Forbush v. J.C. Penney Co., Inc.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 92-1131

MARY JANE FORBUSH,
Plaintiff-Appellant,

versus

J.C. PENNEY COMPANY, INC.,
PENSION PLAN, ET AL.,
Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of Texas

(June 25, 1993)

Before REYNALDO G. GARZA, HIGGINBOTHAM, and EMILIO M. GARZA,
Circuit Judges.

HIGGINBOTHAM, Circuit Judge:

I.

This is an interlocutory appeal from the district court's

refusal to certify a class. Plaintiff Mary Jane Forbush, a vested

retiree under the J.C. Penney Company Pension Plan, sued Penney on

behalf of herself and all those similarly situated. Forbush worked

at a California Penney store from 1970 until 1983, when she was

laid off at the age of 62. Under the applicable terms of the

Penney pension plan, Forbush became eligible to receive her

benefits when she reached the age of 65 in 1985. The plan in

effect at that time, however, offset the money due Forbush under

the plan by the amount she was estimated to receive from Social

Security. Since Forbush's estimated Social Security benefits
exceeded her benefits under the plan, the company determined that

she was entitled to nothing.

Forbush filed this class action suit in U.S. District Court

for the District of Maryland in 1988, claiming that the plan's

method of estimating Social Security benefits violated several

provisions of ERISA. See 29 U.S.C. § 1001 et seq. After the

Maryland district court ordered the case transferred to the

Northern District of Texas, Forbush moved for certification of the

class. In her motion Forbush sought to represent all former and

current Penney employees:

1) who have been employed by Penney at any time after
January 1, 1976;

2) who have, or may obtain, a vested right to benefits
under the pension plan; and

3) whose pension benefits have been or will be reduced
or eliminated as a result of the plan's
overestimation of their Social Security benefits.

Forbush estimated the size of the class at 10,000.

II.

Penney opposed Forbush' motion on several grounds, but relied

most heavily on the fact that the potential class was covered by

four different pension plans. From 1976 to 1982, the plan used the

"prior earnings method" in estimating a retiree's Social Security

benefits. This method assumed that an individual's earnings before

joining the company were similar to the wages she received during

her first year with Penney. As Forbush points out, this method had

an especially negative impact upon women retirees, for whom the

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assumption of full-time employment during all of the years before

coming to Penney was unrealistic.

In July 1982, Penney offered an alternative method for

estimating Social Security benefits. In addition to the prior

earnings method, retirees could request that their Social Security

benefits be determined under the "zero earnings method." This

second method relied entirely on the employee's earnings with

Penney, assuming zero earnings elsewhere, and then offset that

amount by 60%. Penney instituted yet a third method of estimating

Social Security benefits in 1984, a two-step "prorated method." It

first determined the retiree's total wages by disregarding all non-

Penney earning years, and then prorated this sum by multiplying it

by the number of years in service and then dividing by thirty.

Penney finally decided to eliminate the social security offset from

the pension plan in 1989.

Forbush sought certification of the class under Fed.R.Civ.P.

23 (b) (2).1 The district court, however, denied Forbush's motion,

1
Rule 23 sets out four prerequisites for any class action:

1) the class is so numerous that joinder is impracticable;
2) there are questions of law or fact common to the class;
3) the claims or defenses of the representative parties are
typical of the claims or defenses of the class; and 4) the
representative parties will fairly and adequately protect
the interests of the class.

Fed. R. Civ. P. 23 (a). Assuming these threshold requirements
are met, the action may be maintained as a class action if:

(b) (2) 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; or

3
holding that the "problem with the proposed class is that the

merits of each class member's claim will have to be decided on an

individual basis." Since several "issues will have to be resolved

in each individual case before members of the class would be

entitled to relief," the district court found that "the class

proposed by Plaintiffs will in no way effectuate the principal

purpose of Rule 23."

