There’s been considerable teeth gnashing about a 2013 Florida law allowing politicians to hold their assets in blind trusts, and withhold from public disclosure specification of the assets held in those trusts. But the debate is only theoretical at this point, according to Florida’s First District Court of Appeal. For that reason, in its opinion issued today in Apthorp v. Detzner, the 1st DCA punted on the merits of a challenge to the constitutionality of the blind trust provisions.

Apthorp was an aide to former Governor Rubin Askew, who pushed the passage of the Sunshine Amendment, the first successful ballot initiative in Florida, which is now Article II, section 8 of the Florida Constitution. Among other things, the Sunshine Amendment requires full disclosure by public office-holders of their financial interests, to avoid conflicts of interest in their decision-making. With financial holdings public, if a politician voted in a way that benefitted his/her financial interests, that fact would be known to the public and subject to public scrutiny.  

In 2013, the Florida legislature passed section 112.31425, Florida Statutes, which allows public officials to hold their assets in “qualified blind trusts,” for ostensibly the same purpose — to avoid conflicts of interest. A statewide grand jury convened in 2010 had recommended the use of blind trusts for that purpose.

A public office-holder uses a blind trust by placing his/her money with a manager who has full power to buy and sell assets. In theory, then, the public office-holder would not know whether a decision affects his/her financial interests because he/she doesn’t know the identity of the companies in which the assets of the trust are currently invested.

According to the legislature, “if a public officer creates a trust and does not control the interests held by the trust, his or her official actions will not be influenced or appear to be influenced by private considerations.” Correspondingly, the legislature permitted public office-holders to publicly disclose only the total value of the assets held in a blind trust, and not the individual investments of the blind trust.

Apthorp apparently did not see the blind trust provisions as a positive development. He saw the blind trust reporting provisions as a way for public office-holders to essentially hold on to the assets and avoid public disclosure. Soon after the new provisions were enacted, Apthorp sought to block candidates from taking advantage of them by filing a Petition for Writ of Mandamus to the Supreme Court of Florida.

When the Supreme Court ruled that the case should be heard in circuit court, Apthorp sought a declaratory judgment from the circuit court that the blind trust provisions violated the Sunshine Amendment. The trial court ruled that they do not.

Apthorp challenged that ruling on appeal. But the 1st DCA didn’t reach the constitutional issue. Instead, the 1st DCA vacated the trial court’s declaratory judgment after finding that the trial court lacked jurisdiction to entertain the case at all because there was no justiciable controversy.

A bedrock principle of the court system is that courts are constitutionally empowered only to decide actual disputes between the parties. With few exceptions, courts don’t have jurisdiction to issue “advisory opinions,” i.e., to say how they would rule if a certain set of circumstances were presented to them. The plaintiff must assert an actual controversy: that the defendant violated (or is currently violating) the law, that the plaintiff has been injured by the alleged violation, and must seek redress for the alleged injury.

Suits for declaratory judgment are somewhat of an anomoly because they seek a declaration about a future action — before anyone has been harmed — rather than relief for an injury caused by a past or present harm. For example, in a common type of suit for declaratory judgment, an insurer seeks a declaration that its contract doesn’t require it to cover certain damages. That contrasts with the more traditional paradigm suit, in which, for example, an insured might sue the insurer after it had refused to cover damages, claiming the insurer had breached the contract in doing so.

But there are limits to courts’ ability to hear declaratory judgment suits as well, the 1st DCA explained. Under the Florida Supreme Court’s decision in Martinez v. Scanlan, 582 So. 2d 1167 (Fla. 1991), there must still be an actual controversy, “a bona fide, actual, present practical need for the declaration…” (Applying this principle to the insurer’s declaratory judgment suit, there’s a need for a declaration because there’s a present dispute between the insurer and insured over whether the insurer is required to pay for the damages. But if, for example, an insurer sought a declaration that a certain provision in its contract doesn’t require it to ever cover a certain type of damages, without reference to specific damages incurred by a specific insured, under Martinez, there would appear to be no actual present need for a declaratory judgment.)     

