United States Court of Appeals,
Eleventh Circuit.
Nos. 95-8046, 95-8047 and 95-8048.
Lamar ANDREWS, Individually and as representatives of a class of
all other persons similarly situated; Jerry Harper, Individually
and as class representatives of a class of all other persons
similarly situated; Josephine Meadows, Individually and as class
representatives of a class of all other persons similarly situated;
J.D. Powell, Individually and as class representatives of a class
of all other persons similarly situated, Plaintiffs-Appellees,
v.
AMERICAN TELEPHONE & TELEGRAPH COMPANY, individually and as
representatives of a class of all other entities similarly
situated, Defendant, Cross-Claimant-Appellant,
Bellsouth Corporation, Individually and as representatives of a
class of all other entities similarly situated; Bellsouth
Communications Incorporated, Individually and as representatives of
a class of all other entities similarly situated; Bellsouth
Communications Systems, Incorporated, Individually and as
representatives of a class of all other entities similarly
situated; Southern Bell Telephone and Telegraph Company,
Individually and as representatives of a class of all other
entities similarly situated; Financial Collection Agencies,
Individually and as representatives of a class of all other
entities similarly situated, Defendants,
U.S. Sprint Communications Company Limited Partnership,
Individually and as representatives of a class of all other
entities similarly situated, MCI Telecommunications Corporation,
Individually and as representatives of a class of all other
entities similarly situated; Mical Communications, Individually
and as representatives of a class of all other entities similarly
situated; Sweepstakes, Individually and as representatives of a
class of all other entities similarly situated; Prize 395BE,
Individually and as representatives of a class of all other
entities similarly situated; Reward Line, Individually and as
representatives of a class of all other entities similarly
situated; Value House, Individually and as representatives of a
class of all other entities similarly situated; Sweeps 900,
Individually and as representatives of a class of all other
entities similarly situated; Instant 398, Individually and as
representatives of a class of all other entities similarly
situated; Gift Giveaway, Individually and as representatives of a
class of all other entities similarly situated; Fast Cash 398,
Individually and as representatives of a class of all other
entities similarly situated; Unclaimed Funds, Individually and as
representatives of a class of all other entities similarly
situated; Service 900, Individually and as representatives of a
class of all other entities similarly situated; Control A,
Individually and as representatives of a class of all other
entities similarly situated, Defendants,
West Interactive Corporation, Defendant, Cross-Defendant.
Lamar ANDREWS, Individually and as representatives of a class of
all other persons similarly situated; Jerry Harper, Individually
and as class representatives of a class of all other persons
similarly situated; Josephine Meadows, Individually and as class
representatives of a class of all other persons similarly situated;
J.D. Powell, Individually and as class representatives of a class
of all other persons similarly situated, Plaintiffs-Appellees,
v.
AMERICAN TELEPHONE & TELEGRAPH COMPANY, Individually and as
representatives of a class of all other entities similarly
situated, Defendant, Cross-Claimant,
Bellsouth Corporation, Individually and as representatives of a
class of all other entities similarly situated; Bellsouth
Communications Incorporated, Individually and as representatives of
a class of all other entities similarly situated; Bellsouth
Communications Systems, Incorporated, Individually and as
representatives of a class of all other entities similarly
situated; Southern Bell Telephone and Telegraph Company,
Individually and as representatives of a class of all other
entities similarly situated; Financial Collection Agencies,
Individually and as representatives of a class of all other
entities similarly situated, Defendants,
U.S. Sprint Communications Company Limited Partnership,
Individually and as representatives of a class of all other
entities similarly situated, Defendant-Appellant.
MCI Telecommunications Corporation, Individually and as
representatives of a class of all other entities similarly
situated; Mical Communications, Individually and as
representatives of a class of all other entities similarly
situated; Sweepstakes, Individually and as representatives of a
class of all other entities similarly situated; Prize 395BE,
Individually and as representatives of a class of all other
entities similarly situated; Reward Line, Individually and as
representatives of a class of all other entities similarly
situated; Value House, Individually and as representatives of a
class of all other entities similarly situated; Sweeps 900,
Individually and as representatives of a class of all other
entities similarly situated; Instant 398, Individually and as
representatives of a class of all other entities similarly
situated; Gift Giveaway, Individually and as representatives of a
class of all other entities similarly situated; Fast Cash 398,
Individually and as representatives of a class of all other
entities similarly situated; Unclaimed Funds, Individually and as
representatives of a class of all other entities similarly
situated; Service 900, Individually and as representatives of a
class of all other entities similarly situated; Control A,
Individually and as representatives of a class of all other
entities similarly situated, Defendants,
West Interactive Corporation, Individually and as representatives
of a class of all other entities similarly situated, Defendant,
Cross-Defendant.
Lamar ANDREWS, Individually and as representatives of a class of
all other persons similarly situated; Jerry Harper, Individually
and as class representatives of a class of all other persons
similarly situated; Josephine Meadows, Individually and as class
representatives of a class of all other persons similarly situated;
J.D. Powell, Individually and as class representatives of a class
of all other persons similarly situated, Plaintiffs-Appellees,
v.
