Summary
recognizing that “[c]ourts have applied the ‘relation back’ doctrine” where “defendants are able to circumvent judgment by ‘picking off’ of ‘buying off’ named plaintiffs through the mooting of individual claims”
Summary of this case from Jones-Bartley v. McCabe, Weisberg & Conway, P.C.Opinion
No. 02 Civ. 2192 (MBM).
December 29, 2004
EDGAR PAUK, ESQ. New York, NY, Attorney for Plaintiff.
ROBERT T. McGOVERN, ESQ. MEYER, SUOZZI, ENGLISH KLEIN, P.C. Mineola, NY, Attorney for Defendants.
OPINION AND ORDER
In a class action complaint, plaintiff Carlo Novella sued defendants Westchester County, New York Carpenters' Pension Fund ("the Fund") and its Board of Trustees ("the Trustees") on the ground that they refused to award him a pension in the amount to which he was entitled under the Westchester Fund's pension plan ("the Plan"). Novella was awarded summary judgment on his claim that by using two different benefit rates to calculate the amount of his pension, defendants violated the terms of the Plan. His other claims were dismissed as either moot or unexhausted. Pursuant to Fed.R.Civ.P. 23, Novella moves now for class certification.
I.
A detailed account of the underlying dispute appears in this court's Opinion and Order dated August 4, 2004. See Novella v. Westchester County, New York Carpenters' Pension Fund, Bd. of Trustees of Westchester County, New York Carpenters' Pension Fund, No. 02-2192, 2004 WL 1752820 (S.D.N.Y. Aug. 4, 2004). In summary, Novella worked as a carpenter in Westchester County and New York City from 1962 through 1995 and was a participant in the Plan. (Id. at *1) Plan participants earn pension credits based on hours of service in jobs covered by the Plan. (Id.) Novella earned pension credits during two periods: 1962 through 1981 and 1987 through 1995. (Id.) He earned no pension credits from 1982 through 1986 because he worked during that period in jobs covered by a different pension plan. (Id.)
In 1995, Novella suffered a disabling accident at work. (Id.) He applied for Early Retirement Pension under the Plan, which was converted later to Disability Pension. (Id.) In calculating Novella's pension credits for the 1962-81 period, defendants "froze" the benefit rate in effect at the time Novella discontinued work covered by the Plan. (Id. at *2; Am. Compl. ¶ 22) In calculating pension credits for the 1987-95 period, defendants applied the benefit rate then in effect, which was higher than the rate for the 1962-81 period. (Am. Compl. ¶ 22) By applying two different benefit rates in calculating Novella's Disability Pension, defendants followed Section 3.07 of the Plan, which pertains to Deferred Pensions. Novella sued, claiming that defendants' application of the two benefit rates violated the terms of the Plan or, in the instance that the practice was consistent with the Plan, that the Plan violated the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et seq.
Novella was granted summary judgment on his Sixth Claim for Relief, specifically that defendants' application of two benefit rates to pension credits earned by Novella — or treating his Disability Pension like a Deferred Pension — was an arbitrary and capricious interpretation of the Plan. Id. at *3. Novella's Third, Fourth, Fifth, and Seventh Claims for Relief, which alleged that the Plan violated various ERISA provisions if the Plan allowed defendants to apply two benefit rates to his pension, were dismissed as moot. Id. at *5. Because Novella did not seek class certification, the above decision resolved only Novella's claims and not the claims of other potential members of the uncertified class. Id. at n. 1. He seeks now to certify (i) a class of all "Pro-Rata" Pensioners, their beneficiaries, and estates affected by defendants' practice of "freezing" pre-interruption pension benefit rates and thereby applying multiple benefit rates to determine pension credits, or in the alternative, (ii) a more limited class of Disability Pensioners affected by the same practice.
