Pinnock & Wakefield prevailed in an appeal to the Ninth Circuit Court of Appeals in the case Molski v. ARCO.  For the text of the opinion Click Here     Mr. David C. Wakefield drafted the successful arguments in Molski v. ARCO.

I.   The Decision

A. Interpretation of the Consent Decree

The Ninth Circuit determined that state law damages were released under the consent decree because:

B. Right to Opt-Out

The Ninth Circuit ruled the District Court erred by certifying a mandatory class under Rule 23(b)(2) because:

·         In order to permit a Rule 23(b)(2) certification, the claim for monetary damages must be incidental to the primary claim for injunctive or declaratory relief. If the action involves substantial monetary damages, maintenance of a mandatory Rule 23(b)(2) class is inappropriate and violative of minimum due process.

1. The Supreme Court's Decision in Ortiz v. Fibreboard Corp.

  The Ninth Circuit ruled the Supreme Court's recent decision in Ortiz v. Fibreboard Corp., 527 U.S. 815, 144 L. Ed. 2d 715, 119 S. Ct. 2295 (1999), did not remove the distinction between substantial and incidental damages. It was ruled the Supreme Court in Ortiz expressed its growing concern regarding the constitutionality of certifying mandatory classes when monetary damages are at issue.  However, the Supreme Court did not adopt a per se rule that abolished the distinction between statutory and incidental damages in determining whether to certify a mandatory class.

2. Statutory Damages

The Ninth Circuit held that opt-out was required because the statutory damages released by the consent decree were treble in nature. 

C. Adequate Notice

The Court ruled because the consent decree releases all claims for actual damages, except those involving physical injury, the language of the notice was inadequate. Moreover, the Court held the publication required by the District Court was insufficient to effect notice. The Ninth Circuit held the District Court abused its discretion by certifying a mandatory class under Rule 23(b)(2) with no right to opt-out. Because the class members had the right to opt-out, they also had the right to the best notice practicable. Yet, the District Court failed to do so. Notice could have been given through individual mailings to disabled drivers, using the names maintained by the Department of Motor Vehicles. Because no individualized efforts were undertaken, the Court ruled that the notice provided to the class was inadequate and failed to comport with the requirements of due process.

  D. Approval of the Consent Decree

The Ninth Circuit ruled a consent decree need not impose all the obligations and duties set forth in the ADA and its regulations.  It further stated the federal government can still compel ARCO to comply with the full extent of the ADA by filing suit. 42 U.S.C. §  12188(b).  

However, it was determined the District Court clearly erred in deciding that no actual damages were released and in determining that certification under Rule 23(b)(2) was appropriate despite the release of the treble damages. These issues alone raised serious concerns regarding the fairness of the consent decree and warrant reversal. However, the issue of whether the consent decree adequately protected the interests of the absentee class members was equally troubling.

    The class members lost their rights to pursue any claims (excepting those for physical injury); the class representative received monetary relief of $ 5,000; and the class counsel was paid $ 50,000. The corporation was required to make tax-deductible donations to third parties and simply meet its legal obligations (or perhaps even less than that required) under the ADA. In sum, the class members received nothing; the named plaintiff and class counsel received compensation for his injury and their time; and the defendant escaped paying any punitive or almost any compensatory damages. This outcome is particularly problematic because only a minimal amount of discovery occurred in this case, and the primary components of the agreement were reached prior to filing of the class action.

Intertwined with the Court’s finding that the settlement agreement was unfair was the fact that the cy pres award in the case replaced the claims for actual and treble damages of potentially thousands of individuals. In this case, the Court ruled there was no evidence that proof of individual claims would be burdensome or that distribution of damages would be costly. Moreover, the cy pres award circumvents individualized proof requirements and alters the substantive rights at issue in this case. Thus, the use of the cy pres award was inappropriate.  Because the consent decree released almost all of the absent class members' claims with little or no compensation, the settlement agreement was unfair and did not adequately protect the interests of the absent class members.

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