BEFORE: CLAY and GRIFFIN, Circuit Judges; and STAFFORD, District
Judge.*
STAFFORD, District Judge.
With leave of this court, the defendant-appellant, UnumProvident Corporation
*
The Honorable William H. Stafford, Jr., Senior United States District Judge for
the Northern District of Florida, sitting by designation.
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("Unum"), appeals from the district court's interlocutory order certifying the plaintiffs'
breach-of-fiduciary-duty action as a class action. We now REVERSE.
BACKGROUND
The case was begun when fifteen individual claimants filed seven class actions in
six federal district courts 1 located in six different circuits.2 The plaintiffs sued Unum, six
of Unum's insuring subsidiaries,3 and two of Unum's corporate officers, asserting breach-
of-fiduciary-duty claims under section 503(a)(3) of the Employment Retirement Security
Act of 1974 ("ERISA"). 29 U.S.C. § 1132(a)(3). With one exception, the plaintiffs were
covered by group long-term disability insurance policies purchased by their individual
employers either from Unum or one of its subsidiaries.4 Some of the plaintiffs claimed
that they were wrongfully denied long-term disability benefits; others claimed that their
long-term disability benefits were wrongfully terminated.
In 2003, the cases were consolidated in the Eastern District of Tennessee by the
1
The Southern District of New York, the District of Massachusetts, the Northern
District of California, the Eastern District of Pennsylvania, the Eastern District of
Tennessee, and the Southern District of Illinois.
2
The First, Second, Third, Sixth, Seventh, and Ninth Circuits.
3
The insuring subsidiaries are The Paul Revere Life Insurance Company,
Provident Life and Accident Insurance Company, Provident Life and Casualty Insurance
Company, First Unum Life Insurance Company, Unum Life Insurance Company of
America, and Colonial Life & Accident Insurance Company.
4
The one exception is Thomas Davis. It is alleged that Davis was insured under a
group long-term disability policy issued by The Prudential Insurance Company, thereafter
The Hartford, neither of which is alleged to be a subsidiary of Unum.
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Judicial Panel on Multidistrict Litigation. Seven of the plaintiffs thereafter settled their
claims, and an eighth plaintiff ultimately received the benefits she was seeking. Those
eight plaintiffs have been dismissed from the action, leaving seven plaintiffs who seek to
proceed with this consolidated action.
A. The Allegations:
The plaintiffs allege that Unum 5 devised and implemented a corporate-wide scheme
to illegally deny or terminate the long-term disability claims of thousands of disabled
Americans, all in violation of ERISA. Specifically, in their Consolidated Amended Class
Action Complaint, the plaintiffs allege that Unum engages in the following practices:
a. Instituting targets, budgets, or goals for cost-savings to be attained
through the denial and termination of claims; the claims do not receive a
proper review by a fiduciary and are denied or terminated based upon
UnumProvident's financial targets rather than the medical and vocational
evidence concerning claimants' disabilities;
b. Providing financial incentives to in-house physicians who will "rubber
stamp" previously made business decisions; the physicians thus ignore their
appropriate ethical obligations and overlook strong medical evidence that
would ordinarily require a disability claim to be approved.
c. Implementing of compensation and/or bonus plans that reward Company
management for denying or terminating as many claims as possible to meet
special financial goals set by the Company.
d. Authorizing more senior in-house doctors to alter the written reports of
other "uncooperative" in-house doctors in order to justify a claim denial or
termination;
5
Unum is appealing on behalf of itself and the other corporate defendants. We
refer to the group of corporate defendants as Unum.
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e. Creating secret documents for each claim, at the time that claims are filed,
that, upon information and belief, sets [sic] a target date for cutting off
future disability payments; these "Duration Management" documents reflect
business decisions made by non-medical claims personnel as to when the
company believes claim payments should stop in the future; physicians are
not involved in creating these secret documents which are kept outside of the
claims file and withheld from claimants, their attorneys, and reviewing
courts, and are not produced in discovery during litigation;
f. Encouraging a game among the in-house physicians called the practice of
"insurance medicine;" these in-house physicians are prompted, encouraged,
and pressured into (1) changing their valid medical opinions as to a
claimant's disability in order to justify a business-driven claim denial; (2)
closing their eyes to numerous sources of medical evidence that support a
claimant's disability; (3) remaining quiet about their personal medical
opinions that require further analysis, review, testing, and follow up that
would reveal the claimant's obvious disability; and (4) putting "canned"
statements into their written reports that, on the surface, appear to validate a
previous decision by claims personnel to terminate ongoing disability
payments to a claimant or to deny a claim in the first instance.
g. Recruiting claims personnel who have a reputation for "closing claims"
(cutting off the ongoing monthly benefits of disabled individuals);
h. Designing a system in which claimants who have multiple disabling
conditions will never receive an integrated overview as to how all of the
disabling conditions combine to disable the claimant; by deliberately
fragmenting the claim into a number of pieces and preventing a
comprehensive review of individuals with "co-morbid" conditions, the
Company ensures that the claimant will not receive a comprehensive and fair
review of the claim; and
i. Employing numerous other practices that pressure claims handling
personnel into causing claims to be denied or terminated without receiving a
proper review.
Allegations regarding the seven plaintiffs who remain in the case include the
following:
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Theresa Keir worked as a financial systems analyst for a real estate company when
she became insured under a group long-term disability policy issued by Unum to her
employer. In March of 2000, Keir claimed disability arising out of breast cancer surgeries
in her left and right breasts, spinal fusions in her low back, removal of a precancerous
ovarian cyst, dermatomyocitis, two herniated discs in her neck, and fibromyalgia. Based
on an in-house review of her medical records, Unum denied Keir's claim to disability
benefits in December of 2000. On appeal, Unum upheld the adverse benefits decision.
Michelle Lynn Washington was employed as an attorney when she became insured
under a group long-term disability policy issued by Unum. On May 29, 1998, Washington
claimed disability arising from mitral valve prolapse, iron deficiency, anemia,
hypothyroidism, cervical discogenic disease, cervical myofascial pain, L-5 radiculopathy,
fibromyalgia, and depression. Unum paid Washington disability benefits for almost three
years before terminating those benefits in 2001 based upon an in-house medical review
that purportedly revealed that Washington could resume her full-time employment as an
attorney. On Washington's appeal, Unum upheld the termination of benefits.
Karen Gately was employed as a registered nurse when she became insured under a
group long-term disability policy issued by Unum. Gately claimed disability on or about
August 1, 1995, arising from fatigue, loss of balance, joint pain and swelling, short term
memory loss, and confusion, all arising from lyme disease. After paying disability benefits
to Gately for seventy months, Unum terminated her benefits in November of 2001,
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allegedly because her file contained no objective data regarding her "Epstein Barr virus,
lyme disease, chronic fatigue, and cognitive dysfunction." On review, Unum upheld its
decision to terminated Gately's benefits.
Thomas Rocco was employed by the Canadian Imperial Bank of Commerce when
he became insured under a group long-term disability policy issued by Unum. On or about
February 2, 2000, Rocco claimed disability arising from symptoms associated with
Meniere's disease, chronic obstructive pulmonary disease, diabetes mellitus II, hearing
loss, and anxiety disorder. Rocco received disability benefits for approximately nine
months before his benefits were terminated in May of 2001. On review, Unum upheld its
decision to terminate Rocco's benefits.
Thomas P. Davis was employed as a product safety reporting associate when he
became insured under a group long-term disability policy issued by The Prudential
Insurance Company, thereafter The Hartford. Davis claimed disability in July of 1991
arising from labyrinth dysfunction, which produced balance and reading disabilities. The
Prudential/Hartford paid Davis long-term disability benefits until February of 2001, when
Unum—as substituted administrator—terminated his benefits. Those benefits were
reinstated by Unum before the plaintiffs filed their Consolidated Amended Class Action
Complaint in early 2004. Unum contends that Davis has received all benefits to which he
was/is entitled.
