Leonard J. Klay v. Humana, Inc.

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT FILED
__________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 02-16333 September 1, 2004
THOMAS K. KAHN
__________________
CLERK

D.C. Docket No. 00-01334-MD-FAM

LEONARD J. KLAY, M.D.,
CHARLES B. SHANE, M.D.,
ALL PLAINTIFFS,
PRICE PLAINTIFFS,
Price, Sessa, Katz & Yingling,
PROVIDER PLAINTIFFS, et al.,

Plaintiffs-Appellees,

versus

HUMANA, INC.,
HUMANA HEALTH PLAN, INC.,
FOUNDATION HEALTH SYSTEMS, INC.,
n.k.a. Health Net, Inc.,
PACIFICARE HEALTH SYSTEMS, INC.,
PACIFICARE OPERATIONS, INC.,
THE PRUDENTIAL INSURANCE CO. OF AMERICA,
UNITEDHEALTH GROUP, INC.,
f.k.a. United HealthCare Corp.,
UNITEDHEALTH CARE, INC.,
WELLPOINT HEALTH NETWORKS, INC.,

Defendant-Appellants.
 ____________________

Appeal from the United States District Court
for the Southern District of Florida
_____________________

(September 1, 2004)

Before TJOFLAT, BIRCH and GOODWIN *, Circuit Judges.

TJOFLAT, Circuit Judge:

This is a case of almost all doctors versus almost all major health

maintenance organizations (HMOs), coming before us for the third time in as many

years; there have been twenty-one published orders and opinions in this case from

various federal courts. The plaintiffs are a putative class of all doctors who

submitted at least one claim to any of the defendant HMOs between 1990 and

2002. They allege that the defendants conspired with each other to program their

computer systems to systematically underpay physicians for their services. We

affirm the district court’s certification of the plaintiffs’ federal claims, though we

strongly urge the district court to revisit the definition of these classes, and reverse

the district court’s certification of the plaintiffs’ state claims. We do not reach the

district court’s certification of a California Subclass since the defendants did not

specifically challenge the certification on appeal.

*
Honorable Alfred T. Goodwin, United States Circuit Judge for the Ninth Circuit, sitting
by designation.

2
 I.

The plaintiffs are physicians who were reimbursed by one or more of the

defendant HMOs for treating patients covered by those HMOs. The plaintiffs

allege that the backbone of their relationship with the HMOs is that they “will be

paid, in a timely manner, for the covered, medically necessary services they

render.” Provider Plaintiffs’ Second Amended, Consolidated Class Action

Complaint, ¶ 4 (Sept. 19, 2002) (hereinafter, Second Complaint).1 In a phrase that

will undoubtedly play well with a jury, the doctors alliteratively claim that the

defendants systematically “deny, delay and diminish the payments due to [them],”

id. ¶ 5, and fail to tell doctors that they are being underpaid, id. ¶ 78. The

complaint alleges that the defendants’ reimbursement system is based on

covertly denying payments to physicians based on financially
expedient cost and actuarial criteria rather than medical necessity,
processing physicians’ bills using automated programs which
manipulate standard coding practices to artificially reduce the amount
they are paid, and . . . systematically delaying payments to gain
increased use of the physicians’ funds.

Id. ¶ 6.

If an agreement between a physician and an HMO exists, its terms govern

the physician’s reimbursement. The HMOs also “represent to the medical

1
We quote from the plaintiffs’ second amended complaint because it sets forth the
material facts of this case most clearly; the substance of the allegations is the same across all
three of the plaintiffs’ complaints.

3
profession at large” that when a physician treats a patient who belongs to an HMO

with which the physician does not have a contract, the HMO will still reimburse

him. Among the ways in which the defendants allegedly convey this information

are “[b]y disseminating billing information to the profession at large,” “confirming

coverage for medically necessary services when contacted by doctors prior to

treatment,” and “explaining payments so as to make it appear that doctors are being

paid for the covered, medically necessary services they render.” Id. ¶¶ 77(c), (d),

(f).

The complaint alleges that physicians under contract with HMOs are

compensated through one of two different methods—fee-for-service or capitation.

Physicians who do not have a contractual relationship with an HMO are

reimbursed only under a fee-for-service regime. See id. ¶¶ 79, 101. Although the

plaintiffs allege that they are being systematically underpaid under both payment

methods, the exact ways in which this is purportedly accomplished differ; we will

consider each reimbursement scheme in turn.

A.

Under a fee-for-service plan, an HMO agrees to reimburse doctors for any

medically necessary services they perform on covered individuals, whether or not

those doctors are under contract with the HMO. This gives doctors an incentive to

4
perform as many tests and procedures as they can convince the HMO are medically

necessary; HMOs, in contrast, have an incentive to approve as few procedures as

possible. Both parties claim they are acting in their patients’ best medical interests.

To claim reimbursement, physicians are required to fill out an HCFA-1500

form, developed by the federal government and the American Medical Association.

These forms employ a “current procedural terminology” coding procedure (“CPT

coding”) whereby medical procedures are identified by standardized designators.

Each designator is comprised of two components: a “base code” that identifies the

nature of the procedure and a series of modifiers “for the degree of difficulty,

complexity and multiplicity.” Id. ¶ 80. Each HCFA-1500 form is processed by the

defendants’ computer systems, which specify the amount that the physician should

be paid.

The plaintiffs allege that these computer systems are programmed to

systematically underpay the plaintiffs through a variety of methods. First, the

plaintiffs allege that the systems are programmed to simply deny reimbursement

for certain base codes that insurance companies feel are too expensive,

notwithstanding their contractual obligations to both physicians and patients. Id. ¶

84. Second, the plaintiffs allege that when the systems read certain base codes on

HCFA-1500 forms, they are programmed to interpret them as requesting

5
reimbursement for less expensive procedures (“downcoding”). Id. ¶ 86. Third, the

plaintiffs contend that the system is programmed to simply group certain base

codes together, so that if the system reads certain combinations of codes on the

forms, they will be interpreted as being only a single code (“grouping”). Id.

Fourth, the system is allegedly programmed to ignore certain modifiers that

would drive up physicians’ reimbursements. Id. ¶ 90. Fifth, the plaintiffs assert

that the system is designed to unnecessarily put their reimbursement claims in a

“state of suspense before they are processed even though no additional information

is needed or requested. . . . The end result is that average payment times exceed by

multiples the time provided for by law in most states as well as the time set by

contract and industry practice.” Id. ¶¶ 94, 96. Finally, the plaintiffs allege that the

forms the HMOs send to physicians explaining the amounts of their

reimbursements, called “explanation of benefits” forms (“EOBs”), “misrepresent

or conceal the actual manner in which Plaintiffs’ . . . payment requests were

processed so as to induce them to accept reduced payments in reliance thereon.”

Id. ¶ 98.

B.

Even plaintiffs whose contracts establish a capitation payment plan are not

free from the defendants’ alleged manipulation. Under a capitation agreement,

6
each patient specifies a physician as his “primary care provider.” The HMO is

obligated to pay each physician a small monthly fee, called a capitation payment,

for each patient registered to him. The physician, in turn, is obligated to provide

whatever medical services each registered patient requires. Thus, a capitation

system is a flat-rate scheme in which a physician’s payments are “based on the

number of patients they agree to treat rather than on the services they actually

render.” Id. ¶ 7. A capitation method gives a physician an incentive to provide as

few services as possible to each patient, whether or not medically necessary,

because his payments are not tied to the quality or extent of services he provides.

The HMOs, in turn, have an incentive to register as few patients as possible with

each physician, so as to reduce their monthly per-patient outlays.

The plaintiffs contend that the HMOs are underpaying physicians by failing

to pay capitation fees for many patients who have registered with a physician but

never visited him. Id. ¶ 105. Consequently, plaintiffs allege, they are receiving

capitation payments based on a much smaller pool of patients than that to which

they are entitled.

This is not the only way in which the defendants have allegedly cheated

doctors reimbursed under a capitation scheme. Before sending physicians their

capitation payments, HMOs withhold a small amount of money to establish a

7
“pharmacy risk pool,” which is used to pay for their insured patients’ medication.

The plaintiffs contend that the defendants are withholding too much from their

capitation reimbursements because they are basing the withholdings on the actual

cost of the drugs the patients are using, without taking into account “the substantial

rebates/refunds/discounts granted by drug manufacturers.” Id. ¶ 106.

The defendants are also contractually obligated to pay the plaintiffs an extra

bonus if there is money left in the pharmaceutical risk fund at the end of the year

after all of the patients’ covered medications have been paid for. The plaintiffs

allege, however, that defendants somehow “adjust” the year-end statements for the

risk fund so as to avoid making these payments. Id. ¶ 107. Finally, not all services

are covered by the capitation plan; for certain non-covered services, physicians are

required to submit HCFA-1500 forms. The plaintiffs allege that when capitation-

plan doctors submit these forms, they are subjected to the same types of fraudulent

behavior as the fee-for-service doctors, discussed in the previous Section.

C.

The plaintiffs sued a variety of large HMOs because they claim that these

practices are not occurring in isolation, but are instead the end-product of a

decades-long nefarious conspiracy to undermine the American health care system.

The plaintiffs assert that such a conspiracy was necessary to permit these practices

8
to continue, because “[i]f only one Defendant engaged in these activities,

physicians could and would refuse to do business with that Defendant, but together

Defendants have the power and influence necessary to affect and perpetuate their

scheme.” Id. ¶ 118. To support this allegation, the plaintiffs point to the fact that

most of the HMOs run their reimbursement processes in substantially the same

way, id. ¶ 119, and participate in various industry groups, trade associations, and

standards-promulgation projects, id. ¶ 120.

D.

This case originated when lawsuits were filed in four federal judicial

districts against Humana, Inc., for underpaying doctors in the manners described

above. These suits were consolidated by the Judicial Panel on Multidistrict

Litigation (the “Panel”) in the Southern District of Florida. In re Humana

Managed Care Litig., No. 1334, 2000 U.S. Dist. LEXIS 5099 (J.P.M.L. Apr. 13,

2000). Later, the Panel decided to combine the suits against Humana with several

other similar federal suits from across the country filed against other major HMOs.

In re Humana Managed Care Litig., Nos. 1334, 1364, 1366 & 1367, 2000 U.S.

Dist. LEXIS 15927 (J.P.M.L. Oct. 23, 2000). The Panel found that these suits

“involve[d] common questions of fact concerning whether defendants—either

singly or as part of a conspiracy—implemented certain policies, including inter alia

9
utilization review processes, physician financial incentives, and/or failure to pay

clean claims in a timely manner which . . . unlawfully interfered with health care

providers’ delivery of . . . care.” Id. at *7-8. It further held,

Centralization of all the actions under Section 1407 in the Southern
District of Florida . . . will serve the convenience of the parties and
witnesses and promote the just and efficient conduct of this litigation.
Congregating all these actions there is necessary in order to avoid
duplication of discovery, prevent inconsistent or repetitive pretrial
rulings, and conserve the resources of the parties, their counsel and
the judiciary. As a result, resolution of overlapping issues, such as
class certification, any common practices, and the nature and
existence of any conspiracy, will be streamlined.

Id. at *8. Separate federal proceedings against CIGNA were later consolidated into

this suit in In re Managed Care Litig., 246 F. Supp. 2d 1363, 1364 (J.P.M.L. 2003).

