Fifth Circuit’s “Incidental Damages” Approach to Class Action Certification under Rule 23(b)(2) Inapplicable in Ninth Circuit and District Court Erred in Denying Class Action Treatment of Labor Law Class Action based on Conclusion that “Claims for Monetary Relief were Non-Incidental” Ninth Circuit Holds
Plaintiffs filed a class action against Wal-Mart on behalf of assistant managers alleging labor law violations. Plaintiffs filed a motion with the district court for class action certification, arguing that class action treatment was appropriate under Rule 23(b)(2) and 23(b)(3). In an order denying class action certification that may be found here, see Sepulveda v. Wal-Mart Stores, Inc., 237 F.R.D. 229 (C.D.Cal. 2006), the district court refused to certify the litigation as a class action on the grounds that (1) the claims for monetary relief in the class action complaint were not incidental, thus rendering certification under Rule 23(b)(2) inappropriate, and (2) the duties of associate managers “are not susceptible to collective proof,” thus rendering class action treatment under Rule 23(b)(3) inappropriate. Id., at 245-46 and 248-49. Plaintiffs appealed. Sepulveda v. Wal-Mart Stores, Inc., Case No. 06-56090 (9th Cir. April 25, 2008) [Slip Opn., at 1-2]. In an unpublished opinion, the Ninth Circuit reversed. In a single paragraph, the Circuit Court stated that the district court had “misapplied Ninth Circuit precedent when, relying on its conclusion that Plaintiffs’ claims for monetary relief were non-incidental, it denied certification under [Rule] 23(b)(2),” and cited a Ninth Circuit opinion that “refus[ed] to adopt the incidental damages approach set forth by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998).” Id., at 2 (citing Molski v. Gleich, 318 F.3d 937, 949-50 (9th Cir. 2003)). Rather, the lower court should have “focus[ed] on the intent of the Plaintiffs in bringing suit.” Id. (citation omitted). By failing to do so, the district court abused its discretion in denying class action treatment under Rule 23(b)(2). Id. The Ninth Circuit instructed the district court to reconsider on remand whether class certification was appropriate under Rule 23(b)(2) and, further, to consider “using Rule 23©(4) to certify issues under the Rule 23(b)(2) standard.” Id. (citation omitted).
The author notes that the district court opinion contains the following discussion of Rule 23(b)(2):
“Class certification under Rule 23(b)(2) is appropriate only where the primary relief sought is declaratory or injunctive. A class seeking monetary damages may be certified pursuant to Rule 23(b)(2) where such relief is merely incidental to [the] primary claim for injunctive relief.” Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1195 (9th Cir. 2001) (citations and internal quotation marks omitted). There is no bright-line rule for determining what damages are “incidental.” Molski v. Gleich, 318 F.3d 937, 940 (9th Cir. 2003). Rather, the Ninth Circuit “examine[s] the specific facts and circumstances of each case … focus[ing] on the language of Rule 23(b)(2) and the intent of the plaintiffs in bringing the suit.” Id. (citations omitted). The Court may consider “whether a reasonable party would bring the suit to obtain the injunctive relief and whether the injunctive relief sought would be both reasonably necessary and appropriate were the party to succeed on the merits.” In re Paxil Litig., 218 F.R.D. 242, 247 (C.D.Cal. 2003) (citing Molski, 318 F.3d at 950); Wang, 231 F.R.D. at 611-12.
Sepulveda, 237 F.R.D. at 245.
NOTE: The Ninth Circuit upheld that the district court order to the extent that it denied class action certification under Rule 23(b)(3), concluding that the district court did not abuse its discretion with respect to that portion of its order. See Sepulveda, at 3.
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