Sixth Circuit vacates class certification based on preclusion, interprets Wal-Mart

The Sixth Circuit in Gooch v. Life Investors Ins. Co. of Am., Cases Nos. 10-5003/5723 (6th Cir. Feb. 10, 2012), has vacated a Middle District of Tennessee decision granting class certification, remanding the case for further proceedings.  At issue was the District Court’s decision certifying a class action consisting of individuals covered by cancer-only insurance policies issued by Life Investors Insurance Company over a six-year period. 

The Sixth Circuit vacated the order certifying the class based upon preclusion due to a settlement approved in a similar Arkansas state court class action on the same day as the District Court certified the class in Gooch. See Hunter v. Runyan, ___ S.W.3d ___, 2011 WL 478594, at *12 (Ark.); see also Pipes v. Life Investors Ins. Co. of Am., No. 1:07-cv-00035-SWW (E.D. Ark. 2008).

Fully analyzing and giving full faith and credit to the Runyan settlement, the Sixth Circuit’s decision was based upon the fact that many of the putative plaintiffs in Gooch settled their claims by failing to opt out of the Runyan settlement. Therefore, while the Sixth Circuit surmised that Gooch might still be able to pursue claims on behalf of some class (for example, those such as himself who had opted out of the Runyan settlement), the class actually certified had been gutted by the settlement.

The Sixth Circuit conducted a thorough analysis not only of preclusion under the standard in Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367, 374 (1996), but of the merits of class certification as it related to any claims not barred by the Runyan settlement.

One such issue was whether the decision in Wal-Mart Stores, Inc. v. Dukes, ___ U.S. ___, 131 S. Ct. 2541 (2011), precluded certification of a declaratory judgment class under Rule 23(b)(2) when Gooch also sought monetary relief. Parsing Wal-Mart, the Sixth Circuit found the answer is no: A declaratory judgment class can still be certified under Rule 23(b)(2) so long as a declaratory judgment remains a separable and distinct type of relief that will resolve an issue common to all class members. 

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Federal Class Action Law, Insurance Industry, Sixth Circuit Class Action Law, Sixth Circuit Wal-Mart Scoreboard, Wal-Mart v. Dukes