Once the cases were consolidated, the plaintiffs filed an amended complaint

against all of the defendants, see First Consolidated, Amended Class Action

Complaint (Mar. 26, 2001) (hereinafter, First Complaint). It requested that the

district court certify three classes. First, the plaintiffs requested certification of a

Global Class, including “[a]ll medical doctors who provided services to any person

insured by any defendant from August 14, 1990 to [the date of certification],” to

pursue their claims that the defendants conspired to violate the Racketeer

Influenced and Corrupt Organizations Act (RICO), and aided and abetted each

other in doing so. Id. ¶ 119 (brackets in original). Second, the plaintiffs sought

10
recognition of a National Subclass, comprised of all “[m]edical doctors who

provided services to any person insured by a Defendant, when the doctor has a

claim against such Defendant and is not bound to arbitrate the claim,” to pursue

various state-law claims against the defendants, as well as claims based on “direct”

(substantive, as opposed to inchoate) RICO violations.2 Id. ¶ 120. Finally, the

plaintiffs requested certification of a California Subclass, comprised of “[m]edical

doctors who provided services to any person insured in California by any

defendant, when the doctor was not bound to arbitrate the claim being asserted,” to

pursue alleged violations of Cal. Bus. & Prof. Code § 17200. Id. ¶ 121. The

district court certified all three classes, In re Managed Care Litig., 209 F.R.D. 678

(S.D. Fla. 2002), and the HMOs now appeal.

For a district court to certify a class action, the named plaintiffs must have

standing, and the putative class must meet each of the requirements specified in

2
The district court certified a Global Class, comprised of all doctors, whether or not they had
arbitration clauses, to pursue RICO claims based on aiding and abetting and conspiracy because
it held that such causes of action were non-arbitrable. It certified a National Subclass, comprised
only of doctors not subject to enforceable arbitration clauses, to pursue the substantive RICO
claims because those claims were ultimately held by the Supreme Court to be arbitrable. See
PacifiCare Health Sys. v. Book, 538 U.S. 401, 407, 123 S. Ct. 1531, 1536, 155 L. Ed. 2d 578
(2003) (“[T]he proper course is to compel arbitration” of the direct RICO claims.); see also In re
Managed Care Litig., MDL No. 1334, at 8 (S.D. Fla. Sept. 15, 2003) (“[A]ll direct RICO claims
that stem from contractual relationships subject to arbitration must be arbitrated, notwithstanding
any clauses limiting the availability of punitive, exemplary or extra-contractual damages.”).

11
Federal Rule of Civil Procedure 23(a),3 as well as at least one of the requirements

set forth in Rule 23(b).4 City of Hialeah v. Rojas, 311 F.3d 1096, 1101 (11th Cir.

3
This Rule states:

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.

Fed. R. Civ. P. 23(a).
4
This Rule states:

An action may be maintained as a class action if the prerequisites of subdivision
(a) are satisfied, and in addition:

(1) the prosecution of separate actions by or against individual members
of the class would create a risk of

(A) inconsistent or varying adjudications with respect to individual
members of the class which would establish incompatible
standards of conduct for the party opposing the class, or

(B) adjudications with respect to individual members of the class
which would as a practical matter be dispositive of the interests of
the other members not parties to the adjudications or substantially
impair or impede their ability to protect their interests; or

(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) 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. The
matters pertinent to the findings include:

(A) the interest of members of the class in individually controlling

12
2002); Turner v. Beneficial Corp., 242 F.3d 1023, 1025 (11th Cir. 2001). The

classes in this case were certified under Rule 23(b)(3), which states that a class

action may be certified 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.”

In this appeal, the defendants do not challenge the standing of the named

plaintiffs or any of the district court’s findings concerning Rule 23(a); they contend

only that certification under Rule 23(b)(3) was improper. They raise three separate

arguments. First, they contend that common questions of law and fact concerning

the federal claims do not predominate over individual issues specific to each

plaintiff. They next make the same argument regarding the plaintiffs’ state law

claims. Finally, for both the federal and state claims, they contend that, regardless

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.

Fed. R. Civ. P. 23(b).

13
of whether common issues of law and fact predominate, a class action is inferior to

other methods of adjudicating them. We address each of these arguments in

separate Parts.

“The decision to certify is within the broad discretion of the district

court . . . .” Castano v. Am. Tobacco Co., 84 F.3d 734, 740 (5th Cir. 1996).

However, with great power comes great responsibility; the awesome power of a

district court must be “exercised within the framework of rule 23.” Id. We apply

an abuse of discretion standard in reviewing the district court’s class certification

rulings. Hines v. Widnall, 334 F.3d 1253, 1255 (11th Cir. 2003).

A district court abuses its discretion if it applies an incorrect legal
standard, follows improper procedures in making the determination,
or makes findings of fact that are clearly erroneous. A district court
may also abuse its discretion by applying the law in an unreasonable
or incorrect manner. Finally, an abuse of discretion occurs if the
district court imposes some harm, disadvantage, or restriction upon
someone that is unnecessarily broad or does not result in any
offsetting gain to anyone else or society at large. In making these
assessments, we review the district court's factual determinations for
clear error, and its purely legal determinations de novo.

Klay v. United Healthgroup, Inc., No. 02-16640, U.S. App. LEXIS 13492 (11th

Cir. June 30, 2004) (quotation marks and citations omitted).

II.

The defendants’ first claim is that the district court erred in certifying a

14
Global Class to pursue federal RICO claims based on conspiracy and aiding-and-

abetting, and a National Class to pursue federal claims based on “direct” RICO

violations, because the common issues of fact and law these claims involve do not

predominate over individualized issues. Section A explains the substance of the

plaintiffs’ RICO claims in order to determine the issues of fact and law that are

implicated. Section B analyzes our circuit’s precedents concerning whether

common issues of fact and law predominate over individualized ones under Rule

23(b)(3). Section C applies these principles to the RICO claims in this case,

concluding that the district court did not abuse its discretion in certifying classes to

litigate these claims. Finally, although we conclude that the district court acted

within the proper scope of its power, Section D offers an observation that we

strongly urge the court to consider in potentially redefining the scope of these

classes.

A.

To understand the plaintiffs’ RICO claims, it is necessary to first examine

two of the central elements upon which they are predicated—the “pattern of

racketeering activity” in which the defendants allegedly engaged, and the

“enterprise” to which this racketeering activity was allegedly related. To violate

RICO, a defendant must engage in a pattern of racketeering activities. RICO

designates the violation of certain federal criminal laws as “racketeering activities,”
15
see 18 U.S.C. § 1961(1). The plaintiffs contend that the defendants committed

racketeering activities by engaging in mail and wire fraud, in violation of 18

U.S.C. §§ 1341 and 1343; extortion, in violation of 18 U.S.C. §§ 1951(a) and

(b)(2); and violations of the Travel Act, 18 U.S.C. § 1952(a)(3).5

The defendants allegedly committed mail and wire fraud by withholding

from the plaintiffs information concerning the various practices described above in

Sections I.A and I.B. For example, the plaintiffs allege that the “Defendants

misrepresented to Plaintiffs and class members that Defendants would pay

Plaintiffs and class members for medically necessary services and procedures

according to the CPT codes for the services and procedures they provided.” First

Complaint ¶ 236. The plaintiffs further contend that the defendants “have

concealed and have failed to disclose that they deliberately delay payments . . .

[and] that they have developed or purchased claims systems designed to

manipulate CPT codes.” Id. ¶ 239, 241. Regarding doctors reimbursed under a

capitation plan, the plaintiffs maintain that the defendants “have represented that

capitation payments are paid upon enrollment of members [and] . . . have failed to

disclose their use of age/sex adjustment factors to adjust capitation payments

5
The plaintiffs originally alleged that the defendants also engaged in racketeering
activity by interfering with benefit plans in violation of 18 U.S.C. § 1954. See First Complaint
¶¶ 264-67. This allegation was dropped from the Third Amended, Consolidated Class Action
Complaint (Nov. 25, 2002), so we need not consider it.
16
below the levels the Defendants agreed to pay.” Id. ¶¶ 245-46.

The defendants allegedly engaged in extortion by

forc[ing] Plaintiffs and members of the class to accept capitation
contracts, accept the loss of compensation for treating Defendants’
insureds which results from their misrepresentation and manipulation
of the workings of the capitation payment system, and accept the
denial, reduction and delay of payments for covered, medically
necessary services . . . through fear of economic loss. Defendants
create this fear through threats, both veiled and explicit, that doctors
will lose the patient base Defendants control, be blacklisted, and in the
case of noncontract doctors, not be paid at all.

Third Amended, Consolidated Class Action Complaint ¶¶ 150-51 (Nov. 25, 2002)

(hereinafter, Third Complaint).6

The final racketeering activity in which the defendants allegedly engaged

was violating the Travel Act, which makes it a crime to “travel[] in interstate or

foreign commerce or use[] the mail or any facility in interstate or foreign

commerce, with intent to . . . promote, manage, establish, carry on or facilitate the

promotion, management, establishment, or carrying on, of any unlawful activity.”

18 U.S.C. § 1952(a)(3). The defendants purportedly used “the mail or other

6
The district court’s class certification decision was, of course, based on the First
Complaint. However, we will base our class certification ruling on the Third
Complaint—apparently the most recent complaint filed in this case—when it pleads a claim
better than the First Complaint, for the sake of judicial economy. If we reversed the district
court’s certification of a class concerning a particular claim as it is pled in the First Complaint,
even though that class might have been certified based on the pleadings in the Third Complaint,
we would be engendering much unnecessary litigation. Thus, even though the district court did
not formally rule upon the Third Complaint, we will take it into account when it better repleads
claims that the district court adjudicated from the First Complaint. As discussed later, however,
this ruling does not address counts that are raised for the first time in the Third Complaint.
17
facilities of interstate commerce . . . to carry on their extortion” as described above.

Third Complaint ¶ 154.

Having laid out the various racketeering activities in which the defendants

allegedly engaged, we now turn to the enterprise to which these activities were

ostensibly related. The plaintiffs assert that the defendants belonged to a shadowy,

mysterious “Managed Case Enterprise” that included other health insurance

companies not named as defendants, the companies that developed the claims-

processing software the defendants use, companies that review claims for the

defendants, and several trade, standards-setting, and industry organizations and

associations to which the defendants belong or with which the defendants work.

This enterprise is a “system that allows [the defendants] to manipulate and control

reimbursements to physicians and conceal the manner in which that is done.”

Third Complaint ¶ 138.

Based on these facts, the plaintiffs allege several different RICO violations.

First, they contend that the defendants violated 18 U.S.C. §§ 1962(a) and (c)

(Counts III and IV in the First Complaint; Count III in the Third Complaint).

Section 1962(a) makes it unlawful for “any person who has received any income,

derived directly or indirectly, from a pattern of racketeering activity . . . to use or

invest, directly or indirectly, any part of such income . . . [in the] operation of, any

enterprise which is engaged in . . . interstate . . . commerce.” The defendants
18
allegedly violated this provision by using money they obtained through

racketeering activities—that is, underpaying doctors through the dishonest means

specified in Sections I.A and I.B, thereby violating the federal criminal laws

specified above—to further the Managed Care Enterprise.

18 U.S.C. § 1962(c) makes it unlawful for “any person employed by or

associated with any enterprise engaged in . . . interstate . . . commerce, to conduct

or participate, directly or indirectly, in the conduct of such enterprise’s affairs

through a pattern of racketeering activity.” The plaintiffs assert that the defendants

operated the Managed Care Enterprise by engaging in racketeering activity because

the enterprise itself was created to systematically underpay doctors for the services

they provide.