Marvina Jenkins was employed as a bank loan officer when she became insured
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under a group long-term disability policy issued by Unum. In April of 1999, Jenkins
claimed disability arising from cognitive injury due to oxygen deprivation to the brain and
anoxic encephalopathy, producing an IQ of 62. Jenkins received disability benefits until
September of 2000, when Unum terminated her benefits, claiming that she was fit to return
to work. It is not alleged that Jenkins sought review of Unum's decision to terminate her
disability benefits.
Edmundo M. Rombeiro was employed as a mechanical technician by a
communications company when he became insured under a group long-term disability
policy issued by Unum. On or about May 16, 2000, Romberio claimed disability arising
from the debilitating effects of diabetes, including permanent diabetic neuropathy, blurred
vision, dizziness, severe fatigue, and nerve damage. Unum denied Rombeiro's request for
disability benefits, then informed him that coverage under his policy would be terminated.
It is not alleged that Rombeiro sought review of Unum's decision. On or about October
29, 2001, Unum terminated Rombeiro's coverage.
In their Consolidated Amended Class Action Complaint, the plaintiffs requested
injunctive and declaratory relief pursuant to 29 U.S.C. § 1132(a)(3).6 In particular, the
plaintiffs requested an order directing Unum to (a) cease the offending practices of
6
ERISA section 1132(a)(3) is a catchall remedial provision that authorizes a civil
action "by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which
violates any provision of this subchapter or the terms of the plan, or (B) to obtain other
appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions
of this subchapter or the terms of the plan."
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wrongfully denying, terminating, or suspending plan benefits; (b) institute, under
appropriate judicial supervision, new procedures that fully comply with ERISA; and (c)
provide a full and fair review—by a receiver and/or special master appointed to serve as a
neutral claims adjustor—"for all claims for benefits under the plan that have been affected
by the offending claims practices and thus wrongly denied." In the alternative, the
plaintiffs requested imposition of a constructive trust over any trust assets controlled by
Unum.
B. Class Certification Proceedings:
The plaintiffs requested certification of a class defined as follows:
All plan participants and beneficiaries insured under ERISA[-]
governed long-term disability insurance policies/plans issued
by UnumProvident and the insuring subsidiaries of
UnumProvident throughout the United States who have had a
long-term disability claim denied, terminated, or suspended on
or after June 30, 1999 by UnumProvident or one or more of its
insuring subsidiaries after being subjected to any of the
practices alleged in the Complaint.
Unum opposed the motion for class certification, arguing, among other things, that
(1) the existence of individualized issues on both liability and
remedy precludes any finding of the homogeneity and
cohesiveness required for certification under Rule 23(b)(2); (2)
the immature tort doctrine precludes certification because of
the very novelty of this [§ ] 502(a)(3) claim; (3) each class
member who believes his or her claim was wrongfully denied
has both an economically viable cause of action, and a means
of bringing it; (4) any payments of benefits they expect as a
result of this case are not plainly incidental to the declaratory
and injunctive relief that they claim is the focus of their claims;
and (5) the incompatibility between these claims and Rule 23
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certification is highlighted by the defective nature of the class
definition
In re UnumProvident Corp. ERISA Benefits Denial Actions, 245 F.R.D. 317, 322 (E.D.
Tenn. 2007) (internal quotation marks and citation omitted).
The district court conducted a hearing on the plaintiffs' motion for class
certification on July 18, 2007. The district court thereafter issued a memorandum opinion,
explaining that, among other things, (1) the plaintiffs' proposed class definition is
sufficiently definite to determine who is or is not a class member; (2) typicality is present
because the plaintiffs' allegations "will involve a determination of whether Unum
implemented a uniform, profit-driven scheme to deny all claims based on financial
concerns, rather than based on the actual merits of the applications for benefits;" (3) the
plaintiffs are representative of the class, all having allegedly been subject to an improper
uniform policy of denying claims based on the company's profits; (4) the plaintiffs' counsel
are qualified and capable of handling the litigation; and (5) the plaintiffs have satisfied the
requirements of Rule 23(b)(2) because the common claim is subject to a single injunctive
remedy—namely an injunction to end or ameliorate Unum's alleged unlawful claims
review policy. Consistent with its findings and conclusions, the district court certified the
class, using the class definition proposed by the plaintiffs.
STANDARD OF REVIEW
This court reviews a district court's grant of class certification for abuse of
discretion. Coleman v. Gen. Motors Acceptance Corp., 296 F.3d 443, 446 (6th Cir. 2002).
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A district court abuses its discretion when it "applies the wrong legal standard, misapplies
the correct legal standard, or relies on clearly erroneous findings of fact." Schachner v.
Blue Cross & Blue Shield of Ohio, 77 F.3d 889, 895 (6th Cir. 1996) (internal quotation
marks and citation omitted). This court will not find an abuse of discretion unless it has a
"definite and firm conviction that the trial court committed a clear error of judgment."
Miami Univ. Wrestling Club v. Miami Univ., 302 F.3d 608, 613 (6th Cir. 2002) (internal
quotation marks and citation omitted). When ruling on a motion for class certification, the
district court must exercise its discretion within the framework of Rule 23.
DISCUSSION
Before certifying a class action, a district court must conduct a “rigorous analysis"
into whether the requirements of Rule 23 have been satisfied. Gen. Tel. Co. v. Falcon, 457
U.S. 147, 161 (1982); Sprague v. Gen. Motors Corp., 133 F.3d 388, 397 (6th Cir. 1998)
(en banc). Under Rule 23(a), a party seeking class certification must show that (1) the
class is so numerous that joinder of all members is impracticable, (2) there are questions of
law or fact common to the class, (3) the claims or defenses of the representative parties are
typical of the claims or defenses of the class, and (4) the representative parties will fairly
and adequately protect the interests of the class. In addition to the prerequisites of Rule
23(a), a party seeking class certification must satisfy one of the three subsections of Rule
23(b). Here, the plaintiffs have moved for certification under Rule 23(b)(2), which
demands a showing that "the party opposing the class has acted or refused to act on
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grounds that apply generally to the class, so that final injunctive relief or corresponding
declaratory relief is appropriate respecting the class as a whole." Fed. R. Civ. P. 23(b)(2).
According to Unum, the district court failed in its responsibility to conduct the
rigorous analysis required for class certification, failing—in particular—in its analysis of
the typicality requirement under Rule 23(a)(2) and the element of cohesiveness under Rule
23(b)(2). Citing Sprague and Reeb v. Ohio Dep't of Rehabilitation and Correction, 435
F.3d 639 (6th Cir. 2006), Unum contends that, as part of its rigorous analysis, the district
court was required to examine the precise nature of the plaintiffs' claims as well as the
proof required to establish those claims. Reeb, 435 F.3d at 644-45 (explaining that
allegations of a "general policy" of discrimination are inadequate to establish entitlement
to class certification; instead, "rigorous analysis" requires precise information about the
incidents, people involved, motivations, and consequences regarding each of the named
plaintiffs' claims); Sprague, 133 F.3d at 397-98 (noting that certification was not proper
merely because the plaintiffs challenged General Motors' system-wide general policy that
changed retirees' health benefits; instead, the district court was required to examine what
the plaintiffs would have to prove to establish their individual claims); see also Fed. R.
Civ. P. 23(c)(1)(B) (requiring a district court, when certifying a class, to define not only
the class but also the "class claims, issues, or defenses").
While acknowledging that Reeb called for a searching examination of the precise
nature of the plaintiffs' claims, the district court suggested that the lessons of Reeb were
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limited to cases involving generalized claims of employment discrimination. Without
explaining why those lessons would be inapplicable in a case involving the denial of
disability benefits, the district court declined to perform a rigorous analysis of the
plaintiffs' claims, merely stating: "[T]he Court will not need to confront such individual
determinations here." The district court's refusal to look more closely at the plaintiffs'
claims, and also to the defenses that Unum might raise in response to those claims, is
puzzling.
