9 Aggregation
9.1 Joinder
So far we have focused primarily on the simplest form of adversarial litigation: one plaintiff sues one defendant. And we have primarily been concerned with cases in which only the plaintiff asserts claims. But the most interesting kinds of litigations concern multiple claims, multiple parties, or both. This chapter therefore begins to explore complex litigation.
We begin by investigating counterclaims, which are governed by Rule 13. As the next case shows, counterclaims come in two flavors: compulsory and permissive. You’ll notice that the line between the two tracks one of the elements of claim preclusion. This is no accident. See if you can figure out why it is so.
Cordero v. Voltaire, LLC
AUSTIN, M.J.
Report and Recommendation of the United States Magistrate Judge
TO: THE HONORABLE LEE YEAKEL UNITED STATES DISTRICT JUDGE
[…]
I. General Background
Plaintiffs Carlos Cordero, Omar Benitez, Cory Harvey, Remi Harvey and Toby Marrujo sue their former employer, Defendant Voltaire, LLC, a construction company, to recover unpaid overtime wages allegedly due under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq. Plaintiffs Cory Harvey, Toby Marrujo, Remi Harvey and Omar Benitez were employed as laborers with Defendant, while Carlos Cordero was employed as Vice President of Construction. Plaintiffs allege that Defendant willfully failed to pay them at least one and one-half times their regular rate of pay for overtime hours worked as is required under the FLSA.
In response, Defendant alleges that Plaintiffs cannot recover under the FLSA, or that any recovery should be reduced, because Plaintiffs have falsified and inflated the hours they allegedly worked. Specifically, Defendant alleges that “[Plaintiff-Laborers] and numerous other contractors working at Defendant’s job sites would provide their time to Carlos Cordero who would then accumulate that time and provide it to Defendant. Cordero was involved in a scheme to defraud and steal from Defendant which included falsifying and inflating the time [they] claimed to work for Defendant and also conspiring with the other workers to falsify and inflate their time that was turned in to Defendant.” In addition, Defendant alleges that Plaintiffs took valuable materials and equipment from it. Based upon the foregoing, Defendant has asserted […] counterclaims for fraud, theft, conversion and breach of fiduciary duty. […]
II. Analysis
Cordero, Remi Harvey, Corey Harvey, and Marrujo have each moved to dismiss the counterclaims […] pursuant to Federal Rules of Civil Procedure 12(b)(1). […]
A. Plaintiffs’ Rule 12(b)(1) Motion to Dismiss Defendant’s Counterclaims
Cordero argues that the counterclaims for theft, conversion, fraud and breach of fiduciary duty are permissive counterclaims under Federal Rule of Civil Procedure 13(b) and, therefore, must “be supported by independent grounds of federal jurisdiction.” […] Although the Court disagrees with some of the legal reasoning, it agrees that some of Voltaire’s counterclaims should be dismissed for lack of jurisdiction. […]
2. Supplemental Jurisdiction and Rule 13
[The court concluded that there could be jurisdiction over Voltaire’s counterclaims only if they were compulsory rather than permissive.]
3. Are Defendant’s Counterclaims Compulsory? […]
[I]t appears that the only counterclaim which is compulsory in this case is the counterclaim against Cordero for fraud. Voltaire alleges that Cordero committed fraud by submitting work statements to it with “falsified and inflated hours,” and that he submitted bills for time and expenses that were expended on personal and private projects. […] To prove his FLSA claim, Cordero will have to present evidence showing how many hours he worked, how much he was paid for those hours and how much he should have been paid for those hours. Similarly, to prove its fraud counterclaim, Voltaire will have to present evidence showing that Cordero billed it for false and/or inflated hours and for work expended on personal and private projects. Thus, both claims focus on whether Cordero is owed overtime compensation under the Act and if so, the amount actually owed. […] Based upon the foregoing, the Court recommends that the District Court deny Plaintiff Cordero’s Motion to Dismiss Defendant’s fraud counterclaim for lack of jurisdiction.
In contrast to the fraud counterclaim, the evidence needed to prove Defendant’s counterclaims for theft, conversion, and breach of fiduciary duty is entirely different than the evidence needed to prove Plaintiffs’ FLSA claim. Defendant’s allegations that Plaintiffs committed theft and conversion by unlawfully taking valuable equipment and materials and the resulting breach of their fiduciary duties plainly does not rest on the same operative facts as Plaintiffs’ FLSA claim that Defendant failed to pay them overtime wages. […]
[…]
[…] The Court therefore recommends that the District Court grant Plaintiff Cordero’s Motion to Dismiss Defendant’s counterclaims for theft, conversion, and breach of fiduciary duty under Rule 12(b)(1), but deny the Motion with regard to Voltaire’s fraud counterclaim. The Court further recommends that the District Court grant Plaintiffs Remi Harvey, Cory Harvey, and Marrujo’s Motion to Dismiss Defendant’s counterclaims for theft and conversion under Rule 12(b)(1). […]
Notes & Questions
What distinguishes compulsory and permissive counterclaims?
Based on what you know about the law of former adjudication, what other consequences flow from a counterclaim’s classification as compulsory? In other words, what is the implicit penalty for failing to raise a compulsory counterclaim?
The next several cases shift gears from additional claims to additional parties. Rules 19 and 20, respectively, govern whom a plaintiff must or may join as additional parties. Rule 14 controls whom a defendant may name as an additional party by filing a third-party complaint, also known as impleader. Finally, Rule 24 regulates when strangers may force their way into an existing case through a mechanism known as intervention.
Mosley v. General Motors Corp.
ROSS, J.
Nathaniel Mosley and nine other persons joined in bringing this action individually and as class representatives alleging that their rights guaranteed under 42 U.S.C. § 2000e et seq. and 42 U.S.C. § 1981 were denied by General Motors and Local 25, United Automobile, Aerospace and Agriculture Implement Workers of America [Union] by reason of their color and race. […] Each of the ten named plaintiffs had, prior to the filing of the complaint, filed a charge with the Equal Employment Opportunity Commission [EEOC] asserting the facts underlying these claims. Pursuant thereto, the EEOC made a reasonable cause finding that General Motors, Fisher Body Division and Chevrolet Division, and the Union had engaged in unlawful employment practices in violation of Title VII of the Civil Rights Act of 1964. Accordingly, the charging parties were notified by EEOC of their right to institute a civil action in the appropriate federal district court. […]
In each of the first eight counts of the twelve-count complaint, eight of the ten plaintiffs alleged that General Motors, Chevrolet Division, had engaged in unlawful employment practices by: “discriminating against Negroes as regards promotions, terms and conditions of employment”; “retaliating against Negro employees who protested actions made unlawful by Title VII of the Act and by discharging some because they protested said unlawful acts”; “failing to hire Negro employees as a class on the basis of race”; “failing to hire females as a class on the basis of sex”; “discharging Negro employees on the basis of race”; and “discriminating against Negroes and females in the granting of relief time.” Each additionally charged that the defendant Union had engaged in unlawful employment practices “with respect to the granting of relief time to Negro and female employees” and “by failing to pursue … grievances.” The remaining two plaintiffs made similar allegations against General Motors, Fisher Body Division. All of the individual plaintiffs requested injunctive relief, back pay, attorneys’ fees and costs. Counts XI and XII of the complaint were class action counts against the two individual divisions of General Motors. They also sought declaratory and injunctive relief, back pay, attorneys’ fees and costs. […]
The district court ordered that “insofar as the first ten counts are concerned, those ten counts shall be severed into ten separate causes of action,” and each plaintiff was directed to bring a separate action based upon his complaint, duly and separately filed. The court also ordered that the class action would not be dismissed, but rather would be left open “to each of the plaintiffs herein, individually or collectively … to allege a separate cause of action on behalf of any class of persons which such plaintiff or plaintiffs may separately or individually represent.”
In reaching this conclusion on joinder, the district court followed the reasoning of Smith v. North American Rockwell Corp., which, in a somewhat analogous situation, found there was no right to relief arising out of the same transaction, occurrence or series of transactions or occurrences, and that there was no question of law or fact common to all plaintiffs sufficient to sustain joinder under Federal Rule of Civil Procedure 20(a). Similarly, the district court here felt that the plaintiffs’ joint actions against General Motors and the Union presented a variety of issues having little relationship to one another; that they had only one common problem, i.e., the defendant; and that as pleaded the joint actions were completely unmanageable. Upon entering the order, and upon application of the plaintiffs, the district court found that its decision involved a controlling question of law as to which there is a substantial ground for difference of opinion and that any of the parties might make application for appeal under 28 U.S.C. § 1292(b). We granted the application to permit this interlocutory appeal and for the following reasons we affirm in part and reverse in part.
Rule 20(a) of the Federal Rules of Civil Procedure provides:
[(1) Plaintiffs. Persons may join in one action as plaintiffs if:
(A) they assert any right to relief jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and
(B) any question of law or fact common to all plaintiffs will arise in the action.]
Additionally, Rule 20(b) and Rule 42(b) vest in the district court the discretion to order separate trials or make such other orders as will prevent delay or prejudice. In this manner, the scope of the civil action is made a matter for the discretion of the district court, and a determination on the question of joinder of parties will be reversed on appeal only upon a showing of abuse of that discretion. To determine whether the district court’s order was proper herein, we must look to the policy and law that have developed around the operation of Rule 20.
The purpose of the rule is to promote trial convenience and expedite the final determination of disputes, thereby preventing multiple lawsuits. Single trials generally tend to lessen the delay, expense and inconvenience to all concerned. Reflecting this policy, the Supreme Court has said: “Under the Rules, the impulse is toward entertaining the broadest possible scope of action consistent with fairness to the parties; joinder of claims, parties and remedies is strongly encouraged.”
Permissive joinder is not, however, applicable in all cases. The rule imposes two specific requisites to the joinder of parties: (1) a right to relief must be asserted by, or against, each plaintiff or defendant relating to or arising out of the same transaction or occurrence, or series of transactions or occurrences; and (2) some question of law or fact common to all the parties must arise in the action.
In ascertaining whether a particular factual situation constitutes a single transaction or occurrence for purposes of Rule 20, a case by case approach is generally pursued. No hard and fast rules have been established under the rule. However, construction of the terms “transaction or occurrence” as used in the context of Rule 13(a) counterclaims offers some guide to the application of this test. For the purposes of the latter rule, “‘Transaction’ is a word of flexible meaning. It may comprehend a series of many occurrences, depending not so much upon the immediateness of their connection as upon their logical relationship.” Accordingly, all “logically related” events entitling a person to institute a legal action against another generally are regarded as comprising a transaction or occurrence. The analogous interpretation of the terms as used in Rule 20 would permit all reasonably related claims for relief by or against different parties to be tried in a single proceeding. Absolute identity of all events is unnecessary.
This construction accords with the result reached in United States v. Mississippi, 380 U.S. 128 (1965), a suit brought by the United States against the State of Mississippi, the election commissioners, and six voting registrars of the State, charging them with engaging in acts and practices hampering and destroying the right of black citizens of Mississippi to vote. The district court concluded that the complaint improperly attempted to hold the six county registrars jointly liable for what amounted to nothing more than individual torts committed by them separately against separate applicants. In reversing, the Supreme Court said:
But the complaint charged that the registrars had acted and were continuing to act as part of a state-wide system designed to enforce the registration laws in a way that would inevitably deprive colored people of the right to vote solely because of their color. On such an allegation the joinder of all the registrars as defendants in a single suit is authorized by Rule 20(a) of the Federal Rules of Civil Procedure. […] These registrars were alleged to be carrying on activities which were part of a series of transactions or occurrences the validity of which depended to a large extent upon “question[s] of law or fact common to all of them.”
Here too, then, the plaintiffs have asserted a right to relief arising out of the same transactions or occurrences. Each of the ten plaintiffs alleged that he had been injured by the same general policy of discrimination on the part of General Motors and the Union. Since a “state-wide system designed to enforce the registration laws in a way that would inevitably deprive colored people of the right to vote” was determined to arise out of the same series of transactions or occurrences, we conclude that a company-wide policy purportedly designed to discriminate against blacks in employment similarly arises out of the same series of transactions or occurrences. Thus the plaintiffs meet the first requisite for joinder under Rule 20(a).
The second requisite necessary to sustain a permissive joinder under the rule is that a question of law or fact common to all the parties will arise in the action. The rule does not require that all questions of law and fact raised by the dispute be common. Yet, neither does it establish any qualitative or quantitative test of commonality. For this reason, cases construing the parallel requirement under Federal Rule of Civil Procedure 23(a) provide a helpful framework for construction of the commonality required by Rule 20. In general, those cases that have focused on Rule 23(a)(2) have given it a permissive application so that common questions have been found to exist in a wide range of contexts. Specifically, with respect to employment discrimination cases under Title VII, courts have found that the discriminatory character of a defendant’s conduct is basic to the class, and the fact that the individual class members may have suffered different effects from the alleged discrimination is immaterial for the purposes of the prerequisite. In this vein, one court has said:
[A]lthough the actual effects of a discriminatory policy may thus vary throughout the class, the existence of the discriminatory policy threatens the entire class. And whether the Damoclean threat of a racially discriminatory policy hangs over the racial class is a question of fact common to all the members of the class.
The right to relief here depends on the ability to demonstrate that each of the plaintiffs was wronged by racially discriminatory policies on the part of the defendants General Motors and the Union. The discriminatory character of the defendants’ conduct is thus basic to each plaintiff’s recovery. The fact that each plaintiff may have suffered different effects from the alleged discrimination is immaterial for the purposes of determining the common question of law or fact. Thus, we conclude that the second requisite for joinder under Rule 20(a) is also met by the complaint.
For the reasons set forth above, we conclude that the district court abused its discretion in severing the joined actions. The difficulties in ultimately adjudicating damages to the various plaintiffs are not so overwhelming as to require such severance. If appropriate, separate trials may be granted as to any particular issue after the determination of common questions.
The judgment of the district court disallowing joinder of the plaintiffs’ individual actions is reversed and remanded with directions to permit the plaintiffs to proceed jointly. […]
Notes & Questions
What is the test under Rule 20 for whether multiple plaintiffs may join together in a single lawsuit?
Why might multiple plaintiffs want to do so? Why might a defendant want to stop them from doing so?
If permissive joinder is denied, what are the would-be plaintiffs’ options?
Price v. CTB, Inc.
DE MENT, J.
[Price, a chicken farmer, hired Latco to build a new chicken house. After it was built, Price sued] Latco[, among others, over] […] the quality of its workmanship when it constructed chicken houses for various Alabama farmers. The causes of action against Latco include breach of the construction contract, fraudulent misrepresentation of the caliber of materials to be used, and negligence and wantonness in the construction. Latco moved to file a Third Party Complaint against, inter alios, ITW […]. […] In the Third Party Complaint, Latco alleges that ITW, a nail manufacturer, defectively designed the nails used in the construction of the chicken houses. The specific causes of action include breach of warranty, violation of the Alabama Extended Manufacturer’s Liability Doctrine, and common law indemnity. ITW argues that it was improperly impleaded under Rule 14 of the Federal Rules of Civil Procedure, or, alternatively, that the Third Party Complaint is barred by the equitable doctrine of laches.
Under Rule 14(a), a defendant may assert a claim against anyone not a party to the original action if that third party’s liability is in some way dependent upon the outcome of the original action. There is a limitation on this general statement, however. Even though it may arise out of the same general set of facts as the main claim, a third party claim will not be permitted when it is based upon a separate and independent claim. Rather, the third party liability must in some way be derivative of the original claim; a third party may be impleaded only when the original defendant is trying to pass all or part of the liability onto that third party.
