Bittinger v. Tecumseh Products Co.

123 F.3d 877, 1997 WL 460744

• Court: Court of Appeals for the Sixth Circuit
• Decided: August 14, 1997
• Docket: Nos. 96-1231, 96-1233, 96-1234 and 96-1260
• Status: Published

Opinions

MERRITT, J., delivered the opinion of the court, in which GIBSON, J., joined. RYAN, J. (pp. 885-90), delivered a separate dissenting opinion.

MERRITT, Circuit Judge.

SUMMARY

In this ERISA and Labor-Management Relations Act class action, the plaintiff class, made up of former hourly workers at the Tecumseh Products Company, appeals the district court’s dismissal of its claims based on the doctrine of res judicata. The plaintiffs also appeal the district court’s rejection of their jury trial request. The defendants cross-appeal on the theory that the district court should not have certified the plaintiff class. We decide in order the questions of (1) whether under the doctrine of “virtual representation” res judicata should be expanded to cover plaintiffs who were not parties or in “privity” with a party in a previous action; (2) whether the plaintiffs are entitled to a jury trial in an action for a declaration and award of retirement benefits; and (3) whether certification of a class action is proper under Rule 23 when the overall question of entitlement to retirement benefits is common to all class members but the availability of defenses and the amount of benefits may vary.

I.

Charles Bittinger and the other members of the plaintiff class are retired hourly workers of the defendant, Tecumseh Products Company. A series of collective bargaining agreements governed the relationship between Tecumseh and the plaintiffs’ former union, the United Product Workers Union. In June of 1991, after a collective bargaining period in which the union declared that it would no longer represent the interests of the retirees, Tecumseh notified the retirees that their insurance benefits would be terminated upon the expiration of the 1988-1991 collective bargaining agreement. The company simultaneously offered them life and health insurance under a new group plan, only partially funded by the company. In order to participate in the new, partially funded plan, they were required to sign releases of claims against the company. Some but not all of the eventual class members signed the releases.

The retirees soon organized in response to the company’s actions. On June 5, 1991, they called a mass meeting attended by 500 retirees. A formal organization, the Unified Tecumseh Products Hourly Retirees, grew out of this meeting. The organization became a Michigan nonprofit corporation. Its Articles of Incorporation state as the organization’s purpose “[t]he unification of approximately 1200 hourly retirees from [the company] to seek legal advice for the reinstatement of promised benefits.” Articles of Incorporation (J.A. 1428). Eventually, three of its members, Spaulding, Carroll, and Bishop, brought a lawsuit against Tecumseh. During this litigation, the Unified Retirees created mailing lists, held meetings, and collected money from its members — including Bittinger, the named plaintiff in the instant case, who contributed $20 several times — to support the activities of the group, including the suit. The group had attorneys come speak to its members and authorized the inclusion of its members as a class in the suit. It sent a newsletter to its members announcing that a suit had been filed and requesting money and affidavits. In early 1993, however, the district court in the Spaulding litigation granted Tecumseh’s motion for summary judgment and dismissed the action without a trial. Because it dismissed the case, the district court did not reach the plaintiffs’ motion for class certification, and the class of retirees was never certified.

Shortly thereafter, the named plaintiff in this suit, Bittinger, brought the current action under ERISA, 29 U.S.C. §§ 1001-1461, and the Labor-Management Relations Act, 29 U.S.C. §§ 141-187. The district court granted the plaintiffs motion for class certification under Rule 23, but then granted the defendant’s motion for summary judgment on the ground that the suit is barred by the doctrine of res judicata (claim preclusion). The plaintiffs appeal the district court’s grant of summary judgment and its decision that they are not entitled to a jury trial on their statutory claims. Tecumseh cross-appeals on the class certification issue.

II.