To prevail on a breach-of-fiduciary-duty claim under ERISA, a plaintiff must
generally prove that the defendant not only breached its fiduciary duty but also caused
harm by that breach. Kuper v. Iovenko, 66 F.3d 1447, 1459 (6th Cir. 1995). A causal
connection between the alleged breach and the alleged harm is thus a necessary element of
an ERISA-participant's breach-of-fiduciary-duty claim. Where, as here, the alleged breach
purportedly results in the wrongful denial or termination of a participant's benefits, the
existence of a causal link between the breach and the harm is particularly dependant upon
the equities of the participant's claim. Absent a showing that benefits were wrongfully
denied, there can be no causal link between an alleged breach and a denial of benefits; and
whether a claim for benefits is wrongfully denied depends on a number of factors peculiar
to the claimant's case. See Hein v. FDIC, 88 F.3d 210, 224 (3d Cir. 1996) (dismissing the
plaintiff's breach-of-fiduciary-duty claim, explaining that "[b]ecause [the plaintiff] was not
entitled to the benefits in the first place, there is no causal link between the alleged breach
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of fiduciary duty by [the defendants] and the denial of benefits to [the plaintiff]").
Here, the plaintiffs have alleged that Unum breached its fiduciary duties by
wrongfully denying or terminating disability insurance benefits on the basis of a uniform,
profit-driven scheme. Indeed, central to the district court's class certification decision was
its conclusion that "the theory of liability asserted by Plaintiffs in this case does not focus
on individual factors . . . because Plaintiffs have characterized their lawsuit as a challenge
to UnumProvident's uniform policies and practices with respect to reviewing claims."
Dist. Ct. Order of Certification (emphasis in original). That a uniform scheme is alleged,
however, does not mean that a class is easily identified or that a class action is necessarily
appropriate.
As requested by the plaintiffs, the district court in this case defined the class to
include only those plan participants and beneficiaries whose long-term disability benefits
were denied or terminated "after being subjected to any of the practices alleged in the
Complaint." The district court rejected Unum's argument that, to determine who belongs
in a class so defined, thousands of claim files would have to be examined to see if any of
the alleged wrongful practices were employed in any particular case . While recognizing
that "[i]t may be necessary for the Court to make some factual inquiry," the district court
concluded that the class definition was "sufficiently definite so that it is feasible to
determine who is or is not a class member." The district court relied on Forbush v. J.C.
Penney Co, Inc., 994 F.2d 1101 (5th Cir. 1993) in reaching its conclusion.
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In Forbush, a retired employee (Forbush) sought class certification in her lawsuit
challenging the mathematical formulae used by J.C. Penney to calculate a retiree's
estimated social security payments. The method used to estimate such payments was
important because, under the company's retirement plans, the pension benefits due to
retirees were offset by the amounts they were expected to receive from the Social Security
Administration. Forbush sought to represent all former and current Penney employees
"whose pension benefits have been or will be reduced or eliminated as a result of the
overestimation of their Social Security benefits." Id. at 1103. The various employees
included in the class were covered by four different pensions plans; and, during the
relevant time period, three different formulae were used to estimate a retiree's social
security benefits. The district court denied Forbush's motion for class certification,
concluding that "each class member's claim will have to be decided on an individual
basis." Id. at 1104. In a two to one decision, the Fifth Circuit reversed, stating: "The
concerns expressed by [the dissent], as well as the district court, regarding the necessity of
individualized determinations are important but not, we believe, dispositive, at least at this
stage of the litigation." Id. at 1106. The court noted that the class could be divided into
sub-classes to resolve any issues arising from the use of three formulae.
Here, the district court's reliance on Forbush is unmerited. In Forbush, the plaintiff
challenged a very specific practice uniformly applied to a discrete, easily-defined group of
individuals. Indeed, every retiree in the class had his or her pension benefits calculated by
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using one of three mathematical formulae for estimating retirees' social security payments.
If the mathematical formula was improper as used for one retiree, it was improper for
every other retiree whose benefits were determined by application of that formula.
Unlike the plaintiff in Forbush, the plaintiffs in this case challenge a group of
loosely-defined practices that were not applied uniformly to a discrete, easily-defined class
of individuals. Indeed, the record reveals that Unum pays billions in disability benefits
annually, which means that, despite Unum's alleged profit-driven claim review practices,
many claimants successfully pass through the process and receive disability benefits as a
result. Nor can it be said that all class members whose claims for long-term disability
benefits were denied or terminated would have been entitled to benefits but for Unum's
use of the alleged improper practices. Some of the denials and/or terminations were no
doubt merited for medical reasons. As even a cursory search on Westlaw or Lexis Nexis
will illustrate, many individuals who request disability benefits—whether under ERISA or
social security—are unable to establish entitlement to those benefits. It follows that a class
limited to those persons whose benefits were denied or terminated would necessarily
include many individuals whose claims were properly denied for medical reasons.7
To be sure, the district court did not define the class as including those participants
whose disability claims were denied or terminated. The court was more specific, defining
7
Counsel for the plaintiffs conceded at oral argument that a class of persons
whose benefits were denied or terminated would necessarily include some individuals
whose claims were properly denied for medical reasons.
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the class to include those participants whose claims were denied or terminated "after being
subjected to any of the practices alleged in the Complaint." Such definition, however,
does little to distinguish between the set of individuals whose claims were properly denied
for valid medical reasons and the set of individuals whose claims were improperly denied
for profit-driven reasons. Indeed, as Unum has correctly argued, the only way to
distinguish between the two sets of individuals is to engage in individualized fact-finding,
and the need for such individualized fact-finding makes the district court's class definition
unsatisfactory. See John v. Nat'l Sec. Fire and Cas. Co., 501 F.3d 443, 445 (5th Cir. 2007)
(noting that "[t]he existence of an ascertainable class of persons to be represented by the
proposed class representative is an implied prerequisite of Federal Rule of Civil Procedure
23"); Crosby v. Social Sec. Admin., 796 F.2d 576, 580 (1st Cir. 1986) (explaining that a
class definition should be based on objective criteria so that class members may be
identified without individualized fact finding); 5 James Wm. Moore et al., Moore's Federal
Practice ¶ 23.21[3][c] (3d ed. 2007) (explaining that "[a] class definition is inadequate if a
court must make a determination of the merits of the individual claims to determine
whether a particular person is a member of the class").
The problem with the class definition, moreover, carries over into problems with
typicality. As the court explained in Sprague, 133 F.3d at 399: "The premise of the
typicality requirement is simply stated: as goes the claim of the named plaintiff, so go the
claims of the class." There must be some connection, in other words, between the merits
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of each individual claim and the conduct affecting the class. Absent such a connection,
there is no basis upon which to fashion class-wide relief. Where a class definition
encompasses many individuals who have no claim at all to the relief requested, or where
there are defenses unique to the individual claims of the class members, Beck v. Maximum,
Inc., 457 F.3d 291, 296 (3d Cir. 2006), the typicality premise is lacking, for—under those
circumstances—it cannot be said that a class member who proves his own claim would
necessarily prove the claims of other class members.
Relying on a statement taken from Judge Martin's dissenting opinion in Sprague,
the district court began its discussion of typicality by stating: "The test for typicality . . . is
not demanding." Sprague, 133 F.3d at 415 (internal quotation marks and citation omitted).
The district court went on to state that, while typicality is generally lacking when liability
turns on individualized factors, typicality is not lacking in this case because the plaintiffs
"characterized their lawsuit as a challenge to UnumProvident's uniform policies and
practices with respect to reviewing claims." We find the district court's analysis
unpersuasive.
Here, the class members—who worked in different jobs, had different vocational
skills, had different impairments, and experienced different disability review procedures
managed by different claim representatives—are entitled to relief if, and only if, Unum
wrongfully denied or terminated their benefits. That all of the plaintiffs may have been
subjected to some or all of Unum's alleged wrongful practices does not eliminate the need
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for an individualized assessment as to the ultimate propriety of the benefits decisions
affecting each and every class member. Because individualized assessments are
necessary, it cannot be said that if a named plaintiff succeeds in establishing Unum's
liability for breach of fiduciary duty, "so go the claims of the class." Sprague, 133 F.3d at
399. Typicality is thus lacking.
In Parke v. First Reliance Standard Life Ins. Co., 368 F.3d 999 (8th Cir. 2004), the
plaintiff alleged that an ERISA-plan fiduciary engaged in a practice of first awarding long-
term disability benefits to a claimant, then terminating or suspending those benefits
without asking for or receiving evidence that the claimant's conditions had changed.
