Errata to Concurrence Filed: June 27, 2003
Parker v. Time Warner
Docket No. 01-9069
JON O. NEWMAN, Circuit Judge, concurring:
A complaint alleging that up to 12 million cable television
subscribers may each be entitled to receive at least $1,000 for
violations of their statutorily protected privacy rights presents class
action issues in a context unusual even for modern class action
litigation. The Court remands for further consideration the District
Court's decision to deny class certification. I concur in that
decision and agree with most of Judge Underhill's opinion. I write
these additional views to explore matters affecting both the (b)(2) and
(b)(3) aspects of this case. I am somewhat doubtful about the
possibility of a (b)(2) class that would include monetary claims but
believe that there are strong arguments favoring a (b)(3) class. More
specifically, I think a district court has discretion to certify a
(b)(3) class with the aggregate amount of statutory damages limited
substantially below what a literal application of the statute might
seem to require.
1. (b)(2) Issues
Rule 23(b)(2) of the Federal Rules of Civil Procedure provides
that if the threshold prerequisites of Rule 23(a) are met, a class
action may be maintained if
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.
Fed. R. Civ. P. 23(b)(2). Although the text of the (b)(2) provision
focuses on the appropriateness of injunctive or declaratory relief, the
drafters contemplated that a claim for money damages would not
necessarily preclude class certification under (b)(2). They cautioned,
however, that "[t]he subdivision does not extend to cases in which the
appropriate final relief relates exclusively or predominantly to money
damages." Id. advisory committee's note (1966) (emphasis added). In
a case such as the pending one, in which damages are sought in addition
to injunctive and declaratory relief, the (b)(2) certification issue
turns largely on whether the final relief relates "predominantly" to
money damages.
Some courts have ruled that monetary relief predominates "unless
it is incidental to requested injunctive or declaratory relief."
Allison v. Citgo Petroleum Corp., 151 F.3d 402, 415 (5th Cir. 1998);
see also Barabin v. Aramark Corp., No. 02-8057, 2003 WL 355417, at *1-
*2 (3d Cir. Jan. 24, 2003) (adopting the Allison approach to incidental
damages); Jefferson v. Ingersoll International Inc., 195 F.3d 894, 898
(7th Cir. 1999) (same). "Incidental" damages have been said to be
those "that flow directly from liability to the class as a whole on the
claims forming the basis of the injunctive or declaratory relief,"
Allison, 151 F.3d at 415, and "should at least be capable of
computation by means of objective standards and not dependent in any
significant way on the intangible, subjective differences of each class
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member's circumstances," id.
As Judge Underhill's opinion recognizes, however, this Court has
rejected the Fifth Circuit's limitation of (b)(2) to claims for
"incidental" damages, see Robinson v. Metro-North Commuter R.R. Co.,
267 F.3d 147, 162-67 (2d Cir. 2001), outlining instead a broader "ad
hoc approach," id. at 164, that obliges a district court to consider
numerous factors in making the ultimate certification decision.
Robinson explicitly contemplated the possibility that a (b)(2) class
might be appropriate where monetary relief that is non-incidental would
"present[] individual specific damage issues." Id. at 166. The risk
that such certification might create due process concerns was answered
by the possibility of "affording notice and opt out rights to absent
class members for . . . the damages phase of the proceedings." Id. In
addition, Robinson held that damages relief obstacles to (b)(2)
certification can be overcome by using the authority of Rule 23(c)(4)
to certify a class action "with respect to particular issues," Fed. R.
Civ. P. 23(c)(4), specifically, a class action with respect only to
liability. Robinson, 267 F.3d at 167-69.
Although I am obliged to accept Robinson as the law of this
Circuit, I think it risks some inappropriate uses of (b)(2)
certification. That provision is designed for claims for injunctive
and declaratory relief. The (b)(3) class, with its opt-out protection,
is available for monetary claims. In some limited situations, a (b)(2)
class might be appropriate notwithstanding a monetary claim, but, prior
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to Robinson, I would have thought such cases to be rare. See Ansoumana
v. Gristede’s Operating Corp., 201 F.R.D. 81, 88 (S.D.N.Y. 2001)
(observing that implementing opt-out rights in the context of Rule
23(b)(2) class is undesirable, and certifying the class under Rule
23(b)(3) instead). In particular, I question whether we risk unduly
extending (b)(2) in cases with monetary claims by inviting district
judges to use it and then protect claimants with individualized damage
amounts either by affording them opt-out rights or certifying only the
liability issue. Such devices strike me as a way of undermining the
(b)(3) requirement that "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).