Novella's Third Claim for Relief alleged that the "freezing" of pension credit accrual rates after a temporary break in covered service violates 29 U.S.C. § 1054(b)(1)(B). (Am. Compl. ¶¶ 21-27) His Fourth Claim alleged that the classification of Plan participants according to whether they had an interruption in covered service was structured by defendants to evade the accrued benefit requirements of 29 U.S.C. § 1054(b)(1)(B). (Id. ¶¶ 28-29) His Fifth Claim alleged that the "freezing" of benefit accrual rates after any three-year interruption in service and the conditioning of vested accrued pension benefits upon continuous covered service violates 29 U.S.C. § 1053(a). (Id. ¶¶ 30-31) His Seventh Claim alleged that defendants' failure to describe in the Summary Plan Description ("SPD") the consequences of a participant's break in covered service for three or more years violates 29 U.S.C. § 1022(b). (Id. ¶¶ 34-36)
Novella's First and Second Claims arise from defendants' refusal to credit him with hours of service and pension credits during the time he received workers' compensation benefits. (Id. ¶¶ 13-20) These claims were dismissed without prejudice because Novella failed to inform Plan administrators that he received workers' compensation benefits and to ask for pension credits on that basis. See 2004 WL 1752820, at *7.
II.
This court has subject matter jurisdiction pursuant to 29 U.S.C. § 1132 and 28 U.S.C. § 1331.
III.
A. Timing of Motion
Defendants urge that Novella's "belated" certification motion be denied because it is an "attempt to transform what was clearly an individual claim into a class claim after a favorable decision on the merits." (Defs.' Mem. of Law in Opp'n to Pl.'s Mot. for Class Certification ("Defs.' Opp'n") at 14 (quoting McDonald v.Pension Plan of the NYSA-ILA Pension Trust Fund, 320 F.3d 151, 161-62 (2d Cir. 2003)).
Rule 23(c)(1)(A) of the Federal Rules of Civil Procedure provides:
When a person sues or is sued as a representative of a class, the court must — at an early practicable time — determine by order whether to certify the action as a class action.
Fed.R.Civ.P. 23(c)(1)(A). The rule does not set a specific time limit on the certification decision.
The parties offer conflicting accounts of why Novella seeks certification only after a decision on the merits. Novella claims that during a June 11, 2002 scheduling conference, he requested permission to move for class certification, defendants proposed a delay in scheduling a class certification motion until after a decision on the merits, and the court acceded to defendants' request over Novella's objection. Nothing in the record supports such an account. In response to Novella's request for a revision of the August 2, 2004 opinion "to reflect Plaintiff's continuous intent to move for class certification" (Ex. 13 to Affirmation of Edgar Pauk ("Pauk Aff.")), I stated:
The scheduling order dated June 13, 2002, generated following the June 11, 2002 conference to which you refer, makes no mention of a class certification motion. You raised no objections to that order. No rule of this Court, nor any of my individual rules, requires that a lawyer seek permission before filing a motion. Therefore, no clarification or revision of the August 2, 2004 Opinion and Order herein is warranted.
(Ex. 16 to Pauk Aff.)
Regardless, Novella's certification motion is timely. A district court has discretion to decide a motion for summary judgment before ruling on a plaintiff's motion to certify a lawsuit as a class action. Turner v. Gen. Motors Acceptance Corp., 980 F. Supp. 737, 745 n. 5 (S.D.N.Y. 1997) (citingChristensen v. Kiewit-Murdock Inv. Corp., 815 F.2d 206, 214 (2d Cir. 1987)). Courts often do so "to protect both the parties and the court from needless and costly further litigation."Wright v. Schock, 742 F.2d 541, 544 (9th Cir. 1984); see also Cowen v. Bank United of Texas, FSB, 70 F.3d 937, 941-42 (7th Cir. 1995). Moreover, as the issue here is not the sequence of this court's decisions but the timing of Novella's filings, Rule 23 does not prohibit the filing of a class certification motion until after a decision on the merits of the named individual plaintiff's claims.
B. Class of "All Participants in the Plan"
Novella moves first to certify a class consisting of
all participants in the Plan from January 1, 1976 to the present, their beneficiaries, and Estates, who received or will receive when they retire Pro-Rata Regular, Early, or Disability pensions, from January 1, 1976, when ERISA first applied to the Plan, to the present.
(Pl.'s Mem. of Law in Supp. of Mot. for Class Certification ("Pl.'s Mem.") at 4) In the alternative, Novella seeks certification of "a more limited class consisting of Pro-rata Disability Pensioners, their beneficiaries, and Estates." (Id.)
