Case: 19-50904 Document: 00515398715 Page: 1 Date Filed: 04/29/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 19-50904
April 29, 2020
Lyle W. Cayce
Clerk
HERIBERTO CHAVEZ;
EVANGELINA ESCARCEGA,
as the legal representative of her son Jose Escarcega; JORGE MORENO,
Plaintiffs–Appellees,
versus
PLAN BENEFIT SERVICES, INC.;
FRINGE INSURANCE BENEFITS, INCORPORATED;
FRINGE BENEFIT GROUP,
Defendants–Appellants.
Appeal from the United States District Court
for the Western District of Texas
Before SMITH, GRAVES, and HO, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
A district court must engage in a “rigorous analysis” when it certifies a
class action. In the absence of that rigor, we vacate the certification order.
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I.
Plan Benefit Services, Inc., Fringe Insurance Benefits, Inc., and Fringe
Benefit Group (collectively “FBG” or “the company”) market and administer
retirement and health benefit plans to various employers. FBG offers the
plans through two trusts, and there are many plan options, which (FBG
asserts) vary in fees and structures. Employers can sign up to provide their
employees with benefits through those offerings; or they can retain FBG
merely to keep records and supply administrative services.
The named plaintiffs are current and former employees of a company
that contracted with FBG for various services. They sued FBG under the Em-
ployee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et
seq. The thrust of their complaint is that FBG has acted as a fiduciary and
breached its duties. They charge that the company accepted excessive fees,
handpicked providers to maximize its profits, controlled disbursements from
the trusts for its own benefit, and unlawfully procured indirect compensation.
In short: They allege garden-variety fiduciary misbehavior.
The plaintiffs seek to represent a class of “all participants in and bene-
ficiaries of employee benefit plans that provide benefits through [the trusts],
. . . from July 6, 2011 until the time of trial.” The proposed group involves some
90,000 individuals and implicates many employers and plans. 1
1 The record does not reveal the exact number of employers and plans, but the com-
plaint and briefs suggest that there are at least 1,700. Both sides agree that each employer
that participates in the trusts creates its own plan arrangement. Compare Plaintiffs’ Brief
at 20 (“[E]ach employer that joins [the trusts] creates an individual employer plan[.]”), and
Amended Complaint at ¶ 53 (“Each participating employer’s health and welfare plan is an
employee welfare benefit plan within the meaning of ERISA[.]”), with FBG’s Opening Brief
at 5–6 (contending that each employer creates its own plan by selecting various options). And
the complaint alleges that, as of 2015, one trust had 1,716 participating employers and the
other had 162, resulting in a minimum estimate of over 1,700, even if one assumes overlap
between the two. FBG asserts that the number is much higher, given that the class includes
participants over several years, but it does not dispute a floor of 1,700. (The parties strongly
2
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FBG opposes certification with predictable vigor. It maintains that the
central issues—such as whether FBG was a fiduciary or charged excessive
fees—necessarily turn on the diverse features of each plan, so a class involving
so many of them is improper.
After a hearing, the court certified the class. It settled on a mandatory
Federal Rule of Civil Procedure 23(b)(1)(B) class and found that Rule 23(a)’s
prerequisites—numerosity, commonality, typicality, and adequacy—are met.
Despite the complexity of the certification issues, the sweeping scope of
the proposed class, and FBG’s numerous case-specific objections, the court’s
certification order has about five pages of substantive analysis. We accepted
this interlocutory appeal, see FED. R. CIV. P. 23(f), and vacate.
II.
A.
Given the impact of certification, district courts must analyze Rule 23
with special attention. Certification is proper only where “the trial court is
satisfied, after a rigorous analysis,” 2 that the Rule’s requirements are met. Put
another way, “a district court must detail with sufficient specificity how the
plaintiff has met the requirements of Rule 23.” Vizena v. Union Pac. R.R.,
360 F.3d 496, 503 (5th Cir. 2004) (per curiam).
“Rule 23 does not set forth a mere pleading standard.” Dukes, 564 U.S.
disagree, however, as to whether differences among the plans are material.) The district
court and the parties are free to arrive at a more precise number in future proceedings.
