Affirmed and remanded by published opinion. Judge WILLIAMS wrote the majority opinion, in which Judge DEVER concurred. Judge MICHAEL wrote a separate dissenting opinion.
WILLIAMS, Circuit Judge.
The named plaintiffs (Appellants) in this case filed an individual and class-action complaint against Jefferson-Pilot Life Insurance Company on behalf of themselves and approximately 1.4 million African-American policyholders. The complaint alleged that Jefferson-Pilot's corporate predecessors discriminated against the class members in violation of federal law by charging them higher premiums than whites for similar insurance policies. The district court denied certification under Fed.R.Civ.P. 23(b)(3), finding that because it could not resolve Jefferson-Pilot's statute of limitations defense on a class-wide basis, issues common to the class did not predominate over individual ones. The district court also denied certification under Fed.R.Civ.P. 23(b)(2), finding that Appellants' requested remedy was merely a predicate for monetary damages. Appellants moved for an immediate interlocutory appeal under Fed.R.Civ.P. 23(f) and 28 U.S.C.A. § 1292(e) (West Supp. 2005), which we accepted under Fed. R.App. P. 5.
We hold that Appellants bear the burden of proving compliance with Rule 23 and that the district court did not clearly err in finding that Jefferson-Pilot's statute of limitations defense did not present common issues that could be resolved on a class-wide basis. We also hold that the district court correctly held certification was improper under Rule 23(b)(2) because Appellants' requested relief was not predominantly injunctive or declaratory in nature. We therefore affirm and remand for
The parties agree on most of the facts relevant to this appeal. From 1911 to 1973, Jefferson-Pilot Insurance Company's corporate predecessors (collectively Jefferson-Pilot) issued approximately 1.4 million industrial life insurance policies
Jefferson-Pilot stopped issuing industrial life insurance policies altogether in 1973, but continued to collect premiums on the dual-rate policies that were still in effect at that time. In 1988, Jefferson-Pilot adjusted the race-based premiums on all active policies according to blended mortality tables, which were not based on race. Even after this adjustment, however, African-American policyholders still paid more than whites for similar benefits because whites' premiums had been determined according to mortality tables for whites only. In 2000, about the time the instant action was filed,
In September 2000, Appellants Rose Belle Thorn, Rosa M. Thorn, Robert Pugh, and Evelyn D. Pugh — four African-Americans insured under a Jefferson-Pilot industrial life insurance policy — filed a class-action complaint against Jefferson-Pilot alleging that its dual-rate policies violated 42 U.S.C.A. §§ 1981 (West 2003) (granting equal rights to "make and enforce contracts" without regard to race) and 1982 (West 2003) (granting equal rights to "inherit,
In October 2003, Appellants moved under Fed.R.Civ.P. 23(b)(3) and 23(b)(2) to certify a class of "all African-Americans who [were insured by a race-based dual-rate] industrial life insurance policy that was issued [by Jefferson-Pilot]." (J.A. at 284.)
Appellants argued that the district court could resolve Jefferson-Pilot's statute of limitations defense on a class-wide basis — i.e., without conducting individual hearings — because Jefferson-Pilot had not shown that any class member had actual knowledge of its dual-rate practices and because all of the class members would have been exposed to the same information that could have given them actual or constructive knowledge of the practices. In support of this argument, Appellants submitted
In May 2004, the district court conducted an extensive hearing, most of which was devoted to whether the class should be certified. (J.A. at 126-275.) In December 2004, the district court denied the motion to certify by a thorough, well-written opinion. The district court noted that "[t]he claims at issue in this action relate to policies issued as early as 1911 and, at the latest, in 1973. The initial (and possibly only) actionable discrimination would, therefore, have occurred no later than the date of issuance of the policy, in other words, from twenty-seven to eighty-nine years before suit was instituted. This very significant period of time raised critical questions as to when the claim accrued." (J.A. at 296 (footnote and internal quotation marks omitted).) Focusing on this critical question, the district court found that the record was devoid of evidence that resolution of the issue could occur on a class-wide basis. (J.A. at 296, 298 ("[Jefferson-Pilot] has presented a strong prediction of evidence that there were numerous sources available during the relevant period which could have alerted class members to the fact that the practices now complained of were common in the industry, if not uniform among White-owned companies. . . . In light of the information which [Jefferson-Pilot] has shown was available, the court cannot assume that none of the members of the proposed class gained sufficient information to put them on inquiry notice at some point which would result in their claim being time barred.").) The district court held that this fact meant that Jefferson-Pilot was entitled to present evidence as to individual class members' actual or constructive knowledge, thereby rendering the class members' claims uncommon from one another and precluding certification under Rule 23(a). (J.A. at 298-300.) In the alternative, the district court held that certification was improper under Rule 23(b)(3) because individual hearings on the statute of limitations and the issue of damages were required, management of the class would be difficult due to the need for such individual hearings, and the class device was not superior to individual litigation. The district court also held, again in the alternative to the Rule 23(a) holding, that certification was improper under Rule 23(b)(2) because Appellants' requested injunctive and equitable relief was merely a predicate for money damages.
On appeal, Appellants argue that the district court misapplied Rule 23(a), 23(b)(3) and 23(b)(2) in denying their motion to certify. "A district court has broad discretion in deciding whether to certify a class." Lienhart v. Dryvit Sys., Inc., 255 F.3d 138, 146 (4th Cir.2001) (internal quotation marks omitted). "[P]laintiffs bear the burden . . . of demonstrating satisfaction of the Rule 23 requirements and the district court is required to make findings on whether the plaintiffs carried their burden. . . ." Gariety v. Grant Thornton, LLP, 368 F.3d 356, 370 (4th Cir.2004). A district court per se abuses its discretion when it makes an error of law or clearly errs in its factual findings. See Lienhart, 255 F.3d at 146 (noting that the district
We first address Appellants' Rule 23(b)(3) arguments.
