The Federal Circuit recently held that individual notice to absent class members is required to bind them to a judgment in a class action certified under Rule 23(b)(2), at least where the claims are monetary in nature.  This case is particularly significant for a defendant faced with a class action that has been certified under Rule 23(b)(2).  To ensure that class members will be bound by the result, the defendant will need to insist on formal notice to the class.

Beer v. United States, No. 2010-5012, 2012 U.S. App. LEXIS 3279 (Fed. Cir. Feb. 17, 2012) is a lawsuit brought by federal judges asserting that certain legislation regarding judicial salaries was unconstitutional under a provision of Article III of the Constitution that provides that salaries for Article III judges cannot be reduced while judges are in office.  In certain years, Congress has blocked cost of living adjustments for judicial salaries (but not other federal employees), and in other years Congress failed to provide such adjustments for judges (while providing them to other federal  employees),   (Incidentally, this case poses interesting issues of judicial recusal given that the outcome of this case would inure to the personal benefit or detriment of every federal judge.  But if the entire federal judiciary were recused there is no procedure for appointment of a special court to resolve the case.) 

This case has a complex procedural history.  In a previous class action on the same issue, a class of judges was certified under Rule 23(b)(2) by the Federal Court of Claims and the trial judge ruled in favor of the plaintiffs.  The Federal Circuit reversed on a 2-1 vote, holding that Congress’s action was constitutional.  En banc review was denied, with several dissents, and the Supreme Court denied certiorari, but with three justices dissenting (four votes are required to grant cert).  See Williams v. United States, 264 F.3d 1089 (Fed. Cir. 2001), cert. denied, 535 U.S. 911 (2002).  A group of judges who were members of the certified class in Williams, but not named plaintiffs in that case, then filed the Beer case.  Without reaching the issue of preclusion, the Court of Claims dismissed the case as barred by the Williams precedent.  The Federal Circuit affirmed, and en banc review was denied, but with four judges dissenting.  The Supreme Court then granted certiorari, vacated the judgment and remanded the case to the Federal Circuit for resolution of the preclusion issue.

The Federal Circuit held, in addressing an issue left open by the Supreme Court’s decision in Wal-Mart v. Dukes, that notice is required before a certified class can be bound by the judgment in a (b)(2) class action, and thus the prior decision in Williams is not binding in the Beer case:

The Supreme Court established in Wal-Mart that due process requires notice be given to absent class members when monetary claims are more than just “incidental” to the claims for injunctive or declaratory relief. See Wal-mart, 131 S. Ct. at 2557, 2559-60. Wal-Mart explicitly declined, however, to decide whether notice was required as a matter of due process when monetary claims were “incidental” to injunctive or declaratory claims in a class action. Id. at 2560.  . . .

We agree with the plaintiffs that the incidental exception, if there is one, cannot apply where the requested injunctive or declaratory relief is directed to the payment of money. The requested relief in Williams was framed as declaratory relief, asking the court, for example, to “declare” that the blocking legislation was “unconstitutional and void,” and to “declare” that the plaintiffs were “entitled to damages in an amount to be determined by the Court.”  Thus the government conceded that the declaratory relief requested in Williams was itself directed to the payment of money, and the case was “essentially one for money damages.”

It may be, as the government argues, that the “other than money damages” provision of the Administrative Procedure Act (“APA”), 5 U.S.C. § 702, turns on whether a request is for past damages or an order for payment of money in the future. But, as far as the due process right to notice is concerned, we are unable to distinguish between actions in which the suit is for past due money and those situations in which the action is for both past due money and the payment of future money.  . . .

Because we conclude that both the prospective and retrospective aspects of the claims in Williams were essentially monetary in nature, we hold that due process does not allow the plaintiffs’ claims in the present suit to be precluded by Williams in the absence of notice of the Williams class. In other words, Williams was a case in which money claims predominated and in which, accordingly, notice to absent class members was required as a matter of due process. We need not address whether opt-out rights are also required as a matter of due process.

Id. at *17-22.

The court went on to also hold that it was insufficient that informal notice may have been given through an article published in a newsletter distributed to the federal judiciary.  Rather, “when absent class members are entitled to notice as a matter of due process, formal notice must be provided advising absent class members of the pendency of the action and their right to participate before being precluded from bringing their own action.”  Id. at *26. 

So the Supreme Court, if it is so inclined, and assuming it agrees with this ruling, will have the opportunity to take up the constitutional issue regarding judicial salaries.  Given the federal judiciary’s repeated pleas for raises, and the significant number of judges who have complained about salary levels when leaving the bench, it will be interesting to see if the Court takes this up.

What does this mean for other class actions under Rule 23(b)(2)?  Given that a defendant will be bound by a judgment against it in a Rule 23(b)(2) class action, in order to avoid having to re-litigate the issues presented in most circumstances a defendant would be well-advised to insist that formal notice be given to the class, so that the class members will be bound if the defendant prevails.  What could be worse for the government here than winning a certified class action and then having to defend another lawsuit on the very same issue?

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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.