2 Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350–51 (2011) (emphasis added); see
also Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013) (same); Gen. Tel. Co. of the Sw. v.
Falcon, 457 U.S. 147, 161 (1982) (same); M.D. ex rel. Stukenberg v. Perry, 675 F.3d 832, 837
(5th Cir. 2012) (“It is well-established that a district court must conduct a rigorous analysis
of the Rule 23 prerequisites before certifying a class.” (brackets and quotation marks
removed)).
3
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at 350. Instead, “[a] party seeking class certification must affirmatively dem-
onstrate his compliance with the Rule—that is, he must be prepared to prove
that there are in fact sufficiently numerous parties, common questions of law
or fact,” and so on. Id.
As a result, in weighing certification, the court will often have “to probe
behind the pleadings,” Falcon, 457 U.S. at 160, because “[t]he class determin-
ation generally involves considerations that are enmeshed in the factual and
legal issues” of the case, Dukes, 564 U.S. at 351. So the court should seek to
“understand the claims, defenses, relevant facts, and applicable substantive
law in order to make a meaningful determination[.]” Flecha v. Medicredit, Inc.,
946 F.3d 762, 766 (5th Cir. 2020). “If some of the determinations . . . cannot be
made without a look at the facts, then the judge must undertake that investi-
gation.” Spano v. Boeing Co., 633 F.3d 574, 583 (7th Cir. 2011). The judge
cannot merely “review a complaint and ask whether, taking the facts as the
party seeking the class presents them, the case seems suitable for class treat-
ment.” Id. (emphasis added). Much more is needed.
Thus, to satisfy the rigor requirement, a district court must detail with
specificity its reasons for certifying. Vizena, 360 F.3d at 503. It must explain
and apply the substantive law governing the plaintiffs’ claims to the relevant
facts and defenses, articulating why the issues are fit for classwide resolution. 3
The court should respond to the defendants’ legitimate protests of individual-
ized issues that could preclude class treatment. 4 And its analysis must stay
3 See, e.g., Stukenberg, 675 F.3d at 837. We do not mean that the court should decide
the merits of the plaintiffs’ claims. That is inappropriate at the certification stage. See, e.g.,
Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 568 U.S. 455, 466 (2013) (“Rule 23 grants courts
no license to engage in free-ranging merits inquiries at the certification stage.”). Instead, we
mean that the certification issues often entail examining the substantive law that the claims
implicate. See, e.g., Dukes, 564 U.S. at 351.
4 See, e.g., Stukenberg, 675 F.3d at 842–43 (noting that “[t]he district court clearly
4
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close to the facts and law of the case, spurning reliance on generalizations
about what types of disputes may be fit for a class. 5 The court must rigorously
consider both Rule 23(a)’s prerequisites 6 and the Rule 23(b) class type. 7
This “rigorous analysis” mandate is not some pointless exercise that we
foist on this circuit’s hardworking and conscientious district judges, such as
the judge in this case. It matters. A “class action is an exception to the usual
rule that litigation is conducted by and on behalf of the individual named par-
ties only,” Behrend, 569 U.S. at 33 (quotation marks removed), and creative
uses are perilous. It is no secret that certification “can coerce a defendant into
settling on highly disadvantageous terms regardless of the merits of the suit.” 8
rejected” the defendant’s individualization argument but had not “[]sufficiently analyzed” it);
Ward v. Hellerstedt, 753 F. App’x 236, 246 (5th Cir. 2018) (per curiam) (“[W]e note that it is
incumbent on the district court to consider and discuss the facts of this case, as well as the
elements of Plaintiffs’ claims, prior to rejecting Defendant’s argument that dissimilarities
among individual claimants obviate commonality.”).
