W. EUGENE DAVIS, Circuit Judge:
This is an interlocutory appeal from the district court's order certifying a class action and approving a settlement under Rule 23 of the Federal Rules of Civil Procedure.
Several of the original appellants in this case have moved to dismiss their appeals voluntarily, and we have granted those motions. We accordingly do not consider the arguments unique to those appellants. The three groups of appellants remaining before us—the "Allpar Objectors," the "Cobb Objectors," and the "BCA Objectors"—all filed objections with the district court opposing class certification and settlement approval based on various provisions of Rule 23. The Objectors' arguments were each addressed and rejected by the district court in its order of December 21, 2012. The Objectors have now appealed the district court's order and ask this court to remand with instructions to decertify the class and withdraw approval from the Settlement Agreement.
BP also now asks this court to vacate the district court's order, although BP is not formally an appellant and, in fact, BP originally supported both class certification and settlement approval before the district court. In addition to its own set of new arguments under Rule 23, BP also raises additional arguments regarding the Article III standing of certain class members to make claims under the Settlement Agreement. Unlike the Objectors, however, BP argues that the Settlement Agreement can be salvaged if "properly construed and implemented." In BP's view, all of the problems that invalidate the class settlement under Article III and Rule 23 result from two Policy Announcements issued by the Claims Administrator, Patrick Juneau, who was appointed under the Settlement Agreement by the district court.
As set forth below, we cannot agree with the arguments raised by the Objectors or BP. The district court was correct to conclude that the applicable requirements of Rule 23 are satisfied in this case. Additionally, whether or not BP's arguments regarding Exhibits 4B and 4C are correct as a matter of contract interpretation, neither class certification nor settlement approval are contrary to Article III in this case. Accordingly, the district court's order is affirmed.
The factual background of this case is described in more extensive detail in the district court's opinion, In re Oil Spill by Oil Rig Deepwater Horizon in Gulf of Mexico, on April 20, 2010, 910 F.Supp.2d 891 (E.D.La. 2012), and in a previous decision by a different panel of this court, In re Deepwater Horizon, 732 F.3d 326 (5th Cir. 2013) ("Deepwater Horizon I"). As explained in Deepwater Horizon I, BP leased the Deepwater Horizon drilling vessel to drill its Macondo prospect off the Louisiana coast. On April 20, 2010, an
To satisfy its obligations under the Oil Pollution Act ("OPA"), BP initially established its own claims process and later funded the claims process administered by the Gulf Coast Claims Facility ("GCCF") in order to begin paying out claims immediately rather than at the conclusion of litigation. BP then began negotiating a class settlement in February 2011 and jointly worked with the Plaintiffs' Steering Committee ("PSC") to transfer claims from the GCCF to a program supervised directly by the district court.
On April 16, 2012, the PSC filed an Amended Class Action Complaint and a proposed Settlement Agreement for the district court's preliminary approval. In accordance with the terms of the Settlement Agreement, the district court appointed Patrick Juneau as Claims Administrator of the settlement program. Although the Settlement Agreement had not yet received the district court's final approval under Rule 23 of the Federal Rules of Civil Procedure, the Claims Administrator began reviewing claims left unresolved by the GCCF and processing new claims in June 2012 as provided for in Section 4 of the parties' Settlement Agreement, entitled "Implementation of the Settlement."
On August 13, 2012, after a preliminary hearing and the distribution of notifications to the absent members of the proposed class, BP and the PSC moved for final approval of the Settlement Agreement and certification of the class defined at paragraph 306 of the Amended Class Action Complaint. The Allpar Objectors, Cobb Objectors, and BCA Objectors all filed objections with the district court opposing class certification and settlement approval based on various provisions of Rule 23. After conducting a fairness hearing on November 8, 2012, to consider the views of these Objectors and numerous others in accordance with Rule 23(e), the district court issued a final order certifying the class and approving the parties' Settlement Agreement on December 21, 2012. The district court emphasized in particular that the "uncapped compensation" available under the Settlement Agreement would "ensure that a benefit paid to one member of the class will in no way reduce or interfere with a benefit obtained by another member."
BP supported the Settlement Agreement during the proceedings leading up to and including the district court's order of December 21, 2012. BP now argues that two Policy Announcements issued by the Claims Administrator regarding the interpretation and application of the Settlement Agreement—both of which were adopted in orders by the district court—have subsequently brought the Settlement Agreement into violation of Rule 23, the Rules Enabling Act, and Article III of the U.S. Constitution.
One of these two Policy Announcements by the Claims Administrator addresses the interpretation and application of the Settlement Agreement's Exhibit 4C, entitled "Compensation Framework for Business Economic Loss Claims." The Policy Announcement was endorsed on March 5, 2013, by the district court in an order that
After considering the parties' arguments, a majority of the panel in Deepwater Horizon I remanded the case for further proceedings to reexamine the contractual interpretation questions arising under Exhibit 4C.