Appellants argue that the district court abused its discretion in denying the certification motion under Rule 23(b)(3) because Jefferson-Pilot failed to satisfy its burden of showing that its statute of limitations defense presented individual issues that could not be resolved on a class-wide basis. They argue in the alternative that even if they have the burden of proving that Jefferson-Pilot's statute of limitations defense presents common issues that can be resolved on a class-wide basis, they have satisfied that burden. Jefferson-Pilot argues that Appellants bear the burden of proving that its statute of limitations defense presents common issues and that the district court did not clearly err in finding that Appellants failed to satisfy this burden. Before addressing these arguments, we pause to set forth the legal landscape in which they arise.
The class-action device, which allows a representative party to prosecute his own claims and the claims of those who present similar issues, is an exception to the general rule that a party in federal court may vindicate only his own interests. See Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 156, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982). Chief among the justifications for this device is its efficiency: adjudication of a properly-constituted class action generally has res judicata effect and "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." Califano v. Yamasaki, 442 U.S. 682, 701, 99 S.Ct. 2545, 61 L.Ed.2d 176 (1979). To ensure this benefit is realized, however, and to protect both the rights of the absent plaintiffs to present claims that are different from those common to the class and the right of the defendant to present facts or raise defenses that are particular to individual class members, district courts must conduct a "rigorous analysis" to ensure compliance with Rule 23, Falcon, 457 U.S. at 161, 102 S.Ct. 2364, paying "careful attention to the requirements of [that] Rule." E. Tex. Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 405, 97 S.Ct. 1891, 52 L.Ed.2d 453 (1977).
To be certified, a proposed class must satisfy Rule 23(a) and one of the three sub-parts of Rule 23(b). Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 423 (4th Cir.2003). The requirements of Rule 23(a) are familiar: numerosity of parties, commonality of factual or legal issues, typicality of claims and defenses of class representatives, and adequacy of representation.
The district court found that Appellants' proposed class did not satisfy Rule 23(a). Because we base our decision on the district court's alternative holdings that certification was improper under Rules 23(b)(3) and 23(b)(2), we assume, without deciding, that Appellants satisfied Rule 23(a), and turn our attention to Rule 23(b)(3).
Rule 23(b)(3) has two components: predominance and superiority. The predominance requirement is similar to but "more stringent" than the commonality requirement of Rule 23(a). Lienhart, 255 F.3d at 146 n. 4. Whereas commonality requires little more than the presence of common questions of law and fact, see id. at 146, Rule 23(b)(3) requires that "questions of law or fact common to the members of the class predominate over any questions affecting only individual members." Fed. R.Civ.P. 23(b)(3). The predominance requirement "tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation." Gariety, 368 F.3d at 362 (internal quotation marks omitted). The superiority requirement ensures that "a class action is superior to other available methods for the fair and efficient adjudication of the controversy." Fed.R.Civ.P. 23(b)(3). Among the factors a district court should consider in deciding whether a class action meets these two requirements are
At the class certification phase, the district court must take a "close look" at the facts relevant to the certification question and, if necessary, make specific findings on the propriety of certification. Gariety, 368 F.3d at 365 (internal quotations omitted). Such findings can be necessary even if the issues tend to overlap into the merits of the underlying case. Falcon, 457 U.S. at 160, 102 S.Ct. 2364 ("[S]ometimes it may be necessary for the [district] court to probe behind the pleadings before coming to rest on the certification question."); Gariety, 368 F.3d at 366 ("[W]hile an evaluation of the merits . . . is not part of a Rule 23 analysis, the factors spelled out in Rule 23 must be addressed through findings, even if they overlap with issues on the merits."). The likelihood of the plaintiffs' success on the merits, however, is not relevant to the issue of whether certification is proper. See Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974); Gariety, 368 F.3d at 366.
While Congress has not enacted a specific statute of limitations for §§ 1981 and 1982, we interpret these federal statutes to "borrow" the statute of limitations and equitable tolling rules applicable to the state cause of action that is most analogous to §§ 1981 and 1982. See Goodman v. Lukens Steel Co., 482 U.S. 656, 660, 107 S.Ct. 2617, 96 L.Ed.2d 572 (1987) ("Because § 1981, like [§ 1982 and 42 U.S.C. § 1983], does not contain a statute of limitations, federal courts should select the most appropriate or analogous state statute of limitations."); Wade v. Danek Med., Inc., 182 F.3d 281, 289 (4th Cir.1999) (holding that under a borrowed statute of limitations state rules of equitable tolling apply). The parties do not brief the various state causes of action from which we should borrow the federal statute of limitations, but the district court concluded, and the parties do not contest, that the statutes of limitations for the §§ 1981 and 1982 claims range from 2 to 6 years. For purposes of this appeal, we assume the district court's conclusion is correct.
Whether state or federal law supplies the length of the limitations period, federal law determines when the clock begins to run against that period, or, phrased technically, when the cause of action "accrues." Nasim v. Warden, Md. House of Corr., 64 F.3d 951, 955 (4th Cir.1995) (en banc). We have held that a cause of action accrues under a borrowed statute of limitations "either when the plaintiff has [actual] knowledge of his claim or when he [has constructive knowledge of his claim] — e.g., by the knowledge of the fact of injury and who caused it — to make reasonable inquiry and that inquiry would reveal the existence of a colorable claim." Id.; Brooks v. City of Winston-Salem, 85 F.3d 178, 181 (4th Cir.1996).
