Errata to Concurrence Filed: June 27, 2003

Parker v. Time Warner
Docket No. 01-9069


JON O. NEWMAN, Circuit Judge, concurring:

     A complaint alleging that up to 12 million cable television

subscribers may each be entitled to receive at least $1,000 for

violations of their statutorily protected privacy rights presents class

action issues in a context unusual even for modern class action

litigation.   The Court remands for further consideration the District

Court's decision to deny class certification.       I concur in that

decision and agree with most of Judge Underhill's opinion.     I write

these additional views to explore matters affecting both the (b)(2) and

(b)(3) aspects of this case.      I am somewhat doubtful about the

possibility of a (b)(2) class that would include monetary claims but

believe that there are strong arguments favoring a (b)(3) class.   More

specifically, I think a district court has discretion to certify a

(b)(3) class with the aggregate amount of statutory damages limited

substantially below what a literal application of the statute might

seem to require.

     1. (b)(2) Issues

     Rule 23(b)(2) of the Federal Rules of Civil Procedure provides

that if the threshold prerequisites of Rule 23(a) are met, a class

action may be maintained if

     the party opposing the class has acted or refused to act on
     grounds generally applicable to the class, thereby making
     appropriate final injunctive relief or corresponding
     declaratory relief with respect to the class as a whole.

Fed. R. Civ. P. 23(b)(2).        Although the text of the (b)(2) provision

focuses on the appropriateness of injunctive or declaratory relief, the

drafters    contemplated      that   a   claim   for   money   damages   would     not

necessarily preclude class certification under (b)(2). They cautioned,

however, that "[t]he subdivision does not extend to cases in which the

appropriate final relief relates exclusively or predominantly to money

damages."    Id. advisory committee's note (1966) (emphasis added).                In

a case such as the pending one, in which damages are sought in addition

to injunctive and declaratory relief, the (b)(2) certification issue

turns largely on whether the final relief relates "predominantly" to

money damages.

     Some courts have ruled that monetary relief predominates "unless

it is incidental to requested injunctive or declaratory relief."

Allison v. Citgo Petroleum Corp., 151 F.3d 402, 415 (5th Cir. 1998);

see also Barabin v. Aramark Corp., No. 02-8057, 2003 WL 355417, at *1-

*2 (3d Cir. Jan. 24, 2003) (adopting the Allison approach to incidental

damages); Jefferson v. Ingersoll International Inc., 195 F.3d 894, 898

(7th Cir. 1999) (same).         "Incidental" damages have been said to be

those "that flow directly from liability to the class as a whole on the

claims forming the basis of the injunctive or declaratory relief,"

Allison,    151   F.3d   at   415,   and   "should     at   least   be   capable   of

computation by means of objective standards and not dependent in any

significant way on the intangible, subjective differences of each class

                                         -2-
member's circumstances," id.

     As Judge Underhill's opinion recognizes, however, this Court has

rejected the Fifth Circuit's limitation of (b)(2) to claims for

"incidental" damages, see Robinson v. Metro-North Commuter R.R. Co.,

267 F.3d 147, 162-67 (2d Cir. 2001), outlining instead a broader "ad

hoc approach," id. at 164, that obliges a district court to consider

numerous    factors       in    making    the   ultimate   certification    decision.

Robinson explicitly contemplated the possibility that a (b)(2) class

might be appropriate where monetary relief that is non-incidental would

"present[] individual specific damage issues." Id. at 166.                  The risk

that such certification might create due process concerns was answered

by the possibility of "affording notice and opt out rights to absent

class members for . . . the damages phase of the proceedings." Id.                  In

addition,    Robinson      held    that    damages   relief   obstacles    to   (b)(2)

certification can be overcome by using the authority of Rule 23(c)(4)

to certify a class action "with respect to particular issues," Fed. R.

Civ. P. 23(c)(4), specifically, a class action with respect only to

liability.       Robinson, 267 F.3d at 167-69.