Defendants argue first that Novella does not "identify a proper class." They contend that "a Pro Rata Pension has absolutely nothing to do with calculating a pension benefit using two formulae as a result of a so-called freeze," or what they term a "dual-rate pension."
Novella is entitled to a Disability Pension. The proposed class in the certification motion consists of individuals eligible for Pro Rata Disability, Regular, and Early Pension. According to the Plan, a Pro Rata Pension is a type of "reciprocal pension," under which "each Pension Fund in whose jurisdiction an Employee had worked for a substantial period of time, will use the combined service and credit to determine eligibility for a pension" and "will then pay a pension benefit based on the Employee's service and credit in its own jurisdiction." (Ex. 1 to Pauk Aff. at 35) Put more simply by both parties, a Pro Rata Pension is "one in which two or more pension funds each pay a portion of a retiree's pension benefit, pro rated based on the retiree's service and credit in the respective fund's jurisdiction." (Defs.' Opp'n at 5; Pl.'s Reply Mem. of Law in Supp. of Mot. for Class Certification ("Pl.'s Reply") at 1) Because the definition of a Pro Rata Pension does not refer to a pension that was calculated using two or more benefit rates by defendants alone — as was done in Novella's case — defendants argue that the proposed class is not proper.
Novella calls defendants' distinction between dual-rate pensions and pro rata pensions a "matter of nomenclature," and claims that his "intent to represent those affected by the `freeze' is beyond question." (Pl.'s Reply at 2) He appears to have confused and conflated the term "Pro Rata" with defendants' practice of "freezing" the pension benefit rate for participants who have a break in covered service and applying multiple benefit rates to those pensions.
To demonstrate this "intent," Novella refers to the class proposed in his class action complaint:
All Plan participants, whether vested, active, inactive or retired, and all former participants, their surviving spouses and Estates, with one hour of service on or after January 1, 1976, who were or will be granted or denied pensions based on violations of the Plan's provision and/or ERISA.
(Am. Compl. ¶ 8) However, this class "no longer includes `former participants,' a category of participants who would not be entitled to any benefit in any event." (Pl.'s Reply at 2 n. 2)
Regardless, Novella cannot maintain a class action of all "those affected by the `freeze,'" whether they include all Pro-Rata Pensioners, non-Pro-Rata Pensioners, or both. His other ERISA claims challenging the use of multiple benefit rates because of a "freeze" have been found moot. He seeks now to certify a class as to those claims and, in effect, resuscitate them.
In a footnote, Novella argues also that the "remaining `freeze' claims could not be `moot' because ERISA Section 502(a)(3), . . . provides that any participant, whether or not personally affected, can bring an action for declaratory and injunctive relief and obtain appropriate equitable relief to redress ERISA violations and enforce ERISA. . . . In short, a violation of ERISA is never `moot.'" The Second Circuit inMcDonald v. Pension Plan of the NYSA-ILA Pension Trust Fund, 320 F.3d 151 (2d Cir. 2003) has disposed of this argument already. In summary, ERISA Section 502(a)(3) does not require district courts to grant particular relief, but gives courts discretion to fashion appropriate equitable relief, regardless of whether such relief benefits non-party beneficiaries. Id. at 161. "Nothing in [Section 502(a)(3)] supersedes the requirements of Federal Rule of Civil Procedure 23." Id. (citing Yoon v.Fordham Univ., Faculty Admin. Ret. Plan, 263 F.3d 196 (2d Cir. 2001)).
In a class action, if the named plaintiff's claims for relief are rendered moot before the completion of the class action, he no longer has standing because he does not have a personal stake in the outcome of the litigation. See United States Parole Comm'n v. Geraghty, 445 U.S. 388, 397 (1980). Generally, a class action cannot be maintained unless there is a named plaintiff with a live controversy both at the time the complaint is filed and at the time the class is certified. Sosna v.Iowa, 419 U.S. 393, 402 (1975); Swan v. Stoneman, 635 F.2d 97, 102 n. 6 (2d Cir. 1980) ("As a general rule, a class cannot be maintained unless there is a named plaintiff with a live controversy both at the time the complaint is filed and at the time the class is certified."). However, the Supreme Court has adopted a "flexible" approach to the mootness doctrine in the class action context, recognizing that
there may be cases in which the controversy involving the named plaintiffs is such that it becomes moot as to them before the district court can reasonably be expected to rule on a certification motion. In such instances, whether the certification can be said to "relate back" to the filing of the complaint may depend upon the circumstances of the particular case. . . .Sosna, 419 U.S. at 402 n. 11. Under this "relation back" doctrine, where a named plaintiff's claim has become moot, class certification may be deemed to relate back to the filing of the complaint in order to avoid mooting the entire controversy. See Comer v. Cisneros, 37 F.3d 775, 798-99 (2d Cir. 1994).