Our circuit's accrual rule, which focuses on the contents of the plaintiff's mind, is not readily susceptible to class-wide determination. Examination of whether a particular plaintiff possessed sufficient information such that he knew or should have known about his cause of action will generally require individual examination of testimony from each particular plaintiff to determine what he knew and when he knew it. See Broussard v. Meineke Disc. Muffler Shops, Inc., 155 F.3d 331, 342 (4th Cir.1998) (noting, in holding that a state statute of limitations defense presented individual
With this background in mind, we return to Appellants' arguments. Appellants first argue that Dr. McKiven's expert report failed to satisfy Jefferson-Pilot's burden of proving that its statute of limitations defense presents issues that must be decided on an individual basis. This argument, of course, assumes that Jefferson-Pilot bears such a burden. Our cases prove this assumption false; we have stressed in case after case that it is not the defendant who bears the burden of showing that the proposed class does not comply with Rule 23, but that it is the plaintiff who bears the burden of showing that the class does comply with Rule 23. Windham v. Am. Brands, Inc., 565 F.2d 59, 65 n. 6 (4th Cir.1977) (en banc) ("It is well-settled in this jurisdiction that the proponent of class certification has the burden of establishing the right to such certification under Rule 23."); Lienhart, 255 F.3d at 146 ("The party seeking class certification bears the burden of proof."); Gariety, 368 F.3d at 362 ("The plaintiffs who propose to represent the class bear the burden of demonstrating that the requirements of Rule 23 are satisfied."). It is not enough, therefore, for Appellants to argue that Jefferson-Pilot failed to show that its statute of limitations defense presents individual issues. Instead, the record must affirmatively reveal that resolution of the statute of limitations defense on its merits may be accomplished on a class-wide basis.
Seeking to avoid this conclusion, Appellants argue that because Jefferson-Pilot bears the burden of proving the merits of its statute of limitations defense, it should also bear the burden of demonstrating that resolution of that defense cannot occur on a class-wide basis. Even assuming that Jefferson-Pilot has the burden of proving its statute of limitations defense on the merits,
Appellants next contend that even if they have the burden of proving that Jefferson-Pilot's statute of limitations defense presents common questions that can be resolved on a class-wide basis, the evidence in this case satisfies this showing. First, Appellants argue that Dr. Norrell's expert report demonstrates that the public was not generally aware of insurance companies' dual-rate practices. That report concludes that "the public, or the average citizen of the United States, including African-Americans, was not generally aware of [these] practices." (J.A. at 70.) Whether the "average citizen" (whoever that is) or "the public" (whoever that is) was or was not "generally aware" of insurance companies' dual-rate practices, is, however, irrelevant to the question that the trier of fact will have to answer to resolve Jefferson-Pilot's statute of limitations defense on the merits: Were any of the individual class members aware, actually or constructively, outside of the limitations period that Jefferson-Pilot was treating him or her differently from white policyholders? Dr. Norrell's report, therefore, does not support a finding that the trier of fact could resolve this question on a class-wide basis.
Third, Appellants argue that because of the homogeneity of the class, which they describe as being comprised of "blue-collar African-Americans" (Appellants' Br. at 14), any question of whether the members of the class were exposed to sufficient information to cause their claims to accrue can be determined on a class-wide basis. But short of the fact that the class members are all African-American and all purchased industrial life insurance policies from Jefferson-Pilot, the record reveals no information that would allow us to conclude that the class members — 1.4 million African-Americans of all ages and both sexes, who are spread out geographically over four states and temporally over 62 years — are so homogeneous that media reports and other information about dual-rate practices would affect them all in precisely the same manner. We refuse to make such broad generalizations about the class members based on nothing more than the color of their skin and inferences about their socio-economic status arising from the fact that they purchased an industrial life insurance policy from Jefferson-Pilot. To do so would be to engage in the very brand of stereotyping about which Appellants complain.
Fourth, Appellants argue that because Jefferson-Pilot instructed its agents to conceal the dual-rate practices, we should create a class-wide presumption of unawareness of those practices that Jefferson-Pilot failed to rebut by failing to offer any evidence that any class member knew or should have known about the practices. According to Appellants, this unrebutted class-wide presumption allows the district court to resolve the statute of limitations issue (in their favor) on a class-wide basis.
Our good colleague in dissent does not make any argument (short of simple assertion) that the evidence in this case demonstrates that Jefferson Pilot's statute of limitations defense can be resolved on a class-wide basis, post at 336 n. 3, yet he repeatedly argues that the district court abused its discretion in denying the certification motion because Jefferson-Pilot failed to show that its statute of limitations defense requires individualized adjudication. We believe, however, that burdens of proof and standards of review matter. As we have demonstrated, the relevant inquiry is not whether Jefferson-Pilot has shown that the statute of limitations defense requires individualized adjudication, but whether the district court clearly erred in finding that Appellants failed to show that the statute of limitations defense can be resolved on a class-wide basis. For the reasons set forth above, we believe that it did not.
We recognize that parts of our analysis of these issues are in some tension with the Fifth Circuit's decision in In re Monumental Life Ins. Co., 365 F.3d 408 (5th Cir.2004), cert. denied sub nom. Am. Nat'l
While this holding seems apposite to the issue presented here, closer inspection reveals that the court in Monumental neither held what Appellants ask us to hold nor even directly addressed the question before us today. In Monumental, the insurance companies relied on a theory of constructive notice in support of their statute of limitations defense; i.e., that because of the widespread media coverage of insurance companies' dual-rate practices, the court could find that reasonable persons, including class members, should have been aware of sufficient information to provide actual or constructive knowledge of the practices. Id. at 421 ("[D]efendants rely on a theory of constructive notice, arguing that widespread media reporting of the issue over the last several decades should have excite [d] the inquiry of a reasonable person. Where events receive widespread publicity, plaintiffs may be charged with knowledge of their occurrence." (alterations in original and citations omitted)). The court held that because the record contained no evidence that media coverage of the issue varied from state to state, the question of whether a reasonable person could be held to have been exposed to sufficient information to provide actual or constructive knowledge presented a question that could be resolved on a class-wide basis. Id.
