Thorn v. Jefferson-Pilot Life Ins. Co., No. 05-1162.

• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)
• Writing for the Court: Williams
• Citation: 445 F.3d 311
• Parties: Rose Belle Thorn; Rosa M. Thorn, Individually and as Personal Representatives of the Estate of Leroy Thorn, Deceased; Robert Pugh; Evelyn D. Pugh, on behalf of themselves and on behalf of all others similarly situated, Plaintiffs-Appellants, v. JEFFERSON-PILOT LIFE INSURANCE COMPANY, as successor of Pilot Life Insurance Company, Defendant-Appellee. American Council of Life Insurers, Amicus Supporting Appellee.
• Docket Number: No. 05-1162.
• Decision Date: 15 February 2006

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445 F.3d 311 Rose Belle Thorn; Rosa M. Thorn, Individually and as Personal Representatives of the Estate of Leroy Thorn, Deceased; Robert Pugh; Evelyn D. Pugh, on behalf of themselves and on behalf of all others similarly situated, Plaintiffs-Appellants,
v.
JEFFERSON-PILOT LIFE INSURANCE COMPANY, as successor of Pilot Life Insurance Company, Defendant-Appellee.
American Council of Life Insurers, Amicus Supporting Appellee. No. 05-1162. United States Court of Appeals, Fourth Circuit. Argued September 19, 2005. Decided February 15, 2006. Corrected Opinion Filed March 9, 2006.

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ARGUED: Sanford Svetcov, Lerach, Coughlin, Stoia, Geller, Rudman & Robbins, L.L.P., San Francisco, California, for Appellants. James F. Jorden, Jorden Burt, L.L.P., Washington, DC, for Appellee. ON BRIEF: Andrew S. Friedman, Wendy J. Harrison, Bonnett, Fairbourn, Friedman & Balint, P.C., Phoenix, Arizona; William M. Audet, Michael McShane, Alexander, Hawes & Audet,

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L.L.P., San Francisco, California; W. Christian Hoyer, Christa L. Collins, James, Hoyer, Newcomer & Smiljanich, P.A., Tampa, Florida; John J. Stoia, Jr., Alreen Haeggquist, Lerach, Coughlin, Stoia, Geller, Rudman & Robbins, L.L.P., San Francisco, California; Charles Mathis, Mathis, Adams & Tate, P.C., Atlanta, Georgia; Barry A. Weprin, Brad N. Friedman, Milberg, Weiss, Bershad & Schulman, L.L.P., New York, New York; Christopher A. Seeger, David R. Buchanan, Seeger, Weiss, L.L.P., New York, New York; Herman Watson, Jr., Rebekah Keith McKinney, Watson, Jimmerson, Givhan, Martin & McKinney, P.C., Huntsville, Alabama; T. English McCutchen, William E. Hopkins, Jr., McCutchen, Blanton, Johnson & Barnette, L.L.P., Columbia, South Carolina; Ronald R. Parry, David Futscher, Parry, Deering, Futscher & Sparks, P.S.C., Covington, Kentucky; J.P. Strom, Jr., Mario A. Pacella, Strom & Young, L.L.C., Columbia, South Carolina; Joe R. Whatley, Whatley, Drake, L.L.C., Birmingham, Alabama, for Appellants. Brent O.E. Clinkscale, Jacquelyn D. Austin, Womble, Carlyle, Sandridge & Rice, P.L.L.C., Greenville, South Carolina; Debbie W. Harden, Womble, Carlyle, Sandridge & Rice, P.L.L.C., Charlotte, North Carolina; Waldemar J. Pflepsen, Jr., Stephen H. Goldberg, Jorden Burt, L.L.P., Washington, DC, for Appellee. Victoria E. Fimea, American Council of Life Insurers, Washington, DC; Evan M. Tager, Craig W. Canetti, Mayer, Brown, Rowe & Maw, L.L.P., Washington, DC for Amicus Supporting Appellee.

Before WILLIAMS and MICHAEL, Circuit Judges, and James C. DEVER III, United States District Judge for the Eastern District of North Carolina, sitting by designation.

Affirmed and remanded by published opinion. Judge WILLIAMS wrote the majority opinion, in which Judge DEVER concurred. Judge MICHAEL wrote a separate dissenting opinion.

OPINION

WILLIAMS, Circuit Judge.

The named plaintiffs (Appellants) in this case filed an individual and class-action complaint against Jefferson-Pilot Life Insurance Company on behalf of themselves and approximately 1.4 million African-American policyholders. The complaint alleged that Jefferson-Pilot's corporate predecessors discriminated against the class members in violation of federal law by charging them higher premiums than whites for similar insurance policies. The district court denied certification under Fed.R.Civ.P. 23(b)(3), finding that because it could not resolve Jefferson-Pilot's statute of limitations defense on a class-wide basis, issues common to the class did not predominate over individual ones. The district court also denied certification under Fed.R.Civ.P. 23(b)(2), finding that Appellants' requested remedy was merely a predicate for monetary damages. Appellants moved for an immediate interlocutory appeal under Fed.R.Civ.P. 23(f) and 28 U.S.C.A. § 1292(e) (West Supp. 2005), which we accepted under Fed. R.App. P. 5.

