United States District Court, N.D. Illinois, Eastern Division
November 10, 2004.
JAY F. FLANAGAN, JAMES W. CARSON, JOHN M. CHANEY, and DONALD W. JONES, individually and on behalf of all others similarly situated, et al., Plaintiffs,
ALLSTATE INSURANCE COMPANY, an Illinois corporation, and the AGENT TRANSITION SEVERANCE PLAN, Defendants.
The opinion of the court was delivered by: JAMES MORAN, Senior District Judge
MEMORANDUM OPINION AND ORDER
Plaintiffs Jay Flanagan, James Carson, John Chaney and Donald
Jones brought this class action suit against defendants Allstate
Insurance Company (Allstate) and its Agent Transition Severance
Plan (Plan), for violation of the Employee Retirement Income
Security Act (ERISA), 29 U.S.C. § 1001, et seq. After a motion
to dismiss, the plaintiffs had two remaining claims: constructive
discharge with the intent to interfere with the receipt of
benefits in violation of § 510 of ERISA, 29 U.S.C. § 1140, and
failure to disclose serious consideration of improved benefits in
breach of Allstate's fiduciary duty. On plaintiffs' motion we
certified a class as to the constructive discharge claim, but
found that plaintiffs failed to satisfy the commonality
requirement for class certification as to the breach of fiduciary
duty claim.*fn1 Defendants now move the court to reconsider
its decision granting class certification. The motion is granted in part and denied in part.
A party can bring a motion for reconsideration to correct
errors of law or fact, or present newly discovered evidence.
See Bordelon v. Chicago School Reform Board of Trustees,
233 F.3d 524, 529 (7th Cir. 2000) (citing LB Credit Corp. v.
Resolution Trust Corp., 49 F.3d 1263 (7th Cir. 1995)). "A
motion for reconsideration performs a valuable function where the
Court has patently misunderstood a party, or has made a decision
outside the adversarial issues presented to the Court by the
parties, or has made an error not of reasoning but of
apprehension." Bank of Waunakee v. Rochester Cheese Sales,
Inc., 906 F.2d 1185, 1191 (7th Cir. 1990). Motions for
reconsideration should not serve to introduce new legal theories
for the first time. Publishers Resource, Inc. v. Walker-Davis
Publications, Inc., 762 F.2d 557, 561 (7th Cir. 1985);
Pickett v. Prince, 5 F.Supp.2d 595, 597 (N.D.Ill. 1998).
Nonetheless, due to the ongoing duty to ensure that the
requirements for class certification are met throughout the
entire case, courts have analyzed new arguments presented in
motions to reconsider class certifications. See e.g., Belbis
v. County of Cook, 2003 WL 187407 at *1 (N.D.Ill. 2003); see
also Eggleston v. Chicago Journeymen Plumbers' Local Union No.
130, U.A., 657 F.2d 890, 896 (7th Cir. 1981) ("If the
certification of the class is later deemed to be improvident, the
court may decertify.").
Defendants argue that class certification was improper, or at
least that the definition of the class is overly inclusive.
Defendants provide several reasons why the court erred in
granting certification it shifted the burden of proof to
defendants; did not ensure the requirements of both Rule 23(a)
and 23(b)(2) were satisfied; and certified a vague, fail-safe
class. We will address each of these contentions in turn.
Defendants argue that the court did not apply the proper
standard for class certification. They maintain that the court impermissibly shifted
the burden of proof for class certification from plaintiffs to
defendants. A review of our analysis reveals that this is not the
case, though our articulation of the applicable standard could
have been clearer. Defendants' concern stems, in part, from our
statement that "[f]or purposes of this motion the court accepts
the allegations of the complaint as true, though it may probe the
evidence, if necessary, to determine whether class certification
is appropriate" (Mem. Opinion and Order, 6/21/04 (Opinion) at 4).
Defendants argue that courts are not to accept plaintiffs'
allegations as true when determining whether to certify class
actions, but rather are to employ a "rigorous analysis" to ensure
that the requirements for certification are met. See Davis v.
Hutchins, 321 F.3d 641, 649 (7th Cir. 2003) (quoting Davis
v. Romney, 490 F.2d 1360, 1366 (3d Cir. 1974)). In fact, we
acknowledged the need to "probe the evidence" when considering
whether class certification is appropriate, and, throughout our
analysis of plaintiffs' motion, we did not merely accept
plaintiffs' assertions regarding certification as true, but
rather discussed evidence, including various parties' deposition
testimony. As we explained in the followup sentence ("In deciding
whether or not to certify a class, the court does not evaluate
the merits of the underlying action."), the allegations that the
court accepts as true, for the time being, relate to the merits
of the plaintiffs' claims against defendants (Opinion at 4).