Among other things, the plaintiff sought injunctive relief for other claimants affected by
the same practice. The district court denied the plaintiff's motion for class certification,
finding that the plaintiff could not meet the threshold typicality requirement, given that the
propriety of terminating any other claimant's benefits was dependent on the facts of each
individual case. The Eighth Circuit affirmed, noting that, even if the plaintiff established a
breach causing harm to her, the question of whether a breach caused harm to others
remained "a case-by-case determination." Id. at 1005; see also Holmes v. Pension Plan of
Bethlehem Steel Corp., 213 F.3d 124, 137-38 (3d Cir. 2000) (affirming district court's
denial of class certification for class of beneficiaries whose benefits were wrongfully
delayed because "the issue of liability itself requires an individualized inquiry into the
equities of each claim"). Like the plaintiffs in Parke and Holmes, the plaintiffs in this case
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have failed to demonstrate typicality.
Even if the plaintiffs were able to demonstrate typicality, they have not shown that
certification under Rule 23(b)(2) is appropriate. That rule provides that a class action may
be maintained if Rule 23(a) is satisfied and "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 respecting the class as a whole." Fed. R.
Civ. P. 23(b)(2). A class action under Rule 23(b)(2) is referred to as a "mandatory" class
action because class members do not have an automatic right to notice or a right to opt out
of the class. The defining characteristic of a mandatory class is "the homogeneity of the
interests of the members of the class." Reeb, 435 F.3d at 649. Because homogeneity is
required, unitary adjudication of the claims is feasible without the devices of notice and
opt-out. On the other hand, where individualized determinations are necessary, the
homogeneity needed to protect the interests of absent class members is lacking. Id.
In response to Unum's argument that a Rule 23(b)(2) class is inappropriate in this
case because of the lack of homogeneity, the plaintiffs suggest that the presence of
individual issues is immaterial because Rule 23(b)(2), unlike Rule 23(b)(3), contains no
predominance requirement.8 They do not address the well-recognized rule that Rule
23(b)(2) classes must be cohesive. See Lemon v. Int'l Union of Operating Eng'rs, 216 F.3d
577, 580 (7th Cir. 2000) (explaining that "Rule 23(b)(2) operates under the presumption
8
Rule 23(b)(3) requires that "questions of law or fact common to class members
predominate over any questions affecting only individual members."
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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"); Barnes v. Am. Tobacco Co.,
161 F.3d 127, 143 (3d Cir. 1998) (noting that "[w]hile 23(b)(2) class actions have no
predominance or superiority requirements, it is well established that the class claims must
be cohesive"). The Barnes court recognized two reasons why cohesiveness, or
homogeneity, is vital to Rule 23(b)(2) actions:
First, unnamed members with valid individual claims are
bound by the action without the opportunity to withdraw and
may be prejudiced by a negative judgment in the class action.
Thus, the court must ensure that significant individual issues
do not pervade the entire action because it would be unjust to
bind absent class members to a negative decision where the
class representatives's claims present different individual
issues than the claims of the absent members present. Second,
the suit could become unmanageable and little value would be
gained in proceeding as a class action if significant individual
issues were to arise consistently.
Id. (internal quotation marks, ellipses, and citation omitted).
The plaintiffs in this case request, among other things, both imposition of a
constructive trust as well as entry of an order requiring Unum "to provide a full and fair
review . . . of all claims for benefits under the plan that have been denied." The plaintiffs
do not explain how a constructive trust could be imposed without individualized review of
every claim that was denied. Nor do they explain how the court could, if it ordered "a full
and fair review . . . of all claims for benefits under the plan that have been denied," avoid
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exposing Unum to what Unum describes as "a one-way ratchet where [Unum] can lose but
never win." As Unum correctly asserts, Unum would have to provide the very relief
requested (i.e., re-review) in order to determine whether any individual was, in the first
instance, a class member, and, in the second instance, entitled to relief for an improper
denial or termination of benefits. Class certification under the circumstances was an abuse
of discretion.
CONCLUSION
For the foregoing reasons, we will REVERSE the district court's order of
certification.
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CLAY, Circuit Judge, dissenting. This case is well-suited for class certification
because it alleges a common course of wrongful conduct that warrants injunctive relief for
the class as a whole. Today’s result, which will require that Plaintiffs raise their claims in
a series of individual but related lawsuits, will result in a waste of economic and judicial
resources that will do very little to address the alleged system-wide directives and policies
of Unum. The majority, with little focus on the deferential standard of review that is
required in these matters, has grossly misapplied this Court’s holdings in cases such as
Reeb and Sprague, and has failed to apply a number of pertinent cases that support the
district court’s grant of class certification. For these reasons and others, I would affirm the
district court’s grant of class certification, and I respectfully dissent.
I.
Before addressing the majority opinion, it would be helpful to briefly review the
background of this case and Unum’s responsibilities under ERISA. This case originated
as a series of cases which were referred to the district court by a Judicial Panel on
Multidistrict Litigation. On the basis of papers filed and a hearing held, the panel found
that consolidated proceedings were appropriate because (1) the underlying actions
involved common allegations that Unum engaged in improper claims handling practices in
furtherance of a company-wide effort to reduce costs and inflate revenues; (2) the actions
involved common questions of fact; and (3) litigation could be expected to focus on a
significant number of common events, defendants, and/or witnesses.
-22-
The named plaintiffs in the consolidated case are long-term disability insurance
claimants, each of whom alleges that he or she was improperly denied claim benefits by
Unum. Collectively, Plaintiffs allege that Unum and its subsidiaries devised and
implemented an elaborate scheme to illegally deny or terminate the long-term disability
claims of thousands of disabled Americans, and brought this action to “stop [Unum’s]
illegal and alarming practices and to ensure that past, current, and future victims obtain a
full and fair review of their claims.” More specifically, Plaintiffs claim that Unum
fiduciaries systematically: (1) provide financial incentives to physicians who will ‘rubber
stamp’ previously made business decisions in derogation of medical evidence and their
ethical obligations; (2) authorize senior in-house physicians to alter the written reports of
“uncooperative” physicians in order to justify a claim denial or termination; (3) deny or
terminate claims without proper review by a fiduciary based on financial targets rather
than the medical and vocational evidence concerning claimants’ disabilities; (4) create
‘Duration Management’ documents that set target dates for cutting off claims and are
withheld from claimants, attorneys, and reviewing courts; and (5) pressure physicians to
change their medical opinions as to a claimant’s disability in order to justify a business-
driven claim denial. Plaintiffs argue that these practices constitute a beach of fiduciary
duty under ERISA and the regulations promulgated thereunder.
ERISA provides that “a fiduciary shall discharge his duties with respect to a plan
solely in the interest of the participants and beneficiaries and– (A) for the exclusive
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purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying
reasonable expenses of administering the plan . . . .” 29 U.S.C. § 1104. The “minimum
requirements for employee benefit plan procedures” under ERISA prohibit administration
of claims procedures in a way that “unduly inhibits or hampers” the processing of claims
for benefits. 29 C.F.R. § 2560.503-1(a)-(b)(3).
Interpreting these provisions, this Court has held that ERISA imposes high
standards of fiduciary duty upon plan administrators which encompass three components:
The first is a “duty of loyalty” pursuant to which “all
decisions regarding an ERISA plan ‘must be made with an
eye single to the interests of the participants and
beneficiaries.’” The second . . . imposes “an unwavering
duty” to act both “as a prudent person would act in a similar
situation” and “with single-minded devotion” to those same
plan participants and beneficiaries. Finally, an ERISA
fiduciary must “‘act for the exclusive purpose’” of providing
benefits to plan beneficiaries.