Courts have applied the "relation back" doctrine in two circumstances. The first is where the claim in question is "capable of repetition, yet evading review" — that is, where the alleged illegal act is likely to continue but, by its inherent nature, is of such short duration that it is unlikely that any plaintiff could maintain an action challenging it. Gerstein v.Pugh, 420 U.S. 103, 110 (1975) (finding that plaintiff's claim of detention without probable cause constitutes a "suitable exception" to the mootness doctrine on the grounds that "it is by no means certain that any given individual, named as plaintiff, would be in pretrial custody long enough for a district judge to certify the class"). The second is where defendants are able to circumvent judgment by "picking off" or "buying off" named plaintiffs through the mooting of individual claims — i.e. settling with the named plaintiff after a class action complaint has been filed. White v. Mathews, 559 F.2d 852, 857 (2d Cir. 1977); Nasca v. GC Servs. Ltd. P'ship, No. 0-10127, 2002 WL 31040647, at *3 (S.D.N.Y. Sept. 12, 2002).
Neither circumstance exists here. Novella's remaining "freeze" claims were not rendered moot by any effort on the part of defendants to "pick off" the claims. Nor were these claims inherently transitory in nature such that they evaded review because the court could not reasonably be expected to rule on the class certification motion before the expiration of those claims. These claims were held moot because Novella succeeded on an alternative theory of recovery.
Moreover, Novella did not move for class certification untilafter the claims at issue were held moot. Novella was free to do this; however, he was or should have been aware of the distinct possibility that his other "freeze"-related claims would be moot if he was to prevail on his Sixth Claim. The concerns underlying the relation back doctrine are absent here and it is therefore not applicable. Without a named plaintiff with a live controversy as to the Third, Fourth, Fifth, and Seventh Claims for Relief, a class of "all Participants in the Plan" is not proper as to those claims.
C. Class Limited to Disability Pensioners on Sixth Claim
On the other hand, the more limited class of Disability Pensioners affected by the "freeze" practice can be maintained as to the Sixth Claim in the amended complaint, which alleges:
In calculating the amount of Plaintiff's Disability Pension, Defendants followed their practice of applying the provision of Section 3.07 of the Plan, pertaining to Deferred Pensions, to Disability Pensioners. Defendants' practice violates the terms of the Plan.
(Am. Compl. ¶ 32, 33) The claim does not challenge an individual benefit denial, but a "practice" followed by defendants for Disability Pensioners. Hence, the claim is distinguishable from the claims sought to be certified in McDonald, where the complaint included individual claims identified explicitly as such to differentiate them from the class claims. See 320 F.3d at 273-74.
However, Novella's Sixth Claim challenges the above practice explicitly only as to Disability Pensioners. Also, the holding in this court's August 2, 2004 decision is limited to Novello's individual claim as a Disability Pensioner. In contrast, the other claims in the complaint are not limited to one or more specific categories of pensioners. Hence, certification can be granted only as to the "more limited Class consisting of . . . Disability Pensioners, their beneficiaries and Estates." (Pl.'s Mem. at 4)
1. Rule 23(a) Requirements
Rule 23(a) of the Federal Rules of Civil Procedure sets forth four prerequisites for class certification: (i) the class is so numerous that joinder is impracticable (Rule 23(a)(1)); (ii) there are questions of law or fact common to the class (23(a)(2)); (iii) the claims or defenses of the representative parties are typical of the claims or defenses of the class (23(a)(3)); and (iv) the representative parties will fairly and adequately protect the interests of the class (23(a)(4)). These four prerequisites are commonly referred to as (i) numerosity, (ii) commonality, (iii) typicality, and (iv) adequacy of representation. Although defendants only dispute numerosity and adequacy of class counsel, it may be useful to discuss Rule 23(a) in its entirety.