Tecumseh Products argues, and the court below held, that the current suit should be barred under the doctrine of res judicata, or claim preclusion. Under this Court’s articulation of res judicata, a claim will be barred by prior litigation if the following elements are present: (1) a final decision on the merits by a court of competent jurisdiction; (2) a subsequent action betiveen the same parties or their “privies”; (3) an issue in the subsequent action which was litigated or which should have been litigated in the prior action; and (4) an identity of the causes of action. Kane v. Magna Mixer Co., 71 F.3d 555, 560 (6th Cir.1995), cert. denied, — U.S. —, 116 S.Ct. 1848, 134 L.Ed.2d 949 (1996); Sanders Confectionery Prods. v. Heller Financial, Inc., 973 F.2d 474, 480 (6th Cir.1992).

It is clear that the Spaulding litigation cannot be considered a prior action between the same parties, because the class was not certified in Spaulding and because neither the plaintiff nor the Unified Tecumseh Products Hourly Retirees organization became parties in either case. Thus, our focus in the instant case is only on the scope of res judicata’s “privity” element.

Last Term, in a unanimous opinion written by Justice Stevens, the Supreme Court articulated principles of due process governing the permissible constitutional scope of the doctrine of res judicata. Richards v. Jefferson County, — U.S. —, 116 S.Ct. 1761, 135 L.Ed.2d 76 (1996). The Supreme Court of Alabama had held that the taxpayer plaintiffs, who contested the constitutionality of a local occupational tax, were barred by a previous judgment by the Alabama Court upholding the tax. The United States Supreme Court found that the Alabama Court’s decision violated due process because the plaintiffs there were not parties to the previous proceedings and because, like the plaintiffs in the instant case, they were not members of a certified class, nor did they control the previous litigation.

In the course of its decision, the Supreme Court, citing with approval the Restatement of Judgments, said:

[TJhese principles [of res judicata] do not always require one to have been a party to a judgment in order to be bound by it. Most notably, there is an exception when it can be said that there is “privity” between a party to the second case and a party who is bound by an earlier judgment. For example, a judgment that is binding on a guardian or trustee may also bind the ward or the beneficiaries of the trust. Moreover, although there are clearly constitutional limits on the “privity” exception, the term “privity” is now used to describe various relationships between litigants that would not have come within the traditional definition of the term. See generally Restatement (Second) of Judgments, ch. 4 (1980) (Parties and Other Persons Affected by Judgments).

Id. at —, 116 S.Ct. at 1766.

The “privity” section of the Restatement, the section referred to with approval in Richards, is section 41 of the Restatement (Second) of Judgments. It does not permit the extension of the doctrine to the instant case because the plaintiff was not a class member bound by a previous adjudication and does not fit any other category of persons “represented” by a party in the previous action:

Person Represented by a Party

(1) A person who is not party to an action but who is represented by a party is bound by and entitled to the benefits of a judgment as though he were a party. A person is represented by a party who is:

(a) The trustee of an estate or interest of which the person is a beneficiary; or

(b) Invested by the person with authority to represent him in an action; or

(c) The executor, administrator, guardian, conservator, or similar fiduciary manager of an interest of which the person is a beneficiary; or

(d) An official or agency invested by law with authority to represent the person’s interest; or

(e) The representative of a class of persons similarly situated, designated as such with the approval of the court, of which the person is a member.

Restatement (Seoond) of Judgments § 41(1) (1980) (emphasis added).

After referring to the Restatement, the Court noted that “in addition,” the Court in Martin v. Wilks, 490 U.S. 755, 761-62, 109 S.Ct. 2180, 2184-85, 104 L.Ed.2d 835 (1989), recognized “an exception to the general rule when, in certain limited circumstances, a person, although not a party, has his interests adequately represented by someone with the same interests who is not a party.” Richards, — U.S. at —, 116 S.Ct. at 1766. For this proposition, the Court invoked Hansberry v. Lee, 311 U.S. 32, 41-42, 61 S.Ct. 115, 117-18, 85 L.Ed. 22 (1940), Rule 23 of the Federal Rules of Civil Procedure, and Montana v. United States, 440 U.S. 147, 154-55, 99 S.Ct. 970, 973-74, 59 L.Ed.2d 210 (1979). None of this authority supports the broad notion of “virtual representation” upon which the district court relied. Indeed, Rule 23 in particular governs cases such as the instant one, where an individual is said to represent the interests of a class. Here, the requirements of Rule 23 were not met: The Spaulding court did not certify the ease as a class action.