Here, by contrast, Jefferson-Pilot does not argue that the district court should hold that widespread media treatment of the issue provided a reasonable person with sufficient information to give him either actual or constructive knowledge. Instead, it argues that individual class members were actually exposed to sufficient
Our interpretation of Monumental is buttressed by the proceedings on remand in that case. Instead of relying on a theory of constructive notice in support of their statute of limitations defense, as they had before the Fifth Circuit, the insurance companies on remand relied on a theory of actual notice, as Jefferson-Pilot does here. In re: Industrial Life Ins. Litigation, MDL No. 1371, slip. op. at 13 n. 18, 2006 WL 372004, *___, n. 18 (E.D.La. Jan. 25, 2006) (order denying class certification) ("The majority in Monumental seemed to assume that the defendants relied solely on an issue of constructive notice, whereas it is clear on remand that the defendants intend to pursue [a] theor[y] of actual notice. . . ."). On this new legal theory, the district court denied the certification motion, finding that "the plaintiffs . . . failed to show that the predominance requirement of Rule 23(b)(3) has been satisfied" because "individualized proof is patently required to litigate the defendants' statute of limitations defense." Id. slip op. at 15, 2006 WL 372004, *___ (emphasis added).
We therefore conclude that the district court did not clearly err in finding that Jefferson-Pilot's statute of limitations defense presented issues that cannot be determined on a class-wide basis. As our discussion reveals, this conclusion is not born of a view that individual questions necessarily arise any time a defendant raises a statute of limitations defense. Such a holding would be inconsistent with Gariety's requirement that the district court take a "close look" at the facts relevant to the certification question. 368 F.3d at 365 (internal quotations omitted). Indeed, we can easily foresee a situation where the defendant's statute of limitations defense is so dependant upon facts applicable to the entire class, qua class, that individual hearings would not be necessary.
As noted, the district court did not base its Rule 23(b)(3) denial of Appellants' certification motion solely on its finding that the individual issues presented by Jefferson-Pilot's statute of limitations defense predominated over the common issues present in the case, such as whether Jefferson-Pilot's acts violated §§ 1981 and 1982. Rather, the district court also found that because each class member suffered unique damages, the class's claim for equitable restitution was likewise not susceptible to class-wide determination. Moreover, the district court found that allowing the case to proceed as a class action would
Appellants neither challenge these additional findings nor do they argue that,
Appellants also argue that certification was proper under Rule 23(b)(2) because the class seeks an injunction and equitable restitution. Jefferson-Pilot argues that Rule 23(b)(2) certification is improper because Appellants' injunction request is illusory and because Appellants' equitable demand is essentially a request for monetary relief.
A putative class satisfies Rule 23(b)(2) if " the party opposing the class has acted on grounds generally applicable to the class,  thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole."
Rule 23(b)(2) advisory committee's note. Accordingly, we have held that Rule 23(b)(2) does not "cover cases where the primary claim is for damages, but is only applicable where the relief sought is . . . predominantly injunctive or declaratory." Lukenas, 538 F.2d at 595 (internal quotation marks and ellipsis omitted); see also Zimmerman v. Bell, 800 F.2d 386, 389-90 (4th Cir.1986)(holding that Rule 23(b)(2) does not apply where the proposed class seeks "essentially monetary relief," but is
The twin requirements of Rule 23(b)(2) — that the defendant acted on grounds applicable to the class and that the plaintiff seeks predominantly injunctive or declaratory relief — make that Rule particularly suited for class actions alleging racial discrimination and seeking a court order putting an end to that discrimination. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) ("Civil rights cases against parties charged with unlawful, class-based discrimination are prime examples [in which class certification is proper under Rule 23(b)(2)].").
The requirement that declaratory or injunctive relief predominate, of course, echoes the predominance requirement of Rule 23(b)(3), and, albeit indirectly, "serves essentially the same function." See Allison v. Citgo Petroleum Corp., 151 F.3d 402, 414-15 (5th Cir.1998). A class-action claim for monetary relief may present common questions of liability, but, because the goal of the damage phase is to compensate the plaintiffs for their individual injuries, the claim will generally require the court to conduct individual hearings to determine the particular amount of damages to which each plaintiff is entitled. See id. at 413 ("Monetary remedies are more often related directly to the disparate merits of individual claims. As a result, a class seeking substantial monetary remedies will more likely consist of members with divergent interests." (citations omitted)). Where the requested relief is declaratory or injunctive, by contrast, the goal of the remedy phase is either to make a declaration about or enjoin the defendant's actions affecting the class as a whole, and individual hearings will not be necessary. See id. ("[T]he underlying premise of the [Rule 23(b)(2)] class [is] that its members suffer from a common injury properly addressed by class-wide relief. . . ."). Rule 23(b)(2)'s categorical exclusion of class actions seeking primarily monetary relief, like Rule 23(b)(3)'s predominance requirement, therefore ensures that the class is sufficiently cohesive that the class-action device is properly employed.
Appellants argue that certification was proper under Rule 23(b)(2) because their request for injunctive relief from Jefferson-Pilot's collection of discriminatory
This conclusion brings us to the class's request for restitution. Appellants argue that Rule 23(b)(2) authorizes certification when the predominant relief the class seeks is equitable in nature. They also argue that their request is an equitable one. We disagree with both of these arguments.