Latco argues that ITW is the prototypical third party defendant under Rule 14. It asserts that ITW can be found liable for the warranty surrounding its products if Latco is first found liable for faulty construction. Furthermore, insists Latco, this derivative liability merely involves a shift in the overall responsibility of the allegedly defective chicken houses. ITW contends, however, that because Rule 14 is merely a procedural rule, the propriety of its application depends upon the existence of a right to indemnity under the substantive law. ITW accurately states the law in this regard, but its conclusion that there is no viable substantive claim under Alabama law is incorrect.
Conceding that Alabama does not recognize a right to contribution among joint tortfeasors, Latco directs the court’s attention to the concept of implied contractual indemnity. Under this doctrine, Alabama courts recognize that a manufacturer of a product has impliedly agreed to indemnify the seller when 1) the seller is without fault, 2) the manufacturer is responsible, and 3) the seller has been required to pay a monetary judgment. Under Latco’s theory, should it be found liable for its construction of the chicken houses, it can demonstrate that the true fault lies with the nail guns and the nails manufactured by ITW.
Alabama case law, not to mention the parties’ briefs, is especially sparse with respect to the contours of the doctrine of implied indemnity. […] [However, t]he court finds that Alabama law provides Latco a cause of action under common law indemnity against ITW.
It must be noted, however, that, under Alabama law, the doctrine permits recovery only when the party to be indemnified is “without fault.” Whether, in fact, such a factual scenario will be proven at trial is irrelevant for present purposes. The only issue before the court is whether there exists a legal basis to implead ITW, not whether ITW is, in fact, liable to Latco. Since Rule 14 permits Latco to implead any party who “may be liable,” Fed. R. Civ. P. 14(a), it follows that the court must permit development of the factual record so the extent of that liability may be determined. […]
Furthermore, since Latco has established a basis upon which it may properly implead ITW, the court need not address the applicability of Rule 14 to the other claims in Latco’s Third Party Complaint. It is well established that a properly impleaded claim may serve as an anchor for separate and independent claims under Rule 18(a).3 […] In short, the court finds that Latco has properly impleaded ITW under Rule 14(a).
Accordingly, it is CONSIDERED and ORDERED that ITW’s Motion to Dismiss be and the same is hereby DENIED.
Notes & Questions
An important lesson of Price is that defendants are not usually allowed to bring additional parties into an existing suit. Instead, the default rule is that a defendant who has claims against a third party must file a separate suit to recover his own damages.
Rule 14, however, provides a narrow path for complaints against third parties “who is or may be liable to [the defendant] for all or part of the claim against it.” Rule 14(a)(1). Price explains that the liability required to invoke Rule 14 is a particular kind: it must be derivative. In other words, a defendant must show that the third party would be liable, on a dollar-for-dollar basis, to the defendant for at least some of the plaintiff’s damages against the defendant.
While Rule 20 governs permissive joinder of parties, Rule 19 controls required joinder of parties. A “required party,” under Rule 19, is one in whose absence “the court cannot accord complete relief among existing parties,” or one who claims an interest in the subject of the action such that adjudicating the case without them would impair that person or other parties from being able to protect their interests. Rule 19(a)(1). The next case discusses what it takes for a party to be “required.”
Temple v. Synthes Corp.
PER CURIAM.
Petitioner Temple, a Mississippi resident, underwent surgery in October 1986 in which a “plate and screw device” was implanted in his lower spine. The device was manufactured by respondent Synthes, Ltd. (U.S.A.) (Synthes), a Pennsylvania corporation. Dr. S. Henry LaRocca performed the surgery at St. Charles General Hospital in New Orleans, Louisiana. Following surgery, the device’s screws broke off inside Temple’s back.
Temple filed suit against Synthes in the United States District Court for the Eastern District of Louisiana. The suit, which rested on diversity jurisdiction, alleged defective design and manufacture of the device. At the same time, Temple filed a state administrative proceeding against Dr. LaRocca and the hospital for malpractice and negligence. At the conclusion of the administrative proceeding, Temple filed suit against the doctor and the hospital in Louisiana state court.
Synthes did not attempt to bring the doctor and the hospital into the federal action by means of a third-party complaint, as provided in Federal Rule of Civil Procedure 14(a). Instead, Synthes filed a motion to dismiss Temple’s federal suit for failure to join necessary parties pursuant to Federal Rule of Civil Procedure 19. Following a hearing, the District Court ordered Temple to join the doctor and the hospital as defendants within twenty days or risk dismissal of the lawsuit. According to the court, the most significant reason for requiring joinder was the interest of judicial economy. The court relied on this Court’s decision in Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102 (1968), wherein we recognized that one focus of Rule 19 is “the interest of the courts and the public in complete, consistent, and efficient settlement of controversies.” When Temple failed to join the doctor and the hospital, the court dismissed the suit with prejudice.
Temple appealed, and the United States Court of Appeals for the Fifth Circuit affirmed. The court deemed it “obviously prejudicial to the defendants to have the separate litigations being carried on,” because Synthes’ defense might be that the plate was not defective but that the doctor and the hospital were negligent, while the doctor and hospital, on the other hand, might claim that they were not negligent but that the plate was defective. The Court of Appeals found that claims overlapped and that the District Court therefore had not abused its discretion in ordering joinder under Rule 19. A petition for rehearing was denied.
In his petition for certiorari to this Court, Temple contends that it was error to label joint tortfeasors as indispensable parties under Rule 19(b) and to dismiss the lawsuit with prejudice for failure to join those parties. We agree. Synthes does not deny that it, the doctor, and the hospital are potential joint tortfeasors. It has long been the rule that it is not necessary for all joint tortfeasors to be named as defendants in a single lawsuit. Nothing in the 1966 revision of Rule 19 changed that principle. The Advisory Committee Notes to Rule 19(a) explicitly state that “a tortfeasor with the usual ‘joint-and-several’ liability is merely a permissive party to an action against another with like liability.” Advisory Committee’s Notes on Fed. Rule Civ. Proc. 19. There is nothing in Louisiana tort law to the contrary.
The opinion in Provident Bank, supra, does speak of the public interest in limiting multiple litigation, but that case is not controlling here. There, the estate of a tort victim brought a declaratory judgment action against an insurance company. We assumed that the policyholder was a person “who, under … [Rule 19](a), should be joined if ‘feasible’” and went on to discuss the appropriate analysis under Rule 19(b), because the policyholder could not be joined without destroying diversity. After examining the factors set forth in Rule 19(b), we determined that the action could proceed without the policyholder; he therefore was not an indispensable party whose absence required dismissal of the suit.
Here, no inquiry under Rule 19(b) is necessary, because the threshold requirements of Rule 19(a) have not been satisfied. As potential joint tortfeasors with Synthes, Dr. LaRocca and the hospital were merely permissive parties. The Court of Appeals erred by failing to hold that the District Court abused its discretion in ordering them joined as defendants and in dismissing the action when Temple failed to comply with the court’s order. For these reasons, we grant the petition for certiorari, reverse the judgment of the Court of Appeals for the Fifth Circuit, and remand for further proceedings consistent with this opinion.
It is so ordered.
Notes & Questions
There are at least three separate proceedings discussed in this case. Identify each, its parties, and its procedural history.
Why did the courts below think that the doctor and the hospital were required parties? What interest led them to that conclusion?
Why did the Supreme Court disagree that the doctor and the hospital were required parties?
Finally, the Court notes that, because the doctor and the hospital were not required parties, there was no need to conduct an inquiry under Rule 19(b). That provision specifies what the consequences are when a party is required but unable to be joined. The next case takes up those rules.
Helzberg’s Diamond Shops v. Valley West Des Moines Shopping Center
ALSOP, J.
On February 3, 1975, Helzberg’s Diamond Shops, Inc. (Helzberg), a Missouri corporation, and Valley West Des Moines Shopping Center, Inc. (Valley West), an Iowa corporation, executed a written Lease Agreement. The Lease Agreement granted Helzberg the right to operate a full line jewelry store at space 254 in the Valley West Mall in West Des Moines, Iowa. Section 6 of Article V of the Lease Agreement provides:
[Valley West] agrees it will not lease premises in the shopping center for use as a catalog jewelry store nor lease premises for more than two full line jewelry stores in the shopping center in addition to the leased premises. This clause shall not prohibit other stores such as department stores from selling jewelry from catalogs or in any way restrict the shopping center department stores.
Subsequently, Helzberg commenced operation of a full line jewelry store in the Valley West Mall.
Between February 3, 1975 and November 2, 1976 Valley West and two other corporations entered into leases for spaces in the Valley West Mall for use as full line jewelry stores. Pursuant to those leases the two corporations also initiated actual operation of full line jewelry stores. On November 2, 1976, Valley West and Kirk’s Incorporated, Jewelers, an Iowa corporation, doing business as Lord’s Jewelers (Lord’s), entered into a written Lease Agreement. The Lease Agreement granted Lord’s the right to occupy space 261 in the Valley West Mall. Section I of Article V of the Lease Agreement provides that Lord’s will use space 261
… only as a retail specialty jewelry store (and not as a catalogue or full line jewelry store) featuring watches, jewelry (and the repair of same) and incidental better gift items.
However, Lord’s intended to open and operate what constituted a full line jewelry store at space 261.
In an attempt to avoid the opening of a fourth full line jewelry store in the Valley West Mall and the resulting breach of the Helzberg-Valley West Lease Agreement, Helzberg instituted suit seeking preliminary and permanent injunctive relief restraining Valley West’s breach of the Lease Agreement. The suit was filed in the United States District Court for the Western District of Missouri. Subject matter jurisdiction was invoked pursuant to 28 U.S.C. § 1332 based upon diversity of citizenship between the parties and an amount in controversy which exceeded [the statutory amount]. Personal jurisdiction was established by service of process on Valley West pursuant to the Missouri “long arm” statute, Rev. Stat. Mo. § 506.500 et seq. (1977). Rule 4(e), Fed. R. Civ. P.
Valley West moved to dismiss pursuant to Rule 19 because Helzberg had failed to join Lord’s as a party defendant. That motion was denied. The district court went on to order that
pending the determination of [the] action on the merits, that [Valley West] be, and it is hereby, enjoined and restrained from allowing, and shall take all necessary steps to prevent, any other tenant in its Valley West Mall (including but not limited to Kirk’s Incorporated, Jewelers, d/ b/a Lord’s Jewelers) to open and operate on March 30, 1977, or at any other time, or to be operated during the term of [Helzberg’s] present leasehold, a fourth full line jewelry store meaning a jewelry store offering for sale at retail a broad range of jewelry items at various prices such as diamonds and diamond jewelry, precious and semi-precious stones, watches, rings, gold jewelry, costume jewelry, gold chains, pendants, bracelets, belt buckles, tie tacs, tie slides and earrings, provided, however, nothing contained herein shall be construed to enjoin [Valley West] from allowing the opening in said Valley West Mall of a small store, known by [Valley West] as a boutique, which sells limited items such as only Indian jewelry, only watches, only earrings, or only pearls.
From this order Valley West appeals.
It is clear that Valley West is entitled to appeal from the order granting preliminary injunctive relief. 28 U.S.C. § 1292(a)(1). However, Valley West does not attack the propriety of the issuance of a preliminary injunction directly; instead, it challenges the District Court’s denial of its motion to dismiss for failure to join an indispensable party and argues that the District Court’s order fails for lack of specificity in describing the acts of Valley West to be restrained. […]
Because Helzberg was seeking and the District Court ordered injunctive relief which may prevent Lord’s from operating its jewelry store in the Valley West Mall in the manner in which Lord’s originally intended, the District Court correctly concluded that Lord’s was a party to be joined if feasible. See Rule 19(a)[(1)(b)](i), Fed. R. Civ. P. Therefore, because Lord’s was not and is not subject to personal jurisdiction in the Western District of Missouri, the District Court was required to determine whether or not Lord’s should be regarded as indispensable. After considering the factors which Rule 19(b) mandates be considered, the District Court concluded that Lord’s was not to be regarded as indispensable. We agree. […]
Rule 19(b) requires the court to look first to the extent to which a judgment rendered in Lord’s absence might be prejudicial to Lord’s or to Valley West. Valley West argues that the District Court’s order granting preliminary injunctive relief does prejudice Lord’s and may prejudice Valley West. We do not agree.
It seems axiomatic that none of Lord’s rights or obligations will be ultimately determined in a suit to which it is not a party. Even if, as a result of the District Court’s granting of the preliminary injunction, Valley West should attempt to terminate Lord’s leasehold interest in space 261 in the Valley West Mall, Lord’s will retain all of its rights under its Lease Agreement with Valley West. None of its rights or obligations will have been adjudicated as a result of the present proceedings, proceedings to which it is not a party. Therefore, we conclude that Lord’s will not be prejudiced in a way contemplated by Rule 19(b) as a result of this action.
Likewise, we think that Lord’s absence will not prejudice Valley West in a way contemplated by Rule 19(b). Valley West contends that it may be subjected to inconsistent obligations as a result of a determination in this action and a determination in another forum that Valley West should proceed in a fashion contrary to what has been ordered in these proceedings.
It is true that the obligations of Valley West to Helzberg, as determined in these proceedings, may be inconsistent with Valley West’s obligations to Lord’s. However, we are of the opinion that any inconsistency in those obligations will result from Valley West’s voluntary execution of two Lease Agreements which impose inconsistent obligations rather than from Lord’s absence from the present proceedings.
Helzberg seeks only to restrain Valley West’s breach of the Lease Agreement to which Helzberg and Valley West were the sole parties. Certainly, all of the rights and obligations arising under a lease can be adjudicated where all of the parties to the lease are before the court. Thus, in the context of these proceedings the District Court can determine all of the rights and obligations of both Helzberg and Valley West based upon the Lease Agreement between them, even though Lord’s is not a party to the proceedings.
Valley West’s contention that it may be subjected to inconsistent judgments if Lord’s should choose to file suit elsewhere and be awarded judgment is speculative at best. In the first place, Lord’s has not filed such a suit. Secondly, there is no showing that another court is likely to interpret the language of the two Lease Agreements differently from the way in which the District Court would. Therefore, we also conclude that Valley West will suffer no prejudice as a result of the District Court’s proceeding in Lord’s absence. Any prejudice which Valley West may suffer by way of inconsistent judgments would be the result of Valley West’s execution of Lease Agreements which impose inconsistent obligations and not the result of the proceedings in the District Court.
Rule 19(b) also requires the court to consider ways in which prejudice to the absent party can be lessened or avoided. The District Court afforded Lord’s an opportunity to intervene in order to protect any interest it might have in the outcome of this litigation. Lord’s chose not to do so. In light of Lord’s decision not to intervene we conclude that the District Court acted in such a way as to sufficiently protect Lord’s interests.
Similarly, we also conclude that the District Court’s determinations that a judgment rendered in Lord’s absence would be adequate and that there is no controlling significance to the fact that Helzberg would have an adequate remedy in the Iowa courts were not erroneous. It follows that the District Court’s conclusion that in equity and good conscience the action should be allowed to proceed was a correct one.
In sum, it is generally recognized that a person does not become indispensable to an action to determine rights under a contract simply because that person’s rights or obligations under an entirely separate contract will be affected by the result of the action. This principle applies to an action against a lessor who has entered into other leases which also may be affected by the result in the action in which the other lessees are argued to be indispensable parties. We conclude that the District Court properly denied the motion to dismiss for failure to join an indispensable party. […]
In view of the foregoing, it follows that the judgment of the District Court is affirmed.
Notes & Questions
Follow the logic of Rule 19 closely. Helzberg’s sued Valley West. Valley West moved to dismiss for lack of a required party, Lord’s. The court concluded, applying Rule 19(a) that Lord’s was in fact a required party. (Why?) Then the court proceeded to determine, under Rule 19(b), what to do in Lord’s absence (for jurisdictional reasons, Lord’s could not be added to the case). The court then balanced a series of factors to conclude that dismissal was not appropriate, notwithstanding Lord’s absence. (What were the factors considered?)