Kuper v. Iovenko, 66 F.3d 1447, 1458 (6th Cir. 1995) (internal citations omitted). If a
fiduciary fails to meet these standards, he or she may be held personally liable for any
losses to the plan that result from his breach of duty. Id. (citing 29 U.S.C. § 1109(a)). In
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addition, plan members are statutorily authorized to seek injunctive relief to enjoin
prohibited practices. See 29 U.S.C. § 1132(a) (“A civil action may be brought . . . by a
participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any
provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable
relief (i) to redress such violations or (ii) to enforce any provisions of this title or the terms
of the plan . . . .”).
If proven, Plaintiffs’ allegations of Unum’s systemic claims practices would
certainly establish a violation of the terms of ERISA.9 The salient question, therefore, is
whether these claims must be brought as individual lawsuits by a series of claimants, or
whether the claims can properly be raised under the auspices of a class action.
II.
Inexplicably, given the nature of this case, the majority offers little analysis of this
Court’s holdings regarding the propriety of raising “course of conduct” cases as class
actions. I will begin with this.
We recently advised that “cases alleging a single course of wrongful conduct are
particularly well-suited to class certification . . . .” Powers v. Hamilton County Pub.
Defender Comm’n, 501 F.3d 592, 619 (6th Cir. 2007). This proposition has been repeated
9
A fiduciary who issued corporate-wide directives to override or modify medical
decisions based on predetermined target dates and financial incentives would plainly
not be acting “with an eye single to the interests of” plan participants and “for the
exclusive purpose” of providing benefits to plan participants. See Kuper, 66 F.3d at
1458.
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consistently by this Court. See Olden v. Lafarge Corp., 383 F.3d 495, 508 (6th Cir. 2004)
(case suited to class certification because plaintiffs raised common allegations which
would allow the court to determine liability for the class as a whole); Sterling v. Velsicol
Chem. Corp., 855 F.2d 1188, 1197 (6th Cir. 1988) (acknowledging an “increasingly
insistent need” to certify class actions for lawsuits arising out of a “single course of
conduct”); Senter v. GMC, 532 F.2d 511, 525 (6th Cir. 1976) (finding that “[l]awsuits
alleging class-wide discrimination are particularly well suited for 23(b)(2) treatment since
the common claim is susceptible to a single proof and subject to a single injunctive remedy.”).
The rationale supporting these holdings is well-justified. In cases alleging a
common course of prohibited conduct, “the class-action device saves the resources of both
the courts and the parties by permitting an issue potentially affecting every [class member]
to be litigated in an economical fashion . . . ." Gen. Tel. Co. of the Southwest v. Falcon,
457 U.S. 147, 155 (1982) (quoting Califano v. Yamasaki, 442 U.S. 682, 700-701 (1979)).
In this context, class actions serve to achieve economies of time, effort, and expense. See
In re American Medical Sys., 75 F.3d 1069, 1084 (6th Cir. 1996).
Moreover, in cases where the optimum result for any one plaintiff would be more
than consumed by the costs, class actions may provide the only method of vindicating the
rights of individuals who otherwise could not afford the litigation. Deposit Guar. Nat’l
Bank v. Roper, 445 U.S. 326, 338 (1980). It is in this light that the Supreme Court
observed that a district court’s ruling on the class certification issue is often “the most
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significant decision rendered in [ ] class-action proceedings” because when it is not
economically feasible to obtain relief by filing a multiplicity of individual suits for
damages, “aggrieved persons may be without any effective redress unless they may
employ the class-action device.” Id. at 339.
The purposes and benefits of class actions are particularly on point in the instant
case. It is not practical or feasible for any one disability claimant to bear the cost of
litigating the systematic and corporate-wide claims procedures and directives of a large,
national disability provider such as Unum. The costs of conducting discovery regarding
these procedures would undoubtedly exceed the damages any one plaintiff could hope to
recover, and it would be a waste of economic and judicial resources to engage in
duplicitous litigation of these common issues. Moreover, a relatively small award in favor
of a given plaintiff would do nothing to address or deter the systemic processes of Unum.
In such a case, class certification is the proper and practical way to proceed.
The majority takes issue with the fact that in any given plaintiff’s case,
individualized issues are present and a detailed review of a plaintiff’s disability claim may
determine that “the claim [was not] wrongfully denied.” Slip op. at 12 (emphasis in
original). However, if it is proven that Unum engages in systematic and prohibited claims
practices, a plaintiff is statutorily entitled to injunctive relief. See 29 U.S.C. 1104(a)(1)(A)
(fiduciary must discharge his duties for the exclusive purpose of providing benefits to
participants and their beneficiaries); 29 U.S.C. § 1132(a) (a civil action may be brought by
-27-
a plan participant to enjoin any act or practice which violates any provision of the plan).
Moreover, under the majority’s reasoning, class actions would be prohibited in a
wide variety of course of conduct cases that litigate issues of general liability before
addressing individualized issues and damages. There are many such cases. In a toxic tort
action, for example, the first order of business might be to determine that a corporation
wrongfully disposed of an environmental toxin and created an environmental hazard.
After this issue is resolved, individual plaintiffs would have to prove that the toxin caused
injury their individual cases. In such cases, it may ultimately be determined that a given
plaintiff’s injuries were feigned, negligible or attributable to other sources, but so long as
the named plaintiffs and the certified class proffered a cognizable claim of wrongdoing,
the absence of damages in connection with one plaintiff’s claim does not mean the case
was not appropriately tried as a class action. See, e.g., Sterling, 855 F.2d at 1197
(affirming class certification and holding that the presence of questions peculiar to each
individual member of the class was no bar when liability arose from a single course of
conduct).10 Class certification is equally appropriate here, where Unum’s system-wide
claims practices and policies are alleged to be common and can be litigated before
individualized questions are addressed.
10
Securities fraud and consumer protection cases also frequently address general liability
issues before they move to individualized findings. See, e.g., Mayer v. Mylod, 988 F.2d 635, 640
(6th Cir. 1993) (in a securities fraud action, class action certification was appropriate even
though some investors made money and some lost money, because questions of liability were
common to all class members regardless of their level of damages).
-28-
Similarly, in Title VII “pattern or practice” cases, courts routinely proceed by
examining allegations that a company engaged in a common pattern or practice of
discrimination, and approach individualized relief in a separate process. See Franks v.
Bowman Transportation, 424 U.S. 747, 772 (1975) (establishing the “Franks model”
where plaintiffs must demonstrate the existence of a discriminatory hiring pattern or
practice, and the burden then shifts to the defendants to prove that individuals were not in
fact victims of discrimination).11 In Cooper v. Federal Reserve Bank, the Supreme Court
observed that “[w]hile a finding of a pattern or practice of discrimination itself justifies an
award of prospective relief to the class, additional proceedings are ordinarily required to
determine the scope of individual relief for the members of the class.” 467 U.S. 867, 875-
76 (1984). In such cases, as here, it is not known at the onset of litigation whether an
individual plaintiff has suffered discrimination that would warrant individualized relief:
the primary and first issue to be addressed is the system-wide misconduct by the
defendant.
Affirmative action cases also bear similarities to the instant case. In such cases,
courts commonly begin by addressing common questions of liability and then move to
questions peculiar to each individual class member. In Grutter v. Bollinger, for example,
11
The Franks model of litigating pattern or practice cases continues to apply.
See Int’l Bhd. of Teamsters v. United States, 431 U.S. 324, 328 (1977) (applying the
Franks model); McKennon v. Nashville Banner Publ. Co., 513 U.S. 352, 358 (U.S.
1995) (citing Franks and Teamsters with approval); Reeb v. Ohio Dep’t of Rehab and Corr.,
435 F.3d 639, 658 (6th Cir. 2006) (citing Teamsters and Franks as authority).
-29-
the district court granted class certification to individuals of specified races who were
denied admission to the law school, and bifurcated the trial into separate liability and
damages phases. 539 U.S. 306, 317 (2003). It goes without saying that any individual
class member might not have been admitted to the law school, even in the absence of
allegedly prohibited practices of the university. In that case, as here, to establish whether
any individual plaintiff was entitled to individual damages, a detailed review of the
individual’s file would be required. But there, as here, the defendant’s wrongful practices,
if proven, might justify injunctive relief for the class as a whole and “the mere fact that
questions peculiar to each individual member of the class remain after the common
questions of the defendant’s liability have been resolved does not dictate the conclusion
that a class action is impermissible.” Powers, 501 F.3d at 619.