5 See, e.g., E. Tex. Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 405 (1977) (“We
are not unaware that suits alleging racial or ethnic discrimination are often by their very
nature class suits, involving classwide wrongs. Common questions of law or fact are typically
present. But careful attention to the requirements of [Rule] 23 remains nonetheless indis-
pensable.”); Gene & Gene LLC v. BioPay LLC, 541 F.3d 318, 328 (5th Cir. 2008) (“[T]here are
no invariable rules regarding the suitability of a particular case filed under this subsection
of the TCPA for class treatment; the unique facts of each case generally will determine
whether certification is proper.”); Robinson v. Tex. Auto. Dealers Ass’n, 387 F.3d 416, 420–21
(5th Cir. 2004) (“There are no hard and fast rules regarding the suitability of a particular
type of antitrust case for class action treatment. Rather, the unique facts of each case will
generally be the determining factor governing certification.” (cleaned up)).
6 See, e.g., Dukes, 564 U.S. at 350–51.
7 See Behrend, 569 U.S. at 33–34 (“[C]ertification is proper only if the trial court is
satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satis-
fied. . . . The same analytical principles govern Rule 23(b).” (quotation marks removed)); Cas-
tano v. Am. Tobacco Co., 84 F.3d 734, 742–43 (5th Cir. 1996) (holding that the district court
had not engaged in a rigorous analysis of predominance—that is, whether a Rule 23(b)(3)
class type was appropriate); Madison v. Chalmette Ref., L.L.C., 637 F.3d 551, 556–57 (5th
Cir. 2011) (same).
8CE Design Ltd. v. King Architectural Metals, Inc., 637 F.3d 721, 723 (7th Cir. 2011)
(Posner, J.); see also Castano, 84 F.3d at 746 (“[C]lass certification creates insurmountable
pressure on defendants to settle . . . . The risk of facing an all-or-nothing verdict presents too
5
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And the existence of a class fundamentally alters the rights of present and
absent members, particularly for mandatory classes such as the one here. 9 No
less than due process is implicated, so a careful look is necessary. See Unger
v. Amedisys Inc., 401 F.3d 316, 320 (5th Cir. 2005).
A rigorous analysis also ensures effective appellate review, which we are
unable to engage in here. See Stukenberg, 675 F.3d at 842. Indeed, in ad-
dressing a certification, we search only for abuse of discretion, recognizing “the
essentially factual basis of the certification inquiry and . . . the district court’s
inherent power to manage and control pending litigation.” Id. at 836. Appel-
late judges are not finders of fact, 10 and we play no role in managing a district
court’s docket. So it’s up to the district judge to find the facts.
B.
FBG complains that the court analyzed Rule 23 superficially. We agree.
1.
We begin with commonality, which requires the plaintiff to show that
“there are questions of law or fact common to the class.” FED. R. CIV. P.
23(a)(2). Under Dukes—which “heightened the standards” 11—“all of the class
member’s claims [must] depend on a common issue . . . whose resolution will
high a risk, even when the probability of an adverse judgment is low.”).
9 See Ortiz v. Fibreboard Corp., 527 U.S. 815, 846–47 (1999) (“Unlike Rule 23(b)(3)
class members, objectors to the collectivism of a mandatory subdivision (b)(1)(B) action have
no inherent right to abstain. The legal rights of absent class members . . . are resolved re-
gardless of either their consent, or, in a class with objectors, their express wish to the con-
trary.”); Ward, 753 F. App’x at 244 (“Such independent analysis is necessary to protect
unknown or unnamed potential class members[.]” (quotation marks removed)).
10See, e.g., Copeland v. Greyhound Corp., 337 F.2d 822, 825 (5th Cir. 1964) (describing
the “reluctance, shared by all appellate courts, to second-guess trial courts or other fact
finders with respect to determinations of fact”).
11 Stukenberg, 675 F.3d at 839.
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resolve an issue that is central to the validity of each one of the class member’s
claims in one stroke.” Stukenberg, 675 F.3d at 840 (cleaned up).