Even though, in light of Robinson, the pending case must be
remanded for further consideration of (b)(2) certification, I have
additional concerns as to the guidance the Court offers to the District
Court. Although recognizing that monetary claims need not be
"incidental" for (b)(2) certification and correcting the District
Court's view that the statutory damages sought were less than the non-
statutory damages, the Court does not disturb the District Court's view
that the statutory damages are incidental and all other damages are
non-incidental. I disagree with both propositions and air the matter
since it might affect the District Court's ultimate determination of
whether the monetary claims predominate.
As to the statutory damages, I note preliminarily that it is by
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no means settled that a claim for statutory damages is per se
incidental. Apparently no court has explicitly indicated that
statutory damages are "incidental" for purposes of (b)(2) analysis.
In Allison, the Fifth Circuit suggested (by citation to a case
involving a claim for statutory damages) that such damages would
qualify as incidental, see 151 F.3d at 415 (citing Arnold v. United
Artists Theatre Circuit, Inc., 158 F.R.D. 439 (N.D. Cal. 1994)), but
Allison did not involve any such claim. Although some district courts
have certified (b)(2) classes whose claims included statutory damages,
see, e.g., Borcherding-Dittloff v. Transworld Systems, Inc., 185 F.R.D.
558, 565-66 (W.D. Wis. 1999); Colorado Cross-Disability Coalition v.
Taco Bell Corp., 184 F.R.D. 354, 361-62 (D. Colo. 1999); Gammon v. GC
Services Limited Partnership, 162 F.R.D. 313, 320-22 (N.D. Ill. 1995);
Arnold v. United Artists Theatre Circuit, Inc., 158 F.R.D. 439, 450-53
(N.D. Cal. 1994), these courts have not described such damages as
"incidental," and have considered a variety of factors in reaching the
conclusion that statutory damages did not predominate.1
1
One factor considered by some courts approving (b)(2) classes in
which statutory damages were sought is the amount of damages to which
each class member would be entitled. As one might expect, district
courts have appeared more willing to hold that injunctive or
declaratory relief predominates where the damages to be received by
each individual class member would be minimal. See Borcherding-
Dittloff, 185 F.R.D. at 566 ("[T]he potential statutory damages each
plaintiff could recover under the act are nominal. If the class has
over 50,000 members, each would be entitled to less than ten
dollars."); Colorado Cross-Disability Coalition, 184 F.R.D. at 361
(finding that injunctive relief predominated in part because "each
class member seeks only $50"); Gammon, 162 F.R.D. at 321 (finding that
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In the pending case, Judge Glasser, although undervaluing the
statutory damages claim, seems to have accepted the plaintiffs' premise
that a claim for statutory damages is "incidental" for (b)(2) purposes
because it can be adjudicated without consideration of individual
variations among the class members. In this case, the statute provides
for actual damages with a minimum recovery of the greater of $1,000 per
claimant or $100 for each day of violation. 47 U.S.C. § 551(f)(2)(A)
(2000). Although the minimum statutory damages of $1,000 can be
determined without considering variations among class members, the
alternative minimum of $100 per day of violation will vary somewhat
among class members, and any actual damages suffered by each class
member will involve considerable variations. The plaintiffs purporting
to represent the class seek to avoid such variations by limiting the
recovery for each class member to the $1,000 lump sum. I doubt if they
can so easily sacrifice the absent class members' claims for minimum
daily damages or actual damages, at least without notice and some
opportunity for those class members either to agree to accept only the
$1,000 payment (or some specified lesser sum, see Part 2, infra) or to
opt out of the class. Cf. Arnold, 158 F.R.D. at 464-65 (on motion for
reconsideration after certifying (b)(2) class including a claim for
statutory damages, ordering that absent class members receive notice
individual recovery of damages would be de minimis because "the
requested maximum statutory damages, if awarded, would amount to
approximately 13 cents per class member.").
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and an opportunity to opt out).
As to the non-statutory damages, the District Court understood a
major component of the claim to be disgorgement of the profits that the
Defendant is alleged to have made by selling information in violation
of the class members' statutorily-protected privacy rights. See Parker
v. Time Warner Entertainment Co., L.P., 198 F.R.D. 374, 376, 381
(E.D.N.Y. 2001).2 If, as seems likely, the Defendant sold this
information at a fixed amount per subscriber, it would seem that a
claim to disgorge the resulting profit and distribute it pro rata to
the class members would not involve any individual variations of the
sort that would render these damages "non-incidental." Of course, all
of these considerations concerning damages will not matter if the
District Court, on remand, renews its decision to certify a (b)(2)
class only for the claims for injunctive and declaratory relief or
declines to certify any (b)(2) class.