To be sure, there are “course of conduct” cases that are not suited for class
certification. The most common of these are cases where: (1) injuries arise from
individualized or isolated incidents of wrongdoing that do not apply to the class as a
whole; or (2) issues of individual compensatory damages predominate. In Falcon, for
example, the Supreme Court rejected the plaintiffs’ claim that there was a policy of
system-wide discrimination because the court found that the plaintiffs improperly
generalized the experiences of discrete individuals who were subjected to discriminatory
actions. 457 U.S. at 159. The Court explained that “[i]f one allegation of specific
discriminatory treatment were sufficient to support an across-the-board attack, every Title
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VII case would be a potential companywide class action.” Id. The instant case does not
raise the same concerns. Here, Plaintiffs are not using the experiences of the few to
establish a system-wide policy; instead, the heart of their claim is that Unum has employed
corporate-wide directives that claims must be denied based on financial targets. Any
individualized grievances flow from that overarching policy.
Class action designation is also inappropriate in course of conduct cases where
issues of individual compensatory damages predominate. In Reeb, for example, this Court
held that the district court abused its discretion by certifying a class under Rule 23(b)(2)
because claims for individual compensatory damages predominated over declaratory or
injunctive relief. 435 F.3d at 650-51 (expressing concern that highly individualized
damages “counseled strongly” against certifying the class, but acknowledging that it would
be appropriate for the plaintiffs to bring the case “in an action under Rule 23(b)(2) for
declaratory or injunctive relief . . . .”) That is exactly what is presented here: Plaintiffs
seek injunctive relief as the primary form of relief, and individualized damages can be
addressed at a later stage of the proceedings.
In sum, because this course of conduct case centers upon Unum’s common and
systematic claims practices, and because a finding of general liability would justify class-
wide injunctive relief, class certification is appropriate.
III.
In discussing the majority’s conclusions to the contrary, first and foremost, we must
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recognize that this Court is obligated to provide “substantial deference” to a court’s
decision to grant class action certification inasmuch as a district court possesses the
“inherent power to manage and control its own pending litigation.” Reeb, 435 F.3d at 643.
The district court’s decision is subject to a “very limited review” and should be reversed
only upon a “strong showing that the . . . decision was a clear abuse of discretion.” Olden,
383 F.3d at 507 (internal citation omitted).
As the majority states, a plaintiff seeking class certification is required to satisfy the
prerequisites of Rule 23(a) – numerosity, commonality, typicality, and fair representation –
along with the relevant subsection of Rule 23(b), which, in this case, requires that “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
respecting the class as a whole[.]” F ED R. C IV. P. 23(b)(2).
Defendants concede that the requirements of numerosity and commonality are met,
but argue that typicality and cohesiveness are lacking. The majority agrees, and also
asserts that Plaintiffs have failed to show “a causal connection between the alleged breach
and the alleged harm.” Slip. op. at 11-12. I disagree, and will address these issues in turn.
A.
The first contested issue is typicality. To establish this prerequisite, Plaintiffs must
demonstrate that “the claims or defenses of the representative parties are typical of the
claims or defenses of the class.” F ED. R. C IV. P. 23(a)(3). A claim is typical if “it arises
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from the same event or practice or course of conduct that gives rise to the claims of other
class members, and if his or her claims are based on the same legal theory.” Beattie v.
CenturyTel, Inc., 511 F.3d 554, 561 (6th Cir. 2007) (quoting American Med. Sys., 75 F.3d
at 1082). This Court has explained that “[t]ypicality determines whether a sufficient
relationship exists between the injury to the named plaintiff and the conduct affecting the
class, so that the court may properly attribute a collective nature to the challenged
conduct.” Sprague v. GMC, 133 F.3d 388, 399 (1998). For the district court to conclude
that the typicality requirement is satisfied, “a representative’s claim need not always
involve the same facts or law, provided there is a common element of fact or law.” Beattie,
511 F.3d at 561 (quoting Senter, 532 F.2d at 525 n.31).
Here, as discussed above, Plaintiffs’ claims are typical because they arise from
corporate-wide claims directives and procedures, which constitute a prohibited “course of
conduct” and a “common element of fact or law,” as required in Beattie, 511 F.3d at 561.
If Plaintiffs are able to prove that Unum has established corporate practices directing
personnel to disregard medical diagnoses to meet predetermined financial targets, those
findings advance the claims of all class members and would warrant an injunction
prohibiting the illegal practices. Individualized damages may remain, but this does not
counsel against class certification.
The majority disagrees, relying upon misguided interpretations of Reeb and
Sprague to support a conclusion that typicality is lacking. The majority cites Reeb, 435
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F.3d at 644-45, for the proposition that allegations of a “general policy” of discrimination
are inadequate to establish entitlement to class certification because courts are required to
conduct a rigorous analysis of the “incidents, people involved, motivations and
consequences regarding each of the named plaintiffs’ claims.” Slip. op. at 11. However,
the Reeb Court’s admonition was based upon a finding that there was an abundance of
individualized issues of proof and damages present in that case.
The Reeb Court relied upon Falcon, 457 U.S. 147, for the proposition that
resolution of employment discrimination claims would “require proof that particular
managers took particular employment actions and that either the managers were motivated
by a discriminatory animus or the actions resulted in a disparate impact upon the class.”
Reeb, 435 F.3d at 644. The Court expressed concern that the plaintiffs were using the
experiences of the few to allege an “abstract policy” of discrimination, and expressed
concern that the discrimination alleged could affect many different aspects of employment,
such as hiring, firing, promoting, giving benefits, providing vacation time, or delegating
work assignments. Id. at 644-45.
In contrast, here, Plaintiffs allege that Unum fiduciaries employ systemic policies
and practices that instruct medical and claims personnel to deny claims based on pre-
established financial targets. Unlike discriminatory hiring, firing, and promotion practices
that turn upon the statements and actions of specific managers to specific employees,
Plaintiffs here are challenging specific practices and directives that apply to claims
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procedures across the board.
Moreover, Reeb is distinguishable because the Reeb Court was particularly
concerned with the nature of the damages that were sought. The Reeb plaintiffs asserted a
wide variety of claims, and requested $2 million in compensatory damages and $3 million
in punitive damages. Id. at 642. The Court expressed concern that these damages included
“future pecuniary losses, emotional pain, suffering, inconvenience, mental anguish, loss of
enjoyment of life, and other non-pecuniary losses.” Id. at 646. The Court noted that the
plaintiffs sought an injunction but that “they did not specify the conduct they sought to
have enjoined.” Id. at 640. This scenario offers a stark contrast to the present case, where
Plaintiffs seek injunctive relief as the primary form of relief and are specific about the
policies they seek to enjoin.
Most importantly, perhaps, the Reeb Court expressly advised that it would have
been appropriate for the Reeb plaintiffs to bring the case as a class action under Rule
23(b)(2) for declaratory or injunctive relief. Id. at 651 (“We emphasize, however, that this
holding does not foreclose all Title VII class actions. Plaintiffs now have the choice of
proceeding . . . in an action under Rule 23(b)(2) for declaratory or injunctive relief . . . .”).
This is precisely the type of claim that is filed here. In this regard, Reeb is not just
inapposite; it actually supports Plaintiffs’ argument for class certification.
The majority also relies on Sprague, 133 F.3d at 397-98, for the proposition that
class certification is not proper if the plaintiff can prove his own claim but not prove the
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claims of other class members. Slip op. at 16-17. This case, if possible, is even more
inapposite. The Sprague plaintiffs requested relief for the defendants’ violations of
ERISA based on a bilateral contract theory and on an estoppel theory, and the Court found
that the claims lacked typicality because success on either theory would require
individualized proofs. 133 F.3d at 398. Under the bilateral contract theory, the district
court would have to consider the a wide variety of documents signed by the plaintiffs;
under the estoppel theory, the court would need to determine “what statements were made
to a particular person, how the person interpreted those statements, and whether the person
justifiably relied on the statements to his detriment.” Id. This Court noted that “because
of their focus on individualized proof, estoppel claims are typically inappropriate for class
treatment” and concluded that “because each plaintiff’s claim depended upon facts and
circumstances peculiar to that plaintiff, class-wide relief was not appropriate.” Id. Here,
in contrast, Plaintiffs’ claims focus on system-wide policies and directives. This is not a
case like Sprague that had no common thread of liability. Although individualized
damages may exist for the class members, this issue can be resolved after issues of general
liability and injunctive relief are resolved.