Next, the plaintiffs contend that the defendants violated 18 U.S.C. § 1962(d),

which prohibits conspiracies to violate other provisions of RICO by conspiring

with each other to violate 18 U.S.C. §§ 1962(a) and (c), as discussed above.

(Count I in both the First Complaint and Third Complaint). The plaintiffs further

assert that the defendants violated 18 U.S.C. § 2 by aiding and abetting each other

in violating 18 U.S.C. §§ 1962(a) and (c), as discussed above. (Count II in both

the First Complaint and Third Complaint). Finally, based on these allegations, the

plaintiffs seek injunctive and declaratory relief. (Count X in the First Complaint;

Count IV in the Third Complaint). Having explained the federal claims for which
19
the plaintiffs sought class certification, we now explore the “predominance”

analysis mandated by Rule 23(b)(3).

B.

The defendants’ main contention is that the district court erred in certifying

classes to litigate the RICO claims discussed above because the common issues of

fact and law these claims involve do not predominate over the individualized issues

involved that are specific to each plaintiff. Under Rule 23(b)(3), “[i]t is not

necessary that all questions of fact or law be common, but only that some questions

are common and that they predominate over individual questions.” In re

Theragenics Corp. Secs. Litig., 205 F.R.D. 687, 697 (N.D. Ga. 2002). In

determining whether class or individual issues predominate in a putative class

action suit, we must take into account “the claims, defenses, relevant facts, and

applicable substantive law,” Castano, 84 F.3d at 744, to assess the degree to which

resolution of the classwide issues will further each individual class member’s claim

against the defendant.7

7
In determining whether individual or collective issues predominate, we look not only to
the plaintiff’s allegations, but also to any compulsory counterclaims that the defendant can be
expected to bring or permissive counterclaims that the defendant has already brought. See
Heaven v. Trust Co. Bank, 118 F.3d 735, 738 (11th Cir. 1997) (rejecting class certification in
part because the class members, as “counterclaim defendants[,] would be compelled to come
forward with individual defenses” that would “require the court to engage in multiple separate
factual determinations”). We do not, however, take into account permissive counterclaims that
the defendant has yet to bring because it is possible they will not actually be brought and the
district court can reconsider its certification decision once they have been filed. See Roper v.
Consurve, Inc., 578 F.2d 1106, 1116 (5th Cir. 1978); see also Bonner v. City of Prichard, 661
20
 “Whether an issue predominates can only be determined after considering

what value the resolution of the class-wide issue will have in each class member’s

underlying cause of action.” Rutstein v. Avis Rent-A-Car Sys., 211 F.3d 1228,

1234 (11th Cir. 2000). Common issues of fact and law predominate if they “ha[ve]

a direct impact on every class member’s effort to establish liability and on every

class member’s entitlement to injunctive and monetary relief.” Ingram v. Coca-

Cola Co., 200 F.R.D. 685, 699 (N.D. Ga. 2001). Where, after adjudication of the

classwide issues, plaintiffs must still introduce a great deal of individualized proof

or argue a number of individualized legal points to establish most or all of the

elements of their individual claims, such claims are not suitable for class

certification under Rule 23(b)(3). See Perez v. Metabolife Int’l, Inc., 218 F.R.D.

262, 273 (S.D. Fla. 2003) (declining class certification in part because “any

efficiency gained by deciding the common elements will be lost when separate

trials are required for each class member in order to determine each member’s

F.2d 1206, 1209 (11th Cir. 1981) (en banc) (adopting as binding precedent all decisions of the
former Fifth Circuit handed down prior to October 1, 1981); Brown v. SCI Funeral Servs. of
Fla., Inc., 212 F.R.D. 602, 607 (S.D. Fla. 2003) (“[I]f the Court, following certification,
concludes that the counterclaims make the class unmanageable, the Court has the continuing
authority under Rule 23 to issue a supplemental order excluding counter-claim defendants from
the plaintiff class . . . .”). Indeed, even where a defendant files a counterclaim, he must adduce
some evidence in support of it before a court will take it into account as a reason for declining to
certify a class. The defendants in this case have not pointed to any permissive counterclaims
they have already filed, or compulsory counterclaims they are likely to file, against substantial
numbers of class members. Consequently, in determining whether individual or collective issues
predominate in this class action, we consider only the evidentiary and legal issues arising from
the allegations contained in the complaint and the defenses raised against them.
21
entitlement to the requested relief”).

An alternate formulation of this test was offered in Alabama v. Blue Bird

Body Co., 573 F.2d 309 (5th Cir. 1978). In that case, we observed that if common

issues truly predominate over individualized issues in a lawsuit, then “the addition

or subtraction of any of the plaintiffs to or from the class [should not] have a

substantial effect on the substance or quantity of evidence offered.” Id. at 322. Put

simply, if the addition of more plaintiffs to a class requires the presentation of

significant amounts of new evidence, that strongly suggests that individual issues

(made relevant only through the inclusion of these new class members) are

important. Id. (“If such addition or subtraction of plaintiffs does affect the

substance or quantity of evidence offered, then the necessary common question

might not be present.”). If, on the other hand, the addition of more plaintiffs leaves

the quantum of evidence introduced by the plaintiffs as a whole relatively

undisturbed, then common issues are likely to predominate.

C.

In certifying the plaintiffs’ RICO claims, the district court found that

common questions of fact and law predominate because this case “involves a

conspiracy and joint efforts to monopolize and restrain trade.” Managed Care

Litig., 209 F.R.D. at 696. The common factual issues that predominated over

individualized ones included
22
 Defendants’ medical necessity requirements, Defendants’ use of
actuarial guidelines, Defendants’ use of automated claims system and
comparable software capable of adjusting CPT codes and
reimbursement rates and automatically delaying and denying claims
as well as other uniform activities designed to deny, delay or decrease
reimbursement or payments to physicians.

Id. The existence of a conspiracy, and whether the defendants aided and abetted

each other, were also issues common to all of the plaintiffs that tended to

predominate. Id. We agree with this analysis.

1.

The plaintiffs here allege the type of nationwide conspiracy which we

intimated in Blue Bird Body Co., 573 F.2d 309, would probably be appropriate for

nationwide class certification. In that case, the State of Alabama sought to

represent a nationwide class of all governmental entities in the United States that

purchased school buses, alleging that the defendants engaged in a nationwide

price-fixing conspiracy in violation of federal antitrust laws. The only evidence to

which the plaintiffs pointed to support their claims of a nationwide conspiracy,

however, was an excerpt from a deposition that referred solely to price-fixing

within Alabama. We recognized that the plaintiffs might have intended to

establish proof of a nationwide conspiracy “through testimony, exhibits, etc., of the

various school bus markets on a state by state basis.” Id. at 322. We held,

If this is indeed the plaintiffs’ plan, then the national class should not
have been certified since there would be no evidence linking the
23
 different conspiracies to each other in order to establish the one
“common” conspiracy. Common issues of fact do not predominate in
such a situation even though all the plaintiffs might have separate
causes of actions against the same defendants based upon similar
theories of recovery.

Id. at 323 (footnote omitted). In this case, in contrast, all of the defendants operate

nationwide and allegedly conspired to underpay doctors across the nation, so the

numerous factual issues relating to the conspiracy are common to all plaintiffs. Cf.

Kirkpatrick v. J.C. Bradford & Co., 827 F.2d 718, 725 (11th Cir. 1987) (granting

class certification because “each of the complaints alleges a single conspiracy and

fraudulent scheme against a large number of individuals and thus is particularly

appropriate for class action” (quotation marks and citation omitted)).

This case stands in stark contrast to many others in which we found

individualized issues to predominate. For example, in Jackson v. Motel 6

Multipurpose, Inc., 130 F.3d 999 (11th Cir. 1997), a putative class of African-

American plaintiffs sued Motel 6, alleging that the chain either denied African-

Americans accommodations altogether, or rented them only dirty rooms. We

declined to certify the class because the plaintiffs’ claims would have “require[d]

distinctly case-specific inquiries into the facts surrounding each alleged incident of

discrimination.” Id. at 1006. We explained:

The issues that must be addressed include not only whether a
particular plaintiff was denied a room or was rented a substandard
room, but also whether there were any rooms vacant when that
24
 plaintiff inquired; whether the plaintiff had reservations; whether
unclean rooms were rented to the plaintiff for reasons having nothing
to do with the plaintiff’s race; whether the plaintiff, at the time that he
requested a room, exhibited any non-racial characteristics legitimately
counseling against renting him a room; and so on . . . . These issues
are clearly predominant over the only issue arguably common to the
class—whether Motel 6 has a practice or policy of racial
discrimination.

Id.

We came to the same conclusion in Rutstein, 211 F.3d 1228, where we

denied class certification to a group of plaintiffs alleging that Avis refused to

establish corporate accounts for Jewish companies. We held that each plaintiff’s

individualized allegations necessarily predominated over the issue of whether Avis

had discriminatory policies because “[e]ach plaintiff [would] have to bring forth

evidence demonstrating that the defendant had an intent to treat him or her less

favorably because of the plaintiff’s Jewish ethnicity.” Id. at 1235. We explained

that individual claims for discrimination are inextricably bound up in innumerable

case-specific facts, for “even if [the] plaintiffs [could] demonstrate that a general

policy or practice of discrimination was applied in their cases, Avis [could] escape

liability by showing that an individual plaintiff would have been denied or

terminated even if no such policy or practice had existed.” Id. at 1236.

The individual issues that must be addressed [regarding each
individual plaintiff] include not only whether Avis actually denied a
particular plaintiff a corporate account, gave the plaintiff a less
advantageous account, or cancelled the plaintiff’s account, but also
25
 whether the particular plaintiff was of the age required by Avis to
qualify for a corporate account; whether the plaintiff met the financial
criteria for a corporate account; whether the nature of the plaintiff’s
expected use of Avis vehicles would make the transaction cost-
justified for Avis; whether the plaintiff would be renting cars from
Avis in a criminally high-risk or low-risk geographical area; whether
the Avis employee who allegedly denied the plaintiff a corporate
account judged the caller-applicant to be lying about his or her
qualifications based on information not related to the caller's ethnicity;
and so on, and so on. All of these issues are clearly case-specific, and
they will all have to be addressed in one way or another in order for
each plaintiff to demonstrate a prima facie case of intentional
discrimination.

Id. at 1235.

Motel 6 and Rutstein were both cases in which individuals were seeking to

litigate separate discrimination claims that arose from a variety of individual

incidents together in the same class action simply because they alleged that the acts

of discrimination occurred pursuant to corporate policies. In the instant case,

however, the plaintiffs’ RICO claims are not simply individual allegations of

underpayments lumped together, and the allegation of an official corporate policy

or conspiracy is not simply a piece of circumstantial evidence being used to

support such individual underpayment claims. Instead, the very gravamen of the

RICO claims is the “pattern of racketeering activities” and the existence of a

national conspiracy to underpay doctors. These are not facts from which jurors

will be asked to infer the commission of wrongful acts against individual plaintiffs;

these very facts constitute essential elements of each plaintiff’s RICO claims.
26
While the existence of a policy of discrimination did not constitute an element of

any of the causes of action in Rutstein or Motel 6, the existence of a general

conspiracy to violate certain federal laws, or a pattern and practice of aiding and

abetting other HMOs’ violations of those laws, is an essential element of each

individual plaintiff’s RICO-related claims. Cf. Rutstein, 211 F.3d at 1235

(“Whether Avis maintains a policy or practice of discrimination may be relevant in

a given case, but it certainly cannot establish that the company intentionally

discriminated against every member of the putative class.”). Thus, while corporate

policies were only circumstantially relevant in the discrimination cases, and

insufficient to overcome the tremendous individualized issues of fact that remained

in those cases, they constitute the very heart of the plaintiffs’ RICO claims here,

and would necessarily have to be re-proven by every plaintiff if each doctor’s

claims were tried separately.