The second Policy Announcement by the Claims Administrator addresses the interpretation and application of Exhibit 4B of the Settlement Agreement, entitled "Causation Requirements for Businesses [sic] Economic Loss Claims." Whereas the Settlement Agreement's Exhibit 4C established a formula for the measurement of economic loss, Exhibit 4B set forth criteria for prospective claimants to demonstrate to the Claims Administrator that their losses were caused by the Deepwater Horizon oil spill. In the Policy Announcement, the Claims Administrator explained:
The record reflects that no party ever formally objected to this second Policy Announcement, and the district court adopted this Policy Announcement in an order docketed on April 9, 2013. That order was never independently appealed to this court. In the initial brief that BP filed in this appeal on August 30, 2013, BP took "no position on the relevance vel non" of the second Policy Announcement with respect to the lawfulness of class certification and settlement approval in this case.
BP also has never suggested that the Claims Administrator was incorrect to
In the supplemental brief that BP filed in this appeal on October 11, 2013, however, BP argued that the lawfulness of the Settlement Agreement was equally threatened by both Policy Announcements' effects on the interpretation and application of Exhibits 4B and 4C. According to BP, both of these Policy Announcements by the Claims Administrator permit claimants without any actual injuries caused by the oil spill to participate in the class settlement and receive payments. According to BP, this result brings the class settlement into violation of Rule 23, the Rules Enabling Act, and Article III.
Before we reach the questions regarding class certification and settlement approval under Rule 23, we must resolve the Article III question as a threshold matter of jurisdiction.
The abuse-of-discretion standard governs this court's review of both the district court's certification of the class and its approval of the settlement under Rule 23.
As explained in its supplemental brief, the crux of BP's standing argument is that Article III "preclude[s] certification of a
In two respects, BP is correct. First, the elements of Article III standing do indeed include both an injury in fact and a causal connection to the defendant's conduct.
It is striking, however, that BP makes no attempt to identify a standard that we should apply to determine whether these elements are satisfied in this case. The frequent references in BP's briefs to the "vast numbers of members who suffered no Article III injury" are disconnected from any discussion of pleading requirements, competent evidence, or the standards of proof by which the parties' contentions are evaluated during different stages of litigation. In particular, BP's arguments fail to explain how this court or the district court should identify or even discern the existence of "claimants that have suffered no cognizable injury" for purposes of the standing inquiry during class certification and settlement approval.
In the following sections, therefore, we review the law governing the standard applicable to Article III questions in the specific context of Rule 23, and then turn to examine the facts of the present case. As explained below, although the relevant authorities suggest two possible approaches to Article III questions at the class certification stage, both of these approaches require us to reject BP's standing argument. Whichever test is applied, therefore, Article III does not mandate reversal in this case.
As the Supreme Court explained in Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992), the elements of Article III standing are constant throughout litigation: injury in fact, the injury's traceability to the defendant's conduct, and the potential for the injury to be redressed by the relief requested. As Lujan emphasized, however, the standard used to establish these three elements is not constant but becomes gradually stricter as the parties proceed through "the successive stages of the litigation." In Lewis v. Casey, 518 U.S. 343, 358, 116 S.Ct. 2174, 135 L.Ed.2d 606 (1996), the Supreme Court reaffirmed this formulation:
Lujan and Lewis provide a useful blueprint, therefore, but do not comprehensively address all conceivable stages of litigation in which Article III standing may need to be addressed. This quoted passage does not explain, in particular, how courts are to evaluate standing for the purposes of class certification and settlement approval under Rule 23.
In attempting to answer this question, courts have followed two analytical approaches. According to one approach, which has been endorsed by three Justices concurring in Lewis,
In the years since Lewis, this approach to the standing inquiry during class certification has been followed by the Seventh,
Other circuit decisions have not necessarily ignored absent class members. According to these decisions, courts must ensure that absent class members possess Article III standing by examining the class definition. Importantly, however, this approach does not contemplate scrutinizing or weighing any evidence of absent class members' standing or lack of standing during the Rule 23 stage. The most frequently cited formulation of this test is found in the Second Circuit's decision in Denney v. Deutsche Bank AG, 443 F.3d 253, 263-64 (2d Cir.2006): "We do not require that each member of a class submit evidence of personal standing. At the same time, no class may be certified that contains members lacking Article III standing. The class must therefore be defined in such a way that anyone within it would have standing."
If this case actually required us to do so, it might not be a simple task to choose between the Kohen test and the Denney test based on this roughly even split of circuit authority.
Judge Clement's opinion in Deepwater Horizon I, however, did not mention Mims, distinguished Kohen on its facts, and instead applied the Denney test.
This case is not a vehicle, however, for us to choose whether Kohen or Denney articulated the correct test. Nor does this case require us to decide whether Mims has already adopted the Kohen test as a matter of Fifth Circuit law. For the purposes of the present case, these questions are entirely academic because BP's standing argument fails under both the Kohen test and the Denney test. As explained in the next section, both the named plaintiffs and the absent class members contemplated by the class definition include only persons and entities who can allege causation and injury in accordance with Article III.
Looking first to the Kohen test for standing, it is clear that the class action in this case survives Article III because the named plaintiffs have each alleged injury in fact, traceability to the defendant's conduct, and redressability by the relief requested.
Each one of these named plaintiffs satisfies the elements of standing by identifying an injury in fact that is traceable to the oil spill and susceptible to redress by an award of monetary damages. Under the Kohen test, that is the end of the inquiry. As explained in Cole v. General Motors Corp., 484 F.3d 717 (5th Cir.2007), which addressed the Article III standing of named plaintiffs during class certification under Rule 23, we found it "sufficient for standing purposes that the plaintiffs seek recovery for an economic harm that they allege they have suffered."