Forbush's primary contention on appeal is that the district

court improperly imported 23 (b) (3)'s "predominance" and

"manageability" requirements in denying her motion to certify the

class under 23 (b) (2). The parties initially disagree on the

proper standard of review. Penney contends that a district court's

denial of a certification motion may be reversed only where the

court has abused its "substantial discretion." Richardson v. Byrd,

709 F.2d 1016, 1019 (5th Cir.) ("complex cases cannot be run from

the tower of the appellate court"), cert. denied sub nom. Dallas

County Comrs. Court v. Richardson, 104 S.Ct. 527 (1983). Forbush

agrees that a district court's application of Rule 23 to the facts

of a particular case is entitled to great deference, but argues

that this relaxed standard of review is not appropriate where, as

here, the court has applied the wrong rule or misinterpreted the

requirements of the governing provision. Such legal errors,

Forbush contends, should be reviewed de novo. Penney does not

(3) the court finds that the questions of law or fact common
to the members of the class predominate over any questions
affecting only individual members, and that a class action
is superior to other available methods for the fair and
efficient adjudication of the controversy.

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question this higher scrutiny for legal issues, but argues that the

alleged error cited by Forbush is the product of her willful

misreading of the district court's decision. The dispute over the

standard of review thus reduces itself to a question of

interpreting of the district court's opinion.

The district court found it "unnecessary to resolve the issue

of whether certification under (b) (2) or (b) (3) is more

appropriate," for it believed that "[c]ertification under either of

these subdivisions is improper." The court then specifically

rejected Forbush's contention "that a class action is necessary

because of the common issue of whether the alleged overestimation

of social security benefits violates [ERISA]." As the district

court saw it, "[t]he problem with the proposed class is that the

merits of each class member's claim will have to be decided on an

individual basis. The propriety of injunctive relief sought by

Plaintiffs will turn upon a consideration of the individual

circumstances of each class member." The court concluded by

identifying five separate issues that would "have to be resolved in

each individual case before members of the class [would] be

entitled to relief."2

2
These five issues, according to the district court, were:

(1) whether social security benefits were actually
overestimated, which necessarily involves calculating the
pension benefits for every J.C. Penney employee that has
retired since January 1, 1976;

(2) the extent of overestimation;

(3) the amount of foregone past pension benefits each class
member is entitled to;

5
 The court then discussed Dameron v. Sinai Hospital of

Baltimore, 595 F.Supp. 1404 (D.Md. 1984), aff'd in part and rev'd

in part, 815 F.2d 975 (4th Cir. 1987), a case in which a similar

challenge to methods of calculating social security benefits was

certified as a class action. The court found that the

"predominance of individual issues in the present case

distinguishes it from Dameron." While Dameron involved a class of

fifty plaintiffs, the court noted that the class here was 10,000.

Moreover, while "Dameron involved only one plan, Forbush's claims

involve the analysis of at least four different J.C. Penney pension

plans." These two factors "increased the issues that will have to

be resolved on an individual basis." Given the number of potential

plaintiffs and differing claims, the district court concluded that

"certification of the proposed class will not promote judicial

economy, nor will class injunctive relief be appropriate in light

of the prevailing individual issues."

IV.

Forbush reads the district court's opinion to hold that

certification of the class "was inappropriate because individual

relief issues predominated over common ones, resulting in increased

litigation costs and making the case difficult to manage." If so

read, the decision indisputably rested on two considerations

relevant under 23 (b) (3), not 23 (b) (2). First, the question of

(4) whether family members of a deceased former employee
are entitled to foregone pension benefits; and

(5) whether a particular person's claim is barred by the
statute of limitations.

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whether common issues "predominate" over individual ones has no

place in determining whether a class should be certified under 23

(b) (2). See, e.g., Adamson v. Bowen, 855 F.2d 668, 676 (10th Cir.

1988) (Plaintiff "sought relief under Rule 23 (b) (2), which

contains no requirement of 'predominance.' The district court

placed upon the class a burden that the rule does not authorize").

Second, questions of manageability and judicial economy are also

irrelevant to 23 (b) (2) class actions. See, e.g., Johnson v.

American Credit Co., 581 F.2d 526, 531 n.9 (5th Cir. 1978) ("The

defendants argue that the class is unmanageable because it is too

large and too diversified. This argument would be relevant only if

[plaintiff] had sought class certification under Rule 23 (b) (3)").

It would follow that the district court applied the wrong legal

standards and the order denying class certification could not

stand.