In deciding the instant case below, the district court did not have the benefit of the Supreme Court’s opinion in Richards giving a more narrow scope to the doctrine of res judicata than was previously thought to be the case under the so-called “virtual representation” standard recently developed by some courts. See, e.g., NAACP v. Hunt, 891 F.2d 1555 (11th Cir.1990); Aerojet-General Corp. v. Askew, 511 F.2d 710 (5th Cir.1975). The “virtual representation” standard converts the traditional doctrine of res judicata from a relatively clear set of rules to a vague principle relying on balancing the equities as a result of a close inspection and analysis of the relationship between the parties in each individual case. A court attempting to apply “virtual representation” must examine the relationship between the parties to the current suit and parties to the previous suit and look for and balance a variety of elements— including whether the facts demonstrate a close nonlitigating relationship, participation, apparent acquiescence, discussions about the first action, deliberate maneuvering to avoid the effects of the first action, and an express or implied legal relationship in which parties to the first suit are said to be “accountable” to parties to the second. As the Court said in Gonzalez v. Banco Central Corp., 27 F.3d 751 (1st Cir.1994), the doctrine “is best understood as an equitable theory rather than as a crisp rule with sharp corners and clear factual predicates, such that a party’s status as a virtual representative must be determined on a case-by-case basis.” Id. at 756. See also Tyus v. Schoemehl, 93 F.3d 449, 454 (8th Cir.1996), cert. denied, — U.S. —, 117 S.Ct. 1427, 137 L.Ed.2d 536 (1997) (“Because of the fact-intensive nature of these inquiries, there is no clear test that can be employed to determine if virtual representation is appropriate.”).

“Virtual representation” is said by some scholars to be a useful tool for broadening the finality of judgments and enhancing the efficient administration of justice. Bone, Rethinking the “Day in Court” Ideal and Non-Party Preclusion, 67 N.Y.U. L.Rev. 193, 239 (1992) (discussing an efficiency-based theory of preclusion). Ironically, however, its expansion increases the burden on judges, who must apply its multi-factored balancing test to the facts of each case. In this area of the law that must be applied frequently, “crisp rules with sharp corners” are preferable to a round-about doctrine of opaque standards easily manipulated to reach a preferred result. Rules are more predictable and less elastic than standards and “promote economies for the legal decisionmaker by minimizing the elaborate, time-consuming, and repetitive application of background principles to facts.” Sullivan, The Supreme Court, 1991 Term—Foreword: The Justices of Rules and Standards, 106 Haev.L.Rev. 22, 63 (1992). Rules are the normal method used in a jurisprudence of judicial restraint; broad standards and balancing tests are the usual mechanism of a jurisprudence that allows individual judges to choose for themselves the preferred result in each case and to give expression to their feelings, intuition, and sense of justice. Broad standards are often useful and necessary in new areas of the law, particularly those new areas that legislative bodies direct courts to enter for the first time in order to regulate a perceived social problem, as well as in areas of law that traditionally sounded in equity.

“Virtual representation’s” intense case-by-case analysis is particularly undesirable in circumstances where its application would replace settled, rule-like procedures. In eases such as the instant case, these procedures already exist in the form of Rule 23. The application of the doctrine of virtual representation in these circumstances would create an end run around the limitations of Rule 23, and would as a result both avoid its limitations (which are explicitly grounded in due process) and replace a clear rule with an unruly standard. Such a result would defeat the purposes of both res judicata and Rule 23.