AMERICAN TELEPHONE & TELEGRAPH COMPANY, Individually and as
representatives of a class of all other entities similarly
situated, Defendant, Cross-Claimant,
Bellsouth Corporation, Individually and as representatives of a
class of all other entities similarly situated; Bellsouth
Communications Incorporated, Individually and as representatives of
a class of all other entities similarly situated; Bellsouth
Communications Systems, Incorporated, Individually and as
representatives of a class of all other entities similarly
situated; Southern Bell Telephone and Telegraph Company,
Individually and as representatives of a class of all other
entities similarly situated; Financial Collection Agencies,
Individually and as representatives of a class of all other
entities similarly situated, Defendants,
U.S. Sprint Communications Company Limited Partnership,
Individually and as representatives of a class of all other
entities similarly situated; MCI Telecommunications Corporation,
Individually and as representatives of a class of all other
entities similarly situated; Mical Communications, Individually
and as representatives of a class of all other entities similarly
situated; Sweepstakes, Individually and as representatives of a
class of all other entities similarly situated; Prize 395BE,
Individually and as representatives of a class of all other
entities similarly situated; Reward Line, Individually and as
representatives of a class of all other entities similarly
situated; Value House, Individually and as representatives of a
class of all other entities similarly situated; Sweeps 900,
Individually and as representatives of a class of all other
entities similarly situated; Instant 398, Individually and as
representatives of a class of all other entities similarly
situated; Gift Giveaway, Individually and as representatives of a
class of all other entities similarly situated; Fast Cash 398,
Individually and as representatives of a class of all other
entities similarly situated; Unclaimed Funds, Individually and as
representatives of a class of all other entities similarly
situated; Service 900, Individually and as representatives of a
class of all other entities similarly situated; Control A,
Individually and as representatives of a class of all other
entities similarly situated, Defendants,
West Interactive Corporation, Individually and as representatives
of a class of all other entities similarly situated, Defendant,
Cross-Defendant-Appellant.
Sept. 19, 1996.
Appeals from the United States District Court for the Southern
District of Georgia. (Nos. 1:91-175 and 92-134-CV), Dudley H.
Bowen, Jr., Judge.
Before COX and BARKETT, Circuit Judges, and PROPST*, Senior
District Judge.
COX, Circuit Judge.
American Telephone & Telegraph Corporation (AT & T), Sprint
Corporation (Sprint), and West-Interactive Corporation (West-
Interactive) separately appeal the district court's certification
under Fed.R.Civ.P. 23(b)(3) of classes of plaintiffs, in two
related cases, alleging claims relating to hundreds of "900-number"
telemarketing programs. We treat these separate appeals in the
same opinion because the appellants raise similar issues and appeal
the same class certification order. Because we conclude that the
district court erred in determining that the proposed class actions
would be manageable under Rule 23(b)(3), we reverse the court's
order certifying the classes and remand for further proceedings.
I. FACTS AND PROCEDURAL HISTORY
Pay-per-call, or "900-number," telephone service was developed
in the early 1980s. It was first used for telephone polling and
*
Honorable Robert B. Propst, Senior U.S. District Judge for
the Northern District of Alabama, sitting by designation.
other interactive programs designed to disseminate a wide variety
of information to customers, who were usually billed for the calls
in their monthly phone bills. After its inception, the 900-number
industry rapidly expanded to encompass varied news, sports,
weather, and entertainment information programs, as well as
promotional and giveaway contests. While the specifics of
different 900-number programs vary greatly, their basic operation
is the same: callers are enticed by television commercials, direct
mail solicitation, or other advertising materials to call a 900
number, for which the callers are charged either a flat fee per
call or a per-minute rate.
Appellants AT & T and Sprint are major long distance carriers
that provided phone service to various "sponsors" of 900-number
promotions and, after deregulation of the industry in 1986, offered
billing and collection services to 900-number sponsors. The
sponsors, some of which hired independent "service bureaus" to
operate the 900-number enterprises, received a share of the fees
collected by the long distance carriers from customers who called
the 900-numbers. Appellant West-Interactive is a large service
bureau based in Omaha, Nebraska, allegedly involved in the
creation, promotion, and operation of various games of chance and
"sweepstakes" entailing the public's use of 900 numbers.1 This
1
West-Interactive is a party only in the Andrews case. In
addition to the three appellants, the Andrews plaintiffs sued MCI
Telecommunications Corp. (a major long distance carrier),
BellSouth Communications, Inc. (a regional telephone company),
and several other entities that acted as service bureaus or
sponsors. The Harper plaintiffs also named MCI and Southern
Bell, the predecessor of BellSouth, as defendants. MCI and
BellSouth entered into comprehensive settlements with the classes
that were approved by the district court in June 1995. The other
appeal focuses on two groups of 900-number programs, involving
sweepstakes promotions and credit card offers.
A. The Andrews litigation
Lamar Andrews filed Andrews v. AT & T, No. CV 191-175 (S.D.
Ga. filed Sept. 12, 1991), individually and on behalf of "a class
of all other persons similarly situated," alleging that AT & T,
Sprint, West-Interactive, and others knowingly participated in an
"enterprise operated in interstate commerce ... by which [people
dialing applicable 900-numbers] ... place a bet or wager in the
hope of winning a cash prize or some other award of great value."