Judge Castillo articulated this same standard in McClain v.
Leona's Pizzeria, Inc., 222 F.R.D. 574, 576 (N.D.Ill. 2004),
stating: "When evaluating a motion for class certification, the
court accepts as true the moving party's allegations and does not
examine the merits of the case." Citing Hardin v.
Harshbarger, 814 F.Supp. 703, 706 (N.D.Ill. 1993). Though the
Allstate defendants argue that the court employed the wrong
standard when deciding the motion for class certification, the
court used the same standard described in Szabo v. Bridgeport
Machines, Inc., 249 F.3d 672, 677 (7th Cir. 2001), in which the Seventh Circuit stated
that "sometimes it may be necessary for the court to probe beyond
the pleadings before coming to rest on the certification question
. . . actual, not presumed, conformance with Rule 23(a) remains . . .
indispensable." Our decision acknowledged this standard and
distinguished it from an inquiry into the merits of plaintiffs'
Defendants also take issue with the court's statement that
"Rule 23 should be liberally interpreted and . . . when using its
broad discretion regarding the certification of a class, a court
should err in favor of maintaining the class action." Courts have
repeatedly acknowledged their discretion in certifying class
actions and noted that they should err in favor of granting
certification. See e.g., King v. Kansas City Southern
Industries, Inc., 519 F.2d 20, 26 (7th Cir. 1975); Wallace
v. Chicago Housing Authority, 2004 WL 2339332 at *2 (N.D.Ill.
2004). This language appears verbatim in a case cited by
defendants. See Guillory v. American Tobacco Co., 2001 WL
290603 at *2 (N.D.Ill. 2001) ("The court maintains broad
discretion to determine whether a proposed class satisfies the
requirements and should err in favor of maintaining class
actions."). Erring in favor of class actions is not equivalent to
relieving plaintiffs of their burden to show that the
requirements for certification are satisfied.
In our decision to certify the plaintiff class, we considered
and rejected many of defendants' arguments regarding plaintiffs'
failure to show that the requirements for class certification
were satisfied. For the most part, we will not address these
arguments again. However, defendants raise some new arguments and
place renewed emphasis on old arguments that will be analyzed.
Defendants contend that plaintiffs have not satisfied the
requirements of Federal Rule of Civil Procedure 23(b)(2), which
allows for a class action "where the party opposing the class has
acted or refused to act on grounds generally applicable to the class, thereby making appropriate final
injunctive relief or corresponding declaratory relief with
respect to the class as a whole. . . ." A class action, in which
plaintiffs predominantly seek money damages, should not be
maintained under Rule 23(b)(2). Lemon v. International Union of
Operating Engineers, Local No. 139, 216 F.3d 577, 580 (7th
Cir. 2000). In Lemon, the plaintiffs sought monetary damages as
well as injunctive relief. The court explained that a suit for
money damages undermines the cohesion necessary in a Rule
23(b)(2) class action, where the plaintiffs are bound to
litigation seeking redress for a common injury. Id. However, an
exception exists to the general rule prohibiting Rule 23(b)(2)
class certification for actions seeking monetary damages.
Non-equitable monetary relief may be obtained in a Rule 23(b)(2)
class action when the monetary damages are "`incidental' to the
requested injunctive or declaratory relief." Id. at 581. The
Seventh Circuit defined "incidental" damages as "damages that
flow directly from liability to the class as a whole on the
claims forming the basis of the injunctive or declaratory
relief." Id. (quoting Allison v. Citgo Petroleum Corp.,
151 F.3d 402, 425 (5th Cir. 1998)). The Third Circuit has
elaborated: "Consistent with this analysis, whether damages are
incidental depends on: (1) whether such damages are of a kind to
which class members would be automatically entitled; (2) whether
such damages can be computed by `objective standards' and not
standards reliant upon `the intangible, subjective differences of
each class member's circumstances'; and (3) whether such damages
would require additional hearings to determine." Barabin v.
Aramark Corp., 2003 U.S. App. LEXIS 3532 at *5 (3d Cir. 2003).
The damages that plaintiffs seek are incidental damages. The
monetary damages flow directly from Allstate's alleged liability
for harassing plaintiffs to leave the company or convert to
independent contractors, which is the basis for plaintiffs'
request to be declared eligible for the Plan. Upon a finding of liability, class members would be
entitled to monetary damages, which would not require additional
hearings to calculate but would be determined using Allstate's
objective standards for disbursement of Plan benefits.
Defendants reassert that the predominance of individual issues
renders class treatment of this action both inefficient and
unmanageable. This argument echoes their concerns that the class
is too vague. They claim that individual determinations will need
to be made on "causation, the fact of harassment, the causal
nexus between the fact of harassment and the decision to leave,
and the causal nexus between the decision to leave and any
alleged injury." Despite defendants' assessment, the
individualized inquiry can be more simply stated each putative
class member will need to show that but for defendants alleged
harassment he would have remained an employee-agent. See
McLendon v. Continental Can Co., 908 F.2d 1171, 1178 (3d Cir.
