Opinion
Civ. No. 00-971 (DRD).
September 28, 2000.
Ira Cure, Esq., Kennedy, Schwartz Cure, P.C., New York, NY., Attorney For Plaintiff.
Wayne D. Greenstone, Esq., Greenstone Greenstone, Newark, New Jersey, Attorneys for Plaintiff.
Kerry Parker, Esq., Gibbons, Del Deo, Dolan, Griffinger Vecchione Newark, New Jersey, Attorneys for Defendants, Robert Sorensen and Litetronics International, Inc.
Joseph E. Sales, Esq., Norris, McLaughlin Marcus, P.A., Bridgewater, New Jersey, Attorneys for Defendant Fleet Capital Corp.
Ben H. Becker, Esq., Becker Meisel, L.L.C., Millburn, New Jersey, Attorneys for Defendant Horizon Blue Cross Blue Shield of New Jersey.
Robin S. Abramowitz, Esq., Lazer, Aptheker, Feldman, Rosella Yedid, P.C., Melville, New York, Attorneys for Defendant Durolite International, Inc.
O P I N I O N
This is a civil action alleging violations of collective bargaining agreements under Section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185, violation of Section 16 of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 216, violation of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., violation of the Worker Adjustment and Retraining Notification Act ("WARN"), 29 U.S.C. § 2101 et seq. and tortious conversion under New Jersey common law. The matter is presently before the Court on plaintiffs' motion for certification as a class action. For the reasons set forth below, plaintiffs' motion will be granted.
STATEMENT OF FACTS
The factual background of this action has been fully described in the March 16, 2000 decision on plaintiffs' application for a preliminary injunction to enjoin defendants Sorensen, Duro-Test, Durolite, and Litetronics from failing to pay sufficient monies to Horizon Blue Cross to maintain health insurance coverage for all employees represented by Local 433 for three months past the date of the Clifton, New Jersey facility's closure.
To summarize, plaintiffs are Local 433 (the collective bargaining representative of approximately 150 former employees of a Clifton, New Jersey facility owned and operated by one of the defendants), District Three (the district council responsible for all local unions in New York, New Jersey, and other states affiliated with the union at issue here, including Local 433), Local 1199 (the collective bargaining representative of approximately 20 former employees of an Elk Grove, Illinois facility owned and operated by one of the defendants), and individual plaintiffs who were employed in the New Jersey and Illinois facilities and who were Local 433 and Local 1199 members. Defendants are (1) Duro-Test (a New Jersey corporation that manufactured and marketed lighting products, mostly to end-users), (2) Litetronics (an Illinois corporation that manufactured and marketed lighting products, mostly to distributors), (3) Durolite International (a corporation that acquired the stock of both Duro-Test and Litetronics), (4) Robert Sorensen (Chairman and Chief Executive Officer of Durolite and its largest shareholder), (5) Fleet Capital Corporation (the principal lender to Duro-Test and holder of a security interest in much of its assets), and (6) Horizon Blue Cross Blue Shield of New Jersey (administrator of Duro-Test's employee health benefits plan).
Plaintiffs allege that collective bargaining agreements provided for a three-month continuation of medical insurance in the event of plant closures or lay-offs, but because Duro-Test did not pay insurance premiums (even though money had been withheld from employees' paychecks for that purpose), Blue Cross did not maintain health insurance coverage for laid-off workers. As a result, laid-off employees found themselves without health insurance and with outstanding medical bills. Additionally, plaintiffs allege that laid-off workers were not compensated for unused personal and sick days, accrued vacation, did not receive wages to which they were entitled, and that although union dues and contributions to health insurance premiums were withheld from employees' paychecks, those monies were not paid to the unions and health insurance providers.
It is plaintiffs' contention that those practices violated the collective bargaining agreements and the LMRA, violated FLSA, ERISA, WARN, and constituted tortious conversion in violation of New Jersey law.
I granted an order enjoining Sorenson, Duro-Test, Durolite, and Litetronics from failing to pay sufficient monies to Blue Cross to maintain health insurance coverage for three months past the date of the Clifton facility's closure for employees covered as of February 1, 2000. Additionally, I directed that plaintiffs post a bond of $50,000.