Applying the Denney test to the definition of the class proposed for certification, we come to the same conclusion. The Class Definition is set forth in paragraph 306 of the Amended Class Action Complaint and is reproduced in its entirety in Appendix B of the district court's order. Under the plain terms of the Class Definition, a "person or entity" is included "in the Economic Class only if their Claims meet the descriptions of one or more of the Damage Categories described" in Section 1.3.1 of the Class Definition. Of these "Damage Categories," the only category that BP has identified as giving rise to Article III difficulties is the "Economic Damage Category" under Section 1.3.1.2.
Even if the "definition" of the class were interpreted for the purposes of the Denney test to include the entire Amended Class Action Complaint, rather than just the provisions set forth in paragraph 306, the result would be no different. The Amended Class Action Complaint includes numerous allegations of injuries to the absent class members caused by the oil spill. For example, the sections of the Amended Class Action Complaint directed toward
Accordingly, using Judge Clement's formulation of the standard, the class in this case does not include any members who "concede" that they lack any "causally related injury."
Our decision in Cole confirms that "it is sufficient for standing purposes that the plaintiffs seek recovery for an economic harm that they allege they have suffered" because for each class member we "must assume arguendo the merits of his or her legal claim" at the Rule 23 stage.
In concluding this analysis, we note the possibility that the application of a stricter evidentiary standard might reveal persons or entities who have received payments under Exhibits 4B and 4C and yet have suffered no loss resulting from the oil spill. But courts are not authorized to apply such a standard for this purpose at the Rule 23 stage. Under Lujan and Lewis, of course, this is precisely what the district judge must do at summary judgment and what the finder of fact must do at trial.
With respect to the evidence cited by BP regarding these claimant's standing, we emphasize two points. First, and most obviously, none of this evidence was ever considered by the district court prior to December 21, 2012, the date when the district court certified the class and approved the settlement.
Second, BP has cited no authority—and we are aware of none—that would permit an evidentiary inquiry into the Article III standing of absent class members during
Relevant circuit authority confirms the inappropriateness of reviewing evidence of absent class members' standing at the Rule 23 stage. Mims and Kohen suggest that such evidence is simply irrelevant, inasmuch as "[c]lass certification is not precluded simply because a class may include persons who have not been injured by the defendant's conduct."
Of course, had the class in this case been certified under Rule 23 for further proceedings on the merits rather than for settlement, the district court might ultimately have had occasion to apply a stricter evidentiary standard. As the district court said explicitly, "certain causation issues... would have to be decided on an individual basis were the cases not being settled," including "for example, the extent to which the Deepwater Horizon incident versus other factors caused a decline in the income of an individual or business."
Indeed, it would make no practical sense for a court to require evidence of a party's claims when the parties themselves seek settlement under Rule 23(e). Logically, requiring absent class members to prove their claims prior to settlement under Rule 23(e) would eliminate class settlement because there would be no need to settle a claim that was already proven. Such a rule would thwart the "overriding public interest in favor of settlement" that we have recognized "[p]articularly in class action suits."
This is certainly not to say, on the other hand, that the Claims Administrator must afford the same deference to the absent class members' allegations that we apply when addressing Article III issues at the Rule 23 stage. Naturally, the Claims Administrator is not bound to apply the Denney test or the Kohen test but must follow whatever instructions are set forth in Exhibit 4B, Exhibit 4C, and the other provisions of the parties' detailed Settlement Agreement. In his concurrence to Deepwater Horizon I, Judge Southwick succinctly observed that Exhibits 4B and 4C created an evidentiary framework intended to "simplif[y] the claims process by making proof of loss a substitute for proof of factual causation."
The evidentiary standard to be applied by the Claims Administrator, however, is not a matter of Article III standing. It is a question of interpreting the Settlement Agreement and applying it to each individual claim, and we are not called upon to address those issues in this appeal.
We turn now to examine the Rule 23 arguments raised by BP, the Allpar Objectors, the Cobb Objectors, and the BCA Objectors. In addressing Rule 23, BP and the Allpar Objectors have made nearly identical arguments. They challenge class certification and settlement approval under a variety of provisions of Rule 23 based on the same central premise discussed above in the context of Article III—that a class cannot be certified when it includes persons who have not actually been injured. The Cobb Objectors also expressly adopt BP's arguments by reference and add only a single additional argument. According to the Cobb Objectors, the named plaintiffs did not adequately represent the class under Rule 23(a)(4) because there were no subclasses formed to represent residents of different states, particularly residents of Texas, and no subclass formed to represent those potential claimants who would have been "better off under the GCCF claims process." As explained below, the objections of the Allpar Objectors, the Cobb Objectors, and BP have no merit.
For their part, the BCA Objectors—who refer to themselves in this way because they are represented by Brent Coon & Associates—were among the 12,970 objectors who "failed to comply with the requirements of the Preliminary Approval Order in that they failed to provide written proof of class membership and, therefore, forfeited and waived their objections."