2.

The defendants contend that class certification is inappropriate because the

RICO claims are based, in large part, on allegations of mail and wire fraud. Under

Sikes v. Teleline, Inc., reliance may not be presumed in fraud-based RICO actions;

instead, the evidence must demonstrate that each individual plaintiff actually relied

upon the misrepresentations at issue. 281 F.3d 1350, 1360, 1362 (11th Cir. 2002)

(holding that, to make out a civil RICO claim based on mail or wire fraud, a
27
plaintiff must demonstrate that he “relied on a misrepresentation made in

furtherance of [a] fraudulent scheme” because “[i]t would be unjust to employ a

presumption to relieve a party of its burden of production when that party has all

the evidence regarding that element of the claim”). The defendants contend that,

because each individual plaintiff must specifically show that he, personally, relied

on the misstatements at issue, this individualized issue necessarily predominates.

The Fifth Circuit, in Castano, 84 F.3d at 745 (which is not binding upon us),

held that, under Simon v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 482 F.2d

880 (5th Cir. 1973) (citations omitted) (which is binding on us), “a fraud class

action cannot be certified when individual reliance will be an issue.” This is a

misinterpretation of Simon, which in fact stated only that

[i]f there is any material variation in the representations made or in the
degrees of reliance thereupon, a fraud case may be unsuited for
treatment as a class action. . . . [I]f the writings contain material
variations, emanate from several sources, or do not actually reach the
subject investors, they are no more valid a basis for a class action than
dissimilar oral representations.

Simon, 482 F.2d at 882. As this quote demonstrates, we declined certification in

Simon because of the plaintiff’s “failure to prove any standardized representations

by [the defendant].” Id. at 883. In this case, however, the plaintiffs allege that

while the defendants engaged in a variety of specific communications with

physicians, they all conveyed essentially the same message—that the defendants

28
would honestly pay physicians the amounts to which they were entitled.

Under well-established Eleventh Circuit precedent, the simple fact that

reliance is an element in a cause of action is not an absolute bar to class

certification. In Kirkpatrick, 827 F.2d at 720, for example, the plaintiffs sought

class certification of their claim that various brokerage firms “disseminat[ed]

materially misleading information” concerning the financial condition of a

company in which the plaintiffs had purchased limited partnership interests.

Among the provisions under which the plaintiffs sought recovery was Rule 10b-5

(17 C.F.R. § 240.10b-5), promulgated under the Securities and Exchange Act of

1934, 15 U.S.C. § 78j. We reversed the district court’s order denying certification

under Rule 23(b)(3), concluding that common issues of fact and law predominated

over individual issues. The district court’s main concern was that each of the

plaintiffs was individually obligated to demonstrate his or her reliance on the

defendants’ misstatements to make out claims under Rule 10b-5. We held,

however,

In view of the overwhelming number of common factual and legal
issues presented by plaintiffs’ misrepresentation claims, . . . the mere
presence of the factual issue of individual reliance could not render
the claims unsuitable for class treatment. Here, . . . each of the
complaints alleges a single conspiracy and fraudulent scheme against
a large number of individuals and thus is particularly appropriate for
class action.

Kirkpatrick, 827 F.2d at 724-25 (quotation marks and citation omitted).
29
 We follow Kirkpatrick here for two reasons. First, the common issues of

fact discussed in the previous Section, concerning the existence of a national

conspiracy, a pattern of racketeering activity, and a Managed Care Enterprise, are

quite substantial. They would tend to predominate over all but the most complex

individualized issues.

Second, while each plaintiff must prove his own reliance in this case, we

believe that, based on the nature of the misrepresentations at issue, the

circumstantial evidence that can be used to show reliance is common to the whole

class. That is, the same considerations could lead a reasonable factfinder to

conclude beyond a preponderance of the evidence that each individual plaintiff

relied on the defendants’ representations.

The alleged misrepresentations in the instant case are simply that the

defendants repeatedly claimed they would reimburse the plaintiffs for medically

necessary services they provide to the defendants’ insureds, and sent the plaintiffs

various EOB forms claiming that they had actually paid the plaintiffs the proper

amounts. While the EOB forms may raise substantial individualized issues of

reliance, the antecedent representations about the defendants’ reimbursement

practices do not. It does not strain credulity to conclude that each plaintiff, in

entering into contracts with the defendants, relied upon the defendants’

representations and assumed they would be paid the amounts they were due. A
30
jury could quite reasonably infer that guarantees concerning physician pay—the

very consideration upon which those agreements are based—go to the heart of

these agreements, and that doctors based their assent upon them. This is a far cry

from the type of “presumed” reliance we invalidated in Sikes. Consequently, while

each plaintiff must prove reliance, he or she may do so through common evidence

(that is, through legitimate inferences based on the nature of the alleged

misrepresentations at issue). For this reason, this is not a case in which

individualized issues of reliance predominate over common questions.

3.

The defendants point out that individualized determinations are necessary to

determine the extent of damages allegedly suffered by each plaintiff. While this is

undoubtedly true, it is insufficient to defeat class certification under Rule 23(b)(3).

“[N]umerous courts have recognized that the presence of individualized damages

issues does not prevent a finding that the common issues in the case predominate.”

Allapattah Servs. v. Exxon Corp., 333 F.3d 1248, 1261 (11th Cir. 2003), reh’g en

banc denied, 362 F.3d 739 (11th Cir. 2004); see, e.g., In re Tri-State Crematory

Litig., 215 F.R.D. 660, 692 n.20 (N.D. Ga. 2003) (“The requirement of

determination of damages on an individual basis does not foreclose a finding of

predominance or defeat certification of the class.”).

31
 “[I]n assessing whether to certify a class, the Court’s inquiry is limited to

whether or not the proposed methods [for computing damages] are so insubstantial

as to amount to no method at all. . . . [Plaintiffs] need only come forward with

plausible statistical or economic methodologies to demonstrate impact on a class-

wide basis.” In re Terazosin Hydrochloride Antitrust Litig., 220 F.R.D. 672, 698

(S.D. Fla. 2004) (quotation marks omitted). Particularly where damages can be

computed according to some formula,8 statistical analysis,9 or other easy or

essentially mechanical methods,10 the fact that damages must be calculated on an

individual basis is no impediment to class certification.

It is primarily when there are significant individualized questions going to

liability exist that the need for individualized assessments of damages is enough to

preclude 23(b)(3) certification. See, e.g., Sikes, 281 F.3d at 1366 (“These claims

will involve extensive individualized inquiries on the issues of injury and

8
E.g., In re Terazosin Hydrochloride Antitrust Litig., 203 F.R.D. 551, 559 (S.D. Fla. 2001)
(upholding class certification where the plaintiffs offered an “algebraic formula for the
computation of class members’ overcharge damages” despite the fact that “the jury will also
have to consider some individualized evidence in rendering individual damage calculations”).
9
See Pickett v. IBP, Inc., No. 96-A-1103-N, 2001 U.S. Dist. LEXIS 22453, at *35 (M.D. Ala.
Dec. 26, 2001) (“[I]f damages can be computed using ‘statistical techniques, the existence of
individualized damage claims does not pose a barrier to certification.’” (quoting Moore’s Federal
Practice § 23.49[5][b])).
10
E.g., Roper v. Consurve, Inc., 578 F.2d 1106, 1112 (5th Cir. 1978) (“While it may be
necessary to make individual fact determinations with respect to charges, if that question is
reached, these will depend on objective criteria that can be organized by a computer, perhaps
with some clerical assistance. It will not be necessary to hear evidence on each claim.”).
32
damages—so much so that a class action is not sustainable.”); Rutstein, 211 F.3d at

1234, 1240 (declining to certify a class because “most, if not all, of the plaintiffs’

claims will stand or fall . . . on the resolution of . . . highly case-specific factual

issues” and “liability for damages is a necessarily individualized inquiry”). Of

course, there are also extreme cases in which computation of each individual’s

damages will be so complex, fact-specific, and difficult that the burden on the

court system would be simply intolerable, see, e.g., Windham v. Am. Brands, Inc.,

565 F.2d 59, 70 (4th Cir. 1977) (“The district court estimated—conservatively, we

think—that in the absence of a practical damage formula, determination of

individual damages in this case could consume ten years of its time. The propriety

of placing such a burden on already strained judicial resources seems

unjustified.”), but we emphasize that such cases rarely, if ever, come along.

In this case, even though individualized damage inquiries are necessary,

many of them can be accomplished simply through reference to the HCFA-1500

forms or the HMO’s records of which patients registered with doctors who are

reimbursed through a capitation system. Cf. Roper v. Consurve, Inc., 578 F.2d

1106, 1112 (5th Cir. 1978) (“While it may be necessary to make individual fact

determinations with respect to charges, if that question is reached, these will

depend on objective criteria that can be organized by a computer, perhaps with

some clerical assistance.”). In addition, even if many plaintiffs’ claims require
33
corroboration and individualized consideration, such inquiries are outweighed by

the predominating fact that the defendants allegedly conspired to commit, and

proceeded to engage in, a pattern of racketeering activities to further their Managed

Care Enterprise. It is ridiculous to expect 600,000 doctors across the nation to

repeatedly prove these complicated and overwhelming facts.

D.

Because we are reviewing the district court’s certifications under an abuse of

discretion standard, we affirm. Nevertheless, it seems that the plaintiffs could

comfortably be split into two Subclasses based on their reimbursement scheme:

those operating on a fee-for-service basis and those with capitation contracts.

While the existence of the conspiracy is equally relevant to both groups of

plaintiffs, it seems that the capitation providers’ claims revolve around some

additional common issues that are not relevant to the fee-for-service providers.

Moreover, because the capitation providers’ primary allegation is that the HMOs

did not pay them for all the patients actually registered to them, their individualized

damage inquiries seem to be limited to an examination of the HMOs’ records, and

do not require as much potentially in-depth analysis as the fee-for-service

providers’ claims. Because this issue was not raised on appeal, however, we leave

it to the district court to consider in the first instance whether the creation of these

Subclasses might be a superior way of proceeding.
34
 III.

The First Complaint contained five state-law claims. In the plaintiffs’ Third

Complaint, one of the original state law claims (Count V of the First Complaint,

quantum meruit) was dropped, and four additional state-law claims were added

(Counts VIII, IX, XI, and XII of the Third Complaint). Because the quantum

meruit claim is no longer an issue in this lawsuit, we vacate the district court’s

grant of class certification regarding that issue. Similarly, because the district court

order being appealed did not address the additional state law claims raised for the

first time in the Third Complaint, there is nothing for us to review about them.

Consequently, we focus on the four remaining state law claims raised in the First

Complaint. Section A addresses the breach of contract claims, Section B discusses

unjust enrichment, Section C turns to alleged violations of state prompt-pay

statutes, and Section D considers the district court’s certification of a subclass

concerning alleged violations of California law.