2. (b)(3) Issues
By seeking to collect statutory damages of $1,000 for each of up
to 12 million cable subscribers, this lawsuit could potentially impose
on Defendant Time Warner liability for $12 billion. Even for one of
2
It is not clear whether the District Court regarded disgorgement
of profits to be within the scope of the actual damages to which the
class might be entitled under the statute or to be the remedy for a
state law claim. At this point, our Court need not make any ruling on
the former theory, which has not been developed on appeal. As to the
second theory, the District Court declined to exercise supplemental
jurisdiction, although that interlocutory ruling could be reconsidered
now that the class certification issue is being remanded.
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the world's largest corporations, that is a lot of money.3 A claim of
this sort creates a tension between the statutory provisions for
minimum damages and the Rule 23 provisions for class actions that
probably was not within the contemplation of those who promulgated
either the statute or the rule. At first glance, the tension appears
to admit of only two possibilities: (1) the class certification motion
is granted, and, if the allegations are proven, Time Warner becomes
liable for damages of up to $12 billion, or (2) the class certification
motion is denied, and each victim of Time Warner's alleged violations
remains free to pursue an individual claim for $1,000 (or the
alternative daily minimum recovery or actual damages). Both options
are unsatisfactory.
The first option might well encounter due process objections,
somewhat analogous to those that the Supreme Court recently identified
in setting constitutional limits on punitive damages. See, e.g., State
Farm Mutual Automobile Insurance Co. v. Campbell, 123 S. Ct. 1513,
1520-21, 1526 (2003) ("The Due Process Clause of the Fourteenth
Amendment prohibits the imposition of grossly excessive or arbitrary
punishments on a tortfeasor."); Cooper Industries, Inc. v. Leatherman
Tool Group, Inc., 532 U.S. 424, 433-35 (2001); BMW of North America,
3
As Senator Everett Dirksen famously said in the context of the
federal budget, "A billion here and a billion there, and pretty soon
you're talking about real money." The New International Dictionary of
Quotations 184 (Hugh Rawson & Margaret Miner eds., 1986) (quoting
Senator Everett Dirksen).
-8-
Inc. v. Gore, 517 U.S. 559, 585-86 (1996). Although statutory damages
amounts might be calculated in part to compensate for actual losses
that are difficult to quantify, they are often also motivated in part
by a pseudo-punitive intention to "address and deter overall public
harm." Texas v. American Blastfax, Inc., 121 F. Supp. 2d 1085, 1090
(W.D. Tex. 2000) (upholding constitutionality of statutory damages
provision of the Telephone Consumer Protection Act, 47 U.S.C. § 227
(2000)); see also Saint Louis, Iron Mountain & Southern Ry. Co. v.
Williams, 251 U.S. 63, 66 (1919) (in setting a statutory penalty, the
state may "adjust its amount to the public wrong rather than the
private injury."); cf. State Farm, 123 S. Ct. at 1520-21, 1526
("punitive damages serve a broader function [than compensatory
damages]; they are aimed at deterrence and retribution."). A statutory
penalty may violate due process where the penalty prescribed is "so
severe and oppressive as to be wholly disproportioned to the offense
and obviously unreasonable." Williams, 251 U.S. at 66-67. Even if a
massive aggregation of minimum statutory damages survives
constitutional scrutiny, there is a substantial question whether the
Congress that authorized payments of $1,000 for victimized cable
subscribers expected 12 million of them each to receive such an amount
for a somewhat technical violation.
The second option remits each victim to a separate lawsuit,
needlessly clogging the courts with repetitious suits if many are
filed, or rewarding some law violators with liability for only a slight
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amount of total damages if, as seems more likely, few suits are filed.4
Cf. Henry v. Cash Today, Inc., 199 F.R.D. 566, 573 (S.D. Tex. 2000)
(certifying class for claims under Truth in Lending Act ("TILA"), 15
U.S.C. §§ 1601 et seq. (2000), and finding that $1,000 minimum
statutory award under TILA was insufficient to motivate individuals to
bring meritorious claims).