Penney agrees that Rule 23 (b) (2) contains no requirements of

"predominance" and "manageability." But it contends that the

district court's denial of Forbush's certification motion does not

rest there. Rather, the court's discussion should be read, Penney

asserts, as a determination that Forbush has not satisfied the

threshold requirements set out in 23 (a), assertedly six in number:

(1) that plaintiff define the class with some specificity; (2) that

plaintiff be a member of the class; (3) that the class be so

numerous that joinder is impracticable; (4) that there are issues

of law or fact common to the class; (5) that the claims of the

representative plaintiff be typical of the class; (6) that the

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named plaintiff adequately represent the interests of the class.

Penney contends that Forbush has not satisfied the requirements of

(1) specificity, (4) commonality, (5) typicality, and (6) adequacy

of representation.3

Penney concedes that the first requirement of specificity is

not contained within Rule 23 (a)'s express provisions, but asserts

that it has been "implied" by courts. A requirement that the class

be defined with some specificity is sensible in the abstract, but

the application of this "rule" in the manner proposed by Penney is

not. Forbush defines the class as including all current and former

Penney employees "whose pension benefits have been, or will be,

reduced or eliminated as a result of the overestimation of their

Social Security benefits." Penney asserts that this definition is

hopelessly "circular," as the court must first determine whether an

employee's pension benefits were improperly reduced before that

person may be said to be a member of the class. This argument is

meritless and, if accepted, would preclude certification of just

about any class of persons alleging injury from a particular

3
At the outset, we note that the district court rejected the
primary contention advanced by Penney below and renewed here.
Class actions are appropriate under Rule 23 (b) (2) only where
plaintiffs seek "final injunctive relief or corresponding
declaratory relief with respect to the class as a whole." Penney
has repeatedly claimed that 23 (b) (2) is not available to
Forbush because she seeks to recover money damages, namely the
benefits she was denied under the pension plan. The able
district court properly declined to rest its decision on this
basis. "Class certification under Rule 23 (b) (2) does not
automatically preclude an award of monetary damages when the
primary relief sought is injunctive or declaratory." Parker v.
Local Union No. 1466, 642 F.2d 104, 107 (5th Cir. 1981); Johnson
v. General Motors Corp., 598 F.2d 432, 437 (5th Cir. 1979).

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action. These persons are linked by this common complaint, and the

possibility that some may fail to prevail on their individual

claims will not defeat class membership.

Penney's "specificity" argument is best seen as an assertion

of its "commonality" claim in a different guise. Penney contends

that certification is improper because there is no question of law

or fact common to the members of the proposed class. The various

employees included in the class, in addition to their different

terms of service, are covered by four different pension plans and

consequently four different means of allegedly overestimating

Social Security benefits. Because this case presents not one

question, but several, Penney claims that there is no commonality

among the class members. Any attempt by Forbush to depict the case

as raising a single challenge must be regarded, Penney concludes,

as illegitimate "bootstrapping."

The common issue alleged by Forbush is whether Penney's

alleged overestimation of social security benefits violates ERISA's

nonforfeiture provisions. See, e.g., 29 U.S.C. §§ 1054, 1202; see

also Dameron v. Sinai Hospital of Baltimore, Inc., 815 F.2d 975,

978-81 (4th Cir. 1987). Framed in this manner, Forbush has met the

commonality requirement, despite the fact that four different

pension plans are involved. See, e.g., Johnson, 581 F.2d at 532

(plaintiffs attack six different methods of pre-judgment

attachment). The interests and claims of the various plaintiffs

need not be identical. Rather, the commonality test is met when

there is "at least one issue whose resolution will affect all or a

9
significant number of the putative class members." Stewart v.

Winter, 669 F.2d 328, 335 (5th Cir. 1982). For this reason, "[t]he

threshold of 'commonality' is not high." Jenkins v. Raymark

Industries, 782 F.2d 468, 472 (5th Cir. 1986). Although the

subsequent determinations of individual awards are likely to be far

less mechanical than Forbush suggests, the necessity for even

somewhat complex individual calculations does not supply a basis

for concluding that Forbush has not met the commonality

requirement.

Penney finally argues that Forbush's claims are not "typical"

of the class and that she will not, for this reason, adequately

represent the interests of the class. The test for typicality,

like commonality, is not demanding, Shipes v. Trinity Industries,

987 F.2d 311, 316 (5th Cir. 1993), and Penny's argument here fails

for similar reasons. It is true that much of the putative class is

covered by plans other than the one applicable to Forbush, but

Forbush has framed her challenge in terms of Penney's general

practice of overestimating social security benefits. Her claim is

therefore typical and thus provides no basis for suspecting that

she will not adequately represent the interests of the class.