The majority’s faulty logic, and its misreading of Sprague, is perhaps clearest in the
following statement: “That all of the plaintiffs may have been subjected to some or all of
Unum’s alleged wrongful practices does not eliminate the need for an individualized
assessment as to the ultimate propriety of the benefits decisions affecting each and every
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class member. Because individualized assessments are necessary, it cannot be said that if
a named plaintiff succeeds in establishing Unum’s liability for breach of fiduciary duty,
‘so go the claims of the class.’” Slip op. at 17-18 (quoting Sprague, 133 F.3d at 399).
This is perplexing. If a plaintiff proved that Unum engaged in systemic and illegal claims
processing practices that harmed him as well as those similarly situated, he would certainly
have proven that injunctive relief was warranted for the class. Moreover, if the majority’s
reading were applied across the board and a plaintiff had to prove all plaintiffs’ claims by
proving his own claim, class certification would be precluded in a wide variety of cases,
including the toxic tort, Title VII, and affirmative action scenarios discussed above.
The majority reads Sprague too broadly. The statement that “as goes the claim of
the named plaintiff, so go the claims of the class,” 133 F.3d at 399, stands for the
proposition that any one plaintiff, in pursuing his own claims, must advance the interests
of other class members. The Sprague Court, in the quoted passage, was actually
paraphrasing its earlier statement that “[a] necessary consequence of the typicality
requirement is that the representative’s interests will be aligned with those of the
represented group, and in pursuing his own claims, the named plaintiff will also advance
the interests of the class members.” Id. (quoting American Med. Systems, 75 F.3d at 1082)
(emphasis added). The Sprague Court went on to say that “in pursuing their own claims,
the named plaintiffs could not advance the interests of the entire early retiree class. Each
claim, after all, depended on each individual’s particular interactions with GM . . . .” Id.
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(emphasis added).
Consequently, Sprague does not support the majority’s conclusion that typicality is
lacking. Instead, it supports the opposite conclusion: because Plaintiffs have established
that the litigation of their cases would advance the interests of the class, they satisfy the
requirement of typicality.
Perhaps because of the majority’s undue focus on generalized admonitions in cases
such Sprague and Reeb, the majority fails to acknowledge that courts have granted class
certification in a number of cases involving claims that a corporation engaged in a
wrongful practice impacting all class members. In Bittinger v. Tecumseh Prods. Co., 123
F.3d 877, 885 (6th Cir. 1997), for example, this court affirmed the district court’s class
certification decision in case governed by ERISA, over arguments that claims would be
subject to varied defenses and arguments that the class members suffered varying levels of
injury. This Court explained:
Though the level of claimed injury may vary throughout the
class -- a common feature of class actions routinely dealt with
at a remedial phase -- the basic injury asserted is the same:
Tecumseh violated the terms of the collective bargaining
agreements by unilaterally terminating fully-funded lifetime
benefits. As noted above, those differences that exist --
including the individual estoppel claims -- can be dealt with
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through methods other than denial of class certification, at a
later stage in the proceeding.
Id. In that case, we aptly noted that “the plaintiffs’ evidence appears to follow a pattern,
and the people they claim made the representations are largely the same people.” Id. at
884. Here too, the evidence of alleged wrongdoing follows pattern; in this case, the
alleged pattern is one of uniform and prohibited claims procedures. Plaintiffs’ claims, like
the claims in Bittinger and Beattie, satisfy the typicality requirement because they arise
“from the same event or practice or course of conduct that give[] rise to the claims of other
class members, and . . . are based on the same legal theory.” Beattie, 511 F.3d at 561.
Although we are at an early stage of the proceedings, it is noteworthy that Plaintiffs
provide reason to believe that they could succeed in establishing that Unum’s alleged
practices exist. Other plaintiffs have succeeded in similar cases involving the same
defendants. Recently, in the matter of Merrick v. Paul Revere, a district court in Nevada
issued an order upholding a jury’s award of punitive damages to plaintiffs in a trial
involving Defendants in the instant case.12 See Merrick v. Paul Revere, No. 2:00-cv-
00731 (D. Nev. filed Nov. 14, 2008). In the district court’s findings of fact, the court
12
The defendants in Merrick were The Paul Revere Life Insurance Company and
UnumProvident Corporation. Merrick v. Paul Revere, No. 2:00-cv-00731, slip op. at 1.
The court’s order explains that in 1996-1997, Provident and Paul Revere merged with
Unum to form UnumProvident. UnumProvident then entered into an agreement in
which it took over all responsibility for handling Revere claims. Id. at 8.
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stated that the plaintiff had presented “overwhelming” testimonial and documentary
evidence of “the existence of targets and goals to terminate [disability] claims” that were “
. . . communicated to claim handling employees by such means as e-mails, and weekly
Staff Meetings.” Slip op. at 4-5. The court found that “[b]ased on the credible testimony
about targets and goals, documents, and the duration of Defendants’ misconduct, there is
every reason to conclude that Defendants gained well in excess of a billion dollars as a
result of their claims handling misconduct.” Id. at 12.
In another case affirming a jury’s award of punitive damages, the Ninth Circuit
concluded that evidence existed that the same defendants “employed policies to achieve
net termination ratios” and “had a conscious course of conduct firmly grounded in
established company policies that disregarded the rights of insureds.” Hangarter v.
Provident Life and Accident Ins. Co., 373 F.3d 998, 1014 (9th Cir. 2004).13 These findings
support an argument that Plaintiffs’ claims are more than unfounded allegations and that
the alleged practices they describe are systemic.14
13
The defendants in Hangarter were Provident Life and Accident Insurance
Company, The Paul Revere Life Insurance Company, and UnumProvident Corporation.
373 F.3d 998.
14
The claims in Merrick and Hangarter were raised by individual plaintiffs, but the
courts’ findings of fact, combined with large punitive damage awards that ranged from
$5 to $8 million, indicate that the verdicts sought to target the deliberate and systemic
practices of the defendants. See Merrick, No. 2:00-cv-00731; Hangarter, 373 F.3d 998.
The availability of individual suits does not guarantee that the concerns of all potential
class members will be protected, particularly when individual plaintiffs may not have the
resources to bring a claim. In these circumstances, injunctive relief in a class action
context is a particularly appropriate tool.
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In sum, here, where the practices alleged are corporate-wide and purportedly affect
all class members, the claims satisfy the requirements of typicality. In such a case, there is
no sound reason to proceed by requiring individual plaintiffs to advance the claims and try
common issues of fact separately and repetitively.
B.
The majority next asserts that the claims do not satisfy the requirements of Rule
23(b)(2), which requires that “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 respecting the class as a whole[.]” F ED. R. C IV. P.
23(b)(2).
Citing authority from the Third and Seventh Circuits, the majority asserts that there
is a “well-recognized rule” that classes certified under Rule 23(b)(2) must be cohesive and
homogeneous. Pointing to Reeb, 435 F.3d at 649, my colleagues declare that “when
individualized determinations are necessary, the homogeneity needed to protect the
interests of absent class members is lacking.” Slip op. at 19. As discussed above, Reeb is
not fatal to Plaintiff’s case, and there is a long line of cases that establish that
individualized issues may be determined after general issues of liability are resolved.15
15
This Court has affirmed that “the mere fact that questions peculiar to each individual
member of the class remain after the common questions of the defendant’s liability have been
resolved does not dictate the conclusion that a class action is impermissible.” Powers, 501 F.3d
at 619. This Court also advised that it is not uncommon for the level of claimed injury to vary
throughout the class; this is “a common feature of class actions” that can be dealt with through
“methods other than denial of class certification, at a later stage in the proceeding.” Bittinger,
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The majority opinion discusses reasons why “cohesiveness, or homogeneity is vital
to Rule 23(b)(2) actions[,]” stating that there is the potential that unnamed class members
will be prejudiced by a negative judgment in the class action, and that individual issues
may pervade the action, making the suit unmanageable. Slip. op. at 20. But the majority’s
analysis stalls and does not state why the requirement of cohesiveness is lacking here.