The 1st DCA held that there was no actual present need for a declaration regarding the constitutionality of the blind trust provisions because no candidate or public office-holder had yet sought to take advantage of those provisions. “Not only has no public officer ever used the type of ‘qualified blind trust’ authorized by the statute Apthorp is challenging, but his brief concedes that he knows of no constitutional officer or candidate who incorporated a blind trust in the most recent financial statements.” Until that happened, there would be no justiciable question for the court to decide, only a theoretical issue that might arise in the future.

Because it found the courts lacked jurisdiction to decide the issue, the 1st DCA vacated the trial court’s judgment as improperly entered, leaving the constitutional question open for challenge in a later case. In a special concurrence, Judge Thomas emphasized that the opinion should not be read to take a position on the constitutional issue, and hinted that he saw potential constitutional problems. But that issue will need to await a case in which the concerns are not merely theoretical.   

2011 will surely go down as the Year of the Class Action in the Supreme Court of the United States.  If you were surprised at the potential effects of Concepcion v. AT&T Mobility LLC for consumer class actions (unlike many observers, I didn’t see it as their end), then you might want to sit down before reading the Court’s decision in Walmart v. Dukes — which has far greater implications for employment discrimination class actions.

In my first entry on this blog back in April, I wondered where the Court was going with Dukes.  Was it looking to address when (if ever) the easier-to-satisfy Rule 23(b)(2) can be used to certify a class seeking monetary relief?  Plaintiffs’ burden of proof in showing that a class satisfies the requirements of Rule 23?  Or was the Court bothered by an issue specific to Title VII class actions only — the theory that allowing “excessive subjectivity” in hiring decisions can be a “pattern or practice” that may be actionable in an employment discrimination suit if the plaintiffs show a disparate impact on women?

And correspondingly, would the decision’s effects extend to: (a) only civil right cases; (b) all (b)(2) classes; or (c) all class actions?  While many think the answer is all of the above, I think the decision is for the most part confined to (a) and (b).

The Basics of the Decision

The thrust of the Dukes decision can be gleaned from this comment by J. Russell Jackson (who makes his living defending corporations against class actions) on his blog Consumer Class Actions and Mass Torts: “”it’s like an 8-year-old’s Christmas morning in my office!”

Lawyers on the plaintiffs’ side, on the other hand, must feel like they found coal in their stockings, despite what they told the National Law Journal when it called for their reactions.

A description of the background, facts, and procedural hisory of the case can be found in my earlier post, so I’ll focus on the holding.

The Court was unanimous in rejecting the court of appeals’ conclusion that Rule 23(b)(2) certification was appropriate.  The Court also addressed Rule 23(a), with a 5-4 majority rejecting the 9th Circuit’s finding that the class members shared “common issues of law or fact” satisfying Rule 23(a)(2)’s “commonality” requirement.

Either holding would have been sufficient to reverse the decision on appeal, and appellate courts generally try to confine their analyses to what is necessary to decide the case before the court, so it’s somewhat surprising that the Court addressed both points.  Perhaps it did so to ensure that the case wouldn’t wind up back before the Court if the plaintiffs tried another route to certification on remand.  Then again, the Court may have simply felt that since the issues were already teed up, it would be more efficient to decide them now than to wait for them to be brought up again in some future case.

Defense lawyer Jackson goes on to say that the Court fulfilled 5 of the 8 wishes on his wishlist.  I personally think he overstates it a bit.  At least 2 of his wishes — that courts must perform a rigorous analysis at class certification, and can’t use Rule 23 to abridge substantive rights — had been granted by the Court long ago.  And the courts of appeals had already unanimously endorsed another of his wishes: that courts must decide merits issues where necessary to the Rule 23 analysis.

That said, it’s hard to argue with the notion that Dukes embraces many positions advanced by class action defense lawyers.  And I think the decision has the potential to all but eliminate private enforcement class actions under Title VII, as well as the use of Rule 23(b)(2) in cases involving monetary claims (i.e., it will not be used in most cases brought by for-profit law firms).

What About Other Types of Class Actions?

The impact on class actions that don’t involve civil rights is not as clear to me.  Many commentators are saying that the Court’s description of commonality will impact all class actions.  But I’m not so sure.

Cases Like Dukes Are Highly Individualized

One thing to remember when reading appellate decisions is this:  context always matters.  And that is particularly true in Dukes.  As in many Title VII class actions, Dukes is an effort to try very individualized legal claims through representative plaintiffs.  In the absence of an explicit written policy to discriminate or a test designed to achieve the same goal, decisions to hire or promote an employee are extremely individualized.  They’re based not only on an applicant’s qualifications and performance, but also on the qualifications and performance of competing applicants.