The order denying class certification is reversed and this

case is remanded with instructions to certify the class as

requested by Forbush. We are aware of the sometime abuse of the

class device; but that unfortunate reality makes all the more

important that we not reflexively reject its use in appropriate

cases. The concerns expressed by Judge Emilio M. Garza, as well as

10
the district court, regarding the necessity of individualized

determinations are important but not, we believe, dispositive, at

least at this stage of the litigation. District courts retain

substantial discretion in managing their cases and, should the

conditions apprehended by Judge Garza materialize, the district

judge may of course take measures, such as redefining the class and

creating sub-classes, to resolve this dispute with fairness and

efficiency. Concerns that the course of the lawsuit may require

modifications to the class structure, however, should not serve to

defeat this device at the outset.

REVERSED and REMANDED.

EMILIO M. GARZA, Circuit Judge, dissenting:

My main disagreement with the majority lies in their

acceptance))for the purpose of Rule 23(b)(2)))of the common issue

alleged by Forbush which, in my opinion, sweeps too broadly.4

As "Professors Wright and Miller state[,] a rule 23(b)(2)

class action is appropriate when `the party opposing the class

. . . has established a regulatory scheme common to all class

members . . . . What is necessary is that the challenged conduct

or lack of conduct be premised on a ground that is applicable to

the entire class.'" Johnson v. American Credit Co. of Georgia, 581

F.2d 526, 532 (5th Cir. 1978) (alteration in original) (quoting 7A

Charles A. Wright & Arthur R. Miller, FEDERAL PRACTICE AND PROCEDURE §

4
"The common issue alleged by Forbush is whether Penney's alleged
overestimation of social security benefits violates ERISA's nonforfeiture
provisions." Maj. op. at 9.

11
1775, at 19-20, 21 (1972)). Clearly, the district court was

correct in distinguishing Dameron on the basis that "`Dameron

involves only one plan, [while] Forbush's claims involve the

analysis of at least four different J.C. Penney pension plans.'"

Maj. op. at 6 (quoting Amended Order Denying Plaintiffs' Motion for

Certification of a Class, Staying Case, and Certification for

Interlocutory Appeal); see Dameron v. Sinai Hosp. of Baltimore,

Inc., 815 F.2d 975 (4th Cir. 1987) ("Sinai employs a method of

calculating an employee's primary social security benefit which is

not mentioned in the plan and which is unreasonable." (emphasis

added)).

Rule 23(b)(2) simply does not allow for such a broadly defined

class. See Johnson, 581 F.2d at 532 ("In contrast, rule 23(b)(2)

will not allow an action for this broadly defined class premised on

her third argument))that a prior hearing is required because the

six situations in which attachment is allowed are not

`extraordinary situations' under Fuentes. This argument obviously

raises six discrete issues not common to the members of the broadly

defined class." (emphasis added)).5

For these reasons, and for the reasons stated by the district

court,6 I respectfully dissent. See Richardson v. Byrd, 709 F.2d

5
The Johnson court went on to remark that, under Rule 23(c)(4)(B)
which allows for subclasses, "Johnson may represent only a subclass consisting
of all persons who, like her, have had or will have property attached prior to
judgment because they allegedly were removing the property from the state."
Id.
6

Certification of the proposed class will not promote
judicial economy, nor will class injunctive relief be appropriate
in light of the prevailing individual issues. Resolution of the
issue of whether overestimation of social security benefits for
purposes of calculating pension benefits violates ERISA, does not,
1016, 1019 (5th Cir.) ("Complex cases cannot be run from the tower

of the appellate court"), cert. denied, ___ U.S. ___, 104 S. Ct.

527, ___ L. Ed. ___ (1983).

by itself, call for certification of a class action. In this
case, class certification will not reduce litigation expenses in
any appreciable quantity, of any persons seeking to recover past
pension benefits or ensure proper calculation of future benefits.
Each plaintiff will have to prove entitlement to relief on an
individual basis. Each claim will be based on facts and
circumstances unique to the party involved.
Petitioner's Record Excerpts, Tab 4, at 6-7.

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