Mandatory Class Actions That Include Monetary Claims: Do Absent Class Members Have a Due Process Right to Opt Out?
5 Preview of Supreme Court Cases 157 (February 1994)
5 Pages Posted: 19 Feb 2013
Date Written: 1994
This article previews the issues and arguments in Ticor Title Insurance Co. v Brown, on the Supreme Court’s 1993-94 appellate docket. The primary issue the Court will address is whether a federal court may refuse to enforce a certified, mandatory class-action judgment on the ground that absent class members have a constitutional due process right to opt-out of the class asserting claims for monetary damages?
Federal Rule of Civil Procedure 23 provides for three categories of class actions. The first two types are mandatory class actions and bind all plaintiffs to the court's judgment and bar subsequent relitigation of issues. In general, these class actions tend to seek equitable relief – an injunction or a declaratory judgment ― rather than compensatory relief in the form of money damages. In contrast, a (b)(3), or "opt out," class action permits unwilling plaintiffs to remove themselves from the class and avoid the preclusive effects of any class judgment.
Most (b)(3) class actions involve claims for money damages. Thus, plaintiffs who opt out of a (b)(3) class action are free to institute independent or subsequent lawsuits without being bound by the class-action judgment. In addition, it is possible for some mandatory class actions to seek both equitable and monetary relief. Until this case, the Supreme Court has never had to consider whether due process requires that class plaintiffs in "hybrid" mandatory class actions, i.e., class actions seeking both equitable relief and damages, should be permitted to opt out.
The Court will have to consider the applicability of its decision in Phillips Petroleum Co. v. Shutts to the facts in this case. The Court in Shutts concluded that a state court constitutionally could assert personal jurisdiction over absent class members so long as class-certification requirements are satisfied, the Court also qualified its decision by limiting it to "those class actions which seek to bind known plaintiffs concerning claims wholly or predominantly for money judgments." The Court further explained that it intimated "no view concerning other types of class actions, such as those seeking equitable relief."
The Court's Shutts decision is distinguishable from the issues presented in Ticor in three ways. First, Shutts arose in state court, rather than in federal court, and, therefore, the Supreme Court's focus in Shutts was predominantly on due process as it relates to a state court's personal jurisdiction over absent class members. Second, Shutts involved a class action for damages and, accordingly, included an opt out right for plaintiffs, which Ticor does not. Third, the Court in Shutts expressly declined to give its opinion concerning any due process requirements for class actions seeking predominantly equitable remedies.
Ticor is significant because the Court must revisit its decision in Shutts and will need to clarify whether two separate strands of due process relate to class-action procedure: one regarding personal jurisdiction, the other procedural fairness. Shutts did not abundantly distinguish these due process concerns, and the Court may have to unravel them and explain the differences. Further, Ticor presents the Supreme Court with an issue it did not anticipate in Shutts - the hybrid class action seeking a combination of equitable and monetary relief. Thus, the Court must grapple with the difficult problem of how to characterize hybrid class actions, as well as the due process consequences of mixed equitable/damage class actions.
Keywords: Class actions, Federal Rule 23, damage class actions, opt out, mandatory class actions, Phillip Petroleum Co. v. Shutts, hybrid class actions, Ticor Titlte Co. v. Brown
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