Plaintiffs now seek to certify this litigation, with respect to seven of the nine causes of action listed in the Third Amended Complaint (excluding the LMRA and FLSA claims), as a class action pursuant to Fed.R.Civ.P. 23. Plaintiffs propose a class of "all union-represented participants in the Duro-Test Corporation employee medical benefit plan, and all members of the collective bargaining units at defendant Duro-Test Corporation represented by plaintiffs Locals 433 and 1199, International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers, AFL-CIO."
DISCUSSION
I. STANDING
Defendants allege that because plaintiffs' claims arise solely from the collective bargaining agreements, plaintiffs are seeking union-wide enforcement of those agreements and therefore the bargaining representatives, rather than the former employees, are the only proper plaintiffs. (Def. Br. at 8-12) It follows, according to defendants, that plaintiffs' motion for class certification should be denied. Plaintiffs counter that they are not seeking class certification with respect to the claims specifically alleging violations of the collective bargaining agreements. (Pl. Repl. Br. at 2)
In support of their argument, defendants cite Hawaii Teamsters Allied Workers, Local 996 v. City Express, Inc., 751 F. Supp. 1426, 1430 (D. Hi. 1990), for the proposition that unions have standing to pursue union members' claims pursuant to a collective bargaining agreement creating an ERISA plan and that the case held that "the plan participants were not eligible to be named as individual plaintiffs." (Def. Br. at 11-12) Defendants' reading of that case is only partially correct. While the court did hold that the union had standing to pursue the ERISA claim, the court observed that "defendants' counsel conceded at oral argument that the plan participants can be named individually as plaintiffs. Thus, there is no question that these participants can be joined in this suit."Id. Therefore, defendants are incorrect when they contend that only the unions and not the individual plaintiffs have standing to pursue ERISA claims deriving from collective bargaining agreements.
Moreover, Local 966 is not the law in the Third Circuit or in the District of New Jersey. In New Jersey State AFL-CIO v. New Jersey, 747 F.2d 891, 892-93 (3d Cir. 1984), the Court of Appeals for the Third Circuit explicitly held that labor unions are not "participants" or "beneficiaries" as defined by ERISA and therefore do not have standing to bring ERISA claims. Accord Local 469, IUE v. Kramer Trenton Co., Civ. No. 92-303, 1992 WL 233803, at *2 (D.N.J. Sept. 8, 1992); Sheet Metal Workers Nat'l Pension Fund v. Gallagher, Civ. A. No. 87-3925, 1988 WL 101261, at *4 (D.N.J. Sept. 28, 1988). Other districts appear to be in alignment with ours on this issue. See, e.g., CWA v. SBC Disability Income Plan, 80 F. Supp.2d 631, (S.D. Tx. 1999) (holding that even though union negotiated benefit plan, member — not union — was proper plaintiff in ERISA action); CWA v. Nynex Corp, No. 93 Civ. 3322, 1997 WL 122869, at *3-4 (S.D.N.Y. March 18, 1997) (finding union has no standing to bring suit because ERISA claim seeking recovery of benefits and clarification of rights requires participation of union member);International Union v. Auto Glass Employees Fed. Credit Union, 858 F. Supp. 711, 722 (M.D.Tenn. 1994) ("Despite the fact that an ERISA claim may derive from a collective bargaining agreement negotiated by a union, Congress has obviously chosen not to include a labor union as an appropriate party to vindicate employees' rights under ERISA."). Therefore, the individual plaintiffs do have standing. I note that the unions have standing to pursue the claims for which the individual plaintiffs do not seek class certification.
II. CLASS CERTIFICATION
A. Rule 23(a)
In order to receive certification as a class action, plaintiffs must comply with the four prerequisites of Fed.R.Civ.P. 23(a), and must also satisfy the requirements of Rule 23(b). See Baby Neal for and by Kanter v. Casey, 43 F.3d 48 (3d Cir. 1994). Rule 23(a) states that certification will be available only if:
1) the class is so numerous that joinder of all members is impracticable;
2) there are questions of law or fact common to the class;
3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and;
4) the representative parties will fairly and adequately protect the interests of the class.