     Although I am obliged to accept Robinson as the law of this

Circuit,     I    think    it    risks     some   inappropriate   uses     of   (b)(2)

certification.       That provision is designed for claims for injunctive

and declaratory relief. The (b)(3) class, with its opt-out protection,

is available for monetary claims. In some limited situations, a (b)(2)

class might be appropriate notwithstanding a monetary claim, but, prior

                                            -3-
to Robinson, I would have thought such cases to be rare. See Ansoumana

v. Gristede’s Operating Corp., 201 F.R.D. 81, 88 (S.D.N.Y. 2001)

(observing that implementing opt-out rights in the context of Rule

23(b)(2) class is undesirable, and certifying the class under Rule

23(b)(3) instead).     In particular, I question whether we risk unduly

extending (b)(2) in cases with monetary claims by inviting district

judges to use it and then protect claimants with individualized damage

amounts either by affording them opt-out rights or certifying only the

liability issue.     Such devices strike me as a way of undermining the

(b)(3) requirement that "a class action is superior to other available

methods for the fair and efficient adjudication of the controversy."

Fed. R. Civ. P. 23(b)(3).

     Even though, in light of Robinson, the pending case must be

remanded for further consideration of (b)(2) certification, I have

additional concerns as to the guidance the Court offers to the District

Court.    Although    recognizing   that   monetary   claims   need   not   be

"incidental" for (b)(2) certification and correcting the District

Court's view that the statutory damages sought were less than the non-

statutory damages, the Court does not disturb the District Court's view

that the statutory damages are incidental and all other damages are

non-incidental.    I disagree with both propositions and air the matter

since it might affect the District Court's ultimate determination of

whether the monetary claims predominate.

     As to the statutory damages, I note preliminarily that it is by

                                    -4-
no   means   settled   that   a   claim    for   statutory   damages   is   per   se

incidental.      Apparently       no   court    has   explicitly   indicated   that

statutory damages are "incidental" for purposes of (b)(2) analysis.

In Allison, the Fifth Circuit suggested (by citation to a case

involving a claim for statutory damages) that such damages would

qualify as incidental, see 151 F.3d at 415 (citing Arnold v. United

Artists Theatre Circuit, Inc., 158 F.R.D. 439 (N.D. Cal. 1994)), but

Allison did not involve any such claim.           Although some district courts

have certified (b)(2) classes whose claims included statutory damages,

see, e.g., Borcherding-Dittloff v. Transworld Systems, Inc., 185 F.R.D.

558, 565-66 (W.D. Wis. 1999); Colorado Cross-Disability Coalition v.

Taco Bell Corp., 184 F.R.D. 354, 361-62 (D. Colo. 1999); Gammon v. GC

Services Limited Partnership, 162 F.R.D. 313, 320-22 (N.D. Ill. 1995);

Arnold v. United Artists Theatre Circuit, Inc., 158 F.R.D. 439, 450-53

(N.D. Cal. 1994), these courts have not described such damages as

"incidental," and have considered a variety of factors in reaching the

conclusion that statutory damages did not predominate.1


      1
      One factor considered by some courts approving (b)(2) classes in
which statutory damages were sought is the amount of damages to which
each class member would be entitled. As one might expect, district
courts have appeared more willing to hold that injunctive or
declaratory relief predominates where the damages to be received by
each individual class member would be minimal.       See Borcherding-
Dittloff, 185 F.R.D. at 566 ("[T]he potential statutory damages each
plaintiff could recover under the act are nominal. If the class has
over 50,000 members, each would be entitled to less than ten
dollars."); Colorado Cross-Disability Coalition, 184 F.R.D. at 361
(finding that injunctive relief predominated in part because "each
class member seeks only $50"); Gammon, 162 F.R.D. at 321 (finding that

                                          -5-
     In the pending case, Judge Glasser, although undervaluing the

statutory damages claim, seems to have accepted the plaintiffs' premise

that a claim for statutory damages is "incidental" for (b)(2) purposes

because it can be adjudicated without consideration of individual

variations among the class members. In this case, the statute provides

for actual damages with a minimum recovery of the greater of $1,000 per

claimant or $100 for each day of violation. 47 U.S.C. § 551(f)(2)(A)