(R. 1-2 at 10 (First Am.Compl. at ¶ 30).) Andrews contends that
900-number charges incurred by callers participating in programs
involving games of chance, sweepstakes, or information on unclaimed
funds equate to "bets" placed in hope of winning some jackpot or
prize. Andrews's complaint alleges that this gambling activity is
"illegal under the laws of all of the fifty states," (id. at 18 (¶
61)), and constitutes racketeering activity in violation of the
federal RICO statute, 18 U.S.C. §§ 1961 to 1968 (1994), (id. at 19
(¶ 63)), the Communications Act of 1934, 47 U.S.C. §§ 201 to 229
(1994), (id. at 26 (¶ 89)), and the "federal common law" of
communications law, (id. at 24 (¶ 82)).
Andrews's complaint further alleges that the defendants
committed mail and wire fraud, in violation of 18 U.S.C. §§ 1341 &
1343 (1994), in furtherance of their RICO enterprise. It asserts
that service bureaus like West Interactive committed mail fraud by
defendants named in Andrews appear to be defunct and are not
involved in this appeal.
promoting illegal games of chance with postcards mailed to solicit
"the placement of illegal wagers." ( Id. at 19-20 (¶ 65).) The
complaint alleges that AT & T and Sprint had "actual or
constructive knowledge that they [were] in the business of
collecting gambling wagers and debts for gambling businesses," (id.
at 9 (¶ 26)), by using both mailed collection notices and telephone
contacts. In addition to the allegations concerning a national
gambling enterprise, Andrews alleges that the defendants have
violated Georgia statutes that prohibit the operation of a gambling
business within that state.
After discovery was completed with respect both to the merits
and to class issues, the district court conducted a class
certification hearing, beginning on May 23, 1994.2 Andrews, along
with the other named plaintiffs in Harper, testified at the
hearing. Andrews stated that he could not identify any particular
900-number call that he had placed, and he failed to show that he
actually paid 900-number charges that appeared on his phone bill,
although his phone service had been disconnected for failure to pay
his bills in full. (R. 39-272 at 241-44.) With regard to the
promotional postcards he had received in the mail, Andrews admitted
that he could not point to any fraudulent statements on them on
which he had relied to place 900-number calls. (Id. at 261.)
The defendants challenged Andrews's standing to bring suit, as
well as his ability to represent the interests of unnamed class
members. They also argued that class certification was neither
2
Although the Andrews and Harper actions have never been
formally consolidated, the court conducted a single certification
hearing for both cases.
feasible nor desirable, due to the number of possible claimants,
the predominance of individual issues, and the unmanageability of
the litigation.
The district court stated that it was "not at all impressed
with the standing of ... Andrews as a representative" of unnamed
class members. (R. 39-272 at 560.) The court recommended that the
plaintiffs consider "augmentation of the class representatives" and
recessed the hearing. (R. 39-272 at 560-61.) When the court
resumed the certification hearing in September 1994, the plaintiffs
moved to amend their complaints to add several new class
representatives to both the Andrews and Harper groups of
representatives.
The district court granted the motions to amend in November
1994, when it concluded that "all Rule 23 class action requirements
3
are met in this case." (R. 27-336 at 22; R. 38-210 at 22.) The
3
Rule 23 provides, in relevant part:
(a) Prerequisites to a Class Action. One or more
members of a class may sue or be sued as representative
parties on behalf of all only if (1) the class is so
numerous that joinder of all members 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.
(b) Class Actions Maintainable. An action may be
maintained as a class action if the prerequisites of
subdivision (a) are satisfied, and in addition:
....
(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
court rejected the defendants' challenge to Andrews's standing,
concluding that, at the least, Andrews had allegedly been the
target of efforts to collect an illegal gambling debt. The court
also concluded that, with the addition of new named plaintiffs, the
interests of the class would be adequately represented, as required
by Rule 23(a).
The court rejected AT & T, Sprint and West-Interactive's
arguments that individual issues predominate over common questions
of law or fact and that class treatment of the plaintiffs' claims
is inferior to other modes of litigation in resolving their claims.
Applying the language of Rule 23(b)(3), the court stated that it
was "satisfied that common issues predominate, that individual
issues can be adequately managed, and that class treatment is a
superior method of adjudication (if not the only feasible method of
adjudication, given the small size of each member's claims)." (R.
27-336 at 30-31; R. 38-210 at 30-31.) As to manageability of the
huge number of potential claims involved in these cases, the court
stated that "management problems and millions of claims are
obstacles which can be overestimated by defense lawyers....
Counsel ... need have no fear for the management of this case. The
Southern District of Georgia can and will assemble the resources
controversy. The matters pertinent to the findings
include: (A) the interest of members of the class in
individually controlling the prosecution or defense of
separate actions; (B) the extent and nature of any
litigation concerning the controversy already commenced
by or against members of the class; (C) the
desirability or undesirability of concentrating the
litigation of the claims in the particular forum; (D)
the difficulties likely to be encountered in the
management of a class action.
that it requires." (R. 27-336 at 22; R. 38-210 at 22.)
The court certified a master class and a Georgia subclass.
The master class includes:
All persons who paid for one or more 900-number telephone
calls billed and collected by AT & T or Sprint, which calls
were made in connection with programs offering sweepstakes,
games of chance, awards, cash or other prizes, gifts, or
information on unclaimed funds.
