Federal district judge Richard Stearns has provisionally certified two classes in a case in which the plaintiffs have alleged that subsidiaries of insurance giant Cigna invested employee death benefits for their own profit, and without making required disclosures to beneficiaries. Otte v. Life Ins. Co. of North Amer., No. 09-CV-11537 (D. Mass. June 10, 2011) (order granting class certification) (available here).
Named plaintiff Brenda Otte alleges that the Cigna subsidiaries are violating the Employee Retirement Income Security Act of 1974 (ERISA) by investing death benefits owed to beneficiaries without making full disclosures or accounting to the beneficiaries. The division of the class into two sub-classes, one for claims that accrued during the three years before the action’s September 2009 filing date and the second for claims that accrued during the three years before the start of the first class claim period, reflects that an outstanding legal determination remains as to whether the complex ERISA statute of limitations could potentially preclude the latter class’ claims. Additionally, Judge Stearns recognized that “the claims of the [second] sub-class may be so individualized as to be unmanageable as a class action.” Order at 19 n.13. Soon after certification, the court issued a scheduling order specific to determinations bearing only on the class as to which doubts remained. Explaining why he opted for innovative case management tactics rather than simply denying certification altogether, Judge Stearns noted that “‘[c]ourts traditionally have been reluctant to deny class action status under Rule 23(b)(3) simply because affirmative defenses may be available against individual members.’” Order at 19, citing Smilow v. Bell Mobile Sys., Inc., 323 F.3d 32, 39 (1st Cir. 2003).
Thus, even as to an individual defense with complex underlying factual determinations, such challenges can be localized in specific sub-classes, preserving both the defendant’s due process rights and the efficiencies of class actions, rather than warranting a sweeping denial of class certification. Moreover, Judge Stearns modifying the class definition on his own initiative underscores the fact that issues with class definitions ought not be a barrier to class certification.