Fed.R.Civ.P. 23(a). If the requirements of Rule 23(a) are satisfied, one of the three provisions of Rule 23(b) must be met in order for a class to be certified. Rule 23(b)(3) permits certification only where the court finds that the common questions of law or fact predominate over questions affecting only individual members and that a class action is the superior method for fair and efficient adjudication of the controversy. Fed.R.Civ.P. 23(b)(3). The requirements of Rule 23 are meant to ensure that class action treatment "makes sense," in that it is necessary, efficient, and fair to the interested parties. Baby Neal, 43 F.3d at 55. "Class treatment makes no sense if there are no common issues; the trial court would gain nothing but logistical headaches from the combination of the cases for trial." Id. It is necessary to determine whether this action meets the Rule 23 criteria.
1. NUMEROSITY
In order to satisfy Rule 23(a)(1), the moving party must demonstrate that the class is so large that joinder would be impracticable. Fed.R.Civ.P. 23(a)(1). The number of potential class members alone is not dispositive and the moving party need not establish the precise size of the proposed class in order to satisfy this requirement. See Liberty Lincoln Mercury, Inc. v. Ford Mktg. Corp., 149 F.RD. 65, 73 (D.N.J. 1993). Additionally, "impracticability does not mean impossibility, but rather that the difficulty or inconvenience of joining all member of the class calls for class certification." Lerch v. Citizens First Bancorp, Inc., 144 F.R.D. 247, 250 (D.N.J. 1992). Conclusory allegations that joinder is impracticable will not suffice. Liberty Lincoln, 149 F.R.D. at 74. Practicability of joinder depends on a number of factors in addition to the size of the potential class: ease of identifying members and obtaining addresses, ease of service, geographical dispersions, and whether proposed class members could pursue remedies on their own. Id.
Although there were 123 potential class members in Liberty Lincoln, all were known and identifiable, easily subject to service, confined to a limited geographic area, and were all substantial businesses capable of litigating for themselves. Id. Here, however, the potential class of at least 100 members are relatively recently unemployed individuals, some of whom may have moved, and from whom personnel information is or may be incomplete. Levelt Decl. ¶¶ 4, 5, 10. I find that the requirements of Rule 23(a)(1) are met here.
Defendants refers to plaintiffs' interrogatory responses and chart as support for the argument that many putative class members did not make any contributions — and therefore were not entitled to coverage — and that only a segment of those who made contributions allege outstanding claims. (Def. Br. at 14-15.) However, after defendants submitted their brief in opposition to plaintiffs' present motion, plaintiffs submitted a declaration of Ursula Levelt, which explains that due to what appears to be an idiosyncrasy in the software program she used to create the chart to which defendants refer, she was required to enter a zero where information was unavailable. Thus, many of the assertions in defendants' brief regarding plaintiffs' lack of harm due to failure to make contributions or lack of outstanding claims (Def. Br. at 14-16, 18, 25) were made without the benefit of the information contained in the Levelt declaration.
2. COMMONALITY
As a condition for class certification, Rule 23(a)(2) requires that there be questions of fact or law common to all class members. Fed.R.Civ.P. 23(a)(2). The rule requires that there be some question of law or fact common to the class members; all questions of law or fact raised need not be common. Baby Neal, 43 F.3d at 56; Weiss v. York Hosp., 745 F.2d 786, 809 (3d Cir. 1984). The commonality requirement is satisfied if the named plaintiffs and members of the prospective class share at least one question of fact or law in common. In re Prudential Ins. Co. Sales Practices Litig., 148 F.R.D. 283, 310 (3d Cir. 1998),cert. denied, 525 U.S. 1114 (1999). Therefore, there is no need to make an individualized determination of each potential class member's damages when assessing whether the commonality requirement is satisfied. 5 James Wm. Moore et al., Moore's Federal Practice § 23.23[3] (3d ed. 1999). Common issues may arise in cases brought under ERISA. See 29 U.S.C. § 1001 et seq.
I find that plaintiffs have satisfied the commonality requirement of Rule 23(a)(2). Common questions of fact exist concerning the effect of defendants' alleged failure to maintain the health plan and failure to forward monies due to the health plan and the unions. Additionally, common questions of law exist: whether defendants breached a fiduciary duty; whether defendants violated ERISA; and whether defendants engaged in conversion.