To satisfy the rigor requirement, the district court must explain how that
standard is met. Id. at 841. It should do so “with specific reference to the
claims, defenses, relevant facts, and applicable substantive law raised by the
class claims,” id. at 843 (quotation marks removed), and it must “address
actual or potential differences in purported class members’ individual circum-
stances and claims,” Ward, 753 F. App’x at 246.
Here, however, the court’s analysis—for this huge putative class—is
fleeting:
In this case, Plaintiffs allege prohibited self-dealing and fiduciary
breaches stemming from Defendants’ exertion of discretionary con-
trol over [the trusts]. Plaintiffs further allege Defendants’ actions
affected all plans participating in [the trusts]. Because Defen-
dants’ status as fiduciaries with discretionary control over [the
trusts] presents a common question capable of classwide resolu-
tion, Plaintiffs’ proposed class satisfies the commonality require-
ment (docket citations removed).
Our caselaw demands more than this brevity. First, the order does not
identify the common question with any specificity. 12 And, having defined the
question vaguely, the court then analyzes it conclusionally. There is no refer-
ence to ERISA. 13 Nor does the court explain why clarifying FBG’s status as a
fiduciary will in one stroke resolve an issue that is central to the claims of each
12 See id. at 842 (“[T]he formulation of these common questions of law is too general
to allow for effective appellate review.”).
13 See, e.g., id. (faulting the district court for failing to conduct any “analysis of the
elements and defenses for establishing any of the proposed class claims” in weighing com-
monality); Ward, 753 F. App’x at 246 (faulting the district court for failing to explain and
apply “the elements of Plaintiffs’ claims” in evaluating commonality); see also Madison,
637 F.3d at 557 (finding insufficient analysis of predominance because “[t]he opinion [was]
. . . silent as to the relevant state law that applie[d] . . . and what Plaintiffs must prove to
make their case”).
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one of the class members. 14 Most noticeably, the order neglects to consider
asserted differences among class members that could prevent the suit from
generating “common answers apt to drive the resolution of the litigation.” 15
As the briefs reveal, liability apparently will turn on whether FBG
(1) was a fiduciary as to each plan 16 and (2) received too much compensation.17
But FBG informs us—just as it told the district court—that differences in fees,
structure, and assignment of responsibility among the many plans negate the
possibility of a common answer to those issues. The plaintiffs reply that the
documents governing each plan are materially indistinguishable, such that the
analysis pertaining to one plan will apply to all. FBG retorts that there are
fundamental and dispositive differences among the plan documents.
Faced with those warring factual contentions, the district court needed
to resolve whether there were relevant differences among the many plans—
and, if so, to explain why they did not prevent classwide resolution of the
common issue. 18 Instead, the court offered only its unsupported assurance that
14 See, e.g., Stukenberg, 675 F.3d at 841 (criticizing the district court for not consid-
ering or explaining how the one-stroke standard was met); Ward, 753 F. App’x at 246 (same).
15 Dukes, 564 U.S. at 350 (emphasis removed) (quoting Richard A. Nagareda, Class
Certification in the Age of Aggregate Proof, 84 N.Y.U. L. REV. 97, 132 (2009)); see Stukenberg,
675 F.3d at 842–43 (noting that the district court had apparently rejected defendant’s argu-
ments about individualized issues precluding commonality without explaining why); Ward,
753 F. App’x at 246 (similarly faulting the district court for rejecting defendant’s arguments
about dissimilarities obviating commonality without engaging in a proper analysis).
16See 29 U.S.C. § 1104(a) (outlining ERISA fiduciary duties); id. § 1002(21)(A) (outlin-
ing requirements for becoming a functional fiduciary under ERISA).
17 See id. § 1106(b) (outlining impermissible transactions between a plan and a
fiduciary).