a. Numerosity
The numerosity requirement is satisfied when the class is numerous enough to make ordinary joinder of all members impractical. The plaintiffs are not obligated to identify the precise number of class members; a reasonable estimate is sufficient. See Robidoux v. Celani, 987 F.2d 931, 935 (2d Cir. 1993). The plaintiff may rely on reasonable inferences drawn from available facts particularly where more precise information about the size of the class is within the defendants' control.See German v. Fed. Home Loan Mortgage Corp., 885 F. Supp. 537, 552 (S.D.N.Y. 1995) ("[L]ack of knowledge of the exact number of persons affected is not a bar to certification where the defendants alone have access to such data"); see also Clarkson v. Coughlin, 783 F.Supp. 789, 798 (S.D.N.Y. 1992);Ventura v. New York City Health Hosp. Corp., 125 F.R.D. 595, 599 (S.D.N.Y. 1989). There need only be evidence in the record to suggest that a class exists and that a rough estimate of its size can be made. See German, 885 F. Supp. at 552;Clarkson, 783 F. Supp. at 798.
Generally, "courts will find that the `numerosity' requirement has been satisfied when the class comprises 40 or more members and will find that it has not been satisfied when the class comprises 21 or fewer." Ansari v. New York Univ., 179 F.R.D. 112, 114 (S.D.N.Y. 1998).
Novella points to Table 7 of the Fund Actuarial Valuation and Review as of January 1, 1996, which was prepared in 1996 by the Segal Company, an independent consulting and actuarial firm. (Ex. 2 to Pauk Aff. (the "Segal Report") at 13) The table shows that from 1986 through 1993, a total of 89 Disability Pensions (including what are separately categorized as Pro-Rata Disability Pensions) were awarded under the Plan, at an average of 11.12 per year. (Id.) By multiplying that figure by 28 — the number of years from 1976 through 2004 — Novella estimates that a total of 311 Disability Pensions were awarded.
However, the table in the Segal Report does not list how many Disability Pensioners are in the same position as Novello. Neither the table nor the remainder of the Segal Report shows how many Disability Petitioners in a given time period interrupted their covered service with work not covered by the Plan and hence may have had multiple benefit rates used to calculate their pension credits pursuant to Section 3.07 of the Plan.
More helpful information appears to be lacking because of an unresolved discovery dispute. On August 21, 2002, Novella requested defendants to "identify and produce . . . all documents from January 1, 1976, to the present, reflecting the number and/or identity of Plan participants . . . (b) who suffer or have suffered one or more temporary break(s) in service that caused a `freeze' in the rate applicable to a calculation of their accrued benefit or pension." (Ex. 18 to Reply Affirmation of Edgar Pauk in Supp. of Pl.'s Mot. ("Pauk Reply Aff.")) Defendants objected to this request because it was "unduly vague, ambiguous and lacking in requisite specificity" and called for "production of documents containing confidential information in the absence of a confidentiality stipulation and order." (Ex. 19 to Pauk Reply Aff.) Later, defendants made available for Pauk's inspection the file cabinets in defendants' Long Island offices that purportedly contained documents responsive to Novella's discovery request. (Pauk Reply Aff. at 3) Pauk selected several documents, which were to be reproduced and sent to him by defendants. (Id.) Pauk claims that defendants did not "identify" several of these documents and refused to do so upon further request. (Id.)
After this court scheduled motions for summary judgment on April 25, 2003, Pauk did not seek further discovery because he allegedly believed that this court instructed him to postpone a motion for class certification until after a decision on the merits. (Id.) As set forth above, he is mistaken in that belief.
Pauk alleges further that he "came to the conclusion that [the Segal Report] would provide sufficient evidence of `numerosity' for class certification purposes" largely on his erroneous assumption that the term "Pro Rata" describes the practice complained of in the complaint. (Id. at 4) With defendants' response to the instant motion, he has come to realize that the Segal Report, and Table 7 in particular, is of less value than he thought previously.