On November 7, 2012, the night before the fairness hearing and two months after the deadline for filing written objections, the BCA Objectors filed a Motion for Leave to File Reply Memorandum Late
The district court's instruction to provide proof of class membership was a legitimate exercise of its discretion under Rule 23(d)(1)(A) and Rule 23(d)(1)(C) to "issue orders that[] ... determine the course of proceedings" and "impose conditions... on intervenors" in a class action. As the Supreme Court recognized in Gulf Oil Co. v. Bernard, 452 U.S. 89, 101 S.Ct. 2193, 68 L.Ed.2d 693 (1981), a district court presiding over a class action "has both the duty and the broad authority" to enter such orders to minimize "the potential for abuse" during such proceedings.
Accordingly, because the BCA Objectors did not substantiate their membership in this class, the district court did not abuse its discretion under Rule 23(d)(1)(A) and Rule 23(d)(1)(C) in finding that the BCA Objectors "forfeited and waived" their objections to the class certification and settlement approval.
In the remaining sections, we address the arguments raised by BP, the Allpar Objectors, and the Cobb Objectors in relation to the individual provisions of Rule 23.
BP, the Allpar Objectors, and (by reference) the Cobb Objectors have all challenged certification of the class under Rule 23(a)(2), which requires a demonstration that "there are questions of law or
When quoted in its entirety, however, the relevant passage from Wal-Mart demonstrates why both of these arguments are meritless:
As this passage shows, the Supreme Court's use of the phrase, "the same injury," in Wal-Mart (and decades previously in General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 157, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982)) does not support BP's argument. To satisfy the commonality requirement under Rule 23(a)(2), class members must raise at least one contention that is central to the validity of each class member's claims. But this contention need not relate specifically to the damages component of the class members' claims. Even an instance of injurious conduct, which would usually relate more directly to the defendant's liability than to the claimant's damages, may constitute "the same injury." This is confirmed by the example given by the Supreme Court in the above passage from Wal-Mart, "discriminatory bias on the part of the same supervisor," which is itself not a type of damages, but an instance of injurious conduct that violates Title VII. Later in the same decision, the Supreme Court stated that another type of injurious conduct on the part of the defendant, "a companywide discriminatory pay and promotion policy," would also have satisfied the "same injury" test for commonality under Rule 23(a)(2).
Accordingly, as these two examples from Wal-Mart demonstrate, the legal requirement that class members have all "suffered the same injury" can be satisfied by an instance of the defendant's injurious conduct, even when the resulting injurious
The above passage from Wal-Mart also demonstrates that district courts do not err by failing to ascertain at the Rule 23 stage whether the class members include persons and entities who have suffered "no injury at all." As the Supreme Court explained, a "contention" regarding the class members' injury is sufficient to satisfy Rule 23, so long as the party seeking certification can show that this contention is "common" to all the class members, is "central" to the validity of their claims, and is "capable" of classwide resolution. There is no need to resolve the merits of the common contention at the Rule 23 stage or to attempt prematurely the "determination of its truth or falsity."
The district court's certification of this class, therefore, did not violate Rule 23(a)(2). After reviewing expert evidence, the district court found that numerous factual and legal issues were central to the validity of all the class members' claims. These included "[w]hether BP had a valid superseding cause defense," "[w]hether BP used an improper well design that unreasonably heightened the risk," "[w]hether the cement mixture was unstable, and, if so, whether BP should have prevented its use," "[w]hether BP took appropriate and timely steps to stop the release of hydrocarbons from the well," "whether these decisions (individually or collectively) constitute negligence, gross negligence, or willful misconduct," "[w]hether BP is a responsible party under OPA," "[w]hether BP could limit its liability under § 2704 of OPA," "[w]hether punitive damages are available as a matter of law," and whether BP "failed to mitigate the damages of the class."
Accordingly, the commonality arguments raised by BP, the Allpar Objectors, and the Cobb Objectors do not require decertification of the class. Although all of the factual and legal questions identified by the district court are more closely related to BP's injurious conduct than to the injurious effects experienced by the class members, they nonetheless demonstrate that the class members claim to have suffered the "same injury" in the sense that Wal-Mart used this phrase.
BP and the Objectors also challenge class certification and settlement approval under Rule 23(a)(4), which requires a demonstration that "the representative parties will fairly and adequately protect the interests of the class." According to this argument, an impermissible "intraclass conflict" is created by the Claims Administrator's interpretation of Exhibits 4B and 4C because the claimants now include some persons and entities that have suffered injuries, and other persons and entities that allegedly have not. As it has been interpreted, BP argues, the Settlement Agreement "would almost necessarily make injured members worse off than they might have been had non-injured members been excluded from the class." According to BP, had the injured class members been represented by named plaintiffs negotiating exclusively on their behalf, they could have used their increased bargaining power during settlement negotiations to demand a more favorable formula for awarding payments.
The district court must be upheld, however, unless its decision constituted an abuse of discretion. In this case, the district court found that the named plaintiffs were "clearly adequate" to protect the interests of the class as they included "individuals
Although BP made no objection to the district court's order certifying the class and approving the Settlement Agreement, BP asks this court to find an intraclass conflict of interest because the claimants allegedly include persons and entities that have suffered no injury. In support of this allegation, BP presents us with a series of economists' declarations that had not been provided to the district court when the class was certified. But our previous decisions prevent us from considering this evidence for the first time on appeal.
