Forbush v. J.C. Penney Co., Inc.

Decision Date25 June 1993
Docket NumberNo. 92-1131,92-1131
Citation994 F.2d 1101
Parties, 17 Employee Benefits Cas. 1070 Mary Jane FORBUSH, Plaintiff-Appellant, v. J.C. PENNEY COMPANY, INC., Pension Plan, et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

Neal S. Duduvitz, Gill Deford, National Senior Citizens Law Center, Los Angeles, CA, Stephen R. Bruce, Washington, DC, for plaintiff-appellant.

Stanley Weiner, Larry M. Parson, Jerome R. Doak, Jones, Day, Reavis & Pogue, Dallas, TX, for defendants-appellees.

Appeal from the United States District Court for the Northern District of Texas.




This is an interlocutory appeal from the district court's refusal to certify a class. Plaintiff Mary Jane Forbush, a vested retiree under the J.C. Penney Company Pension Plan, sued Penney on behalf of herself and all those similarly situated. Forbush worked at a California Penney store from 1970 until 1983, when she was laid off at the age of 62. Under the applicable terms of the Penney pension plan, Forbush became eligible to receive her benefits when she reached the age of 65 in 1985. The plan in effect at that time, however, offset the money due Forbush under the plan by the amount she was estimated to receive from Social Security. Since Forbush's estimated Social Security benefits exceeded her benefits under the plan, the company determined that she was entitled to nothing.

Forbush filed this class action suit in U.S. District Court for the District of Maryland in 1988, claiming that the plan's method of estimating Social Security benefits violated several provisions of ERISA. See 29 U.S.C. § 1001 et seq. After the Maryland district court ordered the case transferred to the Northern District of Texas, Forbush moved for certification of the class. In her motion Forbush sought to represent all former and current Penney employees:

1) who have been employed by Penney at any time after January 1, 1976;

2) who have, or may obtain, a vested right to benefits under the pension plan; and

3) whose pension benefits have been or will be reduced or eliminated as a result of the plan's overestimation of their Social Security benefits.

Forbush estimated the size of the class at 10,000.


Penney opposed Forbush's motion on several grounds, but relied most heavily on the fact that the potential class was covered by four different pension plans. From 1976 to 1982, the plan used the "prior earnings method" in estimating a retiree's Social Security benefits. This method assumed that an individual's earnings before joining the company were similar to the wages she received during her first year with Penney. As Forbush points out, this method had an especially negative impact upon women retirees, for whom the assumption of full-time employment during all of the years before coming to Penney was unrealistic.

In July 1982, Penney offered an alternative method for estimating Social Security benefits. In addition to the prior earnings method, retirees could request that their Social Security benefits be determined under the "zero earnings method." This second method relied entirely on the employee's earnings with Penney, assuming zero earnings elsewhere, and then offset that amount by 60%. Penney instituted yet a third method of estimating Social Security benefits in 1984, a two-step "prorated method." It first determined the retiree's total wages by disregarding all non-Penney earning years, and then prorated this sum by multiplying it by the number of years in service and then dividing by thirty. Penney finally decided to eliminate the social security offset from the pension plan in 1989.

Forbush sought certification of the class under Fed.R.Civ.P. 23(b)(2). 1 The district court, however, denied Forbush's motion, holding that the "problem with the proposed class is that the merits of each class member's claim will have to be decided on an individual basis." Since several "issues will have to be resolved in each individual case before members of the class would be entitled to relief," the district court found that "the class proposed by Plaintiffs will in no way effectuate the principal purpose of Rule 23."