A.

The plaintiffs’ breach of contract claims (Count VI in the First Complaint;

Count V in the Third Complaint) are not amenable to class certification under Rule

23(b)(3) because, although they are based on questions of contract law that are

common to the whole class, the individualized issues of fact they entail will

probably predominate. These claims allege that “Defendants have breached their
35
obligation to pay Plaintiffs and class members for medically necessary services in

accordance with their contractual obligations.” First Complaint ¶ 335.

“In a multi-state class action, variations in state law may swamp any

common issues and defeat predominance.” Castano, 84 F.3d at 741. It goes

without saying that class certification is impossible where the fifty states truly

establish a large number of different legal standards governing a particular claim.

See Sikes, 281 F.3d at 1367 n.44 (“Assuming that the district court was correct in

ruling that the laws of all fifty states apply, that alone would render the class

unmanageable.”); Andrews v. Am. Tel & Tel. Co., 95 F.3d 1014, 1024 (11th Cir.

1996) (“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.”);

Kirkpatrick, 827 F.2d at 725 (upholding the district court’s denial of class

certification because “the state law claims would require application of the

standards of liability of the state in which each purchase was transacted”). But see

In re St. Jude Med., Inc., MDL No. 01-1396, 2004 U.S. Dist. LEXIS 149, at *12

(D. Minn. Jan. 5, 2004) (“[T]he Court is not convinced that it is per se impossible

to certify and successfully try a class action involving the laws of 50 states . . . .”).

On the other hand, if a claim is based on a principle of law that is uniform

among the states, class certification is a realistic possibility. See In re Terazosin
36
Hydrochloride Antitrust Litig., 220 F.R.D. 672, 695 (S.D. Fla. 2004) (noting that

because “the essential elements of [the plaintiffs’] antitrust claims do not vary

significantly from state-to-state, . . . they are susceptible to proof using common

evidence”). In In re GMC Pick-Up Truck Fuel Tank Products Liability Litigation,

for example, the Third Circuit held that class certification was appropriate because

“we cannot conceive that each of the forty-nine states (excluding Texas)

represented here has a truly unique statutory scheme . . . .” 55 F.3d 768, 818 (3d

Cir. 1995); cf. Simon, 482 F.2d at 883 (declining class certification in part because

“the geographical dispersion of the alleged representations would bring into issue

various state common law standards. With no single law governing the entire

class, common issues of law cannot be shown to warrant Rule 23 treatment.”).

Similarly, if the applicable state laws can be sorted into a small number of

groups, each containing materially identical legal standards, then certification of

subclasses embracing each of the dominant legal standards can be appropriate.

See, e.g., Krell v. Prudential Ins. Co. of Am., 148 F.3d 283, 315 (3d Cir. 1998)

(“Courts have expressed a willingness to certify nationwide classes on the ground

that relatively minor differences in state law could be overcome at trial by

grouping similar state laws together and applying them as a unit.”); Walsh v. Ford

Motor Co., 807 F.2d 1000, 1017 (D.C. Cir. 1986) (holding that class certification is

appropriate where “variations [in state law] can be effectively managed through
37
creation of a small number of subclasses grouping the states that have similar legal

doctrines”). In such a case, of course, a court must be careful not to certify too

many groups. “If more than a few of the laws of the fifty states differ, the district

judge would face an impossible task of instructing a jury on the relevant law . . . .”

In re Am. Med. Sys., 75 F.3d 1069, 1085 (6th Cir. 1996).

The burden of showing uniformity or the existence of only a small number

of applicable standards (that is, “groupability”) among the laws of the fifty states

rests squarely with the plaintiffs. Walsh, 807 F.2d at 1017 (“[T]o establish

commonality of the applicable law, nationwide class action movants must credibly

demonstrate, through an extensive analysis of state law variances, that class

certification does not present insuperable obstacles.”) (quotation marks omitted);

Powers v. Gov’t Employees Ins. Co., 192 F.R.D. 313, 318-19 (S.D. Fla. 1998)

(“To certify a multi-state class action, a plaintiff must prove through ‘extensive

analysis’ that there are no material variations among the law of the states for which

certification is sought. If a plaintiff fails to carry his or her burden of

demonstrating similarity of state laws, then certification should be denied.”)

(citation omitted); cf. Carnegie v. Household Int’l, Inc., 220 F.R.D. 542, 549 (N.D.

Ill. 2004) (declining class certification because “[i]f the laws of the fifty states all

follow one of a small number of identical standards, [the named plaintiff] has not

made any attempt to prove that this is the case”).
38
 In this case, the plaintiffs allege that the only real legal issue pertinent to

their breach of contract claims is the definition of “breach,” which does not differ

from state to state. Judge Marcus once held, “Whether [a] contract[] . . . has been

breached is a pure and simple question of contract interpretation which should not

vary from state to state.” Indianer v. Franklin Life Ins. Co., 113 F.R.D. 595, 607

(S.D. Fla. 1986), overruled in part on other grounds by Ericsson GE Mobile

Communs., Inc. v. Motorola Communs. & Elecs., Inc., 120 F.3d 216, 219 n.12

(11th Cir. 1997); accord Leszczynski v. Allianz Ins., 176 F.R.D. 659, 672 (S.D.

Fla. 1997); see also Kleiner v. First Nat’l Bank of Atlanta, 97 F.R.D. 683, 694

(N.D. Ga. 1983) (“The application of various state laws would not be a bar where,

as here, the general policies underlying common law rules of contract

interpretation tend to be uniform.”). Based on “genius, general knowledge and

previous information,” Penn. Nat’l Mut. Cas. Ins. Co. v. Barnett, 445 F.2d 573,

575-76 (5th Cir. 1971), we are inclined to agree. A breach is a breach is a breach,

whether you are on the sunny shores of California or enjoying a sweet autumn

breeze in New Jersey. See Black’s Law Dictionary 200 (8th ed. 2004) (defining

“breach of contract” as “[v]iolation of a contractual obligation by failing to

perform one’s own promise”).

Moreover, while the plaintiffs’ breach of contract claims necessarily

implicate the contract law of all fifty states (since members of the putative class
39
practice in every jurisdiction in the country), the defendants fail to argue on appeal

that there are any relevant differences in the applicable laws among these

jurisdictions. Their brief fails to point to any material differences among state laws

addressing breaches of contract. Cf. In re Rhone-Poulenc Rorer, Inc., 51 F.3d

1293, 1300-01 (7th Cir. 1995) (declining class certification because the laws of the

several states concerning “negligence, including subsidiary concepts such as duty

of care, foreseeability, and proximate cause” differed sufficiently from each other

that they could not be consolidated into one or a few standards). Consequently, we

accept the proposition that the applicable state laws governing contract

interpretation and breach are sufficiently identical to constitute common legal

issues in this case.

While this relatively simple issue of law is common to all the breach of

contract claims, it is far outweighed by the individualized issues of fact pertinent to

these claims. The plaintiffs contend that all of the agreements at issue require that

doctors be reimbursed at a “reasonable rate” for the “medically necessary” services

they provide. We nevertheless recognize that this case involves the actions of

many defendants over a significant period of time and that each defendant

throughout this period utilized many different form contracts. Indeed, each

defendant contracted with different types of care-providing entities, including

individual physicians, partnerships, medical practice groups, and the like, each of
40
which necessitated a different type of contract. The sheer number of contracts

involved is one factor that makes us hesitant to conclude that common issues of

fact predominate; this is not a situation in which all plaintiffs signed the same form

contract. See Broussard v. Meineke Disc. Muffler Shops, 155 F.3d 331, 340 (4th

Cir. 1998) (“[P]laintiffs simply cannot advance a single collective breach of

contract action on the basis of multiple different contracts.”); cf. Kleiner, 97 F.R.D.

at 692 (“When viewed in light of Rule 23, claims arising from interpretations of a

[single] form contract appear to present the classic case for treatment as a class

action . . . .”). The plaintiffs might be able to establish by admission, stipulation,

or judicial finding of undisputed fact that, notwithstanding their differences in

form or language, all the contracts at issue call for “reasonable compensation” for

“medically necessary services.” See Kleiner, 97 F.R.D. at 694-95 (“[A]t this

point[,] the fact that not all contracts are identical is not sufficient to overcome the

apparent commonality of issues that they present.”). Even assuming, however, that

this is a common fact, it, along with the common legal issue of what constitutes a

“breach” under state law, is dwarfed by the individualized issues of fact to be

resolved.

The facts that the defendants conspired to underpay doctors, and that they

programmed their computer systems to frequently do so in a variety of ways, do

nothing to establish that any individual doctor was underpaid on any particular
41
occasion. See Rutstein, 211 F.3d at 1235 (“Whether Avis maintains a policy or

practice of discrimination may be relevant in a given case, but it certainly cannot

establish that the company intentionally discriminated against every member of the

putative class.”); Motel 6, 130 F.3d at 1006 (holding that plaintiffs alleging racial

discrimination had failed to show “predominance” because proof concerning the

existence of a general policy of racial discrimination does not show whether any

individual plaintiff was actually discriminated against); Ramirez v. DeCoster, 194

F.R.D. 348, 353 (D. Me. 2000) (holding that plaintiffs “do not necessarily satisfy

the requirement that questions of law or fact predominate merely by alleging a

pattern or practice claim”). The evidence that each doctor must introduce to make

out each breach claim is essentially the same whether or not a general conspiracy

or policy of breaching existed. For example, regardless of whether facts about the

conspiracy or computer programs are proven, each doctor, for each alleged breach

of contract (that is, each alleged underpayment), must prove the services he

provided, the request for reimbursement he submitted, the amount to which he was

entitled, the amount he actually received, and the insufficiency of the HMO’s

reasons for denying full payment. There are no common issues of fact that relieve

each plaintiff of a substantial portion of this individual evidentiary burden. Cf.

Terazosin Litig., 220 F.R.D. at 694 (“[W]hen there exists generalized evidence

which proves or disproves an element on a simultaneous, class-wide basis, since
42
such proof obviates the need to examine each class member’s individual position,

the predominance test will be met.”) (quotation marks omitted). While allegations

concerning the defendants’ conspiracy to underpay doctors, or their policy of and

aiding and abetting each other in underpaying doctors, went directly to material

elements of each individual plaintiff’s RICO claim, here they are, at best, merely

circumstantial evidence tangentially relevant to each individual plaintiff’s breach

of contract claim.

Another crucial reason why the plaintiffs cannot establish predominance of

classwide facts on their breach of contract claims is that, although each of the

defendants allegedly breached their contracts in the same general ways, they did so

through a variety of specific means that are not subject to generalized proof for a

large number of physicians. See Andrews, 95 F.3d at 1023 (rejecting class

certification because while “at a general level, the predominant issue presented . . .

is whether the appellants were involved in the operation of illegal gambling

schemes[,] . . . . as a practical matter, the resolution of this overarching common

issue breaks down into an unmanageable variety of individual legal and factual

issues”). For example, the plaintiffs claim that the defendants often grouped

together separate procedures specified on HCFA-1500 forms submitted by doctors,

frequently reimbursing them for only one of the procedures actually performed. If

the plaintiffs were able to prove that the billing programs automatically grouped
43
together the first and second procedures specified on the HCFA-1500 form,

regardless of what they were, paying doctors only for the first, then the breach of

contract issue would be subject to generalized proof. After establishing that the

computer program worked in this way, the doctors would be able to simply submit

their HCFA-1500 forms to the court for an easy determination of damages; no

further evidence of breach would be necessary.