Because it is unclear whether defendants possess documents more responsive to the above document request, an evidentiary hearing will be held to resolve the discovery dispute and the numerosity issue.
b. Commonality
Commonality "is established if all class members are in a substantially similar factual situation and the questions of law raised by plaintiffs are applicable to each class member." In re Prudential Sec. Inc. Ltd. P'ships Litig., 163 F.R.D. 200, 206 (S.D.N.Y. 1995). Here, the central legal issue of whether defendants violated the Plan's terms by applying Section 3.07 of the Plan is common to all class members. See Koch v. Dwyer, No. 98-5519, 2001 WL 289972, at *3 (S.D.N.Y. Mar. 23, 2001).
c. Typicality
The proposed class satisfies the "typicality" requirement, which demands that "each class member's claim arises from the same course of events, and each class member makes similar legal arguments to prove the defendant's liability." Marisol v. Giuliani, 126 F.3d 372, 376 (2d Cir. 1997). Because Novello and the proposed class have been subjected to the same practice of applying Section 3.07, the class satisfies Rule 23(a)(3).
d. Adequacy of Representation
Rule 23(a)(4) requires that, in order for a case to proceed as a class action, "the representative parties will fairly and adequately protect the interests of the class." Adequacy of representation requires that the class representative's attorney be qualified, experienced, and capable, and that the class representative not have interests conflicting with the class in the litigation at hand. Sosna, 419 U.S. at 403; In re Sumitomo Copper Litigation, 182 F.R.D. 85, 95 (S.D.N.Y. 1998).
Novella is an adequate representative of the class of Disability Pensioners because the violation he alleges in the Sixth Claim and the relief he seeks is the same for all members of the class. Defendants do not allege any conflict of interest between Novella and the rest of the class.
As for class counsel Edgar Pauk, defendants argue that he has mishandled this case in ways that render his representation inadequate for purposes of Rule 23(a)(4). Defendants recount that "plaintiff's discovery was limited to one document demand," that counsel did not take any depositions, and that he bases the instant motion on Table 7 in the Segal Report. (Defs.' Opp'n at 9)
Defendants neither contest class counsel's qualifications nor allege any conflict of interest. Pauk's curriculum vitae reflects that he is sufficiently experienced in ERISA and class action litigation. (Ex. 3 to Pauk Aff.; Pl.'s Mem. at 7-9) He blames his discovery efforts, at least in part, on defendants, whom he alleges failed to produce "any pertinent document other than" the Actual Valuation and Review. Regardless, Pauk's credentials, experience, and familiarity with this case satisfy Rule 23(a)(4).
2. Rule 23(b) Requirements
If a proposed class satisfies the requirements of Rule 23(a), it may be certified as a class provided it meets one of three additional requirements set forth under Rule 23(b). Novella contends that the proposed class satisfies Rule 23(b)(1) and (2). Defendants assert that because Novella fails to meet his burden under Rule 23(a), "it is not necessary at this time to address the requirements of Rule 23(b)." (Defs.' Opp'n at 10 (citingMartinez v. Barasch, No. 01-2289, 2004 WL 1367445, at *7 (S.D.N.Y. June 16, 2004)). Despite defendants' assertion, I will discuss the rule, albeit briefly.
Under Rule 23(b)(1), a class may be certified if:
the prosecution of separate actions by or against individual members of the class would create a risk of
(A) 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, or
(B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests[.]
Fed.R.Civ.P. 23(b)(1). In other words, certification of a class under Rule 23(b)(1) is appropriate when the defendant is required by law or by necessity to treat all members of the class alike. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614 (1997). Novella focuses on Subsection (B), which considers possible prejudice to putative class members. Summary judgment in favor of Novella on his Sixth Claim affects all Disability Pensioners with breaks in covered service who had their pensions calculated according to Section 3.07 of the Plan. Reformation of defendants' practice in calculating these Disability Pensions will result in pension amounts being due to these class members. Because the Sixth Claim contemplates Plan-wide relief and defendants do not argue that the proposed class is encumbered by individualized questions of law or fact, the class is appropriate under Rule 23 (b) (1).
Because the class action can be maintained under Rule 23(b)(1), Rule 23(b)(2) need not be addressed.
* * *
For the reasons set forth above, Novello's motion for class certification will be decided at a hearing to resolve the issue of numerosity as to the "alternative" proposed class of Disability Pensioners.SO ORDERED.