(2000).   Although the minimum statutory damages of $1,000 can be

determined without considering variations among class members, the

alternative minimum of $100 per day of violation will vary somewhat

among class members, and any actual damages suffered by each class

member will involve considerable variations. The plaintiffs purporting

to represent the class seek to avoid such variations by limiting the

recovery for each class member to the $1,000 lump sum. I doubt if they

can so easily sacrifice the absent class members' claims for minimum

daily damages or actual damages, at least without notice and some

opportunity for those class members either to agree to accept only the

$1,000 payment (or some specified lesser sum, see Part 2, infra) or to

opt out of the class. Cf. Arnold, 158 F.R.D. at 464-65 (on motion for

reconsideration after certifying (b)(2) class including a claim for

statutory damages, ordering that absent class members receive notice



individual recovery of damages would be de minimis because "the
requested maximum statutory damages, if awarded, would amount to
approximately 13 cents per class member.").

                                 -6-
and an opportunity to opt out).

     As to the non-statutory damages, the District Court understood a

major component of the claim to be disgorgement of the profits that the

Defendant is alleged to have made by selling information in violation

of the class members' statutorily-protected privacy rights. See Parker

v. Time Warner Entertainment Co., L.P., 198 F.R.D. 374, 376, 381

(E.D.N.Y. 2001).2    If, as seems likely, the Defendant sold this

information at a fixed amount per subscriber, it would seem that a

claim to disgorge the resulting profit and distribute it pro rata to

the class members would not involve any individual variations of the

sort that would render these damages "non-incidental."    Of course, all

of these considerations concerning damages will not matter if the

District Court, on remand, renews its decision to certify a (b)(2)

class only for the claims for injunctive and declaratory relief or

declines to certify any (b)(2) class.

     2. (b)(3) Issues

     By seeking to collect statutory damages of $1,000 for each of up

to 12 million cable subscribers, this lawsuit could potentially impose

on Defendant Time Warner liability for $12 billion.      Even for one of


     2
      It is not clear whether the District Court regarded disgorgement
of profits to be within the scope of the actual damages to which the
class might be entitled under the statute or to be the remedy for a
state law claim. At this point, our Court need not make any ruling on
the former theory, which has not been developed on appeal. As to the
second theory, the District Court declined to exercise supplemental
jurisdiction, although that interlocutory ruling could be reconsidered
now that the class certification issue is being remanded.

                                  -7-
the world's largest corporations, that is a lot of money.3          A claim of

this sort creates a tension between the statutory provisions for

minimum damages and the Rule 23 provisions for class actions that

probably was not within the contemplation of those who promulgated

either the statute or the rule.       At first glance, the tension appears

to admit of only two possibilities: (1) the class certification motion

is granted, and, if the allegations are proven, Time Warner becomes

liable for damages of up to $12 billion, or (2) the class certification

motion is denied, and each victim of Time Warner's alleged violations

remains   free   to   pursue   an   individual   claim   for   $1,000   (or   the

alternative daily minimum recovery or actual damages).            Both options

are unsatisfactory.

     The first option might well encounter due process objections,

somewhat analogous to those that the Supreme Court recently identified

in setting constitutional limits on punitive damages. See, e.g., State

Farm Mutual Automobile Insurance Co. v. Campbell, 123 S. Ct. 1513,

1520-21, 1526 (2003) ("The Due Process Clause of the Fourteenth

Amendment prohibits the imposition of grossly excessive or arbitrary

punishments on a tortfeasor."); Cooper Industries, Inc. v. Leatherman

Tool Group, Inc., 532 U.S. 424, 433-35 (2001); BMW of North America,



     3
      As Senator Everett Dirksen famously said in the context of the
federal budget, "A billion here and a billion there, and pretty soon
you're talking about real money." The New International Dictionary of
Quotations 184 (Hugh Rawson & Margaret Miner eds., 1986) (quoting
Senator Everett Dirksen).

