By:  Mark Casciari and Sara Eber

On December 4, 2012, Judge Richard Posner of the Court of Appeals for the Seventh Circuit authored yet another decision interpreting the holding and rationale in Wal-Mart Stores, Inc. v. Dukes in the context of ERISA defined benefit plan claims.  In Johnson v. Meriter Health Services Employee Retirement Plan, No. 12-2216, the Seventh Circuit affirmed the certification of an ERISA class action under Fed. R. Civ. P. 23(b)(2).  We previously discussed Judge Posner’s decision in McReynolds v. Merrill Lynch, a Title VII case, opining that McReynolds opened the Rule 23(c)(4) issue certification door to allow disparate impact Rule 23(b)(2) certification despite individualized damage issues.  Yesterday’s decision in Meriter Health Services Employee Retirement Plan further expands the post-Dukes use of Rule 23(b)(2), where Rule 23(a) preconditions are met, to certify class claims.  The panel hearing the case included Judges Wood and Tinder; notably Judge Wood also served on the McReynolds panel.

In  Meriter Health Services Employee Retirement Plan, the district court certified a class of more than 4,000 participants, consisting of current and former participants in the Meriter Health Services defined benefit cash balance pension plan, who claimed they were not credited with the benefits to which they were entitled over the course of a 23-year period.  The class members raised varying claims depending upon their employment status and the nature and form of the benefits they received, or expected to receive, including interest credit “whipsaw,” “cut-back” and “wear-away” claims.  Given the myriad complaints, in certifying the class, the district court divided the participants into 10 subclasses.  Meriter’s appeal under Rule 23(f) challenged the propriety of the class certification.

Meriter primarily argued that plaintiffs could not bring a Rule 23(b)(2) class action seeking declaratory or injunctive relief and monetary relief, citing Dukes.  Meriter focused on the Dukes rationale that a Rule 23(b)(2) class could be certified only if a single injunction or declaratory judgment would provide relief to all subclasses.  Meriter also argued that monetary relief claims are inconsistent with Rule 23(b)(2) certifications, “at least where (as here) the monetary relief is not incidental to the injunctive or declaratory relief.” Dukes,131 S. Ct. at 2557.

The Seventh Circuit rejected both arguments.  First, it interpreted Dukes’ “single injunction/declaratory judgment” statement not to apply where each subclass member has the same claim.  It left open the possibility that Meriter later could establish later that subclass members’ relief differed, at which time the district court could decertify that subclass.  Next, the court reasoned that, since each subclass is seeking only a declaration of rights under Meriter’s defined benefit pension plan and reformation of the plan to accord with the declaration, any monetary relief credited would be “incidental” and presumably automatic.  The court also said that Meriter’s limitations defense turned on class-wide communications in a summary plan description.

As McReynolds prophesized, Meriter Health Services Employee Retirement Plan evidences the Seventh Circuit’s willingness to certify a class under Rule 23(b)(2) despite the possibility of individualized damage issues.  The court noted in Meriter Health Services Employee Retirement Plan that it was too early to tell whether individualized proceedings ultimately would be necessary, but suggested the possibility of conducting bifurcated proceedings (“divided certification”) whereby, if a subclass obtained declaratory relief under Rule 23(b)(2), a Rule 23(b)(3) proceeding with opt-out rights would follow to determine individual class member relief.

The Meriter Health Services Employee Retirement Plan decision stands in contrast to the Second Circuit’s ruling in Nationwide Life Ins. Co. v. Haddock, discussed previously on this blog [link], where the court vacated the certification of an ERISA fiduciary breach class action following Dukes because it found that allocating monetary relief from various defendants would not be merely “incidental.”  The Seventh Circuit’s latest ruling underscores the contrasting approaches taken by courts across the country as they address whether to certify class actions in the aftermath of Dukes.