The text of Rule 23(b)(2) says nothing whatsoever about equitable relief, but authorizes class treatment only when the plaintiff seeks predominantly "injunctive" or "declaratory" relief. "[W]hen the terms of a statute are clear and unambiguous, [as they are here,] our inquiry ends and we should stick to our duty of enforcing the terms of the statute as Congress has drafted it." Sigmon Coal Co. v. Apfel, 226 F.3d 291, 305 (4th Cir.2000) (citations and internal quotation marks omitted); Business Guides, Inc. v. Chromatic Communications Enters, Inc., 498 U.S. 533, 540, 111 S.Ct. 922, 112 L.Ed.2d 1140 (1991) (applying the plain meaning rule to the Federal Rules of Civil Procedure). To be sure, injunctive and declaratory relief are equitable remedies. But if the Rule's drafters had intended the Rule to extend to all forms of equitable relief, the text of the Rule would say so. See Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 168, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993) (applying the maxim expressio unius est exclusio alterius to the Federal Rules of Civil Procedure). We therefore hold that certification under Rule 23(b)(2) is improper when the predominant relief sought is not injunctive or declaratory, even if the relief is equitable in nature. Because Appellants' injunction request is illusory, their prayer for injunctive relief cannot predominate over their prayer for non-injunctive, non-declaratory equitable relief under any reasonable interpretation of Rule 23(b)(2).
Appellants seek to counter this conclusion by arguing that such a holding is incompatible with Title VII case law where courts, including our own, have found certification proper under Rule 23(b)(2) despite the fact the prevailing plaintiffs are entitled to monetary relief in the form of backpay, which the courts have characterized as a form of equitable relief. See, e.g., Albemarle Paper Co. v. Moody, 422 U.S. 405, 416, 95 S.Ct. 2362, 45 L.Ed.2d 280 (1975); Robinson v. Lorillard Corp., 444 F.2d 791 (4th Cir.1971). But this argument misconstrues our holding: we do not hold, nor have we ever held, that monetary relief is fundamentally incompatible with Rule 23(b)(2). Instead, we hold only that relief that is neither injunctive nor declaratory may not predominate over the injunctive and declaratory relief in a proper Rule 23(b)(2) action. This holding necessarily contemplates that some non-injunctive or non-declaratory relief, be it equitable or, possibly, legal, may be proper under Rule 23(b)(2), so long as it does not predominate. And in the Title VII context, awards of backpay do not predominate over the injunctive remedies available because the "calculation of back pay generally involves [relatively un]complicated factual determinations and few[ ] individualized issues." Coleman v. Gen. Motors Acceptance Corp.,
Even assuming that Rule 23(b)(2) authorizes certification when the class seeks a predominantly equitable remedy, we conclude that Appellants do not seek equitable relief. Restitution can be a legal or an equitable remedy. See Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 212-18, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002). It is a legal remedy where the plaintiff cannot "assert title or right to possession of particular property, but [he] might be able to show just grounds for recovering money to pay for some benefit the defendant had received from him." Id. at 213, 122 S.Ct. 708. It is an equitable remedy, by contrast, "where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant's possession. . . . But where the property sought to be recovered or its proceeds have been dissipated so that no product remains, the plaintiff's claim is only that of a general creditor" and the restitution claim is a legal one. Id. (internal quotation marks and alterations omitted). Appellants, who, it bears repeating, shoulder the burden of proving certification, have not submitted any evidence — nor have they even argued — that Jefferson-Pilot's race-based premium over-charges are traceable. On the record before us, therefore, we cannot conclude that the class's restitution request is an equitable remedy.
For the foregoing reasons, we affirm the district court's denial of Appellants' motion for class certification and remand for further proceedings on Appellants' individual claims.
AFFIRMED AND REMANDED.
MICHAEL, Circuit Judge, dissenting:
The majority's decision to affirm the denial of class certification means that Jefferson-Pilot Life Insurance Company will never be held to account if it discriminated against 1.4 million African-Americans by charging them higher premiums for industrial life insurance than it charged whites. This case makes sense only as a class action because the liability issues are complex and the maximum loss suffered by any class member "is at most, hundreds of dollars." J.A. 280. My point is hardly "puzzling." See ante at 328 n. 20. As the Supreme Court has said, "The policy at the very core of the class action mechanism is to overcome the problem that small
The majority errs by accepting at face value Jefferson-Pilot's argument that class certification is precluded because the Company's statute of limitations defense raises questions that must be decided individually for every class member. The facts tendered at the class certification stage reveal that the Company has at most a defense that the policyholders had constructive knowledge of their injury within the limitations period. The constructive knowledge theory is based solely on the assertion of the Company's expert that there was widespread publicity, both nationally and in the Southeast, about the dual-rate practices of white-owned insurance companies. The record, however, does not contain any facts to suggest that there are individual differences in what class members "could have known" about the dual-rate practices. Thus, the limitations defense can be determined on a classwide basis, and the Rule 23(b)(3) requirement that common issues predominate over any individual ones is met. For this reason, I respectfully dissent.