(R. 27-336 at 31.) The Georgia subclass was defined to include
those members of the master class who paid for 900-number calls
within Georgia. (Id.)
B. The Harper litigation
In Harper v. AT & T, No. CV 192-134 (S.D.Ga. filed June 24,
1992), Andrews and plaintiffs Jerry Harper, Josephine Meadows, and
J.D. Powell sued AT & T, Sprint, Southern Bell, and MCI on behalf
of a Rule 23(b)(3) class of individuals solicited by "organizations
offering credit cards, which, in part, provide for the making of
calls by using a 900 number," who actually made 900-number calls
and received bills for the charges. (R. 28-1 at 3 (Compl. at ¶
8).)4 The Harper complaint alleges that these 900-number programs
violate the federal RICO statute as well as the Georgia RICO
statute, Ga.Code Ann. §§ 16-14-1 to 16-14-15 (Michie 1992 &
Supp.1995). The complaint alleges that promotional postcards and
other solicitation materials used by the organizations contained
fraudulent misrepresentations as to the availability of credit and
the need to call a 900 number for information about how to obtain
a credit card. The plaintiffs contend that the defendants have
4
The plaintiffs also propose to represent a subclass of
Georgia residents who have allegedly been injured by the
defendants' 900-number promotions within that state.
thus engaged in a pattern of racketeering activity by engaging in
mail and wire fraud, both by approving and mailing misleading
promotional and solicitation materials and by collecting the
revenues produced by caller participation. (Id. at 21-22 (¶ 67).)
Harper proceeded in a similar fashion to the Andrews
litigation. During the certification hearing, the named Harper
plaintiffs testified that they, like Lamar Andrews, could not
identify any deceptive representation on which they relied in
making 900-number calls. (See R. 39-272 at 354 (testimony of Jerry
Harper); id. at 328-29 (testimony of Josephine Meadows).) The
defendants attacked the named plaintiffs and the proposed Harper
class, using the same arguments asserted in opposition to the
Andrews class. As in Andrews, the court rejected the defendants'
arguments concerning standing, and it was not persuaded by their
arguments against class certification. The court defined a master
class and a Georgia subclass to include
persons who paid for one or more 900-number telephone calls
billed and collected by AT & T or Sprint, which calls were
made in connection with programs offering credit cards,
financial information services, catalog cards, or information
on obtaining credit cards or catalog cards.
(R. 38-210 at 31-32.)
After the court concluded that the Andrews and Harper classes
could proceed under Rule 23(b)(3), it sua sponte certified for
interlocutory appeal the issue of whether class certification was
proper. See 28 U.S.C. § 1292(b) (1994). AT & T, Sprint, and West-
Interactive filed petitions for permission to appeal the class
certifications, which we granted.
II. ISSUES ON APPEAL
AT & T, Sprint, and West-Interactive assert that the district
court committed multiple errors in certifying the proposed Andrews
and Harper classes. Preliminarily, the appellants challenge the
court's approval of the class representatives because of problems
with standing, adequacy of representation, and typicality of the
named plaintiffs' claims (Rule 23(a) issues). Second, the
appellants argue that individual issues predominate in these cases,
causing manageability problems that render class treatment an
inferior method of resolving this litigation (Rule 23(b)(3)
issues). Finally, even if Andrews and Harper can properly proceed
as class actions, the appellants challenge the district court's
conclusion that individual notice to unnamed class members is not
required under the circumstances of this case (Rule 23(c)(2)
issues). Because our resolution of the first two sets of issues is
dispositive, we do not address the third.
III. STANDARDS OF REVIEW
Whether the named plaintiffs have standing to assert their
claims against AT & T, Sprint, and West-Interactive is a threshold
legal issue subject to de novo review. See Griffin v. Dugger, 823
F.2d 1476, 1482 (11th Cir.1987) ("Only after the court determines
the issues for which the named plaintiffs have standing should it
address the question whether [they] have representative capacity,
as defined by Rule 23(a)...."), cert. denied, 486 U.S. 1005, 108
S.Ct. 1729, 100 L.Ed.2d 193 (1988).
We review the district court's grant of class certification
for an abuse of discretion. Shroder v. Suburban Coastal Corp., 729
F.2d 1371, 1374 (11th Cir.1984). Assuming that the district court
properly exercised its discretion within the parameters of the
criteria of Rule 23, the court's determination should stand. Id.
(quoting Boggs v. Alto Trailer Sales, Inc., 511 F.2d 114 (5th
Cir.1975)). Determining whether a class action is manageable, and
thereby a superior method of fair and efficient adjudication, is
committed to the discretion of the district court "because that
court "generally has a greater familiarity and expertise' with the
"practical ... and primarily ... factual' problems of administering
a lawsuit "than does a court of appeals.' " Central Wesleyan
College v. W.R. Grace & Co., 6 F.3d 177, 185 (4th Cir.1993)
(quoting Windham v. American Brands, Inc., 565 F.2d 59, 65 (4th
Cir.1977) (en banc), cert. denied, 435 U.S. 968, 98 S.Ct. 1605, 56
L.Ed.2d 58 (1978)).