I think a third alternative is warranted in order to achieve to
a considerable extent the objectives of both the statute and the class
action rule. The statute could be construed to authorize an award of
substantially less than $1,000 to all but the initially named
plaintiffs who instituted the class action. I recognize that this
approach cannot be reconciled with the terms of the statute, and for
some that would be an insuperable obstacle. But in my view and that
4
The idea of rejecting class action certification because of the
large size of an aggregation of statutory damages awards drew major
support, if not its origin, from the opinion of Judge Frankel in Ratner
v. Chemical Bank New York Trust Co., 54 F.R.D. 412 (S.D.N.Y. 1972).
In that case, Judge Frankel denied a motion for (b)(3) class
certification for a class consisting of 130,000 credit card holders
claiming the $100 statutory damages authorized by the Truth in Lending
Act of 1968, 15 U.S.C. §§ 1601 et seq. He found "cogent and
persuasive" the defendant's argument that "the proposed recovery of
$100 each for some 130,000 class members would be a horrendous,
possibly annihilating punishment . . . ." Ratner, 54 F.R.D. at 416.
Although Ratner has been cited favorably by many courts, see, e.g.,
Kline v. Coldwell, Banker & Co., 508 F.2d 226, 234-35 (9th Cir. 1974);
Wilcox v. Commerce Bank of Kansas City, 474 F.2d 336, 341-47 (10th Cir.
1973); In re Trans Union Corp. Privacy Litigation, 211 F.R.D. 328, 348-
51 (N.D. Ill. 2002); Berkman v. Sinclair Oil Corp., 59 F.R.D. 602, 608-
09 (N.D. Ill. 1973), I believe this is one of those rare instances
where a judicial Homer nodded, see Horace, Ars Poetica 402 ("Homer
himself hath been observ'd to nod."), quoted in Bartlett's Familiar
Quotations (13th ed. 1951).
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of many others, statutes are not to be applied according to their
literal terms when doing so achieves a result manifestly not intended
by the legislature. See, e.g., Griffin v. Oceanic Contractors, Inc.,
458 U.S. 564, 571 (1982) ("[I]n rare cases the literal application of
a statute will produce a result demonstrably at odds with the
intentions of its drafters, and those intentions must be
controlling."); Church of the Holy Trinity v. United States, 143 U.S.
457, 459 (1892) ("It is a familiar rule, that a thing may be within the
letter of the statute and yet not within the statute, because not
within its spirit, nor within the intention of its makers."); Salute
v. Stratford Greens Garden Apartments, 136 F.3d 293, 297 (2d Cir. 1998)
("The plain meaning of a statute may not be controlling in those rare
cases where literal application of a statute will produce a result
demonstrably at odds with the intentions of its drafters.") (quotation
marks omitted). I do not believe that in specifying a $1,000 minimum
payment for Cable Act violations, Congress intended to expose a cable
television provider to liability for billions of dollars. Nor do I
believe that Congress intended to permit a violator to avoid payment
of at least some compensation to numerous victims of its violations
simply because its actions affected a large number of subscribers.
Perhaps, as the Court's opinion seems to imply, the Due Process Clause
creates a constitutional limit upon an aggregation of statutory
damages. But I hesitate to rely on a novel theory of constitutional
law when a sensible interpretation of a statute, construed against a
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background of possible constitutional concerns, is available.5 See
Edward J. DeBartolo Corp. v. Florida Gulf Coast Building and
Construction Trades Council, 485 U.S. 568, 575, (1988) ("[W]here an
otherwise acceptable construction of a statute would raise serious
constitutional problems, the Court will construe the statute to avoid
such problems unless such construction is plainly contrary to the
intent of Congress.").
Even if possible due process concerns or statutory construction
to avoid a bizarre result not intended by Congress might not
independently require limiting an aggregate statutory damages award,
such considerations would seem appropriate to inform the customarily
broad discretion of a district judge in the context of class
certification. Judges have used their discretion to determine the
appropriate scope of a class, see, e.g., American Timber & Trading Co.
v. First National Bank, 690 F.2d 781, 787 (9th Cir. 1982) (affirming
judicial creation of a subclass as being "within the district court's
broad power under Fed. R. Civ. P. 23(d) to adopt procedural innovations
to facilitate management of the class action."); Shapiro v. Midwest
5
Of course, Congress would always have the option to respond to
the setting of a limit on aggregate damage awards by explicitly
precluding such a limit or establishing a lower or even higher limit
of its own. See Disabled in Action of Metropolitan New York v. Hammons,
202 F.3d 110, 120 (2d Cir. 2000) ("We thus seek to apply the statutory
framework as best we can, recognizing always that Congress has the
final word and may wish to revisit the statutory scheme."); cf. 15
U.S.C. § 1640(a)(2)(B) (amendment that caps class action TILA awards
at the lesser of $500,000 or 1 percent of the creditor's net worth).