This is not the type of allegation the plaintiffs make, however. The

algorithms by which the computer programs allegedly groups procedures appear to

be much more varied and complicated than this. Instead of applying one specific

universal rule to cheat all doctors (e.g. automatically deducting $100 from

everyone’s claim), the reimbursement programs are instead alleged to apply a

variety of more individually tailored rules, each of which applies to only a subset

of the plaintiff class. For example, if the doctors proved that the programs

automatically grouped together all lung transplants with all heart transplants,

reimbursing all doctors who submitted a claim for both only for heart transplants,

this fact would be irrelevant to the breach of contract claims of most members of

the plaintiff class. Instead, such proof would be relevant only to those doctors who

submitted a reimbursement request for both a heart transplant and lung transplant

on the same patient.

For this reason, proof of any given algorithm concerning grouping would be
44
relevant to only a handful of doctors within the class; separate subclasses would

have to be established for each allegedly improper grouping formula. The various

methodologies employed by these programs “cannot be lumped together and

condemned or absolved en masse.” Andrews, 95 F.3d at 1024. This is a case in

which “numerous plaintiffs suffer varying types of injury . . . through different

causal mechanisms, thereby creating many separate issues.” Watson v. Shell Oil

Co., 979 F.2d 1014, 1023 (5th Cir. 1992), reh’g granted, 990 F.2d 805 (5th Cir.

1993), appeal dismissed, 53 F.3d 663 (5th Cir. 1994). “No one set of operative

facts establishes liability. No single proximate cause applies equally to each

potential class member and each defendant.” In re Northern District of California,

Dalkon Shield IUD Prods. Liability Litig., 693 F.2d 847, 853 (9th Cir. 1982).

The same reasoning applies to the plaintiffs’ claim that the programs used by

the defendants sometimes improperly drop modifiers from doctors’ reimbursement

requests. For example, a doctor could include a modifier claiming that a particular

procedure was “complex,” entitling the doctor to greater payment. The plaintiffs

allege that the computer systems sometimes improperly drops the modifier, paying

the doctor for a “standard” rather than a “complex” procedure, meaning that he

receives less than the full amount to which he is entitled.

Because the program does not always automatically drop all modifiers,

however, or always ignore a particular modifier under a set of circumstances
45
applicable to most or all applicants (e.g., if it automatically dropped modifiers

whenever the total amount of reimbursement sought in a claim was over $200), this

allegation is not susceptible to classwide proof. Even if the plaintiffs were to prove

that the computer systems “sometimes” improperly drops “certain” modifiers, this

fact would do nothing to further any of the plaintiffs’ individual breach of contract

claims. Each plaintiff would still have to establish that he submitted a claim

containing a modifier warranting increased payment, that use of the modifier was

justified in that particular situation, and that the HMO’s computer program

improperly dropped it. Generalized evidence that the programs sometimes drops

modifiers would not help each plaintiff in satisfying his burden of proof of

demonstrating that a modifier was improperly dropped in his particular case.

Furthermore, even if the plaintiffs were able to establish that modifiers were

automatically dropped in particular situations not applicable to most of the 600,000

plaintiffs involved in this case (e.g., the program automatically dropped “complex”

modifiers whenever the underlying procedure was a hysterectomy), such proof

would be irrelevant to the large majority of doctors who had not submitted a claim

for that particular procedure with the particular modifier at issue.

Similar reasoning applies to the other ways in which the HMOs allegedly

breached their contracts with the fee-for-service providers, such as the defendants’

alleged downcoding and denial of payment practices. While some of the capitation
46
claims may have been suitable for class treatment, no capitation provider

subclasses were requested or certified.

This case stands in stark contrast to Allapattah, 333 F.3d 1248, in which we

affirmed certification of a class of approximately 10,000 Exxon dealers who sued

Exxon Corp. for breaching their dealer agreements by overcharging them for

wholesale fuel purchases. The dealers alleged that Exxon had promised them that

it would reduce the price of gasoline by 1.7 cents per gallon, but secretly

eliminated that price reduction after a few months. Exxon challenged the district

court’s certification of a class of all Exxon retailers, alleging “that there were

individual issues inherent in each dealer’s breach of contract claim and [Exxon

Corp.’s] own affirmative defenses.” Id. at 1261. We rejected this argument,

holding:

Because all of the dealer agreements were materially similar and
Exxon purported to reduce the price of wholesale gas for all dealers,
the duty of good faith was an obligation that it owed to the dealers as
a whole. Whether it breached that obligation was a question common
to the class, and the issue of liability was appropriately determined on
a class-wide basis.

Id.

In Allapattah, Exxon cheated all of the plaintiffs in exactly the same

way—by secretly eliminating its 1.7 cent-per-gallon price reduction. Once the

plaintiffs proved that Exxon engaged in this behavior, each individual plaintiff’s

47
breach of contract claim was substantially advanced. In light of this classwide

evidence, each individual dealer could demonstrate that Exxon violated his

contractual rights simply by demonstrating that he had purchased gas from Exxon

during the relevant time period. Here, in contrast, classwide proof that the

computer systems were programmed to sometimes cheat doctors in a variety of

ways, through a variety of algorithms, does not tend to demonstrate that any

particular doctor was cheated on any particular occasion, or by how much.

Roper, 578 F.2d 1106, provides an even better example of why the

plaintiffs’ contract claims are inappropriate for class certification, even though

Roper involved claims brought under the National Bank Act, 12 U.S.C. §§ 85 and

86. In that case, the plaintiffs—over 90,000 credit card holders—contended that

their credit card company charged them usurious interest rates, in violation of the

National Bank Act, through its policy on when interest started accruing on certain

purchases. We held that class certification was appropriate because, if the way in

which the credit card company calculated interest violated applicable laws (a point

we did not reach), then the billing program harmed each customer in exactly the

same way; the same illegal formula was applied to each, and proof of that formula

substantially advanced everyone’s claims. Unlike the interest formula at issue in

Roper, even if the plaintiffs here were to establish that the defendants engaged in

some or all of the practices at issue, they would still need extensive individualized
48
proof regarding which plaintiffs have been harmed and in what ways. Cf. Kennedy

v. Tallant, 710 F.2d 711, 717 (11th Cir. 1983) (granting class certification where

the defendants “committed the same unlawful acts in the same method against an

entire class”).

For these reasons, we conclude that, even though the plaintiffs’ breach of

contract claims involve some relatively simple common issues of law and possibly

some common issues of fact, individualized issues of fact predominate. Cf.

Graybeal v. Am. Sav. & Loan Ass’n, 59 F.R.D. 7, 15 (D.D.C. 1973) (denying class

certification because, “while there may be questions of law or fact common to the

members of the proposed class, such questions do not predominate over those

questions affecting only individual class members”). Consequently, the district

court abused its discretion in certifying these claims for classwide treatment.

B.

The plaintiffs’ unjust enrichment claims (Count VII in the First Complaint;

Count VI in the Third Complaint) allege that the “Defendants, through the acts and

omissions described herein, are in possession of money that is the rightful property

of Plaintiffs and the class. As a result, Defendants have been unjustly enriched by

their activities.” First Complaint ¶¶ 338-39. These claims require the same

extensive determinations of individualized fact as the breach of contract claims

discussed above because the facts necessary to support the two types of claims are
49
almost identical. The major difference between these claims is not factual but

legal: the obligation underlying a breach of contract claim comes most

immediately from a voluntary agreement, whereas the obligation underlying an

unjust enrichment claim comes directly from state law (equity). Indeed, in this

case the unjust enrichment claims are simply the way in which doctors without

contracts with particular HMOs are attempting to state breach of contract-type

claims against them. Because individualized factual determinations overwhelm the

common issues of fact and law that exist regarding these claims, class certification

was inappropriate.

C.

The plaintiffs’ next allegation is that the defendant HMOs violated a variety

of state prompt-pay statutes by failing to send doctors their reimbursements within

certain statutorily established deadlines. The most immediate problem with

certifying a nationwide class for this issue is that only thirty-two states have

prompt-pay statutes at all, and of those only five states expressly provide a cause of

action, with courts in another six states having recognized an implied cause of

action under their respective statutes. Even assuming these claims were otherwise

certifiable, the district court abused its discretion by certifying them as to a

nationwide class of physicians, rather than a subclass confined to a subset of only

certain states.
50
 Even a properly restricted subclass, however, would be unable to meet Rule

23(b)(3)’s predominance requirement. There are few common issues of law

because, as the defendant HMOs point out, “[s]tates define differently what

constitutes a ‘clean’ claim for payment. States have also adopted different

deadlines for making ‘prompt’ payment. Not surprisingly, given the heavily

regulated nature of this field, there are also diverse exceptions and conditions

contained in certain states’ prompt pay regulations.” Opening Brief of Appellants

Aetna, et al., at 41-42. Because the applicable state laws are similar only in their

broad contours, class certification is inappropriate.

Compounding the problem of disparate laws is the need for individualized

findings of fact. The plaintiffs have failed to allege that the defendants’ computer

programs always delay payments for every physician, or always delay payments

under a particular set of circumstances that applies to most class members. The

simple fact that payments are sometimes delayed, or delayed under various sets of

particular circumstances that each apply only to a small number of class members,

does not give rise to any predominating common questions of fact. Even if the

plaintiffs were to establish that the HMOs conspired to delay payments and that

payments to physicians were sometimes delayed, that would do nothing to further

any individual physician’s claim that a particular reimbursement of his was

actually held up improperly. Even if a class were certified for this issue, each
51
physician would still have to prove the same facts to make out a prima facie

prompt-pay case that he would if his prompt-pay claims were being tried

independently. Because there are no common questions of either law or fact that

predominate with these claims, certification under Rule 23(b)(3) was improper.

D.

The defendants have failed to challenge the predominance finding implicit in

the district court’s certification of a California Subclass based on alleged violations

of § 17200 of the California Business and Professions Code (Count IX in the First

Complaint; Count X in the Third Complaint). The appellants’ only mention of this

provision is in a somewhat cryptic footnote stating, “In any event, the 17200 class

does not provide an independent basis for certification where, as here, the federal

claims giving rise to subject matter jurisdiction are not subject to class treatment.”

Opening Brief of Appellants Aetna, et al., at 41 n.19. Consequently, we deem this

issue waived, and do not consider whether this claim satisfies the “predominance”

prong of Rule 23(b)(3). See Chavis v. Clayton County Sch. Dist., 300 F.3d 1288,

1291, n.4 (11th Cir. 2002) (“[I]ssues not argued on appeal are deemed waived, and

a passing reference in an appellate brief is insufficient to raise an issue.”).

In conclusion, the district court abused its discretion in certifying the

plaintiffs’ breach of contract, unjust enrichment, and prompt-pay claims because

individualized issues of law or fact predominate over common, classwide issues.
52
We do not reach whether the court should have certified a California Subclass

alleging violations of the California Business and Professions Code.

IV.