3. TYPICALITY
Turning to Rule 23(a)(3), the typicality requirement strives to assure that the named plaintiffs' interests and class members' interests are in alignment. Baby Neal, 43 F.3d at 56. The typicality inquiry assesses whether the case can be maintained efficiently as a class and whether absent class members' interests will be represented fairly by the named plaintiffs. Id. at 57. However, like the commonality requirement, typicality does not require that all putative class members share identical claims; rather, "factual differences among the claims of the putative class members do not defeat certification." Id. at 56. If the named plaintiffs' claims arise from the same events, practice, or conduct, and are based on the same legal theory as those of the other class members, the typicality requirement is satisfied. Weikel v. Tower Semiconductor Ltd., 183 F.R.D. 377, 390 (D.N.J. 1998) (quoting Grasty v. Amalgamated Clothing Textile Workers Union, 828 F.2d 123, 130 (3d Cir. 1987)). Typicality is often found in cases involving uniform conduct that allegedly violates ERISA. 5 James Wm. Moore et al., Moore's Federal Practice § 23.24[8][i] (3d ed. 1999).
The typicality requirements of Rule 23(A)(3) are satisfied here. The named plaintiffs' claims arise from the same alleged course of conduct by the defendants (failure to maintain the health plan and failure to forward monies due to the health plan and the unions) and are based on the same legal theories as those of the other class members whether defendants breached a fiduciary duty; whether defendants violated ERISA; and whether defendants engaged in conversion.
4. ADEQUACY OF REPRESENTATION
Rule 23(a)(4) requires that "the representative parties will fairly and adequately protect the interests of the class." Fed.R.Civ.P. 23(a)(4). The adequacy-of-representation requirement has two components designed to assure protection of absent class members' interests: (1) the named plaintiffs' interests and the absent class members' interests must be sufficiently aligned and (2) class counsel must be qualified and must serve the interests of the entire class. Georgine v. Amchem Prods., Inc., 83 F.3d 610, 630 (3d Cir. 1996). I have reviewed the declarations of the proposed named plaintiffs and am satisfied that the interests of the named plaintiffs and absentee plaintiffs are in alignment. I see no indication of conflict between the interests of named plaintiffs and members of the class. I have also reviewed the declaration of Thomas M. Kennedy, a member of the firm that serves as counsel to plaintiffs in this matter, and I conclude that plaintiffs' counsel is qualified to serve the interests of the class. The requirements of Rule 23(a)(4) have been satisfied.
Defendants argue that because during the preliminary injunction phase plaintiffs asserted their financial instability as a defense to the bond requirements, plaintiffs should be judicially estopped from arguing their ability to finance this litigation (through the union) and therefore cannot argue that they can adequately represent the interests of the class. Contrary to defendants' contention, I do not agree that plaintiffs have put forth an inconsistent position in bad faith and with the intent to "play fast and loose" with the Court.
B. Rule 23(b)
If all four prerequisites of Rule 23(a) are satisfied, Rule 23(b) provides that a class action may be maintained so long as the action falls with one of its three categories: Rules 23(b)(1) and (2) mainly concern actions for equitable relief; Rule 23(b)(3) usually involves actions in which damages are sought. 5 James Wm. Moore et al., Moore's Federal Practice §§ 23.40, 23.45[1] (3d ed. 1999).
Because plaintiffs have withdrawn their request for class certification pursuant to Rule 23(b)(2), I will not address that rule. Additionally, because plaintiffs have not argued that there is a "common fund," I will not address the applicability of Rule 23(b)(1)(B).
Rule 23(b)(1)(A) provides for class certification if the prosecution of separate actions by or against individual members of the class would create a "risk of inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class." Plaintiffs argue Rule 23(b)(1)(A) is satisfied because "there would be a risk that the courts hearing the class members' claims would construe their rights in an inconsistent or contradictory fashion," (Pl. Br. at 13) and that if individual class members are forced to bring separate actions for breach of fiduciary duty, "courts might rule that Sorensen and Litetronics have different responsibilities and obligations as fiduciaries of the plan, establishing different standards of conduct." (Pl. Reply Br. at 11).
Rule 23(b)(1)(A) does not apply to situations in which the "risk of inconsistent results in a series of individual actions would only mean that the nonclass party might prevail in some cases and not in others, and therefore have to pay damages to some claimants and not others." PBA Local No. 38 v. Woodbridge Police Dep't, 134 F.R.D. 96, 103 (D.N.J. 1991) (quoting Employers Ins. Of Wausau v. Federal Deposit Ins., 112 F.R.D. 52, 54 (E.D.Tenn. 1986)). Rather, it must be shown that in the absence of class certification "the nonclass party would be obligated to undertake different and incompatible affirmative relief." Id.