Whose fault was it that there were two jewelry stores in the Valley West mall? Who would have benefited most from dismissal of Helzberg’s suit? Do the answers to those two questions help explain why the case turned out as it did?
Rule 24 allows non-parties to a case an opportunity to join the case (usually, but not always, as a plaintiff). Just as Rule 19 distinguishes between permissive joinder and required joinder, Rule 24 distinguishes between permissive intervention (Rule 24(b)) and intervention as of right (Rule 24(a)). The next case examines these two bases of intervention.
Natural Resources Defense Council v. United States Nuclear Regulatory Commission
DOYLE, J.
The American Mining Congress and Kerr-McGee Nuclear Corporation seek review of the order of the United States District Court for the District of New Mexico denying their motions to intervene [as] a matter of right or on a permissive basis, pursuant to Rule 24(a)(2) and (b), Fed. R. Civil Proc.
The underlying action in which the movants requested intervention was instituted by the Natural Resources Defense Council, Inc., and others. In the action, declaratory and injunctive relief is directed to the United States Nuclear Regulatory Commission (NRC) and the New Mexico Environmental Improvement Agency (NMEIA), prohibiting those agencies from issuing licenses for the operation of uranium mills in New Mexico without first preparing environmental impact statements. Kerr-McGee and United Nuclear are potential recipients of the licenses.
Congress, in the Atomic Energy Act of 1954, has authorized the NRC to issue such licenses. NMEIA is involved because under § 274(b) of the Act, the NRC is authorized to enter into agreements with the states allowing the states to issue licenses. Such agreements have been made with about 25 states including New Mexico. Thus, the action below in effect seeks to prevent the use of § 274(b) of the Act so as to avoid the requirement of an impact statement for which provision is made in the National Environmental Policy Act. […]
The relief sought by the plaintiffs’ complaint is, first, that NRC’s involvement in the licensing procedure in New Mexico is, notwithstanding the delegation to the state, sufficient to constitute major federal action, whereby the impact statement requirement is not eliminated. Second, that if an impact statement is not required in connection with the granting of licenses, the New Mexico program is in conflict with § 274(d)(2) of the Atomic Energy Act of 1954.
The motion of United Nuclear Corporation to intervene is not opposed by the parties and was granted. On May 3, 1977, the date that the complaint herein was filed, NMEIA granted a license to United Nuclear to operate a uranium mill at Church Rock, New Mexico. The complaint seeks to enjoin the issuance of the license thus granted.
It was after that that Kerr-McGee Nuclear Corporation, Anaconda Company, Gulf Oil Corporation, Phillips Petroleum Company, and the American Mining Congress filed motions to intervene. These motions, insofar as they sought intervention as of right, were denied on the ground that the interests of the parties or movants would be adequately represented by United Nuclear. Permissive intervention was also denied. Kerr-McGee and the American Mining Congress both appeal denial of both intervention as of right and permissive intervention.
Our issue is a limited one. We merely construe and weigh Rule 24(a) of the Fed. R. Civ. P. (intervention as of right) and decide in light of the facts and considerations presented whether the denial of intervention was correct. [The court quoted Rule 24(a).] We do not have a subsection (1) situation involving a statutory conferring of right to intervene. Accordingly, we must consider the standards set forth in subsection (2), which are:
1. Whether the applicant claims an interest relating to the property or transaction which is the subject of the action.
2. Whether the claimants are so situated that the disposition of the action may as a practical matter impair or impede their ability to protect that interest.
3. Whether their interest is not adequately represented by existing
[…] Our conclusion is that the interests of movants in the subject matter is sufficient to satisfy the requirements of Rule 24 and that the threat of loss of their interest and inability to participate is of such magnitude as to impair their ability to advance their interest.
I
[…] Strictly to require that the movant in intervention have a direct interest in the outcome of the lawsuit strikes us as being too narrow a construction of Rule 24(a)(2). […]
In our case the matter of immediate interest is, of course, the issuance and delivery of the license sought by United Nuclear. However, the consequence of the litigation could well be the imposition of the requirement that an environmental impact statement be prepared before granting any uranium mill license in New Mexico, or, secondly, it could result in an injunction terminating or suspending the agreement between NRC and NMEIA. Either consequence would be felt by United Nuclear and to some degree, of course, by Kerr-McGee, which is said to be one of the largest holders of uranium properties in New Mexico. It operates a uranium mill in Grants, New Mexico, pursuant to an NMEIA license, which application for renewal is pending. A decision in favor of the plaintiffs, which is not unlikely, could have a profound effect upon Kerr-McGee. Hence, it does have an interest within the meaning of Rule 24(a)(2). This interest of Kerr-McGee is in sharp contrast to the minimal interest which was present in Allard, wherein it was an interest of environmental groups in the protection of living birds. This was considered insufficient to justify intervention in a case involving feathers which are part of Indian artifacts. Their interest was said to be limited to a general interest in the public. The interest asserted on behalf of Kerr-McGee and the American Mining Congress is one which is a genuine threat to Kerr-McGee and the members of the American Mining Congress to a substantial degree.
We do not suggest that Kerr-McGee could expect better treatment from state authorities than federal. We do recognize that a change in procedure would produce impairing complications.
II
The next question is whether, assuming the existence of an interest, the chance of impairment is sufficient to fulfill the requirement of Rule 24(a)(2).
[…] If the relief sought by the plaintiffs is granted, there can be little question but that the interests of the American Mining Congress and of Kerr-McGee would be affected. Plaintiffs contend, however, that appellants would not be bound by such a result if they are not participants. Kerr-McGee points out that even though it may not be res judicata, still it would have a stare decisis effect. Moreover, with NRC and NMEIA as parties, the result might be more profound than stare decisis.
It should be pointed out that the Rule refers to impairment “as a practical matter.” Thus, the court is not limited to consequences of a strictly legal nature. The court may consider any significant legal effect in the applicant’s interest and it is not restricted to a rigid res judicata test. Hence, the stare decisis effect might be sufficient to satisfy the requirement. It is said that where, as here, the case is of first impression, the stare decisis effect would be important.
Finally, the considerations for requiring an environmental impact statement will be relatively the same in respect to the issuance of a uranium mining license in every instance. Hence, to say that it can be repeatedly litigated is not an answer, for the chance of getting a contrary result in a case which is substantially similar on its facts to one previously adjudicated seems remote.
We are of the opinion, therefore, that appellants have satisfied the impairment criterion.
III
The final question is whether the trial court was correct in its conclusion that United Nuclear would adequately represent Kerr-McGee and the American Mining Congress.
The finding and conclusion was that the representation would be adequate because United Nuclear, a fellow member of the industry, has interests which were the same as those of the appellants and possessed the same level of knowledge and experience with the ability and willingness to pursue the matter and could adequately represent Kerr-McGee and the members of the American Mining Congress. […]
United Nuclear is situated somewhat differently in this case than are the other members of the industry since it has been granted its license. From this it is urged by Kerr-McGee that United Nuclear may be ready to compromise the case by obtaining a mere declaration that while environmental impact statements should be issued, this requirement need be prospective only, whereby it would not affect them. While we see this as a remote possibility, we gravely doubt that United Nuclear would opt for such a result. It is true, however, that United Nuclear has a defense of laches that is not available to Kerr-McGee or the others.
7A C. Wright & A. Miller, Federal Practice & Procedure, § 1909, at 524 (1972), says:
[I]f [an applicant’s] interest is similar to, but not identical with, that of one of the parties, a discriminating judgment is required on the circumstances of the particular case, but he ordinarily should be allowed to intervene unless it is clear that the party will provide adequate representation for the absentee.
While the interest of the two applicants may appear similar, there is no way to say that there is no possibility that they will not be different and the possibility of divergence of interest need not be great in order to satisfy the burden of the applicants under National Farm Lines.
There are other reasons for allowing intervention. There is some value in having the parties before the court so that they will be bound by the result. American Mining Congress represents a number of companies having a wide variety of interests. This can, therefore, provide a useful supplement to the defense of the case. The same can be said of Kerr-McGee.
The trial court was concerned that the addition of these movants would make the litigation unwieldy. If the intervenors are limited to this group, unwieldiness does not become a problem which the trial court cannot control. It does not appear that there would be a need for additional parties in view of the presence of the American Mining Congress. While we do not express an opinion on the possibilities of further additions, we wish to make clear that the present holdings that the two applicants should be allowed to intervene does not say that others should be added.
The order of the district court is reversed and the cause is remanded with instructions to the trial court to grant the appellants, Kerr-McGee’s and American Mining Congress’, motions to intervene.
Notes & Questions
As the court notes, in the absence of a statutory right to intervene, intervention as of right requires three showings: (1) an interest relating to the case; (2) the disposition of which would impair the movant’s ability to protect its interest; and (3) there is no party who would adequately represent the would-be intervenor’s interest. The court proceeds through these three requirements in turn. Follow closely its analysis at each stage to get a sense of what each requirement demands.
What happened to the argument that the intervenors should be permitted to intervene? Why didn’t the court discuss that aspect of the movants’ appeal in detail?
9.2 Non-Parties & Judgments
So far we have spoken of aggregation in terms of addition. Instead of one party, twenty. Instead of one claim going one direction, several claims traced by arrows pointing in many directions. But lurking unassuming in the Federal Rules of Civil Procedure is mechanism for aggregation by multiplication. Rule 23 authorizes class actions—representative suits that combine the claims (or defenses) of potentially thousands or even millions of people.
Class actions are important for many reasons, but the chief one is probably economic. By banding together the claims of many in one case, both the litigants and courts can unlock massive economies of scale. For that reason, class actions promise to make the civil litigation system more efficient and, we might therefore say, fairer.
But there is a risk with class actions. Because they litigate the claims of people who are not present before the court but rather are represented by a lead plaintiff or defendant, they threaten to extinguish individual’s rights without affording them notice and an opportunity to be heard. If you’ve made it this far, your due process alarm is sounding. So too does that alarm sound at the Supreme Court.
The next case sets the stage, by reminding us of a fact already learned from Taylor v. Sturgell: those who are not parties to a case cannot be bound by a judgment rendered in it. The flip side of that insight, as the remainder of the chapter will show, is that the class action offers a way to bring non-parties into a case, and thereby bind them—win or lose.
Martin v. Wilks
REHNQUIST, C.J., delivered the opinion of the Court.
A group of white firefighters sued the city of Birmingham, Alabama (City), and the Jefferson County Personnel Board (Board) alleging that they were being denied promotions in favor of less qualified black firefighters. They claimed that the City and the Board were making promotion decisions on the basis of race in reliance on certain consent decrees, and that these decisions constituted impermissible racial discrimination in violation of the Constitution and federal statutes. The District Court held that the white firefighters were precluded from challenging employment decisions taken pursuant to the decrees, even though these firefighters had not been parties to the proceedings in which the decrees were entered. We think this holding contravenes the general rule that a person cannot be deprived of his legal rights in a proceeding to which he is not a party.
The [initial] litigation […] began in 1974, when the Ensley Branch of the NAACP and seven black individuals filed separate class-action complaints against the City [of Birmingham] and the Board. They alleged that both had engaged in racially discriminatory hiring and promotion practices in various public service jobs in violation of Title VII of the Civil Rights Act of 1964 and other federal law. After a bench trial on some issues, but before judgment, the parties entered into two consent decrees, one between the black individuals and the City and the other between them and the Board. These proposed decrees set forth an extensive remedial scheme, including long-term and interim annual goals for the hiring of blacks as firefighters. The decrees also provided for goals for promotion of blacks within the department. The District Court entered an order provisionally approving the decrees and directing publication of notice of the upcoming fairness hearings. Notice of the hearings, with a reference to the general nature of the decrees, was published in two local newspapers. At that hearing, the Birmingham Firefighters Association (BFA) appeared and filed objections as amicus curiae. After the hearing, but before final approval of the decrees, the BFA and two of its members also moved to intervene on the ground that the decrees would adversely affect their rights. The District Court denied the motions as untimely and approved the decrees. Seven white firefighters, all members of the BFA, then filed a complaint against the City and the Board seeking injunctive relief against enforcement of the decrees. The seven argued that the decrees would operate to illegally discriminate against them; the District Court denied relief. […]
A new group of white firefighters, the Wilks respondents, then brought suit against the City and the Board in District Court. They too alleged that, because of their race, they were being denied promotions in favor of less qualified blacks in violation of federal law. The Board and the City admitted to making race conscious employment decisions, but argued the decisions were unassailable because they were made pursuant to the consent decrees. A group of black individuals, the Martin petitioners, were allowed to intervene in their individual capacities to defend the decrees.
The defendants moved to dismiss the reverse discrimination cases as impermissible collateral attacks on the consent decrees. […] After trial the District Court granted the motion to dismiss. […]
On appeal, the Eleventh Circuit reversed. It held that “[b]ecause … [the Wilks respondents] were neither parties nor privies to the consent decrees, … their independent claims of unlawful discrimination are not precluded.” […]
We granted certiorari and now affirm the Eleventh Circuit’s judgment. All agree that “[i]t is a principle of general application in Anglo-American jurisprudence that one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process.” Hansberry v. Lee, 311 U.S. 32, 40 (1940) [see infra]. This rule is part of our “deep-rooted historic tradition that everyone should have his own day in court.” 18 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 4449, p. 417 (1981) (18 Wright). A judgment or decree among parties to a lawsuit resolves issues as among them, but it does not conclude the rights of strangers to those proceedings.2 Petitioners argue that, because respondents failed to timely intervene in the initial proceedings, their current challenge to actions taken under the consent decree constitutes an impermissible “collateral attack.” They argue that respondents were aware that the underlying suit might affect them and if they chose to pass up an opportunity to intervene, they should not be permitted to later litigate the issues in a new action. The position has sufficient appeal to have commanded the approval of the great majority of the Federal Courts of Appeals, but we agree with the contrary view expressed by the Court of Appeals for the Eleventh Circuit in this case.
We begin with the words of Justice Brandeis in Chase National Bank v. Norwalk, 291 U.S. 431 (1934):
The law does not impose upon any person absolutely entitled to a hearing the burden of voluntary intervention in a suit to which he is a stranger. … Unless duly summoned to appear in a legal proceeding, a person not a privy may rest assured that a judgment recovered therein will not affect his legal rights.
While these words were written before the adoption of the Federal Rules of Civil Procedure, we think the Rules incorporate the same principle; a party seeking a judgment binding on another cannot obligate that person to intervene; he must be joined. […] Against the background of permissive intervention set forth in Chase National Bank, the drafters cast Rule 24, governing intervention, in permissive terms. See Fed. Rule Civ. Proc. 24(a) (intervention as of right) (“[on timely motion, the court must permit anyone to intervene”]); Fed. Rule Civ. Proc. 24(b) (permissive intervention) ([“on timely motion, the court may permit anyone to intervene”]). They determined that the concern for finality and completeness of judgments would be “better [served] by mandatory joinder procedures.” 18 Wright § 4452, p. 453. Accordingly, Rule 19(a) provides for mandatory joinder in circumstances where a judgment rendered in the absence of a person may “leave [an existing party] subject to a substantial risk of incurring … inconsistent obligations … .” Rule 19(b) sets forth the factors to be considered by a court in deciding whether to allow an action to proceed in the absence of an interested party.
Joinder as a party, rather than knowledge of a lawsuit and an opportunity to intervene, is the method by which potential parties are subjected to the jurisdiction of the court and bound by a judgment or decree.6 The parties to a lawsuit presumably know better than anyone else the nature and scope of relief sought in the action, and at whose expense such relief might be granted. It makes sense, therefore, to place on them a burden of bringing in additional parties where such a step is indicated, rather than placing on potential additional parties a duty to intervene when they acquire knowledge of the lawsuit. The linchpin of the “impermissible collateral attack” doctrine—the attribution of preclusive effect to a failure to intervene—is therefore quite inconsistent with Rule 19 and Rule 24. […]
Petitioners […] rely on our decision in Provident Tradesmans Bank as authority for the view which they espouse. In that case we discussed Rule 19 shortly after parts of it had been substantially revised, but we expressly left open the question of whether preclusive effect might be attributed to a failure to intervene.