By contrast, we can consider the argument that the Cobb Objectors have raised under Rule 23(a)(4), which was passed upon by the district court. The Cobb Objectors argue that "class members from Texas, Louisiana, Alabama, Florida and Mississippi" should have been divided into their own subclasses, as should those class members who "were better off under the GCCF claims process."
Although the creation of subclasses is sometimes necessary under Rule 23(a)(4) to avoid a "fundamental conflict," there is no need to create subclasses to accommodate every instance of "differently weighted interests."
As the district court expressly found, the differences between the formulas applicable in the different geographic zones were "rationally related to the relative strengths and merits of similarly situated claims."
We also must reject the Cobb Objectors' argument that an intraclass conflict exists between class members who were "better off under the GCCF claims process" and those who were not. Most critically, the Cobb Objectors have failed to provide any details about the cause of these claimants' current disadvantage. In their brief, the Cobb Objectors repeat several times that some number of claimants are now "forced to meet arbitrary loss and recovery benchmarks" under the Settlement Agreement, whereas these same claimants apparently could have recovered under the GCCF without doing so. After considering substantial expert testimony, however, the district court found explicitly that the Settlement Agreement's compensation criteria were not arbitrary, but "detailed" and "objective."
BP and the Objectors also argue that class certification was improper under Rule 23(b)(3), which requires that "the questions of law or fact common to class members predominate over any questions affecting only individual members." According to BP and the Objectors, the Supreme Court's recent decision in Comcast Corp. v. Behrend, ___ U.S. ___, 133 S.Ct. 1426, 185 L.Ed.2d 515 (2013)—which was decided three months after the district court certified the class—precludes certification under Rule 23(b)(3) in any case where the class members' damages are not susceptible to a formula for classwide measurement.
This is a misreading of Comcast, however, which has already been rejected by three other circuits.
As recalled above, the district court set forth a considerable list of issues that were common to all the class members' claims. Nearly all of these issues related to either the complicated factual questions surrounding BP's involvement in the well design, explosion, discharge of oil, and cleanup efforts or the uncertain legal questions surrounding interpretation and application of the OPA. Accordingly, BP and the Objectors are quite correct to suggest that, although the analysis of BP's injurious conduct gives rise to numerous common questions, the class members' damage calculations give rise primarily to individual questions that are not capable of classwide resolution.
But this is not fatal to class certification. As we stated in Bell Atlantic Corp. v. AT&T Corp., 339 F.3d 294, 306 (5th Cir. 2003), "[e]ven wide disparity among class members as to the amount of damages" does not preclude class certification "and courts, therefore, have certified classes even in light of the need for individualized calculations of damages." Accordingly, as we recognized in Steering Committee v.
In particular, as we explained in Madison v. Chalmette Refining, L.L.C., 637 F.3d 551, 556 (5th Cir.2011), predominance may be ensured in a mass accident case when a district court performs a sufficiently "rigorous analysis" of the means by which common and individual issues will be divided and tried. In many circuits, this has been accomplished by means of multi-phase trials under Rule 23(c)(4), which permits district courts to limit class treatment to "particular issues" and reserve other issues for individual determination.
Heeding our instruction in Chalmette Refining, therefore, the district court planned "to manage such litigation by breaking it down into separate phases, as the [district court] was prepared to do prior to the parties' reaching a settlement."
The district court was well aware, therefore, that the class members' damages "would have to be decided on an individual basis were the cases not being settled," as would "the extent to which the Deepwater Horizon incident versus other factors caused a decline in the income of an individual or business."
In rendering this conclusion, the district court did not abuse its discretion. The phased trial of common issues in this case would undoubtedly prevent the repetitious re-litigation of these common issues by each individual claimant in thousands of separate lawsuits. In accordance with our directive in Chalmette Refining, the district court also rigorously analyzed how it would adjudicate "common class issues in the first phase" and "individualized issues in other phases."
This analysis is not changed by the Supreme Court's recent decision in Comcast. BP and the Objectors suggest that, three months after the district court certified the class and approved the settlement, Comcast brought about a revolution in the application of Rule 23(b)(3). According to this argument, Comcast declared "that certification under Rule 23(b)(3) requires a reliable, common methodology for measuring classwide damages." This reading is a significant distortion of Comcast, and has already been considered and rejected by the Seventh Circuit, the Sixth Circuit, and the Ninth Circuit in the months since Comcast was decided.
The principal holding of Comcast was that a "model purporting to serve as evidence of damages ... must measure only those damages attributable to th[e] theory" of liability on which the class action is premised.
This argument must also be rejected. Neither Comcast nor Bell Atlantic, nor any other decision that BP has identified, has suggested that predominance under Rule 23(b)(3) can be defeated by a formula for making voluntary payments under a settlement agreement. Both Comcast and Bell Atlantic addressed formulas for measuring damages in class actions that had been certified for further proceedings on the merits, and neither made any mention of a settlement agreement. The Amchem decision, moreover, which did involve a settlement class proposed for certification under Rule 23(b)(3), explained that the predominance inquiry "trains on the legal or factual questions that qualify each class member's case as a genuine controversy, questions that preexist any settlement."