The preceding Parts focused exclusively on whether common issues of fact

and law stemming from the plaintiffs’ federal and state claims predominate over

individualized issues. We held that while the plaintiffs’ federal claims satisfy this

requirement, their state claims do not.11 We now turn to whether the plaintiffs’

federal claims satisfy the second prong of the Rule 23(b)(3) test—that “a class

action is superior to other available methods for the fair and efficient adjudication

of the [claims].” Our focus is not on the convenience or burden of a class action

suit per se, but on the relative advantages of a class action suit over whatever other

forms of litigation might be realistically available to the plaintiffs. See In re

Managed Care Litig., 209 F.R.D. 678, 692 (S.D. Fla. 2002) (noting that this factor

“requires the Court to determine whether there is a better method of handling the

controversy other than through the class action mechanism”); Carnegie v. Mut.

Sav. Life Ins. Co., No. CV-99-S-3292-NE, 2002 U.S. Dist. LEXIS 21396, at *76-

11
We also noted that the appellants failed to specifically challenge the district court’s
certification of a California Subclass on “predominance” grounds. Their claims regarding the
“superiority” of a class action similarly ignore the California Subclass. Consequently, we need
not consider this subclass at all in this appeal, and so the district court’s ruling in this regard
remains undisturbed (though not specifically affirmed for “law of the case” or “prior panel” rule
purposes).
53
77 (N.D. Ala. Nov. 1, 2002) (“It is only when [management] difficulties make a

class action less fair and efficient than some other method, such as individual

interventions or consolidation of individual lawsuits, that a class action is

improper.”) (quoting Herbert B. Newburg & Alba Conte, Newburg on Class

Actions § 4.32, at 4-125 (3d ed. 1992)) (alteration in original).

In many respects, the predominance analysis of Part II has a tremendous

impact on the superiority analysis of this Part for the simple reason that, the more

common issues predominate over individual issues, the more desirable a class

action lawsuit will be as a vehicle for adjudicating the plaintiffs’ claims. See

Motel 6, 130 F.3d at 1006 n.12 (“The predominance and efficiency criteria are of

course intertwined. When there are predominant issues of law or fact, resolution of

those issues in one proceeding efficiently resolves those issues with regard to all

claimants in the class.”); Shelley v. AmSouth Bank, No. 97-1170-RV-C, 2000 U.S.

Dist. LEXIS 11429, at *26 (S.D. Ala. July 24, 2000) (“[S]uperiority analysis is

intertwined with predominance analysis; when there are no predominant common

issues of law or fact, class treatment would be either singularly inefficient . . . or

unjust.”) (quotation marks omitted) (second alteration in original). Rule 23(b)(3)

contains a “non exhaustive” list of four factors courts should take into account in

making this determination, Miles v. Am. Online, Inc., 202 F.R.D. 297 (M.D. Fla.

2001):
54
 (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; [and]

(D) the difficulties likely to be encountered in the management of a
class action.

Fed. R. Civ. P. 23(b)(3). There is no reason to believe that the putative class

members in this case have any particular interest in controlling their own litigation,

so the first factor does not counsel against class certification. Similarly, there are

no class members separately pursuing other cases involving the same claims and

parties, see In re Managed Care Litig., 246 F. Supp. 2d 1363, 1364 (J.P.M.L. 2003)

(consolidating a separate lawsuit against CIGMA into this multidistrict litigation),

so the second specified factor does not aid the defendants, either. The parties focus

most of their discussion on the remaining two factors—the desirability of litigating

these claims in a single forum, and the manageability of such a large case. We

address each of these concerns in turn. We then turn to two additional arguments

against class certification raised by the defendants.

A.

The first factor the parties seriously contest is whether it is desirable to

concentrate this litigation in a single forum. Once the plaintiffs establish that
55
common issues of fact and law predominate over individualized issues, there are

typically three main reasons why it is desirable to litigate multiple parties’ claims

in a single forum.12 First, class actions “offer[] substantial economies of time,

effort, and expense for the litigants . . . as well as for the [c]ourt.” Terazosin Litig.,

220 F.R.D> at 700. Holding separate trials for claims that could be tried together

“would be costly, inefficient, and would burden the court system” by forcing

individual plaintiffs to repeatedly prove the same facts and make the same legal

arguments before different courts. Id.; see also Cheney v. Cyberguard Corp., 213

F.R.D. 484, 502 (S.D. Fla. 2003) (“It would be impracticable to permit individual

suits by each shareholder of Cyberguard stock during the relevant class period as it

is alleged that there are thousands of purchasers who have been injured by the

alleged wrongful acts of the Defendants.”); Upshaw v. Ga. Catalog Sales, Inc., 206

F.R.D. 694, 701 (M.D. Ga. 2002) (“[E]ven if sufficient incentive existed for

individual claimants to pursue their claims separately, class action treatment is far

superior to having the same claims litigated repeatedly, wasting valuable judicial

resources.”). Where predominance is established, this consideration will almost

12
We reject the claim that this factor “is relevant only when other class litigation has
already been commenced elsewhere.” Carnegie v. Mut. Sav. Life Ins. Co., No. CV-99-S-3292-
NE, 2002 U.S. Dist. LEXIS 21396, at *75 (N.D. Ala. Nov. 1, 2002) (quoting Herbert B.
Newburg & Alba Conte, Newburg on Class Actions § 4.31, at 4-124 (3d ed. 1992)). This factor
calls us to conduct a general examination of “the desirability of concentrating litigation in one
forum,” Pickett v. IBP, Inc., No. 96-A-1103-N, 2001 U.S. Dist. LEXIS 22453, at *33-34 (M.D.
Ala. Dec. 26, 2001), regardless of whether litigation is pending elsewhere.
56
always mitigate in favor of certifying a class.

Second, as the Supreme Court has recognized in a related context, class

actions often involve “an aggregation of small individual claims, where a large

number of claims are required to make it economical to bring suit. The plaintiff’s

claim may be so small, or the plaintiff so unfamiliar with the law, that he would not

file suit individually . . . .” Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 813,

105 S. Ct. 2965, 2975, 86 L. Ed. 2d 628 (1985); see also Amchem Prods., Inc. v.

Windsor, 521 U.S. 591, 617, 117 S. Ct. 2231, 2246, 138 L. Ed. 2d 689 (1997)

(noting that, in enacting Rule 23(b)(3), “the Advisory Committee had dominantly

in mind vindication of ‘the rights of groups of people who individually would be

without effective strength to bring their opponents into court at all.’”) (quoting

Benjamin Kaplan, A Prefatory Note, 10 B.C. Indus. & Com. L. Rev. 497, 497

(1969)); Montgomery v. New Piper Aircraft, Inc., 209 F.R.D. 221, 230 (S.D. Fla.

2002) (declining class certification in part because “there is nothing to indicate that

individual owners of these aircraft will be precluded from bringing separate legal

actions if they so desired”). This consideration supports class certification in cases

where the total amount sought by each individual plaintiff is small in absolute

terms. Cf. Managed Care Litig., 209 F.R.D. at 693 (rejecting the “[p]laintiffs’

assertion that the small size of each member’s claims makes class treatment appear

to be the only feasible method of adjudication” because “[e]ven small individual
57
claims under RICO can be feasible given the possibility of the award of treble

damages and attorneys’ fees”).13 It also applies in situations where, as here, the

amounts in controversy would make it unlikely that most of the plaintiffs, or

attorneys working on a contingency fee basis, would be willing to pursue the

claims individually. This is especially true when the defendants are corporate

behemoths with a demonstrated willingness and proclivity for drawing out legal

proceedings for as long as humanly possible and burying their opponents in

paperwork and filings.

Third, it is desirable to concentrate claims in a particular forum when that

forum has already handled several preliminary matters.14 See Lehocky v. Tidel

Techs., Inc., 220 F.R.D. 491, 510-11 (S.D. Tex. 2004) (“[T]he value of

concentrating litigation in this forum is great as the Court has already made several

rulings in this case thus far.”). In this case, various individual claims were

consolidated before the district court by the Panel on Multidistrict Litigation, and

the court has done a fine job in addressing a wide range of pretrial motions. While

such extensive work is by no means necessary for us to conclude that concentration

of the claims in a class action in a single forum is desirable, in this case it is

13
We hasten to add, however, that “the text of Rule 23(b)(3) does not exclude from
certification cases in which individual damages run high.” Windsor, 521 U.S. at 617, 117 S. Ct.
at 2246.
14
The fact that a court may not yet have made any progress in dealing with a class
action, however, is not a reason against certifying a class action.
58
impossible to overlook the significant efforts that have already been put into these

proceedings. Consequently, the most common factors for assessing whether it is

desirable for the plaintiffs’ claims to be litigated in a single forum point to class

certification in this case.

There are also several reasons courts commonly cite as to why it is

particularly undesirable to litigate a class’s claims in a single judicial forum.

Perhaps most importantly, we assess whether the potential damages available in a

class action are grossly disproportionate to the conduct at issue. Where the

defendant’s alleged behavior is deliberate or intentional, we have had no problem

allowing class actions to proceed. Where defendants are being sued for statutory

damages for unintentional acts under a strict liability standard, however, courts

take a harder look at whether a defendant deserves to be subject to potentially

immense liability. See Ratner v. Chem. Bank N.Y. Trust Co., 54 F.R.D. 412, 416

(S.D.N.Y. 1972) (declining to certify a class where a mandatory strict liability

statutory penalty scheme would lead to “horrendous, possibly annihilating

punishment”). Similar reasoning applies where damages are being sought for

technical violations of a “complex regulatory scheme, subject to different

reasonable interpretations,” London v. Wal-Mart Stores, Inc., 340 F.3d 1246, 1255

n.5 (11th Cir. 2003). In cases where “the defendants’ potential liability would be

enormous and completely out of proportion to any harm suffered by the plaintiff,”
59
we are likely to find that individual suits, rather than a single class action, are the

superior method of adjudication. Id.; see also Roper, 578 F.2d at 1114 (noting our

concern with “a fixed minimum penalty of a substantial amount for a technical

violation that, if magnified, would exact a punishment unrelated to statutory

purposes”) (citations omitted).

Although RICO allows for treble damages, these are tied to the actual harm

suffered by the plaintiffs; RICO does not guarantee a fixed amount of damages

regardless of the gravity of the defendants’ behavior. Furthermore, since RICO

violations must be intentional, there is no danger that the defendants will be subject

to an unjustly harsh verdict for accidental behavior. Finally, because RICO

violations are predicated upon serious federal criminal acts, this is not a case where

the plaintiffs are attempting to obtain a windfall based on minor or technical

violations of a complex regulatory scheme. Thus, the concerns that typically

mitigate against concentrating claims in a single forum do not apply in this case.

At least one district court in our circuit has suggested that, in considering

whether it is desirable to have all putative class members’ claims litigated in a

single forum, we should consider whether the theories under which they seek relief

are “immature”—that is, relatively new or innovative. In Jacobs v. Osmose, Inc.,

the district court held,

Class action treatment is not the superior method for handling this
60
 matter. A mass tort such as this cannot properly be certified without a
prior track record from which this Court would be able to draw the
information necessary to make the predominance analysis required
under Rule 23. Certification of an ‘immature’ tort results in a higher
than normal risk that the class action may not be superior to individual
adjudication. Any savings in judicial resources in this case is
speculative . . . .

213 F.R.D. 607, 618 (S.D. Fla. 2003); see also Castano, 84 F.3d at 749 (“In the

context of an immature tort, any savings in judicial resources is speculative, and

any imagined savings would be overwhelmed by the procedural problems that

certification of a sui generis cause of action brings with it.”).