The facts alleged, if proven true, portray a grievous wrong against well over a million African-Americans. From the early 1900s until the mid-1970s, Jefferson-Pilot (or its predecessors) charged African-Americans higher premiums than similarly situated whites for industrial life insurance. These policies have a low face value (often less than $500), with premiums collected by company agents at the home of the policyholder on a weekly or monthly basis. The Company sold these policies to 1.4 million African-Americans in Georgia, North Carolina, South Carolina, and Virginia. (Ninety percent of the policies were sold in North Carolina.) In 2000 Jefferson-Pilot declared all active industrial life policies to be paid up, and no further premiums were collected. About 45,000 of the policies were still in effect as of 2004. The plaintiffs allege the Company targeted occupations and geographic areas known to have a high concentration of African-Americans. More specifically, the plaintiffs allege that the Company "targeted low income, impoverished, and disadvantaged African-Americans who typically were unsophisticated with respect to life insurance." J.A. 29 ¶ 17. Finally, it is alleged that African-Americans did not know and could not have reasonably known they were charged higher premiums than whites because the Company engaged in a pervasive scheme to conceal this practice. These discriminatory practices, the plaintiffs allege, violate the Civil Rights Act, 42 U.S.C. §§ 1981-1982. The complaint requests injunctive relief, equitable restitution, and punitive damages. In its defense, Jefferson-Pilot maintains that the higher rates charged to African-Americans were based on mortality tables. The Company also asserts the statute of limitations as a defense.
The named plaintiffs seek to represent a class of 1.4 million African-Americans who bought industrial life insurance from Jefferson-Pilot. When the plaintiffs moved for class certification, a key issue was whether the Company's statute of limitations defense required individualized determinations. At the certification stage, the parties offered the following evidence concerning the nature and merits of the Company's limitations defense. Four potential class members were deposed, and none had actual knowledge of his or her injury outside the limitations period. In
The district court found that Jefferson-Pilot's statute of limitations defense requires individualized proof as to each class member. This finding is erroneous as a matter of law, and it misled the court to conclude that Rule 23(b)(3)'s predominance requirement cannot be met here. The record shows that the limitations defense presents not individualized questions, but common ones that can be answered on a classwide basis. If the district court had undertaken the rigorous analysis of the record required by Gariety v. Grant Thornton, LLP, 368 F.3d 356 (4th Cir. 2004), it could not have concluded that the statute of limitations defense presents individualized questions.
In Gariety we noted that "Rule 23(b)(3) on its face requires [a district] court to `find [ ] that the questions of law or fact common to members of the class predominate over questions affecting only individual members.'" Id. at 365 (emphasis and second alteration in original). In making the necessary findings, a district court is not required "simply to accept the [parties'] allegations at face value," for "sometimes it may be necessary . . . to probe behind the pleadings." Id. at 365-66 (citation omitted). Otherwise, there would be nothing to prevent parties from making unsupported allegations in order "to bolster or undermine a finding of predominance." Id. at 365 (citation omitted). In all events, a district court has the responsibility "for taking a `close look' at relevant matters" and "for conducting a `rigorous analysis' of such matters" before making the findings required by Rule 23(b)(3). Id. (citation omitted). We recognized in Gariety that findings made under Rule 23 may "overlap [with] findings that will have to be made on the merits." Id. at 366. This is permissible, we said, because findings made to resolve class certification questions do not bind the ultimate decisionmaker's finding on the merits. Although the district court in this case went beyond the pleadings and examined the report of the defense expert, the court accepted too readily the expert's unsupported conclusion that it was necessary to make an individual inquiry about each class member's access to the available information. The "rigorous analysis" required by Gariety demonstrates that the limitations defense can be determined on a classwide basis.
Jefferson-Pilot raises both actual and constructive knowledge as the basis for its limitations defense, and it argues that neither theory is capable of classwide adjudication. I disagree. With respect to the Company's actual knowledge theory, there is no evidence of actual knowledge to support the district court's finding that individualized inquiry is necessary to adjudicate the limitations defense. The Company deposed four class representatives, and their testimony reveals that not
Jefferson-Pilot's more plausible argument is that the class members had constructive knowledge of the challenged conduct outside the limitations period. A federal claim accrues under the constructive knowledge theory when the plaintiff "possessed sufficient facts to . . . have reason to know of the alleged injury." Brooks v. City of Winston-Salem, N.C., 85 F.3d 178, 181 (4th Cir.1996). The claim accrues, in other words, when the plaintiff "should have known (or been put on inquiry notice of) [his] injury." Thompson v. Metro. Life Ins. Co., 149 F.Supp.2d 38, 52 n. 12 (S.D.N.Y.2001). The district court found that the Company's expert "presented a strong prediction that there were numerous sources of evidence available during the relevant period which could have alerted class members to the fact that the practices now complained of were common in the industry." J.A. 296 (emphasis added). To begin with, this finding does not incorporate the correct legal standard, which is whether plaintiffs "ha [d] reason to know," Brooks, 85 F.3d at 181, or "should have known," Thompson, 149 F.Supp.2d at 52 n. 12, of their injury. More importantly, the finding, which is based entirely on the report of the Company's expert, does not establish that adjudication of the constructive notice limitations defense requires individualized proof.
Dr. McKiven, Jefferson-Pilot's expert, asserts there was "widespread publicity," both nationally and regionally, about the race-based "pricing differential." J.A. 82, 101. This assertion suggests that the
Dr. McKiven also refers to other information on the issue. Black-owned insurance companies encouraged their agents to speak out in churches and in their sales calls about the race-based pricing of white-owned companies. The Congress of Industrial Organizations issued results of a survey indicating that African-Americans did not receive equal treatment from white-owned insurance companies. The NAACP and the Urban League published a few articles in their national magazines addressing the dual-rate practices. Finally, at three congressional hearings testimony was presented on the issue. All of these efforts had a broad regional or national focus.
Dr. McKiven thus concludes that "widespread publicity about [higher life insurance rates for African-Americans] existed in the Southeast" and nationally. J.A. 82. Tellingly, he offers no facts in his twenty-page report to suggest that there are individualized differences in what the class members "could have" known about the dual-rate practices. In other words, McKiven does not say that there was any variation among individual class members as to what they could have known. This lack of variation makes classwide treatment appropriate.