IV. DISCUSSION
A. Standing and the Rule 23(a) issues
AT & T, Sprint, and West-Interactive contend that the
representative plaintiffs, particularly Lamar Andrews, have no
standing to assert claims against them, either individually or as
class representatives. They contend that Andrews and the other
named plaintiffs failed to show that they actually made calls
handled by each of the appellants or paid 900-number charges, so
that they have suffered no injury sufficient to create a "case or
controversy" under Article III.5
5
The appellants further argue that, because of this
shortcoming, these class actions were in effect stillborn,
depriving the district court of any power to permit the
plaintiffs to amend their complaint to add new representative
plaintiffs. This argument is meritless and does not warrant
further discussion. See 11th Cir. Rule 36-1.
The named plaintiffs contend that the district court properly
concluded that they have standing, and we agree. At a minimum, the
plaintiffs were allegedly induced by misleading solicitations to
make 900-number calls, and they were the targets of appellants'
attempts to collect what they allege to be illegal debts.
Andrews's phone service was disconnected in part for his failure to
pay 900-number charges, and the record suggests that the named
plaintiffs paid at least some of the 900-number charges on their
phone bills. This evidence supports the district court's
conclusion that Andrews and the other named plaintiffs have
standing to assert their claims.
The appellants also challenge the district court's conclusion
that the class representatives' claims are typical and that the
class representatives would adequately represent the interests of
the classes, as required by Rule 23(a). The appellants contend
that because the named representatives dialed different 900-number
programs, and the programs actually dialed amount to only a
minuscule portion of the total number of programs encompassed by
these class actions, none of the named plaintiffs' claims can be
considered typical of those of unnamed class members. The
appellants also contend that the class representatives will be too
preoccupied with the individual aspects of their own claims to
prosecute adequately those of the classes in general.
The class representatives need not have participated in a wide
variety of 900-number programs to have suffered harm typical of the
harm suffered by the class members in general. See In re American
Medical Systems, Inc., 75 F.3d 1069, 1082 (6th Cir.1996)
("Typicality" exists when "a plaintiff's injury arises from or is
directly related to a wrong to a class, and that wrong includes the
wrong to the plaintiff.") (internal quotations and citation
omitted); Cox v. American Cast Iron Pipe Co., 784 F.2d 1546, 1557
(11th Cir.) ("The claims actually litigated in the suit must simply
be those fairly represented by the named plaintiffs."), cert.
denied, 479 U.S. 883, 107 S.Ct. 274, 93 L.Ed.2d 250 (1986). The
named plaintiffs can also consistently pursue and protect the
classes' claims while litigating individual issues that may arise
in connection with their own claims. See American Medical Systems,
75 F.3d at 1083 ("Adequacy of representation" means that the class
representative has common interests with unnamed class members and
will vigorously prosecute the interests of the class through
qualified counsel.) (citations omitted); see also General Tel.
Co. of Southwest v. Falcon, 457 U.S. 147, 157 n. 13, 102 S.Ct.
2364, 2370 n. 13, 72 L.Ed.2d 740 (1982) (Commonality and typicality
under Rule 23(a) serve to ensure that named plaintiffs' claims and
class claims are "so interrelated that the interests of the class
members will be fairly and adequately protected.... Those
requirements ... tend to merge with the adequacy-of-representation
requirement, although the latter ... also raises concerns about the
competency of class counsel and conflicts of interest."). We find
no error in the district court's application of Rule 23(a).
B. The application of Rule 23(b)(3)
AT & T, Sprint, and West-Interactive argue that the district
court abused its discretion by certifying the Andrews and Harper
classes under Rule 23(b)(3). The appellants contend that common
questions of law or fact do not predominate over individualized
issues, and that insurmountable difficulties in managing these
actions make class treatment inferior to other available methods,
specifically case-by-case litigation of individual claims, for the
"fair and efficient adjudication of the controversy." Fed.R.Civ.P.
23(b)(3). To support these contentions, they cite the existence of
millions of class members, hundreds of widely differing 900-number
programs, and the necessity of trying elements of the classes'
claims on an individual basis as well as under divergent state
laws. They assert that these problems will inevitably cause these
class actions to deteriorate into a morass of individual
mini-trials that will overwhelm the resources of the district
court.
The class representatives counter that the district court
acted within its discretion to develop a manageable way to try
millions of small claims that otherwise may never be adjudicated.
They argue that, although the hundreds of 900-number programs may
vary in exact content, the predominant issues—the legality of the
basic methods of solicitation and operation of the programs, as
well as the basic wrong suffered by class members—can be assessed
on a class-wide basis in both Andrews and Harper.
Issues of class action manageability encompass the "whole
range of practical problems that may render the class action format
inappropriate for a particular suit." Eisen v. Carlisle &
Jacquelin, 417 U.S. 156, 164, 94 S.Ct. 2140, 2146, 40 L.Ed.2d 732
(1974); see also Windham, 565 F.2d at 70 (stating that, while the
district court "should not decline to certify a class because it
fears that insurmountable problems may later appear," if the court
finds "that there are serious problems now appearing, it should not
certify the class merely on the assurance ... that some solution
will be found") (citation omitted). We conclude that the district
court abused its discretion in certifying the classes because the
court underestimated the management difficulties that would persist
as these suits proceeded as class actions.