Petitioners contend that a different result should be reached because the need to join affected parties will be burdensome and ultimately discouraging to civil rights litigation. Potential adverse claimants may be numerous and difficult to identify; if they are not joined, the possibility for inconsistent judgments exists. Judicial resources will be needlessly consumed in relitigation of the same question.
Even if we were wholly persuaded by these arguments as a matter of policy, acceptance of them would require a rewriting rather than an interpretation of the relevant Rules. But we are not persuaded that their acceptance would lead to a more satisfactory method of handling cases like this one. It must be remembered that the alternatives are a duty to intervene based on knowledge, on the one hand, and some form of joinder, as the Rules presently provide, on the other. No one can seriously contend that an employer might successfully defend against a Title VII claim by one group of employees on the ground that its actions were required by an earlier decree entered in a suit brought against it by another, if the later group did not have adequate notice or knowledge of the earlier suit.
The difficulties petitioners foresee in identifying those who could be adversely affected by a decree granting broad remedial relief are undoubtedly present, but they arise from the nature of the relief sought and not because of any choice between mandatory intervention and joinder. Rule 19’s provisions for joining interested parties are designed to accommodate the sort of complexities that may arise from a decree affecting numerous people in various ways. We doubt that a mandatory intervention rule would be any less awkward. As mentioned, plaintiffs who seek the aid of the courts to alter existing employment policies, or the employer who might be subject to conflicting decrees, are best able to bear the burden of designating those who would be adversely affected if plaintiffs prevail; these parties will generally have a better understanding of the scope of likely relief than employees who are not named but might be affected. Petitioners’ alternative does not eliminate the need for, or difficulty of, identifying persons who, because of their interests, should be included in a lawsuit. It merely shifts that responsibility to less able shoulders.
Nor do we think that the system of joinder called for by the Rules is likely to produce more relitigation of issues than the converse rule. The breadth of a lawsuit and concomitant relief may be at least partially shaped in advance through Rule 19 to avoid needless clashes with future litigation. And even under a regime of mandatory intervention, parties who did not have adequate knowledge of the suit would relitigate issues. Additional questions about the adequacy and timeliness of knowledge would inevitably crop up. We think that the system of joinder presently contemplated by the Rules best serves the many interests involved in the run of litigated cases, including cases like the present one. […]
STEVENS, J., with whom BRENNAN, J., MARSHALL, J., and BLACKMUN, J., join, dissenting.
As a matter of a law there is a vast difference between persons who are actual parties to litigation and persons who merely have the kind of interest that may as a practical matter be impaired by the outcome of a case. Persons in the first category have a right to participate in a trial and to appeal from an adverse judgment; depending on whether they win or lose, their legal rights may be enhanced or impaired. Persons in the latter category have a right to intervene in the action in a timely fashion, or they may be joined as parties against their will. But if they remain on the sidelines, they may be harmed as a practical matter even though their legal rights are unaffected. One of the disadvantages of sideline-sitting is that the bystander has no right to appeal from a judgment no matter how harmful it may be.
In this case the Court quite rightly concludes that the white firefighters who brought the second series of Title VII cases could not be deprived of their legal rights in the first series of cases because they had neither intervened nor been joined as parties. The consent decrees obviously could not deprive them of any contractual rights, such as seniority or accrued vacation pay, or of any other legal rights, such as the right to have their employer comply with federal statutes like Title VII. There is no reason, however, why the consent decrees might not produce changes in conditions at the white firefighters’ place of employment that, as a practical matter, may have a serious effect on their opportunities for employment or promotion even though they are not bound by the decrees in any legal sense. The fact that one of the effects of a decree is to curtail the job opportunities of nonparties does not mean that the non-parties have been deprived of legal rights or that they have standing to appeal from that decree without becoming parties. […]
Notes & Questions
Start by focusing on the various stages of litigation discussed in the Court’s opinion. In the first, the NAACP and a group of Black firefighters filed class action suits against the City and Board for racially discriminatory hiring practices in violation of federal law. That first round of litigation resulted in a pair of consent decrees (essentially court-enforced settlements) setting benchmarks for the future hiring and promotion of Black firefighters. As is required with class-action settlements (see Amchem v. Ortiz, infra), the court conducted a hearing to determine whether the consent decrees were fair. At the fairness hearing, the Birmingham Firefighters Association—representing mostly white firefighters—objected to the consent decrees as unfair to white firefighters. The BFA and two individual white firefighters also sought to intervene in the original litigation to argue against the consent decrees. The court rejected both the objections and the motion to intervene, and approved the consent decrees, which went into effect.
Next, a new group of seven white firefighters—all members of the BFA but none of whom had appeared in the earlier litigation—filed a new lawsuit against the City and Board arguing that the consent decrees caused the hiring process to be illegally biased against them. The court dismissed that suit.
Finally, another set of white firefighters (led by Wilks, respondent in the Supreme Court) filed another lawsuit raising essentially the same arguments as the prior suit. Then, a group of Black firefighters (led by Martin, the petitioner in the Supreme Court) moved for, and were granted, leave to intervene to defend the legality of the consent decrees. As part of their defense of the consent decrees, Martin and the Black firefighters argued that Wilks and the white firefighters were seeking to relitigate that which had already been decided against them in the earlier litigation.Part of the reason why this case is perplexing is because the Wilks firefighters had turned down so many opportunities to raise their arguments earlier in the litigation: They could have objected to the fairness of the consent decrees, as the BFA did; they could have moved to intervene in the original suit; or they could have joined the subsequent suit on behalf of the seven white firefighters. Instead, they stayed on the sidelines, waiting to see what would happen at those earlier stages. Only when their interests weren’t vindicated by others did they file their own suit. At a certain level, that seems wasteful of judicial resources and unfair to the parties to the earlier litigation.
At the same time, the Court’s opinion in Martin v. Wilks simply insists on the same principle that animated Taylor v. Sturgell: each person is entitled to his own day in court—even if similarly situated litigants have already litigated similar claims or arguments. Martin makes this point by emphasizing the voluntary nature of intervention under Rule 24. Simply because a litigant declines the opportunity to intervene in an earlier suit does not mean that he has forfeited his right to his day in court.
What if anything could the NAACP and the original Black plaintiffs have done to ensure no future suits would be possible?
9.3 Class Actions
Hansberry v. Lee
STONE, J., delivered the opinion of the Court.
* [Such covenants were held unenforceable eight years later in Shelley v. Kraemer, 334 U.S. 1 (1948). –Ed.]
The question is whether the Supreme Court of Illinois, by its adjudication that petitioners in this case are bound to a judgment rendered in an earlier litigation to which they were not parties, has deprived them of the due process of law guaranteed by the Fourteenth Amendment. […]
[The Hansberrys, a black family, bought a house in an area of Chicago allegedly covered by a racially restrictive covenant.* The covenant at issue had been recognized as valid and binding in an earlier suit, Burke v. Kleiman, filed in Illinois state court. In Burke, a property owner filed a class action “on behalf of herself and other property owners in like situation” sued four named individuals allegedly in violation of the covenant. The covenant by its terms could not take effect unless signed by owners of 95 percent of the covered property. Burke was litigated in the Illinois courts, where the parties had stipulated (falsely) that the requisite 95 percent had signed. (In fact, the signers represented only 54 percent.) Nevertheless, the Burke court adopted the stipulation in its findings and therefore upheld the covenant.
In the instant action, Lee sued both the Hansberrys and the family who had sold the property to them seeking an injunction to halt breach of the covenant. The Hansberrys resisted the suit by arguing that the covenant was not valid because too few owners had signed it. Lee countered by pointing to Burke v. Kleiman and arguing that the Hansberrys were bound by the judgment in that earlier suit. The Supreme Court of Illinois determined that the earlier Burke case had been a class action, that the Hansberrys and the family who sold to them were members of the class of plaintiffs in Burke, and that they were therefore bound by the findings in the previous action even though those findings were factually erroneous.]
To the defense that the agreement had never become effective because owners of 95 per cent of the frontage had not signed it, respondents pleaded that that issue was res judicata by the decree in an earlier suit. To this petitioners pleaded, by way of rejoinder, that they were not parties to that suit or bound by its decree, and that denial of their right to litigate, in the present suit, the issue of performance of the condition precedent to the validity of the agreement would be a denial of due process of law guaranteed by the Fourteenth Amendment. It does not appear, nor is it contended that any of petitioners is the successor in interest to or in privity with any of the parties in the earlier suit.
The [state] […] court, after a trial on the merits, found that owners of only about 54 per cent of the frontage had signed the agreement, and that the only support of the judgment in the Burke case was a false and fraudulent stipulation of the parties that owners of 95 per cent had signed. But it ruled that the issue of performance of the condition precedent to the validity of the agreement was res judicata as alleged and entered a decree for respondents. […]
From this the Supreme Court of Illinois concluded in the present case that Burke v. Kleiman was a “class” or “representative” suit, and that in such a suit, “where the remedy is pursued by a plaintiff who has the right to represent the class to which he belongs, other members of the class are bound by the results in the case unless it is reversed or set aside on direct proceedings”; that petitioners in the present suit were members of the class represented by the plaintiffs in the earlier suit and consequently were bound by its decree. […]
State courts are free to attach such descriptive labels to litigations before them as they may choose and to attribute to them such consequences as they think appropriate under state constitutions and laws, subject only to the requirements of the Constitution of the United States. But when the judgment of a state court, ascribing to the judgment of another court the binding force and effect of res judicata, is challenged for want of due process it becomes the duty of this Court to examine the course of procedure in both litigations to ascertain whether the litigant whose rights have thus been adjudicated has been afforded such notice and opportunity to be heard as are requisite to the due process which the Constitution prescribes.
It is a principle of general application in Anglo-American jurisprudence that one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process. Pennoyer v. Neff. A judgment rendered in such circumstances is not entitled to the full faith and credit which the Constitution and statutes of the United States prescribe, Pennoyer v. Neff; and judicial action enforcing it against the person or property of the absent party is not that due process which the Fifth and Fourteenth Amendments require.
To these general rules there is a recognized exception that, to an extent not precisely defined by judicial opinion, the judgment in a “class” or “representative” suit, to which some members of the class are parties, may bind members of the class or those represented who were not made parties to it.
The class suit was an invention of equity to enable it to proceed to a decree in suits where the number of those interested in the subject of the litigation is so great that their joinder as parties in conformity to the usual rules of procedure is impracticable. Courts are not infrequently called upon to proceed with causes in which the number of those interested in the litigation is so great as to make difficult or impossible the joinder of all because some are not within the jurisdiction or because their whereabouts is unknown or where if all were made parties to the suit its continued abatement by the death of some would prevent or unduly delay a decree. In such cases where the interests of those not joined are of the same class as the interests of those who are, and where it is considered that the latter fairly represent the former in the prosecution of the litigation of the issues in which all have a common interest, the court will proceed to a decree. […]
[T]here is scope within the framework of the Constitution for holding in appropriate cases that a judgment rendered in a class suit is res judicata as to members of the class who are not formal parties to the suit. Here, as elsewhere, the Fourteenth Amendment does not compel state courts or legislatures to adopt any particular rule for establishing the conclusiveness of judgments in class suits, nor does it compel the adoption of the particular rules thought by this Court to be appropriate for the federal courts. With a proper regard for divergent local institutions and interests, this Court is justified in saying that there has been a failure of due process only in those cases where it cannot be said that the procedure adopted, fairly insures the protection of the interests of absent parties who are to be bound by it.
It is familiar doctrine of the federal courts that members of a class not present as parties to the litigation may be bound by the judgment where they are in fact adequately represented by parties who are present, or where they actually participate in the conduct of the litigation in which members of the class are present as parties, or where the interest of the members of the class, some of whom are present as parties, is joint, or where for any other reason the relationship between the parties present and those who are absent is such as legally to entitle the former to stand in judgment for the latter.
In all such cases, so far as it can be said that the members of the class who are present are, by generally recognized rules of law, entitled to stand in judgment for those who are not, we may assume for present purposes that such procedure affords a protection to the parties who are represented, though absent, which would satisfy the requirements of due process and full faith and credit. Nor do we find it necessary for the decision of this case to say that, when the only circumstance defining the class is that the determination of the rights of its members turns upon a single issue of fact or law, a state could not constitutionally adopt a procedure whereby some of the members of the class could stand in judgment for all, provided that the procedure were so devised and applied as to insure that those present are of the same class as those absent and that the litigation is so conducted as to insure the full and fair consideration of the common issue. We decide only that the procedure and the course of litigation sustained here by the plea of res judicata do not satisfy these requirements.
The restrictive agreement did not purport to create a joint obligation or liability. If valid and effective its promises were the several obligations of the signers and those claiming under them. The promises ran severally to every other signer. It is plain that in such circumstances all those alleged to be bound by the agreement would not constitute a single class in any litigation brought to enforce it. Those who sought to secure its benefits by enforcing it could not be said to be in the same class with or represent those whose interest was in resisting performance, for the agreement by its terms imposes obligations and confers rights on the owner of each plot of land who signs it. If those who thus seek to secure the benefits of the agreement were rightly regarded by the state Supreme Court as constituting a class, it is evident that those signers or their successors who are interested in challenging the validity of the agreement and resisting its performance are not of the same class in the sense that their interests are identical so that any group who had elected to enforce rights conferred by the agreement could be said to be acting in the interest of any others who were free to deny its obligation.
Because of the dual and potentially conflicting interests of those who are putative parties to the agreement in compelling or resisting its performance, it is impossible to say, solely because they are parties to it, that any two of them are of the same class. Nor without more, and with the due regard for the protection of the rights of absent parties which due process exacts, can some be permitted to stand in judgment for all.
It is one thing to say that some members of a class may represent other members in a litigation where the sole and common interest of the class in the litigation, is either to assert a common right or to challenge an asserted obligation. It is quite another to hold that all those who are free alternatively either to assert rights or to challenge them are of a single class, so that any group, merely because it is of the class so constituted, may be deemed adequately to represent any others of the class in litigating their interests in either alternative. Such a selection of representatives for purposes of litigation, whose substantial interests are not necessarily or even probably the same as those whom they are deemed to represent, does not afford that protection to absent parties which due process requires. The doctrine of representation of absent parties in a class suit has not hitherto been thought to go so far. Apart from the opportunities it would afford for the fraudulent and collusive sacrifice of the rights of absent parties, we think that the representation in this case no more satisfies the requirements of due process than a trial by a judicial officer who is in such situation that he may have an interest in the outcome of the litigation in conflict with that of the litigants.
The plaintiffs in the Burke case sought to compel performance of the agreement in behalf of themselves and all others similarly situated. They did not designate the defendants in the suit as a class or seek any injunction or other relief against others than the named defendants, and the decree which was entered did not purport to bind others. In seeking to enforce the agreement the plaintiffs in that suit were not representing the petitioners here whose substantial interest is in resisting performance. The defendants in the first suit were not treated by the pleadings or decree as representing others or as foreclosing by their defense the rights of others; and, even though nominal defendants, it does not appear that their interest in defeating the contract outweighed their interest in establishing its validity. For a court in this situation to ascribe to either the plaintiffs or defendants the performance of such functions on behalf of petitioners here, is to attribute to them a power that it cannot be said that they had assumed to exercise, and a responsibility which, in view of their dual interests it does not appear that they could rightly discharge.
Reversed.
MCREYNOLDS, J., ROBERTS, J., and REED, J., concur in the result.
Notes & Questions
Hansberry sets important limits on the degree to which non-parties can be bound by judgments in class-action suits. The source of this limitation is constitutional due process, which as you know by now guarantees, at a minimum, notice and an opportunity to be heard. See, e.g., Mullane v. Central Hanover Bank & Trust, supra.