So proving that a particular hiring or promotion decision was unlawful is often inseparable from the individual circumstances of that decision.  The “excessive subjectivity” theory was an attempt to get around that problem through statistics.  But statistics in such a case may tell you something about the employer’s overall hiring, but they still can’t say with certainty whether any particular person was adversely impacted.

I’ve always felt that plaintiffs in Title VII cases were held to a lesser standard than in other class actions.  That was likely attributable to the the historical bond between class actions and civil rights actions — Brown v. Board of Education is probably the most famous class action to this day — as well as the understanding that Rule 23’s drafters had civil rights class actions in mind.

After Dukes, forget the Advisory Committee Notes to Rule 23(b).  They may say that provision is meant to apply to “various actions in the civil-rights field where a party is charged with discriminating unlawfully against a class…”  But the text of the rule specifically refers to cases involving “declaratory or injunctive relief.”

So courts’ traditional understanding that Rule 23(b) also encompassed other forms of “equitable relief” in civil rights cases (i.e., backpay) even though monetary in nature, was misgurided, according to the Court.  But in a nod to Brown, perhaps, the Court clarified that when the Advisory Committee notes speak of civil rights cases, they are referring to desegregation cases and the like, where only non-monetary relief is at issue.

So I think one major lesson of Dukes is that civil rights cases are to be treated the same as any other class action.

The Court’s Rule 23(a)(2) Analysis Is Not A Major Change

Which brings us back to the principle that context always matters.  In my view, the Court’s discussion of commonality is inseparable from its rejection of the “excessive subjectivity” theory.  And the Court’s finding that the class didn’t satisfy commonality loses much of its significance when removed from that context.

So I don’t think that the Court’s analysis of the requirement of commonality under Rule 23(a)(2) will have quite the impact on other types of cases that many are predicting.  In fact, I don’t think the Court really changed the standard that generally applies in determining whether the class members share common issues of law or fact.  To satisfy commonality, the Court said:

[The class members’] claims must depend upon a common contention…That common contention, moreover, must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.

What’s new about that?  In the types of cases that I’ve always understood to be good candidates for class action treatment, which is to say where the substantive claims are defendant-centered, that commonality standard would appear to be satisfied.

Take, for example, a price-fixing case.  A “common contention” that is “central to the validity of each one of the claims” is the existence of a price-fixing scheme among the defendants.  And if one plaintiff proves that such a scheme existed, it generally will have resolved that contention class-wide, “in one stroke.”

The same is true in a 10b-5 securities case.  When a plaintiff resolves the central issue of whether the defendants made false or misleading statements, that issue is resolved class-wide.  So too in an Enron-style ERISA cases alleging imprudent investment in an employer’s stock.  When a plaintiff resolves the central contention that it was imprudent for plan managers to invest plan assets in the investment vehicle at issue, the validity of that contention is established class-wide, “in a single stroke.”

              The Court’s Rule 23(b)(2) Holding is Significant, But Mostly for Title VII Cases

There’s no denying that the Court severely restricted the use of the Rule 23(b)(2) accross the board.  The Court nominally left open the possibility that (b)(2) might be used where monetary relief is “incidental to requested injunctive or declaratory relief” and “damages…flow directly from liability to the class as a whole on the claims forming the basis of the injunctive or declaratory relief,” as the 5th Circuit held in Allison v. Citgo Petroleum Corp.

But at the same time, the court strongly implied that allowing a non-opt-out class to pursue monetary relief violates due process.  So I wouldn’t expect to see any such classes certified anytime soon.  Nor are many plaintiffs likely to request it, as the Court made it as difficult to certify a (b)(2) class as a (b)(3) class, in concluding that (b)(2) applies only when “predominance and superiority are self-evident.”

Yet, again, this holding would seem to primarily impact class actions brought under Title VII and other civil rights statutes.  Plaintiffs in most other cases seek monetary relief and certification under Rule 23(b)(3).  Courts, after all, have rarely found that injunctive and declaratory relief predominated in a case where plaintiffs also sought monetary relief.  Outside of the civil rights context, at least.