18 See Stukenberg, 675 F.3d at 843 (noting that the district court needed to explain
why it had rejected the defendant’s argument that “resolution of each of the class member’s
. . . claims require[d] individual analysis” that could have prevented the litigation from
“generat[ing] common answers”); see also In re Hydrogen Peroxide Antitrust Litig., 552 F.3d
305, 320 (3d Cir. 2008), as amended (Jan. 16, 2009) (“[B]ecause each requirement of Rule 23
must be met, a district court errs as a matter of law when it fails to resolve a genuine legal
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FBG’s fiduciary status is “capable of classwide resolution.” It is an abuse of
discretion to find commonality on such a thin survey. 19 An issue is not “capable
of classwide resolution” just because the district court, without explanation,
says it is.
2.
The district court’s analysis of the class type is similarly—and
reversibly—breezy. The court certified under Rule 23(b)(1)(B), which provides
for a mandatory class with no opting out, 20 where
prosecuting separate actions by or against individual class mem-
bers would create a risk of . . . adjudications with respect to indi-
vidual class members that, as a practical matter, would be disposi-
tive of the interests of the other members not parties to the indi-
vidual adjudications or would substantially impair or impede their
ability to protect their interests[.]
FED. R. CIV. P. 23(b)(1)(B).
The district court’s reasoning needs more facts and fewer generaliza-
tions. The court noted that the plaintiffs sought “restitution, an accounting for
profits, and an order that Defendants make good to the plans the losses stem-
ming from Defendants’ exercise of discretion and control with respect to [the
or factual dispute relevant to determining the requirements.”).
The order’s only analysis of the differences among the plans occurs (oddly enough) in
its discussion of typicality under Rule 23(a)(3). And it mentions those asserted differences
only in passing before concluding that FBG hadn’t “cogently explain[ed] why [they]
matter[ed].” Even if we could import that reasoning into the analysis of commonality—and
we cannot, because typicality is a distinct issue—it would be insufficient. The court failed to
articulate what the asserted differences were, much less say why they were immaterial by
reference to the facts, allegations, and law of ERISA.
19 See Stukenberg, 675 F.3d at 844–45 (concluding that certification order did not
rigorously analyze commonality); Ward, 753 F. App’x at 246 (same); cf. Madison, 637 F.3d
at 557 (finding abuse of discretion where district court failed to analyze predominance with
sufficient rigor).
20 See In re Katrina Canal Breaches Litig., 628 F.3d 185, 191 (5th Cir. 2010).
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trusts]” (quotation marks removed). It then quoted dictum in Ortiz, which
stated that Rule 23(b)(1)(B) would often encompass “actions charging a breach
of trust by a[] . . . fiduciary similarly affecting the members of a large class of
beneficiaries,” because such actions “requir[e] an accounting or similar proce-
dure to restore the subject of the trust.” Ortiz, 527 U.S. at 834 (quotation
marks removed). The proposed group fell within that “[c]lassic example,” the
district court opined, because the plaintiffs sought an ERISA accounting that
would make good any losses that resulted from FBG’s fiduciary breaches. So
Rule 23(b)(1)(B) applied.
Despite relying on Ortiz, the court missed its central premise. Even if a
proposed class appears, at first glance, to be an historical example of a
23(b)(1)(B) class, the court must look closely at the facts to ensure that separate
adjudications as to each class member would indeed impair nonparties’ ability
to protect their interests. 21 In other words, the Rule does not tolerate a fleeting
analysis that assumes that a given class is appropriate just because it appears
to be a classic (b)(1)(B) class. See id. at 848–61.
Applying that principle, Ortiz held that a proposed class did not qualify,
because it did not sufficiently resemble a “limited fund.” See id. In so doing,
the Court applied a “limiting construction” to Rule 23(b)(1)(B) designed “to stay
close to the historical model[s]” of such classes. Id. at 842. It spoke warily of
the “likelihood of abuse” of that subsection and counseled against its “adven-
turous application.” 22 The Court wished to avoid “potential conflict with the
21 See Ortiz, 527 U.S. at 848–61 (analyzing a proposed limited-fund class under Rule
23(b)(1)(B) to see whether its characteristics adhered to the historical limited fund).
