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RICO Class Action Controversy Continues

By Kent A. Lambert, Litigation News Associate Editor – October 8, 2009

A petition for certiorari has been filed to challenge the Eleventh Circuit’s much discussed decision in Williams v. Mohawk Indus., Inc., [PDF] reversing the district court’s denial of class certification in a RICO employment case.

The Eleventh Circuit reversed and remanded the case to the district court in May to determine whether the class could be certified under both Federal Rules of Civil Procedure 23 (b)(2) and (b)(3).

The plaintiffs had sought certification of a class that seeks both damages and injunctive relief, claiming that the defendant, through temporary employment agencies, violated state and federal RICO laws by hiring illegal aliens as a way to depress hourly wages.

The Eleventh Circuit held that the district court abused its discretion when it ruled that the employees’ complaint fails to present common issues of law or fact, and when it ruled that the proposed representatives’ claims are not typical of the class. Those errors led the district court to misapply the standard for determining whether the plaintiffs could maintain a class action for damages and a hybrid class action for injunctive relief, notes the court of appeals opinion.

The court of appeals also criticized the district court for improperly analogizing plaintiffs’ RICO claims to claims brought under Title VII. The employee plaintiffs RICO claims are “not dependent on proof of individual acts of disparate treatment as often is the case under Title VII,” the opinion states.

On remand, “[i]f the district court determines that common issues predominate and certifies a class for damages under subsection (b)(3) [of Rule 23], the district court must consider whether to certify a class under subsection (b)(2) with respect to the employees’ claim for equitable relief,” the Eleventh Circuit instructed.

The district court had declined to certify a hybrid class, calling it “overly cumbersome, confusing, and inefficient” to allow individual suits for liability and monetary relief, followed by judicial resolution of class-wide equitable relief. The Eleventh Circuit dismissed this concern as one that “dissolves if the district court determines common issues predominate and certifies a class under subsection (b)(3).”

Practical Concerns over the Williams Analysis
The Eleventh Circuit’s ruling has been touted as a victory for the plaintiff employees whose case has been before the federal appellate court three times so far since the case was originally filed in 2004. However, a petition for certiorari of this latest opinion was filed on August 26, 2009.

Some litigators are concerned over the practical implications of the Eleventh Circuit’s ruling. “Williams did not focus enough on the practical difficulties presented in actually trying a hybrid case,” opines Michael Winston, West Palm Beach, FL, cochair of the Emerging Issues subcommittee of the ABA Section of Litigation’s Class Actions Committee.

The issue, as Winston sees it, is “how the trial court can be expected to try a case effectively when it raises different class claims, subject to inconsistent notice requirements and varying defenses, some specific to individualized damage claims that nonetheless need to be tried to the same jury.”

“The Eleventh Circuit’s decision does not give nearly enough deference to the trial judge’s perspective as to the manageability of the trial,” Winston says. He criticizes the court’s failure to enforce recent amendments to Rule 23 requiring a plaintiff seeking certification to provide a trial plan.

However, others say concerns such as those voiced by Winston take the William decision too far. “The Eleventh Circuit’s analysis in Williams is somewhat specific to the RICO claims at issue in the case,” explains Douglas McCoy, Mobile, AL, cochair of the Section’s Business Torts Litigation Committee.

While RICO is sometimes viewed as making a case more complex, the Eleventh Circuit found RICO to be the principal source of the common ground. “We are talking about one enterprise here. We’re talking about one pattern of racketeering activity, and principally, one type of injury caused by that racketeering activity,” the Eleventh Circuit opined.

“Whether [the employer] conducted the affairs of an enterprise through a pattern of racketeering activity that depressed the wages of all employees is a question common to each employee’s complaint,” the court of appeals said. Georgia’s RICO statute does not require proof of an enterprise, only proof that the defendant committed the crime twice, the opinion notes.

Keywords: Class action, class certification, employment


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