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Rubber Reclaiming Co., 626 F.2d 63, 71 (8th Cir. 1980) (holding that
the broad discretion enjoyed by district courts in the class action
context "extends to defining the scope of the class," and affirming
district court’s limitation of plaintiff’s proposed class),
and, pursuant to Rule 23(c)(4), to certify a class as to particular
issues, see, e.g., Williams v. Owens-Illinois, Inc., 665 F.2d 918 (9th
Cir. 1982) ("It is within the discretion of the trial judge, under Rule
23(c)(4), to limit the issues in a class action to those parts of a
lawsuit which lend themselves to convenient use of the class action
motif.") (quotation marks omitted); Simon v. Philip Morris Inc., 200
F.R.D. 21, 28-33 (E.D.N.Y. 2001) (discussing power of district court
to grant partial certification or to bifurcate issues and collecting
cases). I think that potential due process concerns and avoiding a
result not intended by Congress can appropriately be considered by a
district judge in determining that a class will be certified only up
to some reasonable aggregate amount of damages. When considering
statutory damages provisions authorizing sums of "not more than" stated
maximums, the Ninth Circuit has not hesitated to rule that a large
aggregate award in a class action exceeded a district court's
discretion and should be substantially reduced. See Six (6) Mexican
Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1309-11 (9th Cir.
1990).6 Determining what portion of the full amount of statutory
6
Six (6) Mexican Workers concerned the statutory damages provision
of the Farm Labor Contractor Registration Act, 7 U.S.C. § 2050a(b)
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damages will be available to a class seems not significantly different
than determining what issues will be available for classwide
adjudication. A district judge ought to be able to exercise informed
discretion to certify a class entitled to receive no more than some
specified aggregate amount.7
It would probably make sense to permit the named plaintiffs to
recover the full $1,000 amounts specified in the statute (if they
prevail on the merits) and allocate the balance of the limited
aggregate amount among the other members of the class. Awarding absent
class members less than the full statutory amounts is not unfair to
them since it is highly unlikely that they would have brought any
litigation in their own names. Moreover, the (b)(3) opt-out
opportunity will afford them a chance to sue for the full $1,000 if
they choose to do so.
A district court considering whether to adjust the tension between
a substantial aggregation of statutory damages and the virtues of a
class action by limiting the size of the awards (to all but the named
plaintiffs) should make its damages ruling in the context of deciding
(1988) (repealed), now codified at 29 U.S.C. § 1854(c)(1) (2000).
7
Procedurally, a judge might accomplish this by modifying the
proposed class in the certification order. Another option would be for
the judge to inform the plaintiffs, before deciding on the motion for
certification but after having received argument on the subject from
all parties, of the aggregate statutory amount above which (b)(3)
superiority concerns would arise, and to permit the plaintiffs to amend
their motion for class certification to seek reduced aggregate damages
before a certification decision is rendered.
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the class certification issue, after making at least a preliminary
decision as to the size of the class being considered for
certification. Otherwise, the in terrorem threat of a massive award
of the full statutory amounts will unfairly induce a large settlement
once a class has been certified. See In re Rhone-Poulenc Rorer Inc.,
51 F.3d 1293, 1297-98 (7th Cir. 1995) (discussing settlement pressures
imposed in class action context). It would be appropriate for a
district court to explore with the parties at an early stage not only
the traditional issue of the size of the class but also the novel issue
of an appropriate ceiling on aggregate statutory damages for class
members.
It might seem that my approach suffers from the same defect as
permitting the size of the potential recovery to deny a class action
altogether: the wrongdoer benefits because of the scope of its
wrongdoing. However, if no (b)(3) class is certified, the wrongdoer
escapes liability to all except the named plaintiffs, whereas under my
approach, the wrongdoer is obliged to provide at least some
compensation to all class members, and the anticipation of that result
should exert the deterrent effect that Congress intended. I urge a
limitation on the aggregate amount of damages either through a sensible
construction of the statute or a sensible exercise of a district
judge's Rule 23 discretion, rather than restricting district courts to
the unattractive choice of either evolving a constitutional limitation
on the aggregate recovery or else rejecting (b)(3) class certification
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entirely, thereby insulating a defendant from liability for some
appropriate amount of damages.
* * * * *
In light of these considerations, I concur in the decision to
remand the class certification issues and agree with most of Judge
Underhill's opinion.
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