None of our cases has ever held the “maturity” of a tort to be a proper

consideration in the certification decision. Without delving into whether the

plaintiffs’ claims in this case are sufficiently new or innovative to count as an

“immature” tort under the Osmose standard, we reject this as a legitimate

consideration in making a “superiority” determination. There is no reason why,

even with so-called “immature torts,” district and circuit courts cannot make the

necessary determinations under Rule 23 based on the pleadings and whatever

evidence has been gathered through discovery. Moreover, there is no basis in Rule

23 for arbitrarily foreclosing plaintiffs from pursuing innovative theories through

the vehicle of a class action lawsuit. Particularly when the considerations

discussed at the beginning of this Section would preclude most plaintiffs from

individually litigating their personal claims, a class action may be the only way that
61
most people can have their rights—even “innovative” or “immature”

rights—enforced. Furthermore, if an “immature tort” truly raises a variety of new

or complicated legal questions, then those questions constitute significant common

issues of law. Their resolution in a single class-action forum would greatly foster

judicial efficiency and avoid unnecessary, repetitious litigation. For these reasons,

it is desirable to litigate the plaintiffs’ federal claims in a single forum.

B.

The final factor expressly specified in Rule 23(b)(3) that courts must weigh

in deciding to certify a class action is whether certification will cause

manageability problems. See Perez v. Metabolife Int’l, Inc., 218 F.R.D. 262, 273

(S.D. Fla. 2003) (“Severe manageability problems are a prime consideration that

can defeat a claim of superiority.”). This concern will rarely, if ever, be in itself

sufficient to prevent certification of a class. “Courts are generally reluctant to deny

class certification based on speculative problems with case management.”

Managed Care Litig., 209 F.R.D. at 692. Even potentially severe management

issues have been held insufficient to defeat class certification. See, e.g., Carnegie,

2002 U.S. Dist. LEXIS 21396, at *77 (“There is no question that this action, if

certified, would present management difficulties. . . . [T]hose management issues,

although substantial, do not counsel against certifying the class under Rule

23(b)(3).”); In re Thermagenics Corp. Sec. Litig., 205 F.R.D. 687, 697 (N.D. Ga.
62
2002) (“Certification cannot be denied because the number of potential class

members makes the proceeding complex or difficult.”).

In this case, the district court concluded that there were no “unsurmountable

difficulties” with managing the case. Managed Care Litig., 209 F.R.D. at 696.

While recognizing that “[r]eliance, causation and damages may create

complications during the course of this litigation,” the court found that “the

potential difficulties are nowhere near the magnitude of problems that could arise

from 600,000 separate actions.” Id. at 696-97.

In reviewing this determination, we recall two points generally applicable

throughout this “superiority” analysis. First, we are not assessing whether this

class action will create significant management problems, but instead determining

whether it will create relatively more management problems than any of the

alternatives (including, most notably, 600,000 separate lawsuits by the class

members). Second, where a court has already made a finding that common issues

predominate over individualized issues, we would be hard pressed to conclude that

a class action is less manageable than individual actions. See, e.g., Terazosin

Litig., 220 F.R.D. at 700 (certifying class because “[m]ultiple lawsuits brought by

thousands of consumers and third-party payers in seventeen different states would

be costly, inefficient, and would burden the court system”); cf. Shelley, 2000 U.S.

Dist. LEXIS 11429, at *28 (“[T]he complexity of the individual issues weighs
63
further against manageability of the class action. Most if not all of the individual

issues identified above would require extensive individualized examination of each

class member.”).

While each plaintiff must prove some individualized factual issues to

support his RICO claim,

[t]here are a number of management tools available to a district court
to address any individualized damages issues that might arise in a
class action, including: (1) bifurcating liability and damage trials with
the same or different juries; (2) appointing a magistrate judge or
special master to preside over individual damages proceedings; (3)
decertifying the class after the liability trial and providing notice to
class members concerning how they may proceed to prove damages;
(4) creating subclasses; or (5) altering or amending the class.

In re Tri-State Crematory Litig., 215 F.R.D. 660, 699 n.28 (N.D. Ga. 2003)

(quoting In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 141 (2d

Cir. 2001)).

In light of these considerations, we hold that the district court acted well

within its discretion in concluding that it would be better to handle this case as a

class action instead of clogging the federal courts with innumerable individual suits

litigating the same issues repeatedly. The defendants have failed to point to any

specific management problems—aside from the obvious ones that are intrinsic in

large class actions—that would render a class action impracticable in this case.

C.

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 Moving beyond the factors enumerated in Rule 23(b)(3), the defendants

offer two additional reasons why a class action is inferior to a host of individual

suits in resolving these disputes. First, they maintain that “a single jury, in a single

trial, should not decide the fate of the managed care industry.” Opening Brief of

Appellants Aetna, et al., at 45. Courts have occasionally found the impact that a

class action suit could potentially have on an industry to be a persuasive reason to

prohibit a class action from proceeding. In Rhone, for example, one of the reasons

the Seventh Circuit granted a writ of mandamus ordering a district court to

decertify a class was that, with a class action,

[o]ne jury, consisting of six persons . . . will hold the fate of an
industry in the palm of its hand. This jury . . . [may] hurl the industry
into bankruptcy. . . . [This] need not be tolerated when the alternative
exists of submitting an issue to multiple juries constituting in the
aggregate a much larger and more diverse sample of decision-makers.

51 F.3d at 1300.

We find such reasoning unpersuasive and contrary to the ends of justice.

This trial is not about the managed care industry; it is about whether several large

HMOs conspired to systematically underpay doctors. The issue is not whether

managed care is wrong, but whether particular managed care companies failed to

live up to their agreements. The plaintiffs are seeking nothing more than the

compensatory damages to which they are contractually entitled, and the treble

damages to which they are statutorily entitled.
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 We have nothing but the defendants’ conclusory, self-serving speculations to

support their claim that this trial could devastate the managed care industry.

“Because considering the financial impact of a judgment presupposes success on

the merits and requires the trial court to express an opinion on the harshness Vel

non of a particular remedy prior to trial itself, it ought to be allowed only in

extreme cases.” Roper, 578 F.2d at 1114. More importantly, however, if their

fears are truly justified, the defendants can blame no one but themselves. It would

be unjust to allow corporations to engage in rampant and systematic wrongdoing,

and then allow them to avoid a class action because the consequences of being held

accountable for their misdeeds would be financially ruinous. We are courts of

justice, and can give the defendants only that which they deserve; if they wish

special favors such as protection from high—though deserved—verdicts, they must

turn to Congress.

D.

Second, the defendants contend that a class action creates “unfair and

coercive pressures on [them]” to settle that are unrelated to the merits of the

plaintiffs’ claims. They point to Castano, in which the Fifth Circuit decertified a

class of cigarette smokers seeking to sue tobacco companies in part because

[i]n the context of mass tort class actions, certification dramatically
affects the stakes for defendants. Class certification magnifies and
strengthens the number of unmeritorious claims. Aggregation of
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 claims also makes it more likely that a defendant will be found liable
and results in significantly higher damage awards. In addition to
skewing trial outcomes, class certification creates insurmountable
pressure on defendants to settle, whereas individual trials would not.
The risk of facing an all-or-nothing verdict presents too high a risk,
even when the probability of an adverse judgment is low. These
settlements have been referred to as judicial blackmail.

84 F.3d at 746 (citations omitted); accord Griffin v. GK Intelligent Sys., 196

F.R.D. 298, 305 (S.D. Tex. 2000).

The defendants also tear out of context quotes from Supreme Court cases.

For example, they point out that the Supreme Court once observed that

“[c]ertification of a large class may so increase the defendant’s potential liability

and litigation costs that he may find it economically prudent to settle and to

abandon a meritorious defense.” Coopers & Lybrand v. Livesay, 437 U.S. 463,

476, 98 S. Ct. 2454, 2462, 57 L. Ed. 2d 351 (1978). What the defendants

conveniently omitted from their brief, however, is the fact that Livesay had nothing

to do with the standards articulated in Rule 23(b)(3); it addressed only whether

class certification decisions were immediately appealable prior to the enactment of

Rule 23(f). See id. at 477, 98 S. Ct. at 2462 (“[T]he fact that an interlocutory order

[denying class certification] may induce a party to abandon his claim before final

judgment is not a sufficient reason for considering it a ‘final decision’ within the

meaning of § 1291.”).

Mere pressure to settle is not a sufficient reason for a court to avoid
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certifying an otherwise meritorious class action suit. See MasterMoney Antitrust

Litig., 280 F.3d at 145 (“The effect of certification on parties’ leverage in

settlement negotiations is a fact of life for class action litigants. While the sheer

size of the class in this case may enhance this effect, this alone cannot defeat an

otherwise proper certification.”); Waste Mgmt. Holdings, Inc. v. Mowbray, 208

F.3d 288, 295 (1st Cir. 2000) (“[N]o matter how strong the economic pressure to

settle, a Rule 23(f) application, in order to succeed, also must demonstrate some

significant weakness in the class certification decision.”).

Indeed, settlement pressures have already been taken into account in the

structure of Rule 23; such pressures were the main reason behind the enactment of

Rule 23(f), which allowed the defendants to pursue this appeal in the first place.

See id. at 148 (“One sound basis for granting jurisdiction under Rule 23(f) is . . .

the circumstance that the class certification places inordinate or hydraulic pressure

on defendants to settle, avoiding the risk, however small, of potentially ruinous

liability.”) (quotation marks and citation omitted); see, e.g., Isaacs v. Sprint Corp.,

261 F.3d 679, 681 (7th Cir. 2001) (“If the order of certification stands, the pressure

on [the defendant] to settle will be enormous. We conclude that this is an

appropriate case in which to accept a Rule 23(f) appeal and we proceed to the

merits . . . .”). Having already used settlement pressure as a basis for getting into

this court on interlocutory appeal, the defendants cannot continue to rely upon it as
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the basis for overturning the underlying certification ruling.

Moreover, while affirming certification may induce some defendants to

settle, overturning certification may create similar “hydraulic” pressures on the

plaintiffs, causing them to either settle or—more likely—abandon their claims

altogether. See In re Diet Drugs Prod. Liab. Litig., 93 Fed. Appx. 345, 350 (3d Cir.

2004) (“Orders granting class certification may expose defendants to enormous

liability while orders denying certification may effectively eviscerate the plaintiffs’

ability to recover. In such cases, the pressure to settle that is imposed on the

dissatisfied party may be grave and, effectively, unreviewable.”); Newton v.

Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 165 (3d Cir. 2001)

(holding that while “some of the securities claims pressed by the putative class

members may be too small to survive as individual claims[,] . . . certifying the

class may place unwarranted or hydraulic pressure to settle on defendants. Either

way, an adverse certification decision will likely have a dispositive impact on the .

. . litigation.”). Because one of the parties will generally be disadvantaged

regardless of how a court rules on certification, this factor should not be weighed.

V.

For the reasons articulated above, we affirm the district court’s grants of

class certification as to all RICO-related claims, though we urge it to reconsider the

precise scope of the classes, and reverse the district court’s grant of class
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certification as to all state-law claims other than the claim based on California law.

We do not disturb the district court’s certification of the California Subclass

because the defendants did not specifically challenge that on appeal.

Given the number of parties involved in this case, it threatens to degenerate

into a Hobbesian war of all against all. Nevertheless, we feel that the district

court—a veritable Leviathan—will be able to prevent the parties from regressing to

a state of nature. One can only hope that, on remand, the proceedings will be short,

though preferably not nasty and brutish.

SO ORDERED.

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