1. The Andrews class
It may be true that, at a general level, the predominant
issue presented in Andrews is whether the appellants were involved
in the operation of illegal gambling schemes that used 900 numbers
to facilitate caller participation. But as a practical matter, the
resolution of this overarching common issue breaks down into an
unmanageable variety of individual legal and factual issues. See
Georgine v. Amchem Products, Inc., 83 F.3d 610, 626 (3rd Cir.1996)
(stating that beyond broad common issues surrounding harmfulness of
asbestos exposure, class members' claims against asbestos
manufacturers varied widely in character and could not be tried on
a class basis). The class's mail and wire fraud allegations, for
example, are not wholly subject to class-wide resolution. See
Pelletier v. Zweifel, 921 F.2d 1465, 1499-1500 (11th Cir.) (stating
that each plaintiff must demonstrate reliance on deceptive conduct
in furtherance of the alleged RICO scheme) (citations omitted),
cert. denied, 502 U.S. 855, 112 S.Ct. 167, 116 L.Ed.2d 131 (1991);
Alabama v. Blue Bird Body Co., 573 F.2d 309, 328-29 (5th Cir.1978)
(expressing "serious reservations about the manageability of a
class" when all damage questions cannot be handled by one forum).
With regard to the Andrews gambling claims, the biggest
problems arise not so much in relation to the class plaintiffs'
participation in the 900-number programs, but with the contours of
the programs themselves. In assessing the gambling claims, aspects
of each 900-number program will have to be individually examined to
determine whether a particular program actually involves gambling
or runs afoul of state gaming laws. For example, some programs
were designed to involve skill or knowledge on the part of callers,
while others appear to have depended only upon chance. Many 900-
number programs also provided various means of free entry into
contests or made more complete disclosures than others. In short,
the 900-number programs implicated in Andrews cannot be lumped
together and condemned or absolved en masse.
The appellants cite the need to interpret and apply the gaming
laws of all fifty states to assess the legality of each 900-number
program as foremost among the difficulties in trying the gambling
claims on a class basis, and we agree. 900-number programs could
conceivably be legal in one state but not in another. Scrutinizing
hundreds of 900-number programs under the provisions of fifty
jurisdictions complicates matters exponentially. See Georgine, 83
F.3d at 627; Kirkpatrick v. J.C. Bradford & Co., 827 F.2d 718, 725
(11th Cir.1987), cert. denied, 485 U.S. 959, 108 S.Ct. 1220, 99
L.Ed.2d 421 (1988); see also American Medical Systems, 75 F.3d at
1085 (stating that even where state laws differ only in nuance,
nuance can be significant, leaving district court with the
"impossible task of instructing a jury on the relevant law")
(citing Matter of Rhone-Poulenc Rorer Inc., 51 F.3d 1293, 1300 (7th
Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 184, 133 L.Ed.2d 122
(1995)); W.R. Grace, 6 F.3d at 188-89 (stating that use of
subclasses to allow juries to consider different state laws will
still "pose management difficulties and reduce the judicial
efficiency sought to be achieved through certification").
The plaintiffs contend that only the gaming laws of Nebraska,
West-Interactive's home state, need to be construed in order to
assess the legality of the games of chance implicated in Andrews,
because a gambling business is illegal under RICO if it is illegal
under the laws of any state in which its affairs are conducted.
But this contention assumes that Nebraska law prohibits each of the
900-number programs encompassed by the suit. If this assumption
fails, each program that is legal in Nebraska will have to be
assessed under each class member's home state law. See Castano v.
American Tobacco Co., 84 F.3d 734, 741-42 (5th Cir.1996) (stating
that class action proponents must do more than merely assert that
variations in state law are insignificant or "academic"; court
cannot take class proponents' interpretations of law "on faith")
(citations omitted).
2. The Harper class
We are even more certain that the Harper class is
unsustainable under Rule 23(b)(3). As in Andrews, the plaintiffs
attempt to frame the "predominant" issues broadly to compensate for
variations in the class members' claims. But individual issues
abound and are magnified by the necessity of applying diverse state
laws to programs that in many cases have little in common beyond
their use of 900 numbers.
Unlike Andrews, which alleges an activity—gambling—that, if
proven, would be illegal in most jurisdictions regardless of a
plaintiff's motivation for calling a 900 number, Harper attacks
programs offering credit cards or information about credit
availability, perfectly legal activities unless coupled with
illegal means of solicitation, in this case mail or wire fraud.
The 900-number programs at issue in Harper differ widely in terms
of the advertising and solicitation used, the extent to which
disclosures were made, and the existence and promotion of free
means of participation, so each program must be assessed
individually to determine whether fraudulent tactics were employed
by the appellants.
Even if it could be shown that the appellants were engaged in
a scheme to defraud and made misrepresentations to further that
scheme, the plaintiffs would still have to show, on an individual
basis, that they relied on the misrepresentations, suffered injury
as a result, and incurred a demonstrable amount of damages. See
Pelletier, 921 F.2d at 1498-1500 (discussing elements of mail and
wire fraud; requiring individualized proof of reliance on
deceptive conduct and injury); Blue Bird Body Co., 573 F.2d at 327
(stating that class treatment in no way alters substantive proof
required to succeed on claim for relief); see also Castano, 84
F.3d at 745 (stating that fraud class action cannot be certified
when individual reliance will be an issue) (citing Simon v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 482 F.2d 880 (5th Cir.1973)).