                                       -8-
Inc. v. Gore, 517 U.S. 559, 585-86 (1996).       Although statutory damages

amounts might be calculated in part to compensate for actual losses

that are difficult to quantify, they are often also motivated in part

by a pseudo-punitive intention to "address and deter overall public

harm." Texas v. American Blastfax, Inc., 121 F. Supp. 2d 1085, 1090

(W.D. Tex. 2000) (upholding constitutionality of statutory damages

provision of the Telephone Consumer Protection Act, 47 U.S.C. § 227

(2000)); see also Saint Louis, Iron Mountain & Southern Ry. Co. v.

Williams, 251 U.S. 63, 66 (1919) (in setting a statutory penalty, the

state may "adjust its amount to the public wrong rather than the

private injury."); cf. State Farm, 123 S. Ct. at 1520-21, 1526

("punitive   damages   serve   a   broader   function    [than   compensatory

damages]; they are aimed at deterrence and retribution."). A statutory

penalty may violate due process where the penalty prescribed is "so

severe and oppressive as to be wholly disproportioned to the offense

and obviously unreasonable."       Williams, 251 U.S. at 66-67. Even if a

massive   aggregation    of    minimum       statutory    damages   survives

constitutional scrutiny, there is a substantial question whether the

Congress that authorized payments of $1,000 for victimized cable

subscribers expected 12 million of them each to receive such an amount

for a somewhat technical violation.

     The second option remits each victim to a separate lawsuit,

needlessly clogging the courts with repetitious suits if many are

filed, or rewarding some law violators with liability for only a slight

                                     -9-
amount of total damages if, as seems more likely, few suits are filed.4

Cf. Henry v. Cash Today, Inc., 199 F.R.D. 566, 573 (S.D. Tex. 2000)

(certifying class for claims under Truth in Lending Act ("TILA"), 15

U.S.C. §§ 1601 et seq. (2000), and finding that $1,000 minimum

statutory award under TILA was insufficient to motivate individuals to

bring meritorious claims).

     I think a third alternative is warranted in order to achieve to

a considerable extent the objectives of both the statute and the class

action rule.    The statute could be construed to authorize an award of

substantially   less   than   $1,000   to   all   but    the   initially   named

plaintiffs who instituted the class action.             I recognize that this

approach cannot be reconciled with the terms of the statute, and for

some that would be an insuperable obstacle.         But in my view and that


     4
      The idea of rejecting class action certification because of the
large size of an aggregation of statutory damages awards drew major
support, if not its origin, from the opinion of Judge Frankel in Ratner
v. Chemical Bank New York Trust Co., 54 F.R.D. 412 (S.D.N.Y. 1972).
In that case, Judge Frankel denied a motion for (b)(3) class
certification for a class consisting of 130,000 credit card holders
claiming the $100 statutory damages authorized by the Truth in Lending
Act of 1968, 15 U.S.C. §§ 1601 et seq.          He found "cogent and
persuasive" the defendant's argument that "the proposed recovery of
$100 each for some 130,000 class members would be a horrendous,
possibly annihilating punishment . . . ." Ratner, 54 F.R.D. at 416.
Although Ratner has been cited favorably by many courts, see, e.g.,
Kline v. Coldwell, Banker & Co., 508 F.2d 226, 234-35 (9th Cir. 1974);
Wilcox v. Commerce Bank of Kansas City, 474 F.2d 336, 341-47 (10th Cir.
1973); In re Trans Union Corp. Privacy Litigation, 211 F.R.D. 328, 348-
51 (N.D. Ill. 2002); Berkman v. Sinclair Oil Corp., 59 F.R.D. 602, 608-
09 (N.D. Ill. 1973), I believe this is one of those rare instances
where a judicial Homer nodded, see Horace, Ars Poetica 402 ("Homer
himself hath been observ'd to nod."), quoted in Bartlett's Familiar
Quotations (13th ed. 1951).