Compare Hansberry with Taylor v. Sturgell and Martin v. Wilks, supra. In all three cases, it was argued that people who were not parties to an earlier suit were nevertheless bound by the judgment in that suit. In all three cases, the Supreme Court rejected the argument, recognizing instead the “deep-rooted historic tradition that everyone should have his own day in court.” Martin, 490 U.S. at 752.
On the other side of the same coin, Hansberry also has important consequences for the finality of judgments. Because the Hansberrys were not adequately represented in the Burke case, they had the power to “collaterally attack” the earlier judgment. In other words, due process limits the doctrines of claim and issue preclusion. As a result, parties are almost always free to challenge prior judgments on due process grounds. Keep this in mind when you learn about personal jurisdiction and read Pennoyer v. Neff.
Of course, the stakes of Hansberry were more significant than just the preclusive effect of class-action judgments. The case concerned a type of legal arrangement that was a key building block in edifice of de jure racism in the early twentieth century United States. But you would hardly know that from reading the case, which is silent on the underlying questions of racial segregation. Why do you think that is?
The youngest daughter of the Hansberry family, Lorraine, was a pathbreaking playwright. Her most famous play, A Raisin in the Sun, became the longest-running Black-written play in Broadway history (530 performances), the first Broadway show ever written by a Black woman, and the first Broadway play with a Black director. The production starred Sidney Poitier and Ruby Dee in the leading roles of Walter and Ruth Younger—roles those two reprised one year later in a celebrated film adaptation.
The play tells the story of a poor Black family living on Chicago’s South Side who, with a $10,000 life-insurance payment, buy a house in an all-white neighborhood. Much of the play’s drama is precipitated by efforts by white residents to stop the family from moving in. Sound familiar?
Given the fact that the Hansberrys won at the Supreme Court, it is natural to assume the ending is a happy one. But Lorraine Hansberry wasn’t so sure. Shortly before her death from cancer at the young age of 34, Hansberry remembered the litigation as quixotic and cruel:
My father was typical of a generation of Negroes who believed that the “American way” could successfully be made to work to democratize the United States. Thus, twenty-five years ago, he spent a small personal fortune, his considerable talents, and many years of his life fighting, in association with NAACP attorneys, Chicago’s “restrictive covenants” in one of this nation’s ugliest ghettoes.
That fight also required that our family occupy the disputed property in a hellishly hostile “white neighborhood” in which, literally, howling mobs surrounded our house. One of their missiles almost took the life of the then eight-year-old signer of this letter. My memories of this “correct” way of fighting white supremacy in America include being spat at, cursed and pummeled in the daily trek to and from school. And I also remember my desperate and courageous mother, patrolling our house all night with a loaded German luger, doggedly guarding her four children, while my father fought the respectable part of the battle in the Washington court.
The fact that my father and the NAACP “won” a Supreme Court decision, in a now famous case which bears his name in the lawbooks, is—ironically—the sort of “progress” our satisfied friends allude to when they presume to deride the more radical means of struggle.
[…] The entire situation suggests that the nation be reminded of the too little noted final lines of Langston Hughes’ mighty poem:
What happens to a dream deferred
Does it dry up
Like a raisin in the sun?
Or fester like a sore—
And then run?
Does it stink like rotten meat?
Or crust and sugar over—
Like a syrupy sweet?Maybe it just sags
Like a heavy load.Or does it explode?
Lorraine Hansberry, To Be Young, Gifted and Black 51–52 (Robert Nemiroff ed. 1969).
Wal-Mart Stores, Inc. v. Dukes
SCALIA, J., delivered the opinion of the Court.
We are presented with one of the most expansive class actions ever. The District Court and the Court of Appeals approved the certification of a class comprising about one and a half million plaintiffs, current and former female employees of petitioner Wal-Mart who allege that the discretion exercised by their local supervisors over pay and promotion matters violates Title VII by discriminating against women. In addition to injunctive and declaratory relief, the plaintiffs seek an award of backpay. We consider whether the certification of the plaintiff class was consistent with Federal Rules of Civil Procedure 23(a) and (b)(2).
I
A
Petitioner Wal-Mart is the Nation’s largest private employer. It operates four types of retail stores throughout the country: Discount Stores, Supercenters, Neighborhood Markets, and Sam’s Clubs. Those stores are divided into seven nationwide divisions, which in turn comprise 41 regions of 80 to 85 stores apiece. Each store has between 40 and 53 separate departments and 80 to 500 staff positions. In all, Wal-Mart operates approximately 3,400 stores and employs more than one million people.
Pay and promotion decisions at Wal-Mart are generally committed to local managers’ broad discretion, which is exercised “in a largely subjective manner.” Local store managers may increase the wages of hourly employees (within limits) with only limited corporate oversight. As for salaried employees, such as store managers and their deputies, higher corporate authorities have discretion to set their pay within preestablished ranges.
Promotions work in a similar fashion. Wal-Mart permits store managers to apply their own subjective criteria when selecting candidates as “support managers,” which is the first step on the path to management. Admission to Wal-Mart’s management training program, however, does require that a candidate meet certain objective criteria, including an above-average performance rating, at least one year’s tenure in the applicant’s current position, and a willingness to relocate. But except for those requirements, regional and district managers have discretion to use their own judgment when selecting candidates for management training. Promotion to higher office—e.g., assistant manager, co-manager, or store manager—is similarly at the discretion of the employee’s superiors after prescribed objective factors are satisfied.
B
The named plaintiffs in this lawsuit, representing the 1.5 million members of the certified class, are three current or former Wal-Mart employees who allege that the company discriminated against them on the basis of their sex by denying them equal pay or promotions, in violation of Title VII of the Civil Rights Act of 1964. […]
These plaintiffs, respondents here, do not allege that Wal-Mart has any express corporate policy against the advancement of women. Rather, they claim that their local managers’ discretion over pay and promotions is exercised disproportionately in favor of men, leading to an unlawful disparate impact on female employees. And, respondents say, because Wal-Mart is aware of this effect, its refusal to cabin its managers’ authority amounts to disparate treatment. Their complaint seeks injunctive and declaratory relief, punitive damages, and backpay. It does not ask for compensatory damages.
Importantly for our purposes, respondents claim that the discrimination to which they have been subjected is common to all Wal-Mart’s female employees. The basic theory of their case is that a strong and uniform “corporate culture” permits bias against women to infect, perhaps subconsciously, the discretionary decision-making of each one of Wal-Mart’s thousands of managers—thereby making every woman at the company the victim of one common discriminatory practice. Respondents therefore wish to litigate the Title VII claims of all female employees at Wal-Mart’s stores in a nationwide class action.
C
Class certification is governed by Federal Rule of Civil Procedure 23. [The opinion quoted Rule 23(a), noting that all class actions must satisfy those requirements.]
[T]he proposed class must satisfy at least one of the three requirements listed in Rule 23(b). Respondents rely on Rule 23(b)(2), which applies when “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.”2
Invoking these provisions, respondents moved the District Court to certify a plaintiff class consisting of “‘[a]ll women employed at any Wal-Mart domestic retail store at any time since December 26, 1998, who have been or may be subjected to Wal-Mart’s challenged pay and management track promotions policies and practices.’” As evidence that there were indeed “questions of law or fact common to” all the women of Wal-Mart, as Rule 23(a)(2) requires, respondents relied chiefly on three forms of proof: statistical evidence about pay and promotion disparities between men and women at the company, anecdotal reports of discrimination from about 120 of Wal-Mart’s female employees, and the testimony of a sociologist, Dr. William Bielby, who conducted a “social framework analysis” of Wal-Mart’s “culture” and personnel practices, and concluded that the company was “vulnerable” to gender discrimination.
Wal-Mart unsuccessfully moved to strike much of this evidence. It also offered its own countervailing statistical and other proof in an effort to defeat Rule 23(a)‘s requirements of commonality, typicality, and adequate representation. Wal-Mart further contended that respondents’ monetary claims for backpay could not be certified under Rule 23(b)(2), first because that Rule refers only to injunctive and declaratory relief, and second because the backpay claims could not be manageably tried as a class without depriving Wal-Mart of its right to present certain statutory defenses. With one limitation not relevant here, the District Court granted respondents’ motion and certified their proposed class. [Wal-Mart appealed, relying on Rule 23(f), which permits a Court of Appeals to accept an appeal from an order “granting or denying class-action certification.”]
D
A divided en banc Court of Appeals substantially affirmed the District Court’s certification order. […]
[As part of its ruling,] the Court of Appeals determined that the action could be manageably tried as a class action because the District Court could adopt the approach the Ninth Circuit approved in Hilao v. Estate of Marcos, 103 F.3d 767, 782–787 (1996). There compensatory damages for some 9,541 class members were calculated by selecting 137 claims at random, referring those claims to a special master for valuation, and then extrapolating the validity and value of the untested claims from the sample set. […]
II
The class action is “an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” In order to justify a departure from that rule, “a class representative must be part of the class and ‘possess the same interest and suffer the same injury’ as the class members.” Rule 23(a) ensures that the named plaintiffs are appropriate representatives of the class whose claims they wish to litigate. The Rule’s four requirements—numerosity, commonality, typicality, and adequate representation—“effectively ‘limit the class claims to those fairly encompassed by the named plaintiff’s claims.’”
A
The crux of this case is commonality—the rule requiring a plaintiff to show that “there are questions of law or fact common to the class.” Rule 23(a)(2).5 That language is easy to misread, since “[a]ny competently crafted class complaint literally raises common ‘questions.’” Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97, 131–132 (2009). For example: Do all of us plaintiffs indeed work for Wal-Mart? Do our managers have discretion over pay? Is that an unlawful employment practice? What remedies should we get? Reciting these questions is not sufficient to obtain class certification. Commonality requires the plaintiff to demonstrate that the class members “have suffered the same injury.” This does not mean merely that they have all suffered a violation of the same provision of law. Title VII, for example, can be violated in many ways—by intentional discrimination, or by hiring and promotion criteria that result in disparate impact, and by the use of these practices on the part of many different superiors in a single company. Quite obviously, the mere claim by employees of the same company that they have suffered a Title VII injury, or even a disparate-impact Title VII injury, gives no cause to believe that all their claims can productively be litigated at once. Their claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.
“What matters to class certification … is not the raising of common ‘questions’—even in droves—but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation. Dissimilarities within the proposed class are what have the potential to impede the generation of common answers.”
Nagareda, supra, at 132.
6 A statement in one of our prior cases, Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177 (1974), is sometimes mistakenly cited to the contrary: “We find nothing in either the language or history of Rule 23 that gives a court any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action.” But in that case, the judge had conducted a preliminary inquiry into the merits of a suit, not in order to determine the propriety of certification under Rules 23(a) and (b) (he had already done that, see id., at 165), but in order to shift the cost of notice required by Rule 23(c)(2) from the plaintiff to the defendants. To the extent the quoted statement goes beyond the permissibility of a merits inquiry for any other pretrial purpose, it is the purest dictum and is contradicted by our other cases.
7 In a pattern-or-practice case, the plaintiff tries to “establish by a preponderance of the evidence that … discrimination was the company’s standard operating procedure[,] the regular rather than the unusual practice.” If he succeeds, that showing will support a rebuttable inference that all class members were victims of the discriminatory practice, and will justify “an award of prospective relief,” such as “an injunctive order against continuation of the discriminatory practice.”
Rule 23 does not set forth a mere pleading standard. A party seeking class certification must affirmatively demonstrate his compliance with the Rule—that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc. We recognized in Falcon that “sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question,” and that certification is proper only if “the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied.” Frequently that “rigorous analysis” will entail some overlap with the merits of the plaintiff’s underlying claim. That cannot be helped. “‘[T]he class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff’s cause of action.’” Falcon.6 Nor is there anything unusual about that consequence: The necessity of touching aspects of the merits in order to resolve preliminary matters, e.g., jurisdiction and venue, is a familiar feature of litigation.
In this case, proof of commonality necessarily overlaps with respondents’ merits contention that Wal-Mart engages in a pattern or practice of discrimination.7 That is so because, in resolving an individual’s Title VII claim, the crux of the inquiry is “the reason for a particular employment decision.” Here respondents wish to sue about literally millions of employment decisions at once. Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored.
B
This Court’s opinion in Falcon describes how the commonality issue must be approached[:]
“Conceptually, there is a wide gap between (a) an individual’s claim that he has been denied a promotion [or higher pay] on discriminatory grounds, and his otherwise unsupported allegation that the company has a policy of discrimination, and (b) the existence of a class of persons who have suffered the same injury as that individual, such that the individual’s claim and the class claim will share common questions of law or fact and that the individual’s claim will be typical of the class claims.”
Falcon suggested two ways in which that conceptual gap might be bridged. First, if the employer “used a biased testing procedure to evaluate both applicants for employment and incumbent employees, a class action on behalf of every applicant or employee who might have been prejudiced by the test clearly would satisfy the commonality and typicality requirements of Rule 23(a).” Second, “[s]ignificant proof that an employer operated under a general policy of discrimination conceivably could justify a class of both applicants and employees if the discrimination manifested itself in hiring and promotion practices in the same general fashion, such as through entirely subjective decisionmaking processes.” We think that statement precisely describes respondents’ burden in this case. The first manner of bridging the gap obviously has no application here; Wal-Mart has no testing procedure or other company-wide evaluation method that can be charged with bias. The whole point of permitting discretionary decisionmaking is to avoid evaluating employees under a common standard.
The second manner of bridging the gap requires “significant proof” that Wal-Mart “operated under a general policy of discrimination.” That is entirely absent here. Wal-Mart’s announced policy forbids sex discrimination, and as the District Court recognized the company imposes penalties for denials of equal employment opportunity. The only evidence of a “general policy of discrimination” respondents produced was the testimony of Dr. William Bielby, their sociological expert. Relying on “social framework” analysis, Bielby testified that Wal-Mart has a “strong corporate culture,” that makes it “‘vulnerable’” to “gender bias.” He could not, however, “determine with any specificity how regularly stereotypes play a meaningful role in employment decisions at Wal-Mart. At his deposition […] Dr. Bielby conceded that he could not calculate whether 0.5 percent or 95 percent of the employment decisions at Wal-Mart might be determined by stereotyped thinking. […] Bielby[’s testimony] is worlds away from”significant proof” that Wal-Mart “operated under a general policy of discrimination.”
C
The only corporate policy that the plaintiffs’ evidence convincingly establishes is Wal-Mart’s “policy” of allowing discretion by local supervisors over employment matters. On its face, of course, that is just the opposite of a uniform employment practice that would provide the commonality needed for a class action. […]
To be sure, we have recognized that, “in appropriate cases,” giving discretion to lower-level supervisors can be the basis of Title VII liability under a disparate-impact theory—since “an employer’s undisciplined system of subjective decisionmaking [can have] precisely the same effects as a system pervaded by impermissible intentional discrimination.” But the recognition that this type of Title VII claim “can” exist does not lead to the conclusion that every employee in a company using a system of discretion has such a claim in common. […]
Respondents have not identified a common mode of exercising discretion that pervades the entire company—aside from their reliance on Dr. Bielby’s social frameworks analysis that we have rejected. In a company of Wal-Mart’s size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way without some common direction. Respondents attempt to make that showing by means of statistical and anecdotal evidence, but their evidence falls well short.
The statistical evidence consists primarily of regression analyses performed by Dr. Richard Drogin, a statistician, and Dr. Marc Bendick, a labor economist. After considering regional and national data, Drogin concluded that “there are statistically significant disparities between men and women at Wal-Mart … [and] these disparities … can be explained only by gender discrimination.” Bendick compared workforce data from Wal-Mart and competitive retailers and concluded that Wal-Mart “promotes a lower percentage of women than its competitors.”