We cannot therefore conceive of why or how a formula for making voluntary payments under a settlement agreement could threaten the predominance of common questions over individual questions in litigation. Indeed, the reason that BP has identified no authority for this proposition is that it is nonsensical. A question of law or fact that is "common" under Rule 23 is one that enables the class action "to generate common answers apt to drive the resolution of the litigation."
BP and the Objectors have also argued that, by virtue of the Class Administrator's interpretations of Exhibits 4B and 4C, the class notice distributed to absent class members has been rendered deficient. Under Rule 23(c)(2)(B), "[t]he notice must clearly and concisely state in plain, easily understood language ... the nature of the action," "the definition of the class certified," "the class claims, issues, or defenses," and other items of information relating to opting out, making objections, and the consequences of the judgment. Without tying their argument to any particular provision of Rule 23(c)(2)(B), BP and the Objectors contend that class members should have been informed of the likelihood that the prospective claimants would include uninjured persons and entities.
In our circuit, however, "[i]t is not required[] ... that class members be made cognizant of every material fact that has taken place prior to the notice."
Additionally, in Katrina Canal Breaches, in which we found a statement in a class notice to be "slightly misleading" regarding a point of Louisiana law, we held that the notice was not rendered deficient because "the statement as written [wa]s accurate in its essential point."
BP and the Objectors also argue that the Claims Administrator's interpretations of Exhibits 4B and 4C preclude approval of the Settlement Agreement under Rule 23(e), which requires a district court to ensure that all class settlements are "fair, reasonable, and adequate." Even the cases cited by BP, however, emphasize that the purpose of Rule 23(e) is "to protect the nonparty members of the class."
BP also makes a novel argument regarding our decision in Reed v. General Motors Corp., 703 F.2d 170 (5th Cir.1983), in which we explained that the application of Rule 23(e) should hinge on the analysis of six factors. These factors are: (1) the existence of fraud or collusion behind the settlement; (2) the complexity, expense, and likely duration of the litigation; (3) the stage of the proceedings and the amount of discovery completed; (4) the probability of plaintiffs' success on the merits; (5) the range of possible recovery; and (6) the opinions of the class counsel, class representatives, and absent class members.
BP's argument ignores the six Reed factors altogether. Rather, BP relies on a short quotation from Reed to suggest that district courts should also ensure that settlement agreements are based on a "fair approximation of [class members'] relative entitlement." This quotation is clearly taken out of context.
Last of all, BP and the Objectors have argued that, by virtue of the Class Administrator's interpretations of Exhibits 4B and 4C, Rule 23's implicit "ascertainability" requirement is not satisfied. As we held in Union Asset Management Holding A.G. v. Dell, Inc., 669 F.3d 632 (5th Cir.2012): "[I]n order to maintain a class action, the class sought to be represented must be adequately defined and clearly ascertainable."
To conclude, the numerous arguments that BP and the Objectors have raised with respect to each of the provisions of Rule 23 are variants, for the most part, of a single argument. Based on our previous decisions, we would reject this argument even if we could consider BP's evidence and accept its factual premise, which we cannot. Under Mims and Rodriguez, "[c]lass certification is not precluded simply because a class may include persons who have not been injured by the defendant's conduct."
For the foregoing reasons, therefore, we AFFIRM the district court's order of December 21, 2012.
AFFIRMED.
EMILIO M. GARZA, Circuit Judge, dissenting:
The majority finds Article III causation satisfied by language in the complaint and Settlement Agreement, notwithstanding the Claims Administrator's controlling interpretation rendering this language void, eliminating all causation requirements for a broad swath of the class and allowing individuals or entities to participate in the settlement even though they lack a justiciable claim. "Rule 23's requirements must be interpreted in keeping with Article III...." Amchem Products, Inc., v. Windsor, 521 U.S. 591, 613, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). Standing is an essential
While the three elements of Article III standing—injury, causation, and redressability—remain constant throughout the litigation, the standard of proof necessary to demonstrate these elements becomes progressively more demanding through "the successive stages of the litigation." Lujan, 504 U.S. at 560, 112 S.Ct. 2130; ante, at 799. I agree with the majority we must evaluate standing according to the standard of proof for the Rule 23 class certification and settlement approval stage. I disagree with the majority, however, that Article III standing is satisfied in this case under the Denney test. I also disagree that Kohen, which by its facts addresses only pre-trial certification of a litigation class, applies to the certification of a settlement class.
In Denney v. Deutsche Bank AG, 443 F.3d 253, 264 (2d Cir.2006), a class action settlement case like ours, the Second Circuit determined that "[n]o class may be certified that contains members lacking Article III standing. The class must therefore be defined in such a way that anyone within it would have standing." Id. (internal citations omitted) (emphasis added). The Denney test fundamentally recognizes that a class certification decision opens the doors of federal court to all members of that class. The federal courts are only open to justiciable cases.
The majority holds that the extant settlement class is necessarily limited to those class members with claims causally connected to the oil spill, that is, to those with standing. Id. It bases this holding exclusively upon Section 1.3.1.2 of the Class Definition, which is contained in both the Amended Complaint and the Settlement Agreement. It totally, and erroneously, ignores language in other documents, including Exhibit 4B and the Claims Administrator's Policy Announcement, which materially affects the status of the causation requirement. Section 1.3.1.2 summarizes an economic damage category for "[l]oss of income, earnings or profits suffered by Natural Persons or Entities as a result of the DEEPWATER HORIZON INCIDENT." (emphasis added). Certainly, this language encompasses a causation requirement.