This case, then, is like the case presented on appeal in In re Monumental Life Insurance Co., 365 F.3d 408 (5th Cir.), cert. denied, 543 U.S. 870, 125 S.Ct. 277, 160 L.Ed.2d 117 (2004), where the court held that the insurance companies' statute of limitations defense — whether African-American plaintiffs had constructive knowledge that they were discriminated against in the purchase of industrial life insurance — could be decided on a classwide basis. Like Jefferson-Pilot, the insurance companies in the Monumental appeal relied on "widespread media reporting" that conveyed the same information about the issue in both national and local markets. Id. at 421. The majority's efforts to distinguish the Fifth Circuit's opinion in Monumental fail. The majority says:
Ante at 326. Thus, the majority concludes that "the district court here must conduct individual inquiry into the information each class member actually possessed to determine whether each class member had actual or constructive knowledge of Jefferson Pilot's dual-rate practices." Ante at 326. The problem with this argument is that Jefferson-Pilot has nothing but widespread media treatment and publicity to rely on for its defense that, in the majority's
The Fifth Circuit remanded the Monumental case to the Eastern District of Louisiana for further proceedings on class certification. The plaintiffs then renewed their motion to certify a class against two insurance companies that administrated industrial life insurance policies issued by more than 280 companies. In response the insurance companies offered evidence showing "regional differences in media treatment" of discriminatory pricing and an expert who, according to the Louisiana district court, "proved that whether and when any individual would have learned about industrial life insurance pricing practices depends on where they lived, the time period, what newspapers and articles they read, and what oral conversations they had in local churches or through other social networks." In re Indus. Life Ins. Litig., MDL No. 1371, slip op. at 14, 2006 WL 372004, *____ (E.D.La. Jan. 25, 2006) (order denying class certification) (internal quotation marks omitted and emphasis added). As a result, the district court in the Monumental remand concluded that individualized proof on the limitations issue was required and that Rule 23(b)(3)'s predominance requirement had not been satisfied. Id. slip op. at 14-15, 365 F.3d 408, 417, 2004 WL 718806, *6.
What the defense expert "proved" on remand in Monumental underscores what is lacking in this case. Here, the evidence concerning the information about the dual-rate practices focuses on its wide-spread dissemination rather than on whether the information available varied from place to place or from time period to time period. Accordingly, the district court's finding here — that "numerous sources available . . . could have alerted class members" to the discriminatory pricing, J.A. 296 — does not establish that individualized inquiry is necessary. I would not, however, foreclose the possibility of the district court's later reconsideration of the issue of whether the limitations defense presents individual questions. If discovery on the merits was to show that information about the dual-rate practices varied materially from place to place or from time period to time period in the four relevant states, then the issue of any class certification could be revisited by the district court.
In sum, as the record now stands, the statute of limitations defense presents issues that are common to the class. In addition, the plaintiffs' direct case involves a collective or common claim that the Company engaged in a single, sustained course of intentional discrimination against African-American policyholders by charging them higher rates for industrial life insurance than similarly situated whites.
Rule 23(a)'s prerequisites for a class action, numerosity, commonality, typicality, and adequacy of representation are also satisfied in this case. See Fed.R.Civ.P. 23(a). First, there is no dispute that the proposed class meets the numerosity requirement. Second, as I have just demonstrated, the plaintiffs' affirmative case of discrimination and Jefferson-Pilot's statute of limitations defense both present questions that are common to the class. Third, because the claims of the representative parties are the same as the claims of the class, the typicality requirement is satisfied. Fourth, the district court concluded that any potential representational conflicts could be avoided by limiting the class to "insureds," and "if necessary, by subclassing." J.A. 294. Thus, "the representative parties will fairly and adequately protect the interests of the class." Fed. R.Civ.P. 23(a)(4).
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The prerequisites of Rule 23(a) and the predominance requirement of Rule 23(b)(3) have been met. I would therefore vacate the district court's order denying class certification. In its order denying class certification, the district court briefly mentioned "[a]dditional Rule 23(b)(3) [c]oncerns," J.A. 303, relating to whether the class action method would be superior in this case. Because these concerns were fueled in large measure by the district court's erroneous finding that the statute of limitations defense could not be resolved on a classwide basis, I would remand to allow the district court to reconsider the Rule 23(b)(3) superiority issues.
While § 1981 was enacted well before 1990, Congress amended § 1981 in 1991 to provide additional protections in the right to "make and enforce contracts." See 42 U.S.C.A. § 1981(b). The Supreme Court has held that a cause of action that relies on these additional rights is subject to the four-year statute of limitations found in § 1658. Jones v. R.R. Donnelley & Sons Co., 541 U.S. 369, 382, 124 S.Ct. 1836, 158 L.Ed.2d 645 (2004).
For purposes of this appeal, we need not consider whether Appellants' claims rely on the 1991 amendments to § 1981, thus triggering § 1658 instead of borrowed state law, because neither party disputes that accrual occurs when the class members knew or should have known of Jefferson-Pilot's dual-rate practices, regardless of whether the limitations period is determined by § 1658 or state law.
Our dissenting colleague seems to think that this second situation was satisfied here. He does not argue that the record fails to support the district court's finding that information from numerous sources was available during the relevant period to the class members that "could have alerted" them of Jefferson-Pilot's race-based practices. Rather, he contends that the "could have alerted" standard is incorrect as a matter of law, that the correct legal standard is whether class members had actual or constructive knowledge of Jefferson-Pilot's practices, and that the evidence did not satisfy this standard. Post at 338-39. We disagree. The dissent again confuses the merits of Jefferson-Pilot's statute of limitations defense with the certification issue before us today. In evaluating whether Jefferson-Pilot's limitations defense is even an "issue" in the case, the question is not whether the record demonstrates that any particular class members had actual or constructive knowledge of Jefferson-Pilot's race-based practices — as it would be on the merits — but whether the record demonstrates that an argument that any class members had such knowledge is patently without merit. We believe that the "could have alerted" standard appropriately captures this inquiry.