22Id. at 842, 845; see Katrina, 628 F.3d at 192 (noting that Ortiz “counseled against
adventurous application of Rule 23(b)(1)(B)” and stressed “a limited construction” (quotation
marks removed)); Spano, 633 F.3d at 587 (“In Ortiz, the Supreme Court cautioned strongly
against overuse of (b)(1) classes.”).
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Rules Enabling Act” and “serious constitutional concerns raised by the manda-
tory class resolution of individual legal claims.” Id.
Ortiz shows that the district court’s order does not analyze the class type
with requisite rigor. The court notes that, just as in Ortiz, id. at 834, the
plaintiffs’ case relates to one of the historical models—namely, an action
against a fiduciary seeking an accounting to restore the subject of the trust (in
this case, benefits plans). But, parting ways with Ortiz, the court’s analysis
begins and ends there. It fails to examine the facts of this specific class to
ensure that it qualifies.
That failure is reversible error. 23 FBG vigorously asserts that the class
in no way resembles a typical ERISA class belonging under (b)(1)(B). Among
other things, the company contends—as it did at the district court—that
even assuming that the relief sought for one individual’s claim
would be dispositive of another individual’s claim in the same plan,
that relief would not affect, much less be dispositive of, claims
under the other . . . plans. Different plans require their own lia-
bility and damage[s] analysis, and their own respective account-
ings or other relief.
The order has no response to that fact-bound contention. It instead
assumes that the desired relief—an ERISA accounting—automatically entitles
the plaintiffs to certification via (b)(1)(B). The court’s nonspecific, categorical
reasoning contradicts Ortiz and fails to demonstrate a rigorous analysis.
It follows that we cannot do this work in the district court’s stead. The
Rule requires a case-specific inquiry into whether, “as a practical matter,” one
class member’s relief in an adjudication would impair the interests of non-
23 Cf. Cruson v. Jackson Nat’l Life Ins. Co., 954 F.3d 240, 255 (5th Cir. 2020) (“Here,
the district court provided only a cursory analysis on this key point. That is reversible
error.”).
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parties. 24 But here, the court bypasses that required analysis, offering instead
only its conclusional reassurance that the desired “relief would, as a practical
matter, dispose of the interests of the other putative class members.”
A more searching analysis is required. “[C]areful attention to the re-
quirements of [Rule] 23 remains . . . indispensable.” Rodriguez, 431 U.S.
at 405. The court must explain, in the factual context of this case, why adjudi-
cations for individual class members would prejudice nonparty members.25
Such will necessarily entail considering and responding to FBG’s contention
that the existence of many different plans prevents (b)(1)(B) from applying.
C.
The plaintiffs, maybe sensing the inadequacies, point out that the court
had plenty of evidence before it and that the hearing showed that the court was
thoughtfully considering the issues. All true. But the rigor requirement does
not turn on how much material the parties submit or on how carefully the court
seems to weigh the issues at a hearing. It instead asks whether the court’s
order sufficiently analyzes Rule 23. E.g., Stukenberg, 675 F.3d at 842–44. For
reasons described, the one here does not.
The certification order is VACATED. We express no view on whether a
class should be certified, and we place no limit on the matters the court may
consider in further proceedings.
24 FED. R. CIV. P. 23(b)(1)(B) (emphasis added); see 7AA CHARLES ALAN WRIGHT &
ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1774 (3d ed.) (“Because of the
rule’s emphasis on the practical effects of separate adjudications, the determination of wheth-
er a particular action falls within its ambit depends largely on the facts of each case.”).
25 See FED. R. CIV. P. 23(b)(1)(B); cf. Cruson, 954 F.3d at 255 (“We recognize that suits
involving form contracts often lend themselves to class treatment. But this is not always so.”
(citations removed)).
12