Section 1.3.1 of the Class Definition incorporates by reference Exhibit 4B: "Causation Requirements for Business Economic Loss Claims." Section 1 of Exhibit 4B establishes that certain individuals and entities, based on their location or the nature of their enterprise, "are not required to provide any evidence of causation."
The Claims Administrator is specifically charged with implementing and administering the Settlement in Section 4.3.1 of the Settlement Agreement. Pursuant to this charge he issued an interpretive decision about causation for economic losses, in which he explained that he would:
The Claims Administrator further determined that "the Settlement Agreement does not contemplate that the Claims Administrator will undertake additional analysis of causation issues beyond those criteria that are specifically set out in the Settlement Agreement." In short, the Claims Administrator established that the Settlement Agreement requires no proof of causation, beyond the specific requirements of Exhibit 4B. And, the district
Consequently, this class can encompass individuals or entities who could never truthfully allege or establish standing, at any stage of the litigation. Thus, it fails under Denney. As explained in Lujan, Article III standing irreducibly requires that the injury be "fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court." 504 U.S. at 660, 112 S.Ct. 2188 (internal quotations and alterations omitted). The elimination of a causation requirement for these Business Economic Loss claimants renders the Settlement Agreement unconstitutional in this respect.
At the settlement class certification stage, Denney does "not require that each member of a class submit evidence of personal standing." Denney 443 F.3d at 263. The test is whether each member contemplated by the definition can allege standing. Ante at 805-06. And for the purposes of standing allegations, we "assume arguendo the merits of [the] legal claim." Cole v. General Motors Corp., 484 F.3d 717, 723 (5th Cir.2007). But here, at the settlement class certification stage, these standards are not met. Because the interpretation has nullified the causation language of Section 1.3.1.2 of the complaint, there is no guarantee that each member of the class meets the standing requirements of Article III. Thus, it is quite possible that claimants eligible for Exhibit 4B's presumption of causation can fully participate in the settlement even though their injuries, if any, are not fairly traceable to the Deepwater Horizon incident. Cf. Lujan, 504 U.S. at 560, 112 S.Ct. 2130. Denney requires that the class must "be defined in such a way that anyone within it would have standing." Denney, 443 F.3d at 264 (emphasis added). Absent a causation requirement for certain segments of Business Economic Loss claimants, this Class Definition includes those who would not.
Furthermore, the majority strongly suggests that the Claims Administrator's interpretation is not before us in this appeal. Ante at 807. While the policy interpretation is not literally part of the district court's December 21, 2012 certification order, the document directly before us, it is clearly an integral aspect of how the Class Definition and the Settlement Agreement operate. The Denney test for verifying Article III standing at the class settlement stage of litigation requires the reviewing court to analyze the class definition. It is not possible to perform a true and accurate analysis while ignoring the controlling interpretation of this definition.
The Claims Administrator's interpretation must be treated as part and parcel of the Settlement Agreement and Class Definition for several reasons. First, the very district court that certified the class and oversees the settlement's implementation has repeatedly affirmed this interpretation.
Lastly, Article III cannot be so easily duped by sleight of hand. Here, the district court certified a class based on the written Class Definition in the Amended Complaint and Settlement Agreement. This definition initially included "as a result of"—a clear causation requirement.
The majority further determines that this settlement class certification satisfies Article III standing under the Kohen test, which requires that the named plaintiffs— as opposed to absent class members—can satisfy Article III's standing requirements. Kohen, 571 F.3d at 676; ante at 802-03. While I agree that the named plaintiffs' standing is uncontested in this case, Kohen does not apply. As also observed by Judge Clement in Deepwater Horizon I, 732 F.3d at 344 n. 12, Kohen does not concern an end of litigation settlement class certification. This distinguishing factor is crucial.
In Kohen, the court determined that the "possibility or indeed inevitability" that the defined class will "often include persons who have not been injured by the defendant's conduct" does not preclude class certification. Thus, the court looked only to the named plaintiffs to satisfy Article III standing. However, Kohen concerns a pre-trial litigation class certification, not a final settlement class certification, and in this presupposes that there will be a further stage where the Article III standing requirements will be proven up. Kohen, 571 F.3d at 677 ("If the case goes to trial, this plaintiff may fail to prove injury."). The Kohen opinion relies on the fact that jurisdiction alleged at the pleading stage of a class action litigation must eventually be substantiated. Id. But, in a settlement class certification, like that at bar, there will be no additional stages for substantiating standing. The settlement ends the litigation. Accordingly, the Kohen "named plaintiffs only" formula for evaluating Article III standing is inapplicable here.