As in Andrews, the problems with trying the individualized elements
of the plaintiffs' claims, as well as handling the unique aspects
of the 900-number programs, are compounded by the necessity of
referencing fifty sets of credit card and consumer protection laws.
See Castano, 84 F.3d at 741; Georgine, 83 F.3d at 627; Rhone-
Poulenc Rorer, 51 F.3d at 1300.
The district court, recognizing the challenge of litigating
these cases, assured the parties that it "can and will assemble the
resources that [management of these cases] requires." (R. 27-336
at 22; R. 38-210 at 22). But litigating the plaintiffs' claims as
class actions no matter what the cost in terms of judicial economy,
efficiency, and fairness runs counter to the policies underlying
Rule 23(b)(3). See Fed.R.Civ.P. 23 advisory committee's note (1966
amendment) (stating that subdivision (b)(3) encompasses those cases
"in which a class action would achieve economies of time, effort,
and expense"). While we recognize that Rule 23 is to be applied
flexibly, the manageability problems discussed above defeat the
Rule's underlying purposes and render these claims inappropriate
for class treatment.6 Finally, although the district court stated
that class treatment may be the "only feasible method of
adjudication, given the small size of each member's claims," (R.
27-336 at 30-31; R. 38-210 at 30-31), we note that even small
individual claims under RICO can be feasible given the possibility
of the award of treble damages and attorneys' fees to successful
plaintiffs. See 18 U.S.C. § 1964(c) (1994); see also Castano, 84
F.3d at 749-50 (stating that individual trials in "immature tort"
6
The plaintiffs suggested at oral argument that these cases
would be made manageable by virtue of the fact that, if the
classes are certified, the defendants would likely settle. We do
not view this as an appropriate measure of manageability.
context may actually enhance long-term judicial efficiency by
allowing plaintiffs to winnow claims to include only strongest
causes of action, thereby simplifying choice of law and
predominance inquiries for eventual class treatment).
V. CONCLUSION
Because the district court abused its discretion in certifying
the Andrews and Harper classes based on its belief that these
actions would be manageable, we reverse the certification order and
remand for further proceedings consistent with this opinion.
REVERSED AND REMANDED.
BARKETT, Circuit Judge, concurring in part and dissenting in
part:
I agree with the majority's determination that the district
court properly found standing, adequacy of representation, and
typicality of claims under Rule 23(a). I also agree with the
conclusion that the district court abused its discretion in
determining that the Harper class action was maintainable under
Rule 23(b)(3). I disagree, however, with the determination that
the district court abused its discretion in determining that the
Andrews class action is maintainable under Rule 23(b)(3). I
therefore dissent from the reversal of the district court's
certification of the Andrews class.
Rule 23(b)(3) provides that a class action is maintainable if
"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." Fed.R.Civ.Pro. 23(b)(3). In making these findings,
the trial court considers, in pertinent part, "the desirability or
undesirability of concentrating the litigation of the claims in the
particular forum" and "the difficulties likely to be encountered in
the management of a class action." Id.
As the majority notes, determining the manageability of a
class action is committed to the discretion of the district court
"because that court generally has a greater familiarity and
expertise with the practical and primarily factual problems of
administering a lawsuit than does a court of appeals." Central
Wesleyan College v. W.R. Grace & Co., 6 F.3d 177, 185 (4th
Cir.1993) (quotation omitted). In my view, the district court's
conclusion, following a six-day evidentiary hearing, that the
Andrews class action was manageable because common questions of
fact and law predominate over individual legal and factual issues
that might arise, does not constitute an abuse of discretion.
The majority's abuse-of-discretion finding is based primarily
on its conclusion that the district court "underestimated the
management difficulties that would persist as these suits proceed
as class actions." Maj.Op. at 3580. According to the majority,
management would be difficult because the district court would have
to resolve "an unmanageable variety of individual legal and factual
issues," id., that would predominate over the common questions of
fact and law.1 According to the majority, three primary issues are
1
As to the Andrews class, the district court found that a
multitude of common issues would predominate over any issues
requiring individual determination. These common issues include
the creation and operation of the 900-number gambling schemes;
the terms of the billing services agreements; the 900-number
guidelines; the defendants' knowing participation in the
operation of the schemes; and the applicability of RICO and
present: determining whether each individual relied on deceptive
conduct; determining the legality and "deceptiveness" of each of
the various 900-number schemes; and interpreting and applying the
gambling laws of all fifty states.2 As explained below, I believe
that these issues would not predominate so as to render the action
unmanageable; and even if they did, the district court could
always decertify the class or address them through the other
mechanisms provided by Rules 23(c)(1) and 23(c)(4).
As to the mail- and wire-fraud-based RICO claims, issues of
individual reliance do not generally preclude Rule 23(b)(3)
certification, particularly in cases where a common course of
deceptive conduct is alleged. In Kirkpatrick v. J.C. Bradford &
Co., 827 F.2d 718 (11th Cir.1987), for example, the district court
declined to certify a securities-fraud class action after
determining that questions of individual investors' reliance on
misrepresentations predominated over the common questions. Upon
review, we noted that although plaintiffs were required to show
that they each relied upon defendants' misrepresentation, they
alleged a common course of misrepresentation. Id. at 724. Under
these circumstances, we held that "the mere presence of the factual
issue of individual reliance could not render the claims unsuitable
Communications Act statute.