Even if they are taken at face value, these studies are insufficient to establish that respondents’ theory can be proved on a classwide basis. […] As Judge Ikuta observed in her dissent, “[i]nformation about disparities at the regional and national level does not establish the existence of disparities at individual stores, let alone raise the inference that a companywide policy of discrimination is implemented by discretionary decisions at the store and district level.” A regional pay disparity, for example, may be attributable to only a small set of Wal-Mart stores, and cannot by itself establish the uniform, store-by-store disparity upon which the plaintiffs’ theory of commonality depends. […]
Respondents’ anecdotal evidence suffers from the same defects, and in addition is too weak to raise any inference that all the individual, discretionary personnel decisions are discriminatory. […] Here […] respondents filed some 120 affidavits reporting experiences of discrimination—about 1 for every 12,500 class members—relating to only some 235 out of Wal-Mart’s 3,400 stores. […] Even if every single one of these accounts is true, that would not demonstrate that the entire company “operate[s] under a general policy of discrimination.” […]
In sum, we agree with Chief Judge Kozinski that the members of the class:
“held a multitude of different jobs, at different levels of Wal-Mart’s hierarchy, for variable lengths of time, in 3,400 stores, sprinkled across 50 states, with a kaleidoscope of supervisors (male and female), subject to a variety of regional policies that all differed. … Some thrived while others did poorly. They have little in common but their sex and this lawsuit.” (dissenting opinion).
III
We also conclude that respondents’ claims for backpay were improperly certified under Federal Rule of Civil Procedure 23(b)(2). Our opinion in Ticor Title Ins. Co. v. Brown, 511 U.S. 117, 121 (1994) (per curiam) expressed serious doubt about whether claims for monetary relief may be certified under that provision. We now hold that they may not, at least where (as here) the monetary relief is not incidental to the injunctive or declaratory relief.
A
Rule 23(b)(2) allows class treatment when “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.” One possible reading of this provision is that it applies only to requests for such injunctive or declaratory relief and does not authorize the class certification of monetary claims at all. We need not reach that broader question in this case, because we think that, at a minimum, claims for individualized relief (like the backpay at issue here) do not satisfy the Rule. The key to the (b)(2) class is “the indivisible nature of the injunctive or declaratory remedy warranted—the notion that the conduct is such that it can be enjoined or declared unlawful only as to all of the class members or as to none of them.” Nagareda, 84 N.Y.U. L. Rev. at 132. In other words, Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each member of the class. It does not authorize class certification when each individual class member would be entitled to a different injunction or declaratory judgment against the defendant. Similarly, it does not authorize class certification when each class member would be entitled to an individualized award of monetary damages.
That interpretation accords with the history of the Rule. Because Rule 23 “stems from equity practice” that predated its codification, in determining its meaning we have previously looked to the historical models on which the Rule was based. As we observed in Amchem, “[c]ivil rights cases against parties charged with unlawful, class-based discrimination are prime examples” of what (b)(2) is meant to capture. In particular, the Rule reflects a series of decisions involving challenges to racial segregation—conduct that was remedied by a single classwide order. In none of the cases cited by the Advisory Committee as examples of (b)(2)’s antecedents did the plaintiffs combine any claim for individualized relief with their classwide injunction.
11 Rule 23(b)(1) applies where separate actions by or against individual class members would create a risk of “establish[ing] incompatible standards of conduct for the party opposing the class,” Rule 23(b)(1)(A), such as “where the party is obliged by law to treat the members of the class alike,” or where individual adjudications “as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests,” Rule 23(b)(1)(B), such as in “‘limited fund’ cases, … in which numerous persons make claims against a fund insufficient to satisfy all claims.”
Permitting the combination of individualized and classwide relief in a (b)(2) class is also inconsistent with the structure of Rule 23(b). Classes certified under (b)(1) and (b)(2) share the most traditional justifications for class treatment—that individual adjudications would be impossible or unworkable, as in a (b)(1) class,11 or that the relief sought must perforce affect the entire class at once, as in a (b)(2) class. For that reason these are also mandatory classes: The Rule provides no opportunity for (b)(1) or (b)(2) class members to opt out, and does not even oblige the District Court to afford them notice of the action. Rule 23(b)(3), by contrast, is an “adventuresome innovation” of the 1966 amendments, framed for situations “in which ‘class-action treatment is not as clearly called for’” (quoting Advisory Committee’s Notes, 28 U.S.C. App., p. 697 (1994 ed.)). It allows class certification in a much wider set of circumstances but with greater procedural protections. Its only prerequisites are that “the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Rule 23(b)(3). And unlike (b)(1) and (b)(2) classes, the (b)(3) class is not mandatory; class members are entitled to receive “the best notice that is practicable under the circumstances” and to withdraw from the class at their option. See Rule 23(c)(2)(B).
Given that structure, we think it clear that individualized monetary claims belong in Rule 23(b)(3). The procedural protections attending the (b)(3) class—predominance, superiority, mandatory notice, and the right to opt out—are missing from (b)(2) not because the Rule considers them unnecessary, but because it considers them unnecessary to a (b)(2) class. When a class seeks an indivisible injunction benefiting all its members at once, there is no reason to undertake a case-specific inquiry into whether class issues predominate or whether class action is a superior method of adjudicating the dispute. Predominance and superiority are self-evident. But with respect to each class member’s individualized claim for money, that is not so—which is precisely why (b)(3) requires the judge to make findings about predominance and superiority before allowing the class. Similarly, (b)(2) does not require that class members be given notice and opt-out rights, presumably because it is thought (rightly or wrongly) that notice has no purpose when the class is mandatory, and that depriving people of their right to sue in this manner complies with the Due Process Clause. In the context of a class action predominantly for money damages we have held that absence of notice and opt-out violates due process. While we have never held that to be so where the monetary claims do not predominate, the serious possibility that it may be so provides an additional reason not to read Rule 23(b)(2) to include the monetary claims here. […]
B
Against that conclusion, respondents argue that their claims for backpay were appropriately certified as part of a class under Rule 23(b)(2) because those claims do not “predominate” over their requests for injunctive and declaratory relief. They rely upon the Advisory Committee’s statement that Rule 23(b)(2) “does not extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages.” […]
Respondents’ predominance test […] creates perverse incentives for class representatives to place at risk potentially valid claims for monetary relief. In this case, for example, the named plaintiffs declined to include employees’ claims for compensatory damages in their complaint. That strategy of including only backpay claims made it more likely that monetary relief would not “predominate.” But it also created the possibility (if the predominance test were correct) that individual class members’ compensatory-damages claims would be precluded by litigation they had no power to hold themselves apart from. If it were determined, for example, that a particular class member is not entitled to backpay because her denial of increased pay or a promotion was not the product of discrimination, that employee might be collaterally estopped from independently seeking compensatory damages based on that same denial. That possibility underscores the need for plaintiffs with individual monetary claims to decide for themselves whether to tie their fates to the class representatives’ or go it alone—a choice Rule 23(b)(2) does not ensure that they have. […]
C
The Court of Appeals believed that it was possible to replace such proceedings with Trial by Formula. A sample set of the class members would be selected, as to whom liability for sex discrimination and the backpay owing as a result would be determined in depositions supervised by a master. The percentage of claims determined to be valid would then be applied to the entire remaining class, and the number of (presumptively) valid claims thus derived would be multiplied by the average backpay award in the sample set to arrive at the entire class recovery—without further individualized proceedings. We disapprove that novel project. Because the Rules Enabling Act forbids interpreting Rule 23 to “abridge, enlarge or modify any substantive right,” 28 U.S.C. § 2072(b); a class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims. And because the necessity of that litigation will prevent backpay from being “incidental” to the classwide injunction, respondents’ class could not be certified even assuming, arguendo, that “incidental” monetary relief can be awarded to a 23(b)(2) class.
* * *
The judgment of the Court of Appeals is Reversed.
GINSBURG, J., with whom BREYER, J., SOTOMAYOR, J., and KAGAN, J., join, concurring in part and dissenting in part.
The class in this case, I agree with the Court, should not have been certified under Federal Rule of Civil Procedure 23(b)(2). The plaintiffs, alleging discrimination in violation of Title VII, seek monetary relief that is not merely incidental to any injunctive or declaratory relief that might be available. A putative class of this type may be certifiable under Rule 23(b)(3), if the plaintiffs show that common class questions “predominate” over issues affecting individuals—e.g., qualification for, and the amount of, backpay or compensatory damages—and that a class action is “superior” to other modes of adjudication
Whether the class the plaintiffs describe meets the specific requirements of Rule 23(b)(3) is not before the Court, and I would reserve that matter for consideration and decision on remand.1 The Court, however, disqualifies the class at the starting gate, holding that the plaintiffs cannot cross the “commonality” line set by Rule 23(a)(2). In so ruling, the Court imports into the Rule 23(a) determination concerns properly addressed in a Rule 23(b)(3) assessment. […]
* * *
The Court errs in importing a “dissimilarities” notion suited to Rule 23(b)(3) into the Rule 23(a) commonality inquiry. I therefore cannot join Part II of the Court’s opinion.
Notes & Questions
Rule 23 governs class actions in federal court. It both states the criteria that must be met before a class may be certified and lays down special procedures that apply in class-action cases. To certify a class, a court must find both that: the four elements of Rule 23(a)—numerosity, commonality, representativeness, and adequacy of representation—are satisfied; and that one of the three elements of Rule 23(b) are satisfied.
Wal-Mart speaks to both Rule 23(a) and Rule 23(b). First, all nine members of the Court agreed that the plaintiffs had failed to satisfy the requirements of Rule 23(b). The case was litigated as a “(b)(2)” class, meaning that was the only of three Rule 23(b) paths chosen by the plaintiffs. Rule 23(b)(2) (sometimes referred to simply as a “civil-rights class”) typically applies when the party is seeking injunctive relief. The full Court said that, because the class was seeking back pay, it could not qualify as a (b)(2) class.
Second, by a vote of 5–4, the Court also held that the plaintiffs failed to satisfy the requirements of Rule 23(a). In particular, the Court held that the plaintiffs had failed to show commonality under Rule 23(a)(2). The Court explained that, because the class was so numerous and geographically dispersed, and because the methods for hiring and promotion in Wal-Mart stores, there were no “questions of law or fact common to the class.” Is that conclusion consistent with Mosley v. General Motors, supra, which held (under Rule 20) that employees alleging discrimination by the same employer at different plants could join together in a single suit? Key to the Court’s analysis is an insistence, which it credits to Professor Richard Nagareda, that commonality requires not just common questions but in fact common answers.
Perhaps some of the Court’s resistance to the class in Wal-Mart has to do with its size. As certified, the class contained more than 1.5 million members. Certification alone dramatically shifts the balance of power in litigation, as Judge Posner has explained, even if a defendant has defenses to class claims, even a small risk of losing—and the potentially ruinous liability that would attach—means that defendants “may not wish to roll the[] dice. That is putting it mildly. They will be under intense pressure to settle.” In re Rhone-Poulenc, 51 F.3d 1293, 1298 (7th Cir. 1995). If that was true of the 5,000 class members from Rhone-Poulenc, it is true many times over for a class of 1.5 million.
The size of the class points to a larger issue with classwide litigation. There are problems in our economy and society that affect thousands or millions of people: things like unfair workplace practices, unsafe products, anticompetitive business practices. Each of these kinds of harms can give rise to individual lawsuits. But if every suit had to be litigated individually, the sheer volume of cases would grind the courts to a halt. In the absence of an administrative scheme to resolve these cases en masse, class actions offer one of the only paths out of a decades-long morass.
Asbestos caused the first, and probably still the paradigmatic, wave of mass torts that threatened to overwhelm the courts. Used for millennia because of its fire resistance and quality as an insulator, asbestos exploded in industrial popularity in the early 20th century. It was used in everything from pipes to home appliances to athletic clothing. Unfortunately, it eventually became clear that asbestos is toxic to humans, causing a variety of ailments. The most serious ailments are asbestosis, which can lead to things like lung cancer and heart disease, and mesothelioma, a cancer that is highly correlated (80% or more) with asbestos exposure. Most relevant to our inquiry is the fact that injury from asbestos exposure has a very long incubation period: a typical case of mesothelioma will not manifest for 40 years after exposure to asbestos. But once it takes hold, it is deadly: mesothelioma has low survival rates even among cancers.
These features of asbestos posed significant problems for courts trying to adjudicate asbestos lawsuits, which began appearing on dockets in large numbers in the 1970s. Because the producers of asbestos were not making much money selling asbestos products anymore (it was banned for most uses by that time), there was a limited amount of money to go around to those injured by asbestos. Yet it was clear that a large number of as-yet unidentified plaintiffs would come forward in the future, once injuries manifested from their past asbestos exposure. How could a court ensure everyone was treated equally across decades? Trying to solve this problem has been one of the great engines of creativity in complex litigation for the last 50 years, as the next case shows.
Amchem Products, Inc. v. Windsor
GINSBURG, J., delivered the opinion of the Court.
This case concerns the legitimacy under Rule 23 of the Federal Rules of Civil Procedure of a class-action certification sought to achieve global settlement of current and future asbestos-related claims. The class proposed for certification potentially encompasses hundreds of thousands, perhaps millions, of individuals tied together by this commonality: each was, or some day may be, adversely affected by past exposure to asbestos products manufactured by one or more of 20 companies. Those companies, defendants in the lower courts, are petitioners here. […]
I
A
The settlement-class certification we confront evolved in response to an asbestos-litigation crisis. A United States Judicial Conference Ad Hoc Committee on Asbestos Litigation, appointed by The Chief Justice in September 1990, described facets of the problem in a 1991 report:
[This] is a tale of danger known in the 1930s, exposure inflicted upon millions of Americans in the 1940s and 1950s, injuries that began to take their toll in the 1960s, and a flood of lawsuits beginning in the 1970s. On the basis of past and current filing data, and because of latency period that may last as long as 40 years for some asbestos related diseases, a continuing stream of claims can be expected. The final toll of asbestos related injuries is unknown. Predictions have been made of 200,000 asbestos disease deaths before the year 2000 and as many as 265,000 by the year 2015.
The most objectionable aspects of asbestos litigation can be briefly summarized: dockets in both federal and state courts continue to grow; long delays are routine; trials are too long; the same issues are litigated over and over; transaction costs exceed the victims’ recovery by nearly two to one; exhaustion of assets threatens and distorts the process; and future claimants may lose altogether.
Report of the Judicial Conference Ad Hoc Committee on Asbestos Litigation 2–3 (Mar. 1991).
Real reform, the report concluded, required federal legislation creating a national asbestos dispute-resolution scheme. […] To this date, no congressional response has emerged.
In the face of legislative inaction, the federal courts—lacking authority to replace state tort systems with a national toxic tort compensation regime—endeavored to work with the procedural tools available to improve management of federal asbestos litigation. Eight federal judges, experienced in the superintendence of asbestos cases, urged the Judicial Panel on Multidistrict Litigation (MDL Panel), to consolidate in a single district all asbestos complaints then pending in federal courts. Accepting the recommendation, the MDL Panel transferred all asbestos cases then filed, but not yet on trial in federal courts to a single district, the United States District Court for the Eastern District of Pennsylvania; pursuant to the transfer order, the collected cases were consolidated for pretrial proceedings before Judge Weiner. The order aggregated pending cases only; no authority resides in the MDL Panel to license for consolidated proceedings claims not yet filed.
B
After the consolidation, attorneys for plaintiffs and defendants formed separate steering committees and began settlement negotiations. […] Settlement talks […] concentrated on devising an administrative scheme for disposition of asbestos claims not yet in litigation. In these negotiations, counsel for masses of inventory plaintiffs* endeavored to represent the interests of the anticipated future claimants, although those lawyers then had no attorney-client relationship with such claimants.