Additionally, the Kohen court actually embraces Denney's focus on the class definition for verifying Article III standing. Kohen specifically rejected defendant-appellant' PIMCO's argument that the district court needed to verify each class members' individual standing before certifying the class—that is, absent class members needed to prove standing before certification. Id. at 676. According to the Kohen court, the burden of proving standing at the pre-trial class certification stage lies with the named plaintiffs alone. But Kohen simultaneously recognizes that a "class should not be certified if it is apparent that it contains a great many persons who have suffered no injury at the hands of the defendant...." Id. at 677. (emphasis added). The court specifically noted that "if the class definition clearly were overbroad, this would be a compelling reason to require that it be narrowed." Id. at 678. So, without concern for proof of standing, Kohen recognizes that, even at the pretrial class certification stage, a certification does not comply with Article HI if it embraces a swath of claimants who cannot claim injury-in-fact, causation, or redressability. Here, in light of the controlling interpretation, the class definition does exactly that for certain groups of
In conclusion, this interpretation creates an overbroad class definition, which "includes people who have no legal claim whatsoever." Sullivan v. DB Investments, Inc., 667 F.3d 273, 340 (3d Cir. 2011) (Jordan, J. dissenting). Under its terms, a segment of claimants could enter federal court and receive redress for injuries that need not have been caused by the defendant's conduct. Without a causation requirement for class membership, this Settlement Agreement encompasses individuals and entities that do not possess the requisite justiciable case or controversy. From an administrative perspective the elimination of causation may be more efficient, but it is also violates Article III, which does not permit the federal courts to administer private handout programs. Accordingly, the district court's Rule 23 certification is not in keeping with Article III constraints. See Amchem, 521 U.S. at 613, 117 S.Ct. 2231.
In addition to straying beyond Article III jurisdictional constraints, the Claims Administrator's interpretation, by eliminating the causation requirement, violates at least two aspects of Rule 23, and runs afoul of the Rules Enabling Act, 28 U.S.C. § 2702(b).
Rule 23(a)(2) requires, as a necessary prerequisite to class certification, that "there are questions of law or fact common to the class." In Wal-Mart Stores, Inc. v. Dukes, ___ U.S. ___, 131 S.Ct. 2541, 2551, 180 L.Ed.2d 374 (2011), the Supreme Court interpreted this provision to require that the members of the class have "suffered the same injury." This requires that the class members' claims "depend upon a common contention," the "truth or falsity [of which] will resolve an issue that is central to the validity of each one of the claims in one stroke." Id. (emphasis added). The majority asserts that the commonality requirement is satisfied by myriad questions of law and fact about BP's injurious conduct. See ante, at 810-12 (listing common questions). Certainly, these contentions are central to many class member's claims. But Rule 23(a)(2) and Wal-Mart require more—the common contentions must go to the validity of each one of the claims. Because this class includes a segment of claimants whose injuries need not have been caused by the oil spill, this cannot be so. For example, "[w]hether BP used an improper well design that unreasonably heightened the risk [of an incident]" says nothing about the validity of a claim for economic injuries caused by factors other than the oil spill. As long as the class impermissibly aggregates those whose injuries were purportedly caused by the oil spill with those without any arguable claim of such causation, questions concerning BP's liability are insufficient to satisfy Rule 23(a) commonality.
The same argument applies with full force to the Rule 23(a)(3) requirement that "the claims or defenses of the representative parties are typical of the claims or defenses of the class." Cf. ante, at 811-12 n. 92. The Supreme Court has observed that the "commonality and typicality requirements of Rule 23(a) tend to merge." Wal-Mart, 131 S.Ct. at 2550-51 n. 5. The majority holds that typicality is satisfied because "the class representatives—like all class members—allege economic and/or property damage stemming directly from the Deep water Horizon spill." Ante, at 811-12 n. 92. (quoting In re Oil Spill by Oil Rig Deepwater Horizon in Gulf of Mexico, on April 20, 2010, 910 F.Supp.2d 891, 915 (E.D.La.2012)). This disregards
Rule 23 certification requires that the proposed class meets all the prerequisite requirements of Rule 23(a). See W. RUBENSTEIN, A. CONTE & H. NEWBERG, NEWBERG ON CLASS ACTIONS § 3:1 (5th ed.2011). Commonality and typicality are absent here.
The Rules Enabling Act requires that that the rules of procedure "shall not abridge, enlarge or modify any substantive right." 28 U.S.C. § 2702(b). The class action rules must be applied in keeping with this mandate. See Amchem, 521 U.S. at 613, 117 S.Ct. 2231. It follows that Rule 23's aggregation function cannot be used to "create new rights and then settle claims brought under them." Deepwater Horizon I, 732 F.3d at 342; see Sullivan, 667 F.3d at 343 (Jordan, J. dissenting) ("Rule 23 [serves] to efficiently handle claims recognized by law, not to create new claims.").
This Settlement Agreement resolves claims arising under General Maritime Law (tort principles of federal common law) and the Oil Pollution Act, 33 U.S.C. § 2702(a). Each of these claims contains some sort of causation element. In order to prevail in a negligence action, a plaintiff must establish that the defendant's breach of duty is the but-for and proximate cause of the injury complained of.
What makes this case unique, perhaps, is that causation is contemplated on the face of the core documents—the Amended Complaint, Class Definition, and the Settlement Agreement—but eliminated in application by the Claims Administrator's interpretation. In evaluating whether Article Ill's causation requirement for standing has been properly demonstrated at the settlement class certification stage, I would look to the class definition as it has been authoritatively interpreted, not simply as it is ostensibly written. Today, the majority takes another path, turning a blind eye to the Claims Administrator's interpretation.
Respectfully, I dissent.