1990) (discussing individual class members' requirement to prove
but for causation in class action suit for violation of § 510 of
ERISA in order to receive monetary award for lost pension
rights). Regardless, defendants contend that where individualized
inquiries are necessary, class certification is improper.
In our prior opinion we cited precedent for such inquiries in
class action suits. See Romasanta v. United Air Lines, Inc.,
717 F.2d 1140 (7th Cir. 1983). Defendants attempt to
distinguish the individualized inquiries that were conducted in
Romasanta and McDonald v. United Air Lines, Inc.,
587 F.2d 357, 360 n. 4 (7th Cir. 1978), from the inquiries needed in
this case. Their argument is unconvincing. In the airline cases
the court certified a class action for female flight attendants
who lost their jobs as a result of United Air Lines' ban on
married flight attendants. This class included not just married
women who were terminated by the airline, but also women who
resigned because of the policy. Defendants argue that even though individual inquiries were required in those cases, they
were a simple exercise requiring a determination of whether or
not the flight attendant was engaged to be married or
subsequently married. The investigative hearings conducted in
McDonald belie that assessment. McDonald v. United Air Lines,
745 F.2d 1081 (7th Cir. 1984). The court laid out a number of
principles to be considered when determining flight attendants'
entitlement to relief. Id. at 1084. An impending marriage alone
would not have qualified a flight attendant for the class, as
some flight attendants would have left their positions regardless
of United's policy. Nor would a flight attendant's failure to
complain about the policy have automatically disqualified her
from the class. The inquiry into whether former Allstate
employees left because of the company's alleged harassment would
not be significantly different from the inquiry into whether a
flight attendant left her job because of United Air Line's
Nonetheless, defendants have another concern about the
certified class, which must be addressed. Defendants contend that
the class, as defined, is fail-safe "a class which would be
bound only by a judgment favorable to plaintiffs but not by an
adverse judgment," Dafforn v. Rousseau Associates, Inc., 1976
WL 1358 at *1 (N.D.Ind. 1976). In Dafforn, the court refused to
certify a class of homeowners who had been charged "illegal"
brokerage fees because the class definition depended on a finding
that the defendants' fees were illegal. Id. As the court
explained, if the trier of fact determined that the defendants'
fees were not illegal, there would be no class members against
whom res judicata would apply, allowing homeowners to bring
individual suits to retry the same issues. Id. The Allstate
defendants argue that the certified class of Allstate
employee-agents, harassed to leave the company or convert to
independent contractors, suffers the same defect as the proposed
class in Dafforn. They maintain that if a ruling on liability
determines that Allstate's policies do not constitute harassment, no former employee-agents would fall under the class
definition and, therefore, no one other than the named plaintiffs
would be impeded from re-litigating the same action.
We recognize that a certified class should not be able to
engage in risk-free litigation by eluding res judicata. The
Seventh Circuit has acknowledged the need for a definite class to
avoid such a problem, stating that "[s]ince the outcome of a
class action suit is res judicata as to all unnamed class
members, it is crucial to have a clear definition of what groups
or individuals are members of the class." Alliance to End
Repression v. Rochford, 565 F.2d 975, 977 n. 6 (7th Cir.
1977). In Rochford, the Seventh Circuit, affirmed the
certification of a class defined as Chicago residents who engaged
in lawful political, religious, educational or social activities,
and, as a result, were subjected to coercion, punishment or
harassment by the defendants. Id. at 976. The court noted that
class membership based on prospective members' state of mind is
indefinite, but that class membership based on the defendant's
conduct is not indefinite. Id. at 978; see also Hispanics
United of DuPage County v. Village of Addison, Illinois,
160 F.R.D. 681, 686 (N.D.Ill. 1995). Thus, a class of "individuals
and organizations operating in Chicago that have been subjected
to the alleged pattern of unconstitutional harassment by the
defendants" is certifiable. Rochford, 565 F.2d at 978. Of
course, this class could also have been labeled a fail-safe class
under Dafforn, since it consisted of those who had been
subjected to unconstitutional harassment. However, the Seventh
Circuit did not view the Rochford class as a fail-safe class,
perhaps because it was confident that the district courts would
not allow unnamed class members to play semantic games with
judicial doctrine such as res judicata. Like the Seventh
Circuit in Rochford, we are not concerned that the courts would
allow the unnamed Allstate class members to avoid res judicata.
