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United States Court of Appeals for the Seventh Circuit
January 30, 2005, Submitted ; March 8, 2005, Decided
[*506] POSNER, Circuit Judge. Allstate petitions us under Fed. R. Civ. P. 23(f) for leave to appeal the district court's decision to certify under Rule 23(b)(2) a class of plaintiffs who allege that Allstate constructively discharged them in order to deprive them of benefits to which ERISA entitled them. We grant the petition (and proceed to decide the merits) because it presents a novel and important issue: whether certification under Rule 23(b)(2) is proper when, though injunctive or declaratory relief is sought rather than damages, individual hearings may be necessary to determine [**2] causation and hence liability.
The plaintiffs' complaint, which the district court held states a claim, alleges the following facts: In 1998 Allstate decided to replace its employee insurance agents with independent contractors, and before announcing a severance package for employees who would lose their jobs harassed them, in violation of ERISA § 510, 29 U.S.C. § 1140, so that they would quit before they could take advantage of the severance benefits. It harassed them by extending office hours, imposing burdensome reporting requirements, reducing or eliminating reimbursement for office expenses, and setting unrealistic sales quotas. As a result of the campaign of harassment, between December 1998 and May 1999 176 agents quit outright and 1,106 others quit as employees but became independent contractors. The class seeks a judgment declaring that the members are entitled to the benefits they would have received under Allstate's ERISA plan had they been fired rather than quitting. Armed with the declaration, they will then ask the court to award them those benefits.
] A Rule 23(b)(2) class action does not require giving class members notice of the suit and a [**3] chance to opt out of it and bring their own, individual suits; a Rule 23(b)(3) class action does. The thinking behind this distinction is that declaratory or injunctive relief will usually have the same effect on all the members of the class as individual suits would. Lemon v. International Union of Operating Engineers, Local No. 139, 216 F.3d 577, 580 (7th [*507] Cir. 2000); Jefferson v. Ingersoll International, Inc., 195 F.3d 894, 897 (7th Cir. 1999); Holmes v. Continental Can Co., 706 F.2d 1144, 1157 (11th Cir. 1983). For example, were Allstate enjoined from issuing a particular type of insurance policy, there wouldn't be any purpose in allowing individual members of the class to opt out and seek their own injunction. They would all sink or swim together. Indeed, as Judge Friendly explained in Galvan v. Levine, 490 F.2d 1255, 1261 (2d Cir. 1973), ] "insofar as the relief sought [in a class action] is prohibitory, an action seeking declaratory or injunctive relief . . . is the archetype of one where class action designation is largely a formality, at least for the plaintiffs." In contrast, when damages are sought, it is [**4] quite likely that some individual class members will want to sue on their own (provided that the potential damages per class member are substantial) rather than participate in a class-wide award, because they may have greater than average damages.
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400 F.3d 505 *; 2005 U.S. App. LEXIS 3801 **; 34 Employee Benefits Cas. (BNA) 2005
IN RE: ALLSTATE INSURANCE COMPANY; AGENT TRANSITION SEVERANCE PLAN, Petitioners.
Subsequent History: Class certification granted by Flanagan v. Allstate Ins. Co., 2007 U.S. Dist. LEXIS 9779 (N.D. Ill., Feb. 9, 2007)
Prior History: [**1] Petition to Appeal from an Order Granting Class Certification by the United States District Court for the Northern District of Illinois, Eastern Division. No. 01 C 1541--James B. Moran, Judge.
Flanagan v. Allstate Ins. Co., 223 F.R.D. 489, 2004 U.S. Dist. LEXIS 11418 (N.D. Ill., 2004)
Disposition: Certification vacated.
damages, quit, class member, class action, declaratory, injunctive, opt out, incidental, benefits, notice
Civil Procedure, Class Actions, Prerequisites for Class Action, General Overview, Special Proceedings, Notice of Class Action, Notice of Class Action, Content of Notice, Opt Out Provisions, Judgments, Declaratory Judgments, Remedies, Damages, Injunctions, Preliminary & Temporary Injunctions, Judicial Officers, Judges, Pensions & Benefits Law, Equitable Relief, Preliminary Considerations, Equity, Trials, Jury Trials, Right to Jury Trial, Relief From Judgments, Independent Actions, Constitutional Law, Bill of Rights, Fundamental Rights, Trial by Jury in Civil Actions, ERISA, Civil Litigation