                                   -10-
of many others, statutes are not to be applied according to their

literal terms when doing so achieves a result manifestly not intended

by the legislature.          See, e.g., Griffin v. Oceanic Contractors, Inc.,

458 U.S. 564, 571 (1982) ("[I]n rare cases the literal application of

a   statute     will   produce    a    result        demonstrably   at   odds   with   the

intentions       of    its    drafters,         and     those   intentions      must    be

controlling."); Church of the Holy Trinity v. United States, 143 U.S.

457, 459 (1892) ("It is a familiar rule, that a thing may be within the

letter of the statute and yet not within the statute, because not

within its spirit, nor within the intention of its makers."); Salute

v. Stratford Greens Garden Apartments, 136 F.3d 293, 297 (2d Cir. 1998)

("The plain meaning of a statute may not be controlling in those rare

cases where literal application of a statute will produce a result

demonstrably at odds with the intentions of its drafters.") (quotation

marks omitted). I do not believe that in specifying a $1,000 minimum

payment for Cable Act violations, Congress intended to expose a cable

television provider to liability for billions of dollars.                       Nor do I

believe that Congress intended to permit a violator to avoid payment

of at least some compensation to numerous victims of its violations

simply because its actions affected a large number of subscribers.

Perhaps, as the Court's opinion seems to imply, the Due Process Clause

creates    a    constitutional        limit    upon    an   aggregation   of    statutory

damages.       But I hesitate to rely on a novel theory of constitutional

law when a sensible interpretation of a statute, construed against a

                                              -11-
background of possible constitutional concerns, is available.5 See

Edward     J.       DeBartolo   Corp.    v.    Florida   Gulf      Coast   Building    and

Construction Trades Council, 485 U.S. 568, 575, (1988) ("[W]here an

otherwise acceptable construction of a statute would raise serious

constitutional problems, the Court will construe the statute to avoid

such problems unless such construction is plainly contrary to the

intent of Congress.").

      Even if possible due process concerns or statutory construction

to   avoid      a    bizarre    result   not    intended      by   Congress    might   not

independently require limiting an aggregate statutory damages award,

such considerations would seem appropriate to inform the customarily

broad     discretion      of    a   district    judge    in    the   context    of   class

certification.          Judges have used their discretion to determine the

appropriate scope of a class, see, e.g., American Timber & Trading Co.

v. First National Bank, 690 F.2d 781, 787 (9th Cir. 1982) (affirming

judicial creation of a subclass as being "within the district court's

broad power under Fed. R. Civ. P. 23(d) to adopt procedural innovations

to facilitate management of the class action."); Shapiro v. Midwest



      5
      Of course, Congress would always have the option to respond to
the setting of a limit on aggregate damage awards by explicitly
precluding such a limit or establishing a lower or even higher limit
of its own. See Disabled in Action of Metropolitan New York v. Hammons,
202 F.3d 110, 120 (2d Cir. 2000) ("We thus seek to apply the statutory
framework as best we can, recognizing always that Congress has the
final word and may wish to revisit the statutory scheme."); cf. 15
U.S.C. § 1640(a)(2)(B) (amendment that caps class action TILA awards
at the lesser of $500,000 or 1 percent of the creditor's net worth).

