Haven't Read Enough About Class Actions Lately? Professor Posner Has Another Lesson

Posted 10:20 PM by Michael Fox

With the recent enactment of the Class Action Fairness Act of 2005 most have had their annual fill of class action information. But just in case the recent outpouring of information has only whetted your appetite, check out Judge Posner's articulation on the differences between 23(b)(2) and 23(b)(3) classes in In Re: Allstate Insurance Company (7th Cir. 3/28/05) [pdf].

The issue, described by Judge Posner as both interesting and important is:

whether certification under Rule 23(b)(2) is proper when, though injunctive or declaratory relief is sought rather than damages, individual hearings may be necessary to determine causation and hence liability.

The case arose as a challenge by former Allstate agents who quit, allegedly under pressure as Allstate was trying to convert from sales agents to independent contractors. The class was seeking a finding that Allstate had a policy of harassing agents to get them to quit to keep them from getting benefits they would have been entitled to under an ERISA plan if they had been fired.

If the answer is important to you, you really need the opinion, but for those looking for the quick answer, the Court ultimately dismissed the class certification which had been granted under Rule 23(b)(2), saying if class certification were proper it would be under Rule 23(b)(3). The reason - under Rule 23(b)(3) members can opt out if they choose to go it on their own, an option not available under Rule 23(b)(2). Since what was really being sought was declaratory relief about Allstate's policy, the Court found when:

the suit is for declaratory relief, the effect of the declaration on individual class members will vary with their particular circumstances, they should be given notice of the class action so that they can
decide whether they would be better off proceeding individually.

That would require a Rule 23(b)(3) procedure or a bastardized version of Rule 23(b)(2) and although some courts had suggested the possibility of such a proceeding, this Court found no need to go there when such a proceeding would be "complicated and confusing—unnecessarily so, given the ready availability of the 23(b)(3) procedure."

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