Forbush's primary contention on appeal is that the district court improperly imported 23(b)(3)'s "predominance" and "manageability" requirements in denying her motion to certify the class under 23(b)(2). The parties initially disagree on the proper standard of review. Penney contends that a district court's denial of a certification motion may be reversed only where the court has abused its "substantial discretion." Richardson v. Byrd, 709 F.2d 1016, 1019 (5th Cir.) ("complex cases cannot be run from the tower of the appellate court"), cert. denied sub nom., Dallas County Comrs. Court v. Richardson, 464 U.S. 1009, 104 S.Ct. 527, 78 L.Ed.2d 710 (1983). Forbush agrees that a district court's application of Rule 23 to the facts of a particular case is entitled to great deference, but argues that this relaxed standard of review is not appropriate where, as here, the court has applied the wrong rule or misinterpreted the requirements of the governing provision. Such legal errors, Forbush contends, should be reviewed de novo. Penney does not question this higher scrutiny for legal issues, but argues that the alleged error cited by Forbush is the product of her willful misreading of the district court's decision. The dispute over the standard of review thus reduces itself to a question of interpreting of the district court's opinion.

The district court found it "unnecessary to resolve the issue of whether certification under (b)(2) or (b)(3) is more appropriate," for it believed that "[c]ertification under either of these subdivisions is improper." The court then specifically rejected Forbush's contention "that a class action is necessary because of the common issue of whether the alleged overestimation of social security benefits violates [ERISA]." As the district court saw it, "[t]he problem with the proposed class is that the merits of each class member's claim will have to be decided on an individual basis. The propriety of injunctive relief sought by Plaintiffs will turn upon a consideration of the individual circumstances of each class member." The court concluded by identifying five separate issues that would "have to be resolved in each individual case before members of the class [would] be entitled to relief." 2

The court then discussed Dameron v. Sinai Hospital of Baltimore, 595 F.Supp. 1404 (D.Md.1984), aff'd in part and rev'd in part, 815 F.2d 975 (4th Cir.1987), a case in which a similar challenge to methods of calculating social security benefits was certified as a class action. The court found that the "predominance of individual issues in the present case distinguishes it from Dameron." While Dameron involved a class of fifty plaintiffs, the court noted that the class here was 10,000. Moreover, while "Dameron involved only one plan, Forbush's claims involve the analysis of at least four different J.C. Penney pension plans." These two factors "increased the issues that will have to be resolved on an individual basis." Given the number of potential plaintiffs and differing claims, the district court concluded that "certification of the proposed class will not promote judicial economy, nor will class injunctive relief be appropriate in light of the prevailing individual issues."


Forbush reads the district court's opinion to hold that certification of the class "was inappropriate because individual relief issues predominated over common ones, resulting in increased litigation costs and making the case difficult to manage." If so read, the decision indisputably rested on two considerations relevant under 23(b)(3), not 23(b)(2). First, the question of whether common issues "predominate" over individual ones has no place in determining whether a class should be certified under 23(b)(2). See, e.g., Adamson v. Bowen, 855 F.2d 668, 676 (10th Cir.1988) (Plaintiff "sought relief under Rule 23(b)(2), which contains no requirement of 'predominance.' The district court placed upon the class a burden that the rule does not authorize"). Second, questions of manageability and judicial economy are also irrelevant to 23(b)(2) class actions. See, e.g., Johnson v. American Credit Co., 581 F.2d 526, 531 n. 9 (5th Cir.1978) ("The defendants argue that the class is unmanageable because it is too large and too diversified. This argument would be relevant only if [plaintiff] had sought class certification under Rule 23(b)(3)"). It would follow that the district court applied the wrong legal standards and the order denying class certification could not stand.

Penney agrees that Rule 23(b)(2) contains no requirements of "predominance" and "manageability." But it contends that the district court's denial of Forbush's certification motion does not rest there. Rather, the court's discussion should be read, Penney asserts, as a determination that Forbush has not satisfied the threshold requirements set out in 23(a), assertedly six in number: (1) that plaintiff define the class with some specificity; (2) that plaintiff be a member of the class; (3) that the class be so numerous that joinder is impracticable; (4) that there are issues of law or fact common to the class; (5) that the claims of the representative plaintiff be typical of the class; (6) that the named plaintiff adequately represent the interests of the class. Penney contends that Forbush has not satisfied the requirements of (1) specificity, (4) commonality, (5) typicality, and (6) adequacy of representation. 3

Penney concedes that the first requirement of specificity is not contained within Rule 23(a)'s express provisions, but asserts that it has been "implied" by courts. A requirement that the class be defined with some specificity is...

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