                                              -12-
Rubber Reclaiming Co., 626 F.2d 63, 71 (8th Cir. 1980) (holding that

the broad discretion enjoyed by district courts in the class action

context "extends to defining the scope of the class," and affirming

district court’s limitation of plaintiff’s proposed class),

and, pursuant to Rule 23(c)(4), to certify a class as to particular

issues, see, e.g., Williams v. Owens-Illinois, Inc., 665 F.2d 918 (9th

Cir. 1982) ("It is within the discretion of the trial judge, under Rule

23(c)(4), to limit the issues in a class action to those parts of a

lawsuit which lend themselves to convenient use of the class action

motif.") (quotation marks omitted); Simon v. Philip Morris Inc., 200

F.R.D. 21, 28-33 (E.D.N.Y. 2001) (discussing power of district court

to grant partial certification or to bifurcate issues and collecting

cases).     I think that potential due process concerns and avoiding a

result not intended by Congress can appropriately be considered by a

district judge in determining that a class will be certified only up

to some reasonable aggregate amount of damages.               When considering

statutory damages provisions authorizing sums of "not more than" stated

maximums, the Ninth Circuit has not hesitated to rule that a large

aggregate    award   in   a   class   action   exceeded   a   district   court's

discretion and should be substantially reduced. See Six (6) Mexican

Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1309-11 (9th Cir.

1990).6     Determining what portion of the full amount of statutory


     6
     Six (6) Mexican Workers concerned the statutory damages provision
of the Farm Labor Contractor Registration Act, 7 U.S.C. § 2050a(b)

                                       -13-
damages will be available to a class seems not significantly different

than       determining   what   issues   will    be   available   for   classwide

adjudication.        A district judge ought to be able to exercise informed

discretion to certify a class entitled to receive no more than some

specified aggregate amount.7

       It would probably make sense to permit the named plaintiffs to

recover the full $1,000 amounts specified in the statute (if they

prevail on the merits) and allocate the balance of the limited

aggregate amount among the other members of the class. Awarding absent

class members less than the full statutory amounts is not unfair to

them since it is highly unlikely that they would have brought any

litigation      in   their   own   names.       Moreover,   the   (b)(3)   opt-out

opportunity will afford them a chance to sue for the full $1,000 if

they choose to do so.

       A district court considering whether to adjust the tension between

a substantial aggregation of statutory damages and the virtues of a

class action by limiting the size of the awards (to all but the named

plaintiffs) should make its damages ruling in the context of deciding


(1988) (repealed), now codified at 29 U.S.C. § 1854(c)(1) (2000).
       7
      Procedurally, a judge might accomplish this by modifying the
proposed class in the certification order. Another option would be for
the judge to inform the plaintiffs, before deciding on the motion for
certification but after having received argument on the subject from
all parties, of the aggregate statutory amount above which (b)(3)
superiority concerns would arise, and to permit the plaintiffs to amend
their motion for class certification to seek reduced aggregate damages
before a certification decision is rendered.

                                         -14-
the class certification issue, after making at least a preliminary

decision    as      to    the   size      of    the    class    being    considered       for

certification.         Otherwise, the in terrorem threat of a massive award

of the full statutory amounts will unfairly induce a large settlement

once a class has been certified.                See In re Rhone-Poulenc Rorer Inc.,

51 F.3d 1293, 1297-98 (7th Cir. 1995) (discussing settlement pressures

imposed in class action context).                     It would be appropriate for a

district court to explore with the parties at an early stage not only

the traditional issue of the size of the class but also the novel issue

of an appropriate ceiling on aggregate statutory damages for class

members.

     It might seem that my approach suffers from the same defect as

permitting the size of the potential recovery to deny a class action

altogether:      the     wrongdoer     benefits       because    of   the   scope    of   its

wrongdoing.      However, if no (b)(3) class is certified, the wrongdoer

escapes liability to all except the named plaintiffs, whereas under my

approach,     the      wrongdoer     is    obliged      to     provide   at   least       some

compensation to all class members, and the anticipation of that result

should exert the deterrent effect that Congress intended.                           I urge a

limitation on the aggregate amount of damages either through a sensible

construction of the statute or a sensible exercise of a district

judge's Rule 23 discretion, rather than restricting district courts to

the unattractive choice of either evolving a constitutional limitation

on the aggregate recovery or else rejecting (b)(3) class certification

                                               -15-
entirely, thereby insulating a defendant from liability for some

appropriate amount of damages.

                             * * * * *

     In light of these considerations, I concur in the decision to

remand the class certification issues and agree with most of Judge

Underhill's opinion.




                                 -16-