I have already issued an injunction to enjoin defendants Sorensen, Duro-Test, Durolite, and Litetronics from failing to pay sufficient monies to Horizon Blue Cross to maintain health insurance coverage for all employees represented by Local 433 for three months past the date of the Clifton, New Jersey facility's closure. (3/16/00 opinion) That date has since passed. The conduct at issue has ceased. With respect to defendants Sorensen, Duro-Test, Durolite, and Litetronics, the remaining relief sought is for money damages only. The cases plaintiffs cite are inapposite because, unlike the activity alleged here, both involved activity that was on-going. In Local 117 v. Acme Precision Prods., Inc., 515 F. Supp. 537, 540 (E.D.Mich. 1981), the court found that Rule 23(b)(1) was satisfied when considering whether the defendant had a responsibility to continue to pay the cost of health insurance benefits for the duration of retirees' lives. Local 899 v. Phoenix Assoc., Inc., 152 F.R.D. 518 (S.D.W. Va. 1994), involved the establishment and continued operation of a non-union company in violation of collective bargaining agreements.
The only non-monetary relief plaintiffs currently seek pursuant to the Third Amended Complaint — but that is not mentioned in their brief with respect to this issue — is an order enjoining Fleet from transferring any goods it acquired from defendants out of its possession or out of New Jersey. I considered that issue and in my March 16, 2000 opinion stated that there was inadequate evidence on the record to issue an injunction.
Because plaintiffs have not satisfied the requirements of Rule 23(b)(1) and have withdrawn their request for certification pursuant to Rule 23(b)(2), Rule 23(b)(3) must be satisfied in order for the class to be certified. The central purpose of Rule 23(b)(3) is to determine whether questions of law and fact common to the class predominate over questions affecting only individual class members, and, if so, whether the maintenance of a class action is superior to other available methods for the fair and efficient adjudication of the controversy. Fed.R.Civ.P. 23(b)(3).
Defendants argue that because "many former employees made no contributions to the plans after December 1, 1999," many putative class members appear to have been ineligible for health benefits. (Def. Br. at 25) Again, defendants' argument was made without the benefit of the Levelt declaration. See footnote 1, supra. I conclude that questions of law and fact common to the members of the class predominate over those affecting individual members. Factual distinctions, such as the issue of individual damages, are matters of mathematical calculations. See See Gaspar v. Linvatec Corp., 167 F.R.D. 51 (N.D.Ill. 1996) (certifying class in ERISA action brought by former employees seeking either severance pay or enhanced retirement benefits); Walsh v. Pittsburgh Press Co., 160 F.R.D. 527 (W.D.Pa. 1994) (certifying class in ERISA action brought by former employees seeking dismissal and severance benefits and vacation pay).
In my consideration of commonality and typicality pursuant to Rules 23(a)(2) and (3), I have already concluded that questions of law and fact common to the proposed class exist and that the class members' claims arose from the same alleged course of conduct by defendants. Rule 23(b)(3) requires that common questions of law and fact not merely exist but predominate over any questions affecting only individual members. Notwithstanding that more stringent standard, I conclude that Rule 23(b)(3) is satisfied here. The questions of whether defendants breached a fiduciary duty, violated ERISA, and engaged in conversion predominate over questions affecting individual class members — such as damages.
I also conclude that a class action is superior to other methods of adjudicating claims raised in the Third Amended Complaint. Applying the factors set forth in Rule 23(b)(3)(A) through (D): the class members do not have a strong interest in individually controlling the prosecution of their own actions rather than being part of a class action; I am not aware of any litigation concerning this matter currently pending by individual class members; judicial economy will be served by litigating these claims together in this forum; and I see no difficulties likely to be encountered in the management of this action.
Because this class has been certified pursuant to Rule 23(b)(3), class members have the right to opt out of the class action, and therefore, potential class members must be so notified in conformity with Fed.R.Civ.P. 23(c)(2). Counsel for plaintiffs should submit a proposed notice of the class action for the Court's approval.
CONCLUSION
For the reasons set forth above, plaintiffs' motion for class certification pursuant to Fed.R.Civ.P. 23 will be granted. If necessary, sub-classes may be created at a later date. An appropriate order shall be entered.