Moreover, the district court's factual finding on this point is correct. Every potential class member who believes that his §§ 1981 and 1982 rights were violated may file an action in state or federal court. See Sullivan v. Little Hunting Park, Inc., 396 U.S. 229, 235-40, 90 S.Ct. 400, 24 L.Ed.2d 386 (1969) (holding that state and federal courts have concurrent jurisdiction under §§ 1981 and 1982). If such a party prevails, he may be entitled to punitive damages, see Johnson v. Railway Exp. Agency, Inc., 421 U.S. 454, 460-61, 95 S.Ct. 1716, 44 L.Ed.2d 295 (1975), and attorney's fees, see 42 U.S.C.A. § 1988 (West 2003); Hensley v. Eckerhart, 461 U.S. 424, 429, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983). Although the amount of damages recovered is relevant to the amount of the punitive damage and attorney's fee award, the small amount of damages involved in each individual plaintiff's claims against Jefferson-Pilot would not necessarily provide an obstacle to a sizeable attorney's fee award because the Supreme Court has rejected "the proposition that fee awards under § 1988 should necessarily be proportionate to the amount of damages a civil rights plaintiff actually recovers." City of Riverside v. Rivera, 477 U.S. 561, 574, 106 S.Ct. 2686, 91 L.Ed.2d 466 (1986). Awards of attorney's fees substantially exceeding damages are not unusual in civil rights litigation. See, e.g., Mercer v. Duke Univ., 401 F.3d 199, 211-12 (4th Cir.2005) (affirming $349,244 in attorney's fees awarded in Title IX suit yielding only nominal damage award); Wadsworth v. Clindon, 846 F.2d 265, 266-67 (4th Cir.1988) (affirming $13,317 in attorney's fees awarded in Fair Housing Act suit yielding $1,000 in compensatory damages); Northington v. Marin, 102 F.3d 1564, 1570-71 (10th Cir.1996) (affirming $93,649 in attorney's fees awarded in § 1983 suit yielding $5,000 judgment); Estate of Borst v. O'Brien, 979 F.2d 511, 517 (7th Cir.1992) (affirming $47,254 in attorney's fees in § 1983 suit yielding $500 in compensatory damages and $500 in punitive damages). Indeed, the attentive reader of this opinion will observe that our disposition is to affirm the district court's denial of the certification motion and remand to allow the Appellants to pursue their individual claims.
While we are empathetic to Appellants' plight, even assuming that the class-action device is more favorable to Appellants than individual actions would be, it is not the task of the federal court to create class-action rules that favor those with whom we empathize.
On remand, the insurance companies in Monumental submitted evidence showing that only 2%, or approximately 112,000 of the policies at issue in that case, were still in force and less than 1/10th of 1%, or fewer than 5,600, of those policies were still collecting premiums. In re: Industrial Life Ins. Litigation, 2006 WL 372004, *___-___, slip. op. at 4-5. The district court credited this evidence, and denied certification under Rule 23(b)(2) in part because of its finding that the injunctive relief sought by a "statistically insignificant" number of plaintiffs did not predominate over non-injunctive and non-declaratory relief. Id. at 9.
In Broussard a class of former and current Meineke muffler shop franchisees was awarded judgment against the franchisor on various claims, including breach of contract, fraud, and negligence. We reversed certification of the class because none of Rule 23(a)'s four prerequisites was satisfied. The lack of adequate representation was our main reason for reversal, but we also found that the central issues, including whether the statute of limitations was tolled, presented individual questions. We said in Broussard that "tolling the statute of limitations on each of [the] plaintiffs' claims depends on individualized showings" because the "representations made to each franchisee varied considerably." 155 F.3d at 342. After concluding that the limitations question was not common to the class, we added the following statement: "As the Ninth Circuit has recognized, when the defendant's `affirmative defenses (such as . . . the statute of limitations) may depend on facts peculiar to each plaintiff's case,' class certification is erroneous." Id. (quoting In re Northern Dist. of Cal. Dalkon Shield IUD Prods. Liab. Litig., 693 F.2d 847, 853 (9th Cir.1982)). At least two courts of appeals have suggested that in making this statement we were flirting with a per se rule against class certification when individual affirmative defense issues are presented. See Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 296 n. 4 (1st Cir.2000); In re Linerboard Antitrust Litig., 305 F.3d 145, 161 (3d Cir. 2002). In the same vein, the district court here read the Broussard statement to mean "[t]he Fourth Circuit has specifically found that individual issues preclude class treatment." J.A. 292. Although the statement has understandably grabbed attention, it was not our holding. Indeed, if it had been, it would have conflicted with Rule 23(b)(3), which allows class action status for cases presenting individual questions so long as common questions predominate. Our holding in Broussard was simply that the class did not meet Rule 23(a)'s requirements.
In Gunnells purchasers and beneficiaries of a defunct multi-employer health plan sued the claims administrator for breach of duty and the insurance agents who marketed the plan for negligence, fraud, and breach of contract. We reversed certification of a class action against the insurance agents because the claims of the plaintiffs and the affirmative defenses of the agents, taken together, presented too many issues requiring individualized inquiry. Gunnells, 348 F.3d at 434-38. Common questions did not predominate.
In sum, neither Broussard nor Gunnells stands for the proposition that the existence of individual issues precludes class certification when common issues predominate.