We hold that Appellants bear the burden of proving compliance with Rule 23 and that the district court did not clearly err in finding that Jefferson-Pilot's statute of limitations defense did not present common issues that could be resolved on a class-wide basis. We also hold that the district court correctly held certification was improper under Rule 23(b)(2) because Appellants' requested relief was not predominantly injunctive or declaratory in nature. We therefore affirm and remand for

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further proceedings on Appellants' individual claims.

I.

The parties agree on most of the facts relevant to this appeal. From 1911 to 1973, Jefferson-Pilot Insurance Company's corporate predecessors (collectively Jefferson-Pilot) issued approximately 1.4 million industrial life insurance policies¹ to African-Americans in North Carolina, South Carolina, Georgia, and Virginia. Jefferson-Pilot admits that it charged African-American policyholders higher premiums than it charged white policyholders for policies with similar benefits. Jefferson-Pilot contends, however, that its "dual-rate"² policies were not the product of racial animus. Instead, it argues that the price difference was nothing more than a wise business decision based on mortality tables showing that African-Americans had shorter life expectancies and were thus higher life-insurance risks than similarly situated whites.³

Jefferson-Pilot stopped issuing industrial life insurance policies altogether in 1973, but continued to collect premiums on the dual-rate policies that were still in effect at that time. In 1988, Jefferson-Pilot adjusted the race-based premiums on all active policies according to blended mortality tables, which were not based on race. Even after this adjustment, however, African-American policyholders still paid more than whites for similar benefits because whites' premiums had been determined according to mortality tables for whites only. In 2000, about the time the instant action was filed,⁴ Jefferson-Pilot declared that all still-active industrial insurance policies, whether owned by African-Americans or whites, were "paid up"; i.e., that no further premiums would be charged on the policies. At that time, only approximately 45,000 of the 1.4 million dual-rate policies issued to African-Americans were still in effect.⁵

In September 2000, Appellants Rose Belle Thorn, Rosa M. Thorn, Robert Pugh, and Evelyn D. Pugh — four African-Americans insured under a Jefferson-Pilot industrial life insurance policy — filed a class-action complaint against Jefferson-Pilot alleging that its dual-rate policies violated 42 U.S.C.A. §§ 1981 (West 2003) (granting equal rights to "make and enforce contracts" without regard to race) and 1982 (West 2003) (granting equal rights to "inherit,

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purchase, lease, sell, hold, and convey real and personal property" without regard to race).⁶ The complaint also alleged that Jefferson-Pilot took steps to conceal these practices from its policyholders, such as instructing its agents not to disclose the race-based premium disparities. The complaint sought, inter alia, an injunction prohibiting Jefferson-Pilot from collecting any future premiums on its dual-rate policies, restitution for the difference in premium payments made by African-American and white policyholders, punitive damages, and attorney's fees. In its answer, Jefferson-Pilot, inter alia, denied that it took steps to conceal its dual-rate practices, denied that Appellants were entitled to relief, and raised a statute of limitations defense.

In October 2003, Appellants moved under Fed.R.Civ.P. 23(b)(3) and 23(b)(2) to certify a class of "all African-Americans who [were insured by a race-based dual-rate] industrial life insurance policy that was issued [by Jefferson-Pilot]." (J.A. at 284.)⁷ Jefferson-Pilot opposed the motion. It argued, in pertinent part, that certification was improper under Rule 23(b)(3) because individual members of the class could have been exposed to sufficient information to give them either actual or constructive knowledge of its dual-rate practices outside of the limitations period. In Jefferson-Pilot's view, this fact required the district court to conduct individual hearings for each class member to determine when he or she learned of the dual-rate practices, a requirement that defeated the benefits of class certification. In support of this argument, Jefferson-Pilot submitted an expert report from Henry M. McKiven, a professor in the History Department at the University of South Alabama. In the report, Dr. McKiven detailed the news media's reports of race-based insurance practices over the course of the twentieth century, noted the objections to the practices raised in the African-American community, particularly by African-American church leaders, through the middle part of the century, and explained that a number of African-Americans formed their own insurance companies early in the century in an effort to offer an alternative to white-owned insurance companies' race-based practices. Dr. McKiven claimed that "based on these numerous sources of information, ... an African American living in the Southeast could have become aware" of insurance companies' dual-rate practices. (J.A. at 101.) Jefferson-Pilot also argued that certification was improper under Rule 23(b)(2) because Appellants sought primarily monetary relief.

Appellants argued that the district court could resolve Jefferson-Pilot's statute of limitations defense on a class-wide basis — i.e., without conducting individual hearings — because Jefferson-Pilot had not shown that any class member had actual knowledge of its dual-rate practices and because all of the class members would have been exposed to the same information that could have given them actual or constructive knowledge of the practices. In support of this argument, Appellants submitted

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an expert report from Robert J. Norrell, a professor in the history department at the University of Tennessee. Dr. Norrell claimed that although there had been some media...