This Court’s only other examination of virtual representation deserves comment. In Becherer v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 43 F.3d 1054 (6th Cir.1995), Judge Kennedy reviewed scholarly treatment of virtual representation and rejected the lower court’s overly broad application of the doctrine. The Court remanded the case for factual findings under “the narrower theory of virtual representation articulated above.” Id. at 1071. It is not clear from the Court’s discussion whether this narrower theory was to be broader than the Restatement sections cited with approval in Richards. In any case, however, the Supreme Court’s subsequent decision in Richards, which requires a more limited analysis subject to the rules articulated in the Restatement and Rule 23, has since intervened, and Richards binds us to a rule of res judicata limited to parties and their “privities.” It may not be extended, as would be the case under a broad “virtual representation” doctrine, to a class never certified.

Under the proper test — that of the Restatement and Rule 23 — the plaintiffs in the instant case are not precluded from pursuing their claims. Section 41 clearly requires “approval of the court” for a representative of a class to “represent,” for privity purposes, later plaintiffs. Restatement (Seo-ond) of Judgments § 41 (1980). Contrary to the defendants’ arguments in a supplemental briefing to this Court, § 40 of the Restatement does not imply a contrary result. Section 40 provides: “A person who agrees to be bound by the determination of issues in an action between others is bound in accordance with the terms of the agreement.” Id. § 40. Here, no such agreement exists. While it is true that one of the Restatement’s comments suggests that an agreement may be implied, see id. cmt. b, “no such agreement should be inferred except upon the plainest circumstances.” Id. (emphasis added). The illustration found in comment b is completely inapposite to this case. Moreover, the facts in this case do not support such an inference. Indeed, during the Spaulding litigation Bittinger asked his current counsel about pursuing his own cause of action. This fact suggests that. Bittinger did not believe Spaulding, Carroll, and Bishop were representing his interests. Tecumseh and the district court conclude from the fact that Bittinger then waited to bring his own suit that he expected to benefit from the Spaulding suit if it was successful, but their reasoning is flawed. Had the class been certified, Bittinger would admittedly have benefitted, and had the class lost would today be bound by that decision. But the class was not certified, and because the court granted Tecumseh’s summary judgment motion before ruling on class certification, Bit-tinger and other putative class members had no opportunity to litigate their claims in that action. Thus, we cannot conclude that Bit-tinger’s failure to bring his own suit implies that he agreed to be bound by the Spaulding litigation.

III.

The second issue in this case is whether the plaintiffs are entitled to a jury trial for their claims. The plaintiffs provide two statutory bases for their claims: the Labor-Management Relations Act § 301, which allows suits by labor organizations to enforce the provisions of the Act; and ERISA § 502(a)(1)(B), which allows a person to bring a civil action to recover benefits due under a plan or to enforce or clarify rights.

Whether the plaintiffs are entitled to a jury trial to enforce these provisions depends on whether their claims are best characterized as legal or equitable under the familiar two-part test of Tull v. United States, 481 U.S. 412, 419, 107 S.Ct. 1831, 1836, 95 L.Ed.2d 365 (1987). This test requires (1) a historical determination, which considers whether the modern statutory cause of action most nearly resembles historical actions in law or equity, and (2) an examination of the nature of the relief sought. Chauffeurs, Teamsters and Helpers Local 391 v. Terry, 494 U.S. 558, 565, 110 S.Ct. 1339, 1344, 108 L.Ed.2d 519 (1990) (plurality opinion); Tull, 481 U.S. at 419, 107 S.Ct. at 1836.