Once negotiations seemed likely to produce an agreement purporting to bind potential plaintiffs, CCR[, a group of defendants,] agreed to settle, through separate agreements, the claims of plaintiffs who had already filed asbestos-related lawsuits. […] After settling the inventory claims, CCR, together with the plaintiffs’ lawyers CCR had approached, launched this case, exclusively involving persons outside the MDL Panel’s province—plaintiffs without already pending lawsuits.3
C
The class action thus instituted was not intended to be litigated. Rather, within the space of a single day, January 15, 1993, the settling parties—CCR defendants and the representatives of the plaintiff class described below—presented to the District Court a complaint, an answer, a proposed settlement agreement, and a joint motion for conditional class certification.
The complaint identified nine lead plaintiffs, designating them and members of their families as representatives of a class comprising all persons who had not filed an asbestos-related lawsuit against a CCR defendant as of the date the class action commenced, but who (1) had been exposed—occupationally or through the occupational exposure of a spouse or household member—to asbestos or products containing asbestos attributable to a CCR defendant, or (2) whose spouse or family member had been so exposed. Untold numbers of individuals may fall within this description. All named plaintiffs alleged that they or a member of their family had been exposed to asbestos-containing products of CCR defendants. More than half of the named plaintiffs alleged that they or their family members had already suffered various physical injuries as a result of the exposure. The others alleged that they had not yet manifested any asbestos-related condition. The complaint delineated no subclasses; all named plaintiffs were designated as representatives of the class as a whole.
[…]
A stipulation of settlement accompanied the pleadings; it proposed to settle, and to preclude nearly all class members from litigating against CCR companies, all claims not filed before January 15, 1993, involving compensation for present and future asbestos-related personal injury or death. An exhaustive document exceeding 100 pages, the stipulation presents in detail an administrative mechanism and a schedule of payments to compensate class members who meet defined asbestos-exposure and medical requirements. The stipulation describes four categories of compensable disease: mesothelioma; lung cancer; certain “other cancers” (colon-rectal, laryngeal, esophageal, and stomach cancer); and “non-malignant conditions” (asbestosis and bilateral pleural thickening). Persons with “exceptional” medical claims—claims that do not fall within the four described diagnostic categories—may in some instances qualify for compensation, but the settlement caps the number of “exceptional” claims CCR must cover. […]
For each qualifying disease category, the stipulation specifies the range of damages CCR will pay to qualifying claimants. Payments under the settlement are not adjustable for inflation. Mesothelioma claimants—the most highly compensated category—are scheduled to receive between $20,000 and $200,000. The stipulation provides that CCR is to propose the level of compensation within the prescribed ranges; it also establishes procedures to resolve disputes over medical diagnoses and levels of compensation.
Class members are to receive no compensation for certain kinds of claims, even if otherwise applicable state law recognizes such claims. […] Although not entitled to present compensation, exposure-only claimants and pleural claimants may qualify for benefits when and if they develop a compensable disease and meet the relevant exposure and medical criteria. Defendants forgo defenses to liability, including statute of limitations pleas.
Class members, in the main, are bound by the settlement in perpetuity, while CCR defendants may choose to withdraw from the settlement after ten years. A small number of class members—only a few per year—may reject the settlement and pursue their claims in court. Those permitted to exercise this option, however, may not assert any punitive damages claim or any claim for increased risk of cancer. Aspects of the administration of the settlement are to be monitored by the AFL-CIO and class counsel. Class counsel are to receive attorneys’ fees in an amount to be approved by the District Court.
D
On January 29, 1993, as requested by the settling parties, the District Court conditionally certified, under Federal Rule of Civil Procedure 23(b)(3), an encompassing opt-out class. […] Judge Weiner assigned to Judge Reed, also of the Eastern District of Pennsylvania, “the task of conducting fairness proceedings and of determining whether the proposed settlement is fair to the class.” [The district court approved the settlement.]
E
The Court of Appeals [reversing] […] found that “serious intra-class conflicts precluded the class from meeting the adequacy of representation requirement” of Rule 23(a)(4). […]
III
To place this controversy in context, we briefly describe the characteristics of class actions for which the Federal Rules provide. Rule 23, governing federal-court class actions, stems from equity practice and gained its current shape in an innovative 1966 revision. […]
In the decades since the 1966 revision of Rule 23, class action practice has become ever more “adventuresome” as a means of coping with claims too numerous to secure their “just, speedy, and inexpensive determination” one by one. See Fed. Rule Civ. Proc. 1. The development reflects concerns about the efficient use of court resources and the conservation of funds to compensate claimants who do not line up early in a litigation queue. […]
Among current applications of Rule 23(b)(3), the “settlement only” class has become a stock device. Although all Federal Circuits recognize the utility of Rule 23(b)(3) settlement classes, courts have divided on the extent to which a proffered settlement affects court surveillance under Rule 23’s certification criteria. […]
IV
We granted review to decide the role settlement may play, under existing Rule 23, in determining the propriety of class certification. […]
Confronted with a request for settlement-only class certification, a district court need not inquire whether the case, if tried, would present intractable management problems, see Fed. Rule Civ. Proc. 23(b)(3)(D), for the proposal is that there be no trial. But other specifications of the rule—those designed to protect absentees by blocking unwarranted or overbroad class definitions—demand undiluted, even heightened, attention in the settlement context. Such attention is of vital importance, for a court asked to certify a settlement class will lack the opportunity, present when a case is litigated, to adjust the class, informed by the proceedings as they unfold. See Fed. Rule Civ. Proc. 23(c), (d).16 And, of overriding importance, courts must be mindful that the rule as now composed sets the requirements they are bound to enforce. Federal Rules take effect after an extensive deliberative process involving many reviewers: a Rules Advisory Committee, public commenters, the Judicial Conference, this Court, the Congress. The text of a rule thus proposed and reviewed limits judicial inventiveness. Courts are not free to amend a rule outside the process Congress ordered, a process properly tuned to the instruction that rules of procedure “shall not abridge … any substantive right.” 28 U.S.C. § 2072(b).
Rule 23(e) [at the time of the decision,] on settlement of class actions, read[] in its entirety: “A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs.” This prescription was designed to function as an additional requirement, not a superseding direction, for the “class action” to which Rule 23(e) refers is one qualified for certification under Rule 23(a) and (b). The safeguards provided by the Rule 23(a) and (b) class-qualifying criteria, we emphasize, are not impractical impediments—checks shorn of utility—in the settlement class context. […]
Federal courts, in any case, lack authority to substitute for Rule 23’s certification criteria a standard never adopted—that if a settlement is “fair,” then certification is proper. Applying to this case criteria the rulemakers set, we conclude that the Third Circuit’s appraisal is essentially correct. Although that court should have acknowledged that settlement is a factor in the calculus, a remand is not warranted on that account. The Court of Appeals’ opinion amply demonstrates why—with or without a settlement on the table—the sprawling class the District Court certified does not satisfy Rule 23’s requirements. […]
A
We address first the requirement of Rule 23(b)(3) that “[common] questions of law or fact […] predominate over any questions affecting only individual members.” The District Court concluded that predominance was satisfied based on two factors: class members’ shared experience of asbestos exposure and their common “interest in receiving prompt and fair compensation for their claims, while minimizing the risks and transaction costs inherent in the asbestos litigation process as it occurs presently in the tort system.” […]
The predominance requirement stated in Rule 23(b)(3), we hold, is not met by the factors on which the District Court relied. The benefits asbestos-exposed persons might gain from the establishment of a grand-scale compensation scheme is a matter fit for legislative consideration, but it is not pertinent to the predominance inquiry. That inquiry trains on the legal or factual questions that qualify each class member’s case as a genuine controversy, questions that preexist any settlement. […]
B
Nor can the class approved by the District Court satisfy Rule 23(a)(4)’s requirement that the named parties “will fairly and adequately protect the interests of the class.” The adequacy inquiry under Rule 23(a)(4) serves to uncover conflicts of interest between named parties and the class they seek to represent. […]
As the Third Circuit pointed out, named parties with diverse medical conditions sought to act on behalf of a single giant class rather than on behalf of discrete subclasses. In significant respects, the interests of those within the single class are not aligned. Most saliently, for the currently injured, the critical goal is generous immediate payments. That goal tugs against the interest of exposure-only plaintiffs in ensuring an ample, inflation-protected fund for the future. […]
The settling parties, in sum, achieved a global compromise with no structural assurance of fair and adequate representation for the diverse groups and individuals affected. Although the named parties alleged a range of complaints, each served generally as representative for the whole, not for a separate constituency. […]
The Third Circuit found no assurance here—either in the terms of the settlement or in the structure of the negotiations—that the named plaintiffs operated under a proper understanding of their representational responsibilities. That assessment, we conclude, is on the mark.
C
Because we have concluded that the class in this case cannot satisfy the requirements of common issue predominance and adequacy of representation, we need not rule, definitively, on the notice given here. In accord with the Third Circuit, however, we recognize the gravity of the question whether class action notice sufficient under the Constitution and Rule 23 could ever be given to legions so unselfconscious and amorphous.
V
The argument is sensibly made that a nationwide administrative claims processing regime would provide the most secure, fair, and efficient means of compensating victims of asbestos exposure. Congress, however, has not adopted such a solution. And Rule 23, which must be interpreted with fidelity to the Rules Enabling Act and applied with the interests of absent class members in close view, cannot carry the large load CCR, class counsel, and the District Court heaped upon it. As this case exemplifies, the rulemakers’ prescriptions for class actions may be endangered by “those who embrace [Rule 23] too enthusiastically just as [they are by] those who approach [the rule] with distaste.” C. Wright, Law of Federal Courts 508 (5th ed. 1994). […]
O’CONNOR, J., took no part in the consideration or decision of this case.
BREYER, J., with whom STEVENS, J., joins, concurring in part and dissenting in part.
Although I agree with the Court’s basic holding that “settlement is relevant to a class certification,” I find several problems in its approach that lead me to a different conclusion. First, I believe that the need for settlement in this mass tort case, with hundreds of thousands of lawsuits, is greater than the Court’s opinion suggests. Second, I would give more weight than would the majority to settlement-related issues for purposes of determining whether common issues predominate. Third, I am uncertain about the Court’s determination of adequacy of representation, and do not believe it appropriate for this Court to second-guess the District Court on the matter without first having the Court of Appeals consider it. Fourth, I am uncertain about the tenor of an opinion that seems to suggest the settlement is unfair. And fifth, in the absence of further review by the Court of Appeals, I cannot accept the majority’s suggestions that “notice” is inadequate. […]
Notes & Questions
Amchem says that even classes proposed to be certified solely for the purposes of settlement must satisfy the requirements of Rule 23, including both Rule 23(a) & (b). Rule 23(b)’s requirement of predominance proved fatal to the proposed class in Amchem. See if you can explain why.
On one level, this makes sense. Rule 23 contains certain requirements, and those requirements are there to ensure that the due process rights of absent class members are not trampled upon. See, e.g., Hansberry v. Lee, supra. But on another level, Amchem is madness. By 1997, hundreds of thousands of suits had been filed. Even at that time, it was estimated that the total number of claimants would exceed one million. Asbestos litigation has bankrupt multiple Fortune 500 companies. Total liability has now reached roughly a quarter trillion dollars. Yet only a fraction of the money generated by asbestos litigation was actually paid to victims. The rest is paid to lawyers on both sides trying to identify, manage, and litigate the unending stream of cases. The possibility of a global settlement would have stopped the flow of cases, reduced litigation costs, and perhaps brought some sense to the problem.
After Amchem, the next major attempt at a global asbestos settlement came in Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999). In that case, one asbestos manufacturer entered a deal with a group of plaintiffs’ lawyers in a coffee shop in Tyler, Texas to settle all asbestos claims against it for $1.535 billion. To ensure global repose, the parties structured the settlement by creating a fixed fund to pay out claims ($1.525 billion of the fund came from insurance companies; the other $10 million came from Fibreboard itself). Then, after the agreement was struck, a group of plaintiffs filed suit in federal court seeking to certify a class of all present and future claimants against Fibreboard. The lead plaintiffs invoked Rule 23(b)(1)(B)—the provision for so-called “limited fund” classes. / / The Supreme Court rejected the proposed class and thus doomed the settlement. The Court held that the proposed settlement stretched the bounds of the “limited fund” beyond recognition, because the only limit on the settlement fund was how much Fibreboard and its insurers were willing to give up.
Both Amchem and Ortiz represent one of the chief concerns with class action litigation. Because it is typically driven not by clients but by lawyers, and because plaintiffs’ attorneys typically work on contingency, there is an incentive for the lawyers to settle even if it is not in the best interests of some (or all) of the proposed class. Making this problem worse, defense attorneys understand this dynamic and go shopping for plaintiffs’ lawyers who will cut the best deal that still offers global repose. Viewed from this angle, the Court’s interventions in Amchem and Ortiz protect absent class members’ due process rights against the threat of being sold out by attorneys on both sides. Yet it is worth pausing to ask whether those same absent class members any better off as asbestos litigation drags into its sixth decade?
9.4 Multidistrict Litigation
Class actions are not the only way to aggregate and manage large volumes of mass tort cases. In 1968, just two years after Rule 23(b)(3) damages classes were added to the Federal Rules, Congress enacted the first multidistrict litigation (MDL) statute, 28 U.S.C. § 1407. The statute authorizes a special panel of federal judges—the Judicial Panel on Multidistrict Litigation—to transfer and consolidate (for pretrial purposes only) cases that concern similar subject matter. To date, the JPML has created more than 1800 MDLs comprising more than 1 million cases (many of them putative class actions). Today, the biggest MDLs concern such topics as earplugs, talc, hernia mesh, heartburn medication, nicotine vape products, weed killers, and PFAS. Though MDLs are most common for products liability mass torts, they can involve any subject matter, as the following case shows.
Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach
Justice Souter delivered the opinion of the Court, which was unanimous except insofar as Scalia, J., did not join Part II—C.
Title 28 U.S.C. § 1407(a) authorizes the Judicial Panel on Multidistrict Litigation to transfer civil actions with common issues of fact “to any district for coordinated or consolidated pretrial proceedings,” but imposes a duty on the Panel to remand any such action to the original district “at or before the conclusion of such pretrial proceedings.” The issue here is whether a district court conducting such “pretrial proceedings” may invoke § 1404(a) to assign a transferred case to itself for trial. We hold it has no such authority.
I
In 1992, petitioners, Lexecon Inc., a law and economics consulting firm, and one of its principals (collectively, Lexecon), brought this diversity action in the Northern District of Illinois against respondents, the law firms of Milberg Weiss Bershad Hynes & Lerach (Milberg) and Cotchett, Illston & Pitre (Cotchett), claiming malicious prosecution, abuse of process, tortious interference, commercial disparagement, and defamation. The suit arose out of the firms’ conduct as counsel in a prior class action brought against Charles Keating and the American Continental Corporation for violations of the securities and racketeering laws. Lexecon also was a defendant, charged with giving federal and state banking regulators inaccurate and misleading reports about the financial condition of the American Continental Corporation and its subsidiary Lincoln Savings and Loan. Along with other actions arising out of the failure of Lincoln Savings, the case against Lexecon was transferred under § 1407(a)* for pretrial proceedings before Judge Bilby in the District of Arizona, where the matters so consolidated were known as the Lincoln Savings litigation. Before those proceedings were over, the class-action plaintiffs and Lexecon reached what they termed a “resolution,” under which the claims against Lexecon were dismissed in August 1992.
Lexecon then filed this case in the Northern District of Illinois charging that the prior class action terminated in its favor when the respondent law firms’ clients voluntarily dismissed their claims against Lexecon as meritless, amounting to nothing more, according to Lexecon, than a vendetta. When these allegations came to the attention of Judge Bilby, he issued an order stating his understanding of the terms of the resolution agreement between Lexecon and the class-action plaintiffs. Judge Bilby’s characterization of the agreement being markedly at odds with the allegations in the instant action, Lexecon appealed his order to the Ninth Circuit.