2
Although the majority does not identify damages as an
individualized inquiry as to the Andrews class, I note that
"[w]hile the court may have to take aim at the individual amounts
charged each class member for the purposes of damage
calculations, such a determination should not preclude class
certification when common issues which determine liability
predominate." Ettinger v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 122 F.R.D. 177, 182 (E.D.Pa.1988).
for class treatment." Id. at 724-25; see also In re Data Access
Systems Securities Litigation, 103 F.R.D. 130, 139 (D.N.J.1984);
Gelb v. American Telephone & Telegraph Co., 150 F.R.D. 76, 77-78
(S.D.N.Y.1993). In this case, the district court found that
individual reliance on any misrepresentation would be obvious and
easy to prove because "the 900-numbers are not listed in any public
telephone directory and are not otherwise in general circulation,
so it may be reasonably assumed that the caller learned of the game
... and decided to call, at least in part, from the [defendant's]
promotional materials or from another person who learned of the
enterprise through those promotional materials."
Similarly, the majority places too much emphasis on the number
of different schemes involved, identifying this issue as the
biggest one confounding class certification. As an initial matter,
I emphasize again that the district judge had the benefit of a
six-day hearing on the merits of certifying the class, and, given
the thoroughness of that hearing, I am hesitant to substitute our
judgment for his on such a fact-based inquiry. But even upon my
independent review of the schemes at issue here, I find that the
similarities far outweigh the differences. Generally, the schemes
offer a chance to win a prize—$20,000, $15,000, a Chevrolet
Blazer—in exchange for dialing, and being billed for, the 900
number. Though the prizes and the charges vary (the schemes charge
varying amounts by the minute; others charge a flat fee for the
call), the schemes generally involve one or more prizes distributed
by chance to persons who have paid for a chance to win such a
prize.3 The schemes also generally include a free option, in which
individuals may also have an opportunity to win the prize by
mailing in an entry without incurring the 900-number charges.
Thus, while it is true that different media are employed, including
cable television, direct mail and magazine advertisements,
different typefaces and layouts and graphics are used, different
prizes are offered, and different charges billed, these details are
not particularly relevant in determining whether the schemes
themselves are legal or illegal under state gambling laws. All
that is involved in that determination is whether prizes are
distributed by chance to persons who have paid for a chance to win,
and what effect the free option has on the overall scheme in a
particular state.
Moreover, that the district court may have to examine the
anti-gambling laws of numerous states in addressing plaintiffs'
gambling-based RICO claims is not a reason to find the class
unmanageable at this time. To begin with, the possibility that the
district court will have to apply the laws of numerous states is
just that—a possibility. As the majority recognizes, if the
gambling schemes are illegal under the law of Nebraska, West-
Interactive's home state, then the schemes' illegality need not be
examined under the laws of any other state. And even if the
anti-gambling laws of other states must be examined, these
individual examinations, as the district court found, would share
many common questions; nor would the individual state legal issues
3
A few schemes fall outside these generalities. For
example, a few schemes appear to offer coupons to everyone who
calls.
predominate over the many other common questions in the case. The
commonality and manageability of the state-law gambling issues is
confirmed by the form opinion letters used by game operators to
convince AT & T that the games were "legal": The letters analyze
the gambling and lottery laws of all fifty states in less than
twelve pages. Thus, even if different state laws apply, the
application of those laws would not necessarily render the
litigation unmanageable.4
Even if the litigation does become unmanageable, due to
individual questions of reliance, the particularities of the games,
or the need to apply numerous anti-gambling laws, the district
court could employ a variety of mechanisms to mitigate the
unmanageability. As the court noted, the use of special masters
and computer programs may be used to facilitate an efficient
resolution of certain types of issues. And pursuant to Rules
23(c)(1) and 23(c)(4), a district court can modify a certification
order by employing subclasses or decertifying class treatment of
certain issues. Indeed, "courts have certified nationwide ...
class actions, which also include myriad individual factual and
legal issues, relying on the capacity for a court to decertify or
redefine the class subsequently if the case should become
unmanageable." See In re General Motors Corp. Pick-Up Truck Fuel
Tank, 55 F.3d 768, 815 (3d Cir.1995).
In short, I believe the majority does not give sufficient
4
This case is thus distinct from Castano v. American Tobacco
Co., 84 F.3d 734, 741-45 (5th Cir.1996), in which the district
court failed to adequately consider how variations in state law
would effect commonality and manageability.
deference to the sound judgment of the district court which, as
noted earlier, "generally has a greater familiarity and expertise
with the practical and primarily factual problems of administering
a lawsuit than does a court of appeals," W.R. Grace & Co., 6 F.3d
at 185. I also believe the majority gives insufficient weight to
the Rule 23, post-certification mechanisms designed for use when
manageability problems arise, thus risking the foreclosure of
relief to plaintiffs whose claims, for all practical purposes, can
be raised only by way of a class action. Accordingly, I
respectfully dissent.