The plaintiffs erroneously contend that their claims most nearly resemble claims for breach of contract, are legal in nature, and hence support a jury right. With respect to the plaintiffs’ claim under the LMRA § 301, it is true that the Supreme Court has concluded that a jury trial right exists in some situations under § 301. In Chauffeurs, Teamsters and Helpers Local 391 v. Terry, a union sought back pay in an action for breach of the duty of fair representation. Though the search for an adequate 18th-century analog revealed both legal and equitable aspects, the Court found the type of relief sought legal in nature, and concluded that a jury right exits. 494 U.S. at 573, 110 S.Ct. at 1348. However, the nature of the relief requested in this case much more nearly resembles the relief requested in Golden v. Kelsey-Hayes Co., 73 F.3d 648, 662 (6th Cir.1996), cert. denied, — U.S. —, 117 S.Ct. 49, 136 L.Ed.2d 13 (1996), which involved an action to reinstate health care benefits and obtain damages sustained as a result of the defendants’ refusal to pay health care benefits. The Golden court held that this type of action was equitable in nature, and hence that no right to a jury trial existed. Id. at 661. The complaint in Golden, like the complaint in the instant case, sought some relief couched in the language of damages. For example, the Golden plaintiffs sought “damages equal to all costs and expenses sustained by class members ... as a result of their refusal to provide the health care benefits negotiated by Kelsey-Hayes and the UAW....” Id. at 661. Similarly, the instant plaintiffs seek “damages in the form of loss of benefits, the cost of premiums incurred under the unilaterally amended Insurance Plan, expenses incurred in purchasing private coverage, and/or the costs incurred of uninsured medical bills.” Complaint at 7 (J.A. at 30). The Golden court explained that “[a] court does not err in denying a jury trial where the monetary award sought is incidental to, or intertwined with, equitable relief. It does err when it denies a jury trial because of its determination that legal issues in the case are merely incidental to equitable ones.” Golden, 73 F.3d at 661. The court, based on a complaint similar to that in the instant case, held that the relief sought was within the former situation. Id. Similarly, we hold that the plaintiffs’ request for monetary relief here is incidental and intertwined with their fundamental request for a declaration that they are entitled to fully-funded retiree benefits. The latter claim is clearly equitable in nature. It most closely resembles an action in chancery by beneficiaries to interpret and enforce a trust agreement or for the impressment of a constructive trust, an action historically brought before the chancellor, not before the court of common pleas. Thus the plaintiffs are not entitled to a jury trial on their LMRA § 301 claim.

The plaintiffs also seek relief under ERISA § 502(a)(1)(B). The Supreme Court and this circuit have held that suits under § 502(a)(3), which allows actions for injunctions or other equitable relief, are not entitled to jury trials. See Mertens v. Hewitt Assocs., 508 U.S. 248, 260, 113 S.Ct. 2063, 2070, 124 L.Ed.2d 161 (1993); Bair v. General Motors Corp., 895 F.2d 1094, 1096-97 (6th Cir.1990). The plaintiffs, however, argue that § 502(a)(1)(B), which allows actions for benefits due and for clarification of rights, should be treated differently. While they may be correct in noting that some claims under ERISA — perhaps even claims under § 502(a)(1)(B) — may carry with them a jury trial right, we need not decide this issue, because our analysis with respect to the plaintiffs’ LMRA claim is equally true here: Their claim is fundamentally a claim for benefits analogous to an action to enforce a trust and hence clearly equitable in nature. Their related requests for damages do not constitute separate claims that warrant their own jury right analysis: Rather, they are intertwined with the claim for benefits. The plaintiffs are thus also not entitled to a jury trial on their ERISA claim.

IV.

The defendants argue, in their cross-appeal, that the district court should not have certified the class under Rule 23 of the Federal Rules of Civil Procedure. Specifically, they contend that there are no questions of law or fact common to the class and that the claims and defenses of the representative parties are atypical of the claims and defenses of the class.¹ Within the confines of Rule 23, the district court has broad discretion in deciding whether to certify the class. In re American Medical Systems, Inc., 75 F.3d 1069, 1078-79 (6th Cir.1996). We review the district court’s judgment for abuse of discretion.

Under Rule 23(a), a class action may not be maintained unless certain preconditions are met. The second of these requires the presence of questions of law or fact that are common to the class. Fed.R.Civ.P. 23(a). Rule 23(a) simply requires a common question of law or fact. See Forbush v. J.C. Penney Co., 994 F.2d 1101, 1106 (5th Cir.1993). In the instant case, each class member claims that the original collective bargaining agreement guaranteed them lifetime, fully-funded benefits. This common question is all that is required under the Rule.