Milberg, joined by Cotchett, then filed a motion under § 1407(a) with the Judicial Panel on Multidistrict Litigation seeking transfer of [Lexecon’s case originally filed in Illinois] to Judge Bilby for consolidation with the Lincoln Savings litigation. Although the judge entered a recusal because of the order he had taken it upon himself to issue, the law firms nonetheless renewed their motion for a § 1407(a) transfer.
The Panel ordered a transfer in early June 1993 and assigned the case to Judge Roll, noting that Lexecon’s claims “share questions of fact with an as yet unapproved settlement involving Touche Ross, Lexecon, Inc. and the investor plaintiffs in the Lincoln Savings investor class actions in MDL-834.” The Panel observed that “i) a massive document depository is located in the District of Arizona and ii) the Ninth Circuit has before it an appeal of an order [describing the terms of Lexecon’s dismissal from the Lincoln Savings litigation] in MDL-834 which may be relevant to the Lexecon claims.” Prior to any dispositive action on Lexecon’s instant claims in the District of Arizona, the Ninth Circuit appeal mentioned by the Panel was dismissed, and the document depository was closed down.
In November 1993, Judge Roll dismissed Lexecon’s state-law malicious prosecution and abuse of process claims, applying a “heightened pleading standard,” Although the law firms then moved for summary judgment on the claims remaining, the judge deferred action pending completion of discovery, during which time the remaining parties to the Lincoln Savings litigation reached a final settlement, on which judgment was entered in March 1994.
In August 1994, Lexecon moved that the District Court refer the case back to the Panel for remand to the Northern District of Illinois, thus heeding the point of Multidistrict Litigation Rule 14(d), which provides that “[t]he Panel is reluctant to order remand absent a suggestion of remand from the transferee district court.” The law firms opposed a remand because discovery was still incomplete and filed a counter motion under § 1404(a)* requesting the District of Arizona to “transfer” the case to itself for trial. Judge Roll deferred decision on these motions as well.
In November 1994, Lexecon again asked the District Court to request the Panel to remand the case to the Northern District of Illinois. Again the law firms objected and requested a § 1404 transfer, and Judge Roll deferred ruling once more. On April 24, 1995, however, he granted summary judgment in favor of the law firms on all remaining claims except one in defamation brought against Milberg, and at the same time he dismissed Milberg’s counterclaims. Cotchett then made a request for judgment under Federal Rule of Civil Procedure 54(b). Lexecon objected to the exercise of Rule 54(b) discretion, but did not contest the authority of the District Court in Arizona to enter a final judgment in Cotchett’s favor. On June 7, 1995, the court granted respondent Cotchett’s Rule 54(b) request.
In the meantime, the Arizona court had granted the law firms’ § 1404(a) motions to assign the case to itself for trial, and simultaneously had denied Lexecon’s motions to request the Panel to remand under § 1407(a). Lexecon sought immediate review of these last two rulings by filing a petition for mandamus in the Ninth Circuit. [The Ninth Circuit denied relief.]
Trial on the surviving defamation claim then went forward in the District of Arizona, ending in judgment for Milberg, from which Lexecon appealed to the Ninth Circuit. [The Ninth Circuit again affirmed, holding in relevant part that a transferee court had the power to transfer a case to itself for trial.] We granted certiorari to decide whether § 1407(a) does permit a transferee court to entertain a § 1404(a) transfer motion to keep the case for trial.
II
A
In defending the Ninth Circuit majority, Milberg may claim ostensible support from two quarters. First, the Panel has itself sanctioned such assignments in [its own Rule] 14(b)[, which] provides that “[e]ach transferred action that has not been terminated in the transferee district court shall be remanded by the Panel to the transferor district for trial, unless ordered transferred by the transferee judge to the transferee or other district under 28 U.S.C. § 1404(a) or 28 U.S.C. § 1406.” Thus, out of the 39,228 cases transferred under § 1407 and terminated as of September 30, 1995, 279 of the 3,787 ultimately requiring trial were retained by the courts to which the Panel had transferred them. Although the Panel’s rule and the practice of self-assignment have not gone without challenge, federal courts have treated such transfers with approval […].
The second source of ostensible authority for Milberg’s espousal of the self-assignment power here is a portion of text of the multidistrict litigation statute itself:
“When civil actions involving one or more common questions of fact are pending in different districts, such actions may be transferred to any district for coordinated or consolidated pretrial proceedings.” 28 U.S.C. § 1407(a).
Although the statute limits a transferee court’s authority to the conduct of “coordinated or consolidated” proceedings and to those that are “pretrial,” these limitations alone raise no obvious bar to a transferee’s retention of a case under § 1404. If “consolidated” proceedings alone were authorized, there would be an argument that self-assignment of one or some cases out of many was not contemplated, but because the proceedings need only be “coordinated,” no such narrow limitation is apparent. While it is certainly true that the instant case was not “consolidated” with any other for the purpose literally of litigating identical issues on common evidence, it is fair to say that proceedings to resolve pretrial matters were “coordinated” with the conduct of earlier cases sharing the common core of the Lincoln Savings debacle, if only by being brought before judges in a district where much of the evidence was to be found and overlapping issues had been considered. Judge Bilby’s recusal following his decision to respond to Lexecon’s Illinois pleadings may have limited the prospects for coordination, but it surely did not eliminate them. Hence, the requirement that a transferee court conduct “coordinated or consolidated” proceedings did not preclude the transferee Arizona court from ruling on a motion (like the § 1404 request) that affects only one of the cases before it.
Likewise, at first blush, the statutory limitation to “pretrial” proceedings suggests no reason that a § 1407 transferor court could not entertain a § 1404(a) motion. Section 1404(a) authorizes a district court to transfer a case in the interest of justice and for the convenience of the parties and witnesses. See § 1404(a). Such transfer requests are typically resolved prior to discovery and thus are classic “pretrial” motions.
Beyond this point, however, the textual pointers reverse direction, for § 1407 not only authorizes the Panel to transfer for coordinated or consolidated pretrial proceedings, but obligates the Panel to remand any pending case to its originating court when, at the latest, those pretrial proceedings have run their course.
“Each action so transferred shall be remanded by the panel at or before the conclusion of such pretrial proceedings to the district from which it was transferred unless it shall have been previously terminated.” § 1407(a) (proviso without application here omitted). The Panel’s instruction comes in terms of the mandatory “shall,” which normally creates an obligation impervious to judicial discretion. In the absence of any indication that there might be circumstances in which a transferred case would be neither “terminated” nor subject to the remand obligation, then, the statutory instruction stands flatly at odds with reading the phrase “coordinated or consolidated pretrial proceedings” so broadly as to reach its literal limits, allowing a transferee court’s self-assignment to trump the provision imposing the Panel’s remand duty. If we do our job of reading the statute whole, we have to give effect to this plain command, even if doing that will reverse the longstanding practice under the statute and the rule.
As the Ninth Circuit panel majority saw it, however, the inconsistency between an expansive view of “coordinated or consolidated pretrial” proceedings and the uncompromising terms of the Panel’s remand obligation disappeared as merely an apparent conflict, not a real one. The “focus” of § 1407 was said to be constituting the Panel and defining its authority, not circumscribing the powers of district courts under § 1404(a). Milberg presses this point in observing that § 1407(a) does not, indeed, even apply to transferee courts, being concerned solely with the Panel’s duties, whereas § 1407(b), addressed to the transferee courts, says nothing about the Panel’s obligation to remand. But this analysis fails to persuade, for the very reason that it rejects that central tenet of interpretation, that a statute is to be considered in all its parts when construing any one of them. To emphasize that § 1407(b) says nothing about the Panel’s obligation when addressing a transferee court’s powers is simply to ignore the necessary consequence of self-assignment by a transferee court: it conclusively thwarts the Panel’s capacity to obey the unconditional command of § 1407(a).
A like use of blinders underlies the Circuit majority’s conclusion that the Panel was not even authorized to remand the case under its Rule 14(c), the terms of which condition the remand responsibility on a suggestion of the transferee court, a motion filed directly with the Panel, or the Panel’s sua sponte decision to remand. None of these conditions was fulfilled, according to the Court of Appeals, which particularly faulted Lexecon for failing to file a remand motion directly with the Panel, as distinct from the transferee court. This analysis, too, is unpersuasive; it just ignores the fact that the statute places an obligation on the Panel to remand no later than the conclusion of pretrial proceedings in the transferee court, and no exercise in rule making can read that obligation out of the statute. See 28 U.S.C. § 1407(f) (express requirement that rules be consistent with statute).
B
Milberg proffers two further arguments for overlooking the tension between a broad reading of a court’s pretrial authority and the Panel’s remand obligation. First, it relies on a subtle reading of the provision of § 1407(a) limiting the Panel’s remand obligation to cases not “previously terminated” during the pretrial period. To be sure, this exception to the Panel’s remand obligation indicates that the Panel is not meant to issue ceremonial remand orders in cases already concluded by summary judgment, say, or dismissal. But according to Milberg, the imperative to remand is also inapplicable to cases self-assigned under § 1404, because the self-assignment “terminates” the case insofar as its venue depends on § 1407. When the § 1407 character of the action disappears, Milberg argues, the strictures of § 1407 fall away as well, relieving the Panel of any further duty in the case. The trouble with this creative argument, though, is that the statute manifests no such subtlety. Section 1407(a) speaks not in terms of imbuing transferred actions with some new and distinctive venue character, but simply in terms of “civil actions” or “actions.” It says that such an action, not its acquired personality, must be terminated before the Panel is excused from ordering remand. The language is straightforward, and with a straightforward application ready to hand, statutory interpretation has no business getting metaphysical.
Second, Milberg tries to draw an inference in its favor from the one subsection of § 1407 that does authorize the Panel to transfer a case for trial as well as pretrial proceedings. Subsection (h) provides that,
“[n]otwithstanding the provisions of section 1404 or subsection (f) of this section, the judicial panel on multidistrict litigation may consolidate and transfer with or without the consent of the parties, for both pretrial purposes and for trial, any action brought under section 4C of the Clayton Act.”
Milberg fastens on the introductory language explicitly overriding the “provisions of section 1404 or subsection (f),” which would otherwise, respectively, limit a district court to transferring a case “to any other district or division where it might have been brought,” § 1404(a), and limit the Panel to prescribing rules “not inconsistent with Acts of Congress,” § 1407(f). On Milberg’s reasoning, these overrides are required because the cited provisions would otherwise conflict with the remainder of subsection (h) authorizing the Panel to order trial of certain Clayton Act cases in the transferee court. The argument then runs that since there is no override of subsection (a) of § 1407, subsection (a) must be consistent with a transfer for trial as well as pretrial matters. This reasoning is fallacious, however. Subsections (a) and (h) are independent sources of transfer authority in the Panel; each is apparently written to stand on its own feet. Subsection (h) need not exclude the application of subsection (a), because nothing in (a) would by its terms limit any provision of (h).
Subsection (h) is not merely valueless to Milberg, however; it is ammunition for Lexecon. For the one point that subsection (h) does demonstrate is that Congress knew how to distinguish between trial assignments and pretrial proceedings in cases subject to § 1407. Although the enactment of subsection (a) preceded the enactment of subsection (h), the fact that the later section distinguishes trial assignments from pretrial proceedings generally is certainly some confirmation for our conclusion, on independent grounds, that the subjects of pretrial proceedings in subsections (a) and (b) do not include self-assignment orders.
C
There is, finally, nothing left of Milberg’s position beyond an appeal to legislative history, some of which turns out to ignore the question before us, and some of which may support Lexecon. Milberg cites a House Report on the bill that became § 1407, which addresses the question of trial transfer in multidistrict litigation cases by saying that, “[o]f course, 28 U.S.C. 1404, providing for changes of venue generally, is available in those instances where transfer of a case for all purposes is desirable.” H. R. Rep. No. 1130, 90th Cong., 2d Sess., p. 4 (1968). But the question is not whether a change of venue may be ordered in a case consolidated under § 1407(a); on any view of § 1407(a), if an order may be made under § 1404(a), it may be made after remand of the case to the originating district court. The relevant question for our purposes is whether a transferee court, and not a transferor court, may grant such a motion, and on this point, the language cited by Milberg provides no guidance.
If it has anything to say to us here, the legislative history tends to confirm that self-assignment is beyond the scope of the transferee court’s authority. The same House Report that spoke of the continued vitality of § 1404 in § 1407 cases also said this:
“The proposed statute affects only the pretrial stages in multidistrict litigation. It would not affect the place of trial in any case or exclude the possibility of transfer under other Federal statutes. […]
“The subsection requires that transferred cases be remanded to the originating district at the close of coordinated pretrial proceedings. The bill does not, therefore, include the trial of cases in the consolidated proceedings.” H. R. Rep., at 3–4.
The comments of the bill’s sponsors further suggest that application of § 1407 (before the addition of subsection (h)) would not affect the place of trial. See, e.g., Multidistrict Litigation: Hearings on S. 3815 and S. 159 before the Subcommittee on Improvements in Judicial Machinery of the Senate Comm. on the Judiciary, 90th Cong., 1st Sess., pt. 2, p. 110 (1967) (Sen. Tydings) (“[W]hen the deposition and discovery is completed, then the original litigation is remanded to the transferor district for the trial”). Both the House and the Senate Reports stated that Congress would have to amend the statute if it determined that multidistrict litigation cases should be consolidated for trial.
D
In sum, none of the arguments raised can unsettle the straightforward language imposing the Panel’s responsibility to remand, which bars recognizing any self-assignment power in a transferee court and consequently entails the invalidity of the Panel’s Rule 14(b). See 28 U.S.C. § 1407(f). Milberg may or may not be correct that permitting transferee courts to make self-assignments would be more desirable than preserving a plaintiff’s choice of venue (to the degree that § 1407(a) does so), but the proper venue for resolving that issue remains the floor of Congress. See Amchem Products, Inc. v. Windsor.
III
The remaining question goes to the remedy, which Milberg argues may be omitted under the harmless-error doctrine. Milberg posits a distinction between a first category of cases erroneously litigated in a district in which (absent waiver) venue may never be laid under the governing statute, and a second category, in which the plaintiff might originally have chosen to litigate in the trial forum to which it was unwillingly and erroneously carried, as by a transfer under § 1404. In the first, reversal is necessary; in the second, affirmance is possible if no independent and substantial right was violated in a trial whose venue was determined by a discretionary decision. Since Lexecon could have brought suit in the Arizona district consistently with the general venue requirements of 28 U.S.C. § 1391, and since the transfer for trial was made on the authority of § 1404(a), Milberg argues, this case falls within the second category and should escape reversal because none of Lexecon’s substantial rights was prejudicially affected. Assuming the distinction may be drawn, however, we think this case bears closer analogy to those in the first category, in which reversal with new trial is required because venue is precluded by the governing statute.
Milberg’s argument assumes the only kind of statute entitled to respect in accordance with its uncompromising terms is a statute that categorically limits a plaintiff’s initial choice of forum. But there is no apparent reason why courts should not be equally bound by a venue statute that just as categorically limits the authority of courts (and special panels) to override a plaintiff’s choice. If the former statute creates interests too substantial to be denied without a remedy, the latter statute ought to be recognized as creating interests equally substantial. In each instance the substantiality of the protected interest is attested by a congressional judgment that in the circumstances described in the statute no discretion is to be left to a court faced with an objection to a statutory violation. To render relief discretionary in either instance would be to allow uncorrected defiance of a categorical congressional judgment to become its own justification. Accordingly, just as we agree with Milberg that the strict limitation on venue under, say, § 1391(a) (diversity action “may … be brought only …”) is sufficient to establish the substantial character of any violation, the equally strict remand requirement contained in § 1407 should suffice to establish the substantial significance of any denial of a plaintiff’s right to a remand once the pretrial stage has been completed.
[…]
Accordingly, the judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.