Were the defendants to prevail on the common issues of liability,
the court would have to enforce res judicata in the event an unnamed class member who could have benefitted from a
favorable decision attempted to re-litigate the same issue. The
current class definition is definite enough for the court to make
such a determination.
Nonetheless, any concern about a fail-safe class can be wholly
eliminated by slightly revising the class definition. The court
has wide latitude to resolve any ambiguity in a class definition
by redefining it or providing plaintiffs with the opportunity to
redefine it. See Metropolitan Area Housing Alliance v. U.S.
Dept. of Housing and Urban Development, 69 F.R.D. 633, 638 n. 7
(N.D.Ill. 1976). By replacing the word "harassed" with a
description of defendants' allegedly offending policies,
plaintiffs avoid the allegation that their class definition rests
on a finding of liability. We will allow plaintiffs the
opportunity to revise their class definition in light of our
prior denial of class certification for their breach of fiduciary
duty claim, concern about a fail-safe class, and our limitation
of the class period, discussed below.
Defendants maintain that even if certification of the class was
not improper, the class period certified is overly inclusive due
to both its commencement date and closing date. Upon
reconsideration, we agree that the class period should not extend
until June 30, 2000, but, for the time being, do not disturb the
April 1, 1998, start date.
Recognizing that employees who left Allstate or converted to
independent contractors on or after June 1, 1999, were eligible
to participate in the Agent Transition Severance Plan, we still
certified the class to include them, as we said, "[f]or now." As
we explained, even though these employees had the option to
participate in the Plan, and thus harassment did not preclude
them from this benefit, it may have precluded them from receiving
their other plan benefits. This appeared to be a special risk for
those former employee-agents who left Allstate during the "look back" period between June 1, 1999, and November
30, 1999, since they were offered the opportunity to participate
in the Plan after they left Allstate and, therefore, their
decision to quit or transition would not have been influenced by
Defendants have pointed out two facts, which reveal the
untenability of including those who left on and after June 1,
1999, in the class. First, on November 10, 1999, all employee
agents were put on notice that Allstate was terminating their
contracts, effective no later than June 30, 2000 (Defs' Ex. 1,
Barry Hutton Dep. at 61-62; Defs' Ex. 8, Preparing for the Future
Booklet ["Your agent agreement and employment will terminate no
later than June 30, 2000"]). As part of Allstate's Preparing for
the Future Group Reorganization Program, these employees could
participate in the Plan and had several post-termination options.
As a prerequisite to receiving benefits under the Plan, the
agents needed to sign a release for Allstate. All but nineteen
agents signed the release and accepted some form of benefits
under the plan. See Romero v. Allstate Insurance Co., 2004 WL
692231 at *2 (E.D.Pa. 2004) (certifying a class of former
employee-agents who signed the release and who now seek to
rescind it, and certifying a class of the sixteen former agents
who did not sign the release). Second, all but five of the
employees who left between June 1, 1999, and November 30, 1999,
and were not originally eligible to participate in the Plan,
eventually accepted benefits and signed a release of any claims
against Allstate (Defs' Ex. 18, Scott Proctor's Declaration).
The named plaintiffs did not sign the release and accept
benefits under the Plan, nor did they refuse to sign the release.
They all left Allstate or converted to independent contractors
before Allstate offered the option to release any claims and
participate in the Agent Transition Severance Plan. The named
plaintiffs are not the proper representatives for those who left
on or after June 1, 1999, especially since the Romero action
would apply to those individuals' claims.
The class period will still commence on April 1, 1998.
Defendants maintain that the work rules central to plaintiffs'
complaint were not announced until the fall of 1998, and were not
implemented until January 1, 1999. Therefore, the alleged
harassment could not have occurred prior to New Year's Day 1999.
Defendants dismiss the "handful of documents" which plaintiffs
argue create a question as to when the alleged harassment began.
These documents include a Field Communication Package announcing
Allstate's effort to make it easier for employee-agents to
convert to independent contractors, and announcing greater
control over how employee-agents operate their expenses and
their training. While plaintiffs may not ultimately be able to
prove that Allstate's alleged harassment began this early, or at
all, common issues of law and fact apply throughout the class
period, "which is all that is required at this stage of the
proceedings." In re Bromine Antitrust Litigation,
203 F.R.D. 403, 414 (S.D.Ind. 2001); see Sirota v. Solitron Devices,
Inc., 673 F.2d 566, 572 (C.A.N.Y. 1982) ("[I]t would be improper
for a district court to resolve substantial questions of fact
going to the merits when deciding the scope or time limits of the
For the foregoing reasons defendants' motion to reconsider is
granted in part and denied in part. Plaintiffs will be allowed
the opportunity to amend the class definition to eliminate any
concern regarding a fail-safe class and to limit the class period
to April 1, 1998, through May 31, 1999.