The third prerequisite to a class action under Rule 23(a) is the requirement that “the claims or defenses of the representative parties are typical of the claims or defenses of the class.” Fed.R.Civ.P. 23(a). The defendants first contend that the required typicality of claims is not met. They point out that some but not all of the class members retired before the Sixth Circuit held that retiree benefits were mandatory subjects of bargaining. They also note that approximately two-thirds of the class signed releases and enrolled in Tecumseh’s alternate, partially-funded plan. Finally, Tecumseh argues that the representations of company management on which the plaintiffs rely (most but not all of which were oral) were not uniformly communicated to all class members. All this may be true, but it does not disqualify the class under Rule 23(a). The plaintiffs’ evidence appears to follow a pattern, and the people they claim made the representations are largely the same people. More importantly, Bittinger' — like each class member— contends that Tecumseh originally planned to provide lifetime, fully-funded benefits to retirees, as a general matter. That the evidence varies from plaintiff to plaintiff would not affect this basic claim (though the district court correctly notes that individual estoppel claims might be affected). See In re American Medical Systems, 75 F.3d at 1083 (holding that named plaintiffs’ claim is typical if it arises from the same course of conduct).

The defendants also contend that the class should not have been certified under Rule 23(a)(3) because the plaintiffs’ claims would be subject to varied defenses. In particular, some class members, including Bittinger, signed papers releasing the company from liability when they accepted the partially-funded alternative plans. Not all of the class members signed these releases. Again, however, this difference is not enough to justify rejection of class certification. See Finnan v. L.F. Rothschild & Co., 726 F.Supp. 460 (S.D.N.Y.1989) (certifying class despite the fact that some but not all class members had signed arbitration agreements); see also Forbush, 994 F.2d at 1106 (noting that test for typicality, like commonality, is not demanding and does not require identicality). It may be that the best remedy to both the purportedly atypical claims and defenses would be to create sub-classes. Rule 23 does not require such an action at this stage, however, and we express no opinion on this issue as the district court expressly left this possibility open. Opinion at 3-4 (J.A. at 64-65).

Finally, the defendants argue that the varying level of injury among class members should preclude class certification. In particular, they contend that because Bittinger accepted benefits under the partially-funded alternate plan, and because he “did not protest increased benefit costs” after 1984, he did not suffer the same injury suffered by all members of the class. This argument is also without merit. Though the level of claimed injury may vary throughout the class — a common feature of class actions routinely dealt with at a remedial phase — the basic injury asserted is the same: Tecumseh violated the terms of the collective bargaining agreements by unilaterally terminating fully-funded lifetime benefits. As noted above, those differences that exist — including the individual estoppel claims — can be dealt with through methods other than denial of class certification, at a later stage in the proceeding.

Y.

The defendants raise on appeal numerous additional grounds for relief, most of which are related to the merits of the plaintiffs’ claims. As the district court has not ruled on these alternative grounds, the district court will be given an opportunity to rule on them on remand.

CONCLUSION

For the foregoing reasons, the judgement of the district court is AFFIRMED in part, REVERSED in part, and REMANDED for proceedings consistent with this opinion.

1 . Tecumseh also contends that the plaintiffs failed to address the issue of whether joinder of all members of the class is impracticable, a requirement under Rule 23(a). This contention is frivolous. Rule 23(a) requires the court to find that "the class is so numerous that joinder of all members is impracticable.” F.R. Civ. P. 23. The class is composed of over 1100 retirees. The district court explicitly found, and we agree, that joinder of so many parties would be impracticable. To reach this conclusion is to state the obvious and does not constitute the adoption of a "strict numerical test.” See Senter v. General Motors Corp., 532 F.2d 511, 523 n. 24 (6th Cir.1976).