This lapse is telling; cohesiveness is plainly present in this case, where Plaintiffs state a
common theory of wrongdoing and seek injunctive relief that would benefit class members
across the board. See Beattie, 511 F.3d at 564 (finding that the proposed class was
sufficiently cohesive in a consumer protection claim because the issues in that case were
“subject to generalized proof, and thus applicable to the class as a whole” and because
such issues “predominate[d] over those issues that [we]re subject only to individualized
proof.”) (citations omitted).
Moreover, the majority appears to take issue with the relief that is sought. Glossing
over the fact that the primary form of relief requested is injunctive, the majority states that
Plaintiffs request a constructive trust and an order requiring Unum to provide a full and
fair review of claims for benefits that have been denied. My colleagues then conclude that
this relief would expose Unum to a “one-way ratchet” where Unum would have to provide
re-review of claims to determine if a class member was entitled to relief for an improper
denial or termination of benefits.
123 F.3d at 885.
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Plaintiffs seek the following forms of relief:
[1.] Awarding plaintiffs and the Class declaratory relief
determining the illegality of the conduct alleged and
injunctive relief whereby UnumProvident and its subsidiaries
are ordered to immediately cease. . . engaging in the offending
practices delineated herein;
[2.] Awarding plaintiffs and the Class equitable relief
whereby Unum Provident and the subsidiaries are ordered to
institute, under the supervision of the Court, new, national
procedures that are in full compliance with ERISA;
[3.] Awarding plaintiffs and the Class equitable relief
appointing a receiver and/or special master to serve as a
neutral claims adjustor and assume the role of responsibility
for responding to, acting upon, and making determinations
pertaining to claims by plaintiffs and the Class and to provide
a full and fair review, as required by 29 U.S.C. §1133(2) of all
claims for benefits under the plan that have been denied;
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[4.] In the alternative, awarding plaintiffs and the Class a
permanent injunction enjoining [the named defendants] from
serving as claim fiduciaries and an the [sic] imposition of a
constructive trust over the any [sic] trust assets controlled by
[said defendants] [pursuant to] 29 U.S.C. §1109; [and]
[5.] Awarding plaintiffs and the Class other appropriate
relief[.]
(J.A. 38.)
As the request for relief indicates, the imposition of a constructive trust is only one
alternative form of relief. Plaintiffs also request injunctive and declaratory relief enjoining
Unum from engaging in the specified prohibited practices, which are more general forms
of relief that apply to the class as a whole.
Moreover, it would be perfectly acceptable for the district court to address
individualized damages in a separate proceeding. There are a “number of management
tools available to a district court to address any individualized damages issues,” such as
“bifurcating liability and damage trials, or appointing a magistrate judge or special master
to preside over individual damages proceedings.” Beattie, 511 F.3d at 562. This is not an
uncommon practice. “By bifurcating issues like general liability or general causation and
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damages, a court can await the outcome of a prior liability trial before deciding how to
provide relief to the individual class members.” Olden, 383 F.3d at 509 (citations
omitted); see also Fed. R. Civ. P. 23(c)(4) (“When appropriate, an action may be
maintained as a class action with respect to particular issues.”); Reeb, 435 F.3d at 658
(suggesting that bifurcated phases of the class action could help separate issues of class-
wide claims of discrimination from individual employment decisions).16 Consequently,
the majority’s concerns regarding the form of relief sought are unwarranted.
C.
Finally, the majority asserts that class certification is inappropriate because, under
Kuper, 66 F.3d at 1459, “a causal connection between the alleged breach and the alleged
harm is . . . a necessary element of an ERISA-participant’s breach-of-fiduciary-duty
claim.” Slip op. at 12. The majority reasons that “whether a claim for benefits is
wrongfully denied depends on a number of facts peculiar to the claimant’s case” and that
“absent a showing that benefits were wrongfully denied, there can be no causal link
between an alleged breach and a denial of benefits.” Slip. op. at 12 (emphasis in original).
This analysis is misguided for several reasons.
First, and importantly, the Kuper Court did not find that plaintiffs must provide a
16
Insofar as the Defendants claim that an individual may not have a medical
condition warranting disability benefits, Unum’s records are the most relevant items of
proof. If the refusal of benefits was based on permissible factors, such as the lack of a
qualifying medical condition, Unum and its agents know best what those factors are and
the extent to which they influenced Unum’s decision-making process. See Teamsters,
421 U.S. at 359; Franks, 424 U.S. at 772.
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“causal connection” that their claims were “wrongfully denied” at the class certification
stage of proceedings. The district court in Kuper had already granted class certification to
the plaintiffs at an earlier stage of litigation, and was reviewing, de novo, the grant of
summary judgment in favor of the defendants, after considerable discovery had been
conducted, and after other dispositive motions had been decided. 66 F.3d at 1451-52. The
Court did not discuss class certification requirements anywhere in its opinion, nor was the
Court reviewing the district court’s decision with the substantial deference that is required
when reviewing class certification.
Second, the Kuper Court’s discussion of a “causal connection” is taken out of
context. In the passage cited by the majority, slip op. at 12, the Kuper Court concluded
that summary judgment was appropriate because the plaintiffs had not demonstrated a
“causal link” between the failure to investigate an investment and the harm suffered by the
plan because the plaintiff had not demonstrated that “an adequate investigation would have
revealed to a reasonable fiduciary that the investment at issue was improvident.” 66 F.3d
at 1459-60. In other words, the Kuper plaintiffs had not proven that the defendants’
actions were improper, even on a general level. Here, as discussed above, proof that
Unum had issued directives that valid medical decisions be disregarded in a quest to meet
financial targets would certainly constitute a breach of duty warranting injunctive relief.
Consequently, the Kuper Court’s statements cannot be plausibly offered for the
proposition that each plaintiff must demonstrate that his claim was wrongfully denied at
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the class certification stage of proceedings.17
This Court must take care not to confuse issues of general liability with issues of
individualized causation and damages. As we have advised:
Although such generic and individual causation may appear to
be inextricably intertwined, the procedural device of the class
action permitted the court initially to assess the defendant’s
potential liability for its conduct without regard to the
individual components of each plaintiff’s injuries. [ . . . ] The
main problem on review stems from a failure to differentiate
between the general and the particular. This is an
understandably easy trap to fall into . . . . Although many
common issues of fact and law will be capable of resolution on
a group basis, individual particularized damages still must be
proved on an individual basis.
Sterling, 855 F.2d at 1200 (affirming grant of class certification in a mass tort class
action). Here, by holding that Plaintiffs must establish that their claims were “wrongfully
17
The majority also cites to Hein v. Fed. Deposit Ins. Corp., 88 F.3d 210, 224 (3d
Cir. 1996), for the proposition that when a plaintiff is not wrongfully denied benefits, no
“causal link” is established between the alleged breach of fiduciary duty and the denial
of benefits. Slip op. at 12. Similarly, the Hein court was addressing a grant of summary
judgment and not class certification, and the majority’s arguments fail for the same
reasons discussed above.
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denied” at the class certification stage of proceedings and by denying class certification
based on the presence of individualized issues, my colleagues fall into the “trap” of which
the Sterling Court warned. Because general issues of liability could be resolved for the
class as a whole, individualized issues of causation and damages were no bar to class
certification in that case, and they should be no bar here.
IV.
In conclusion, the district court’s class certification decision should stand even
under de novo review. But given the deferential standard of review that applies in this
case, it is particularly improper for this Court to reverse the district court’s judgment. In
so doing, my colleagues have misapplied the law of this Court, and have disregarded the
valid purposes that a class action serves. For these reasons, I respectfully dissent.
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