          Case: 17-12381   Date Filed: 06/04/2018   Page: 1 of 28


                                                         [DO NOT PUBLISH]



            IN THE UNITED STATES COURT OF APPEALS

                   FOR THE ELEVENTH CIRCUIT
                     ________________________

                            No. 17-12381
                      ________________________

                  D.C. Docket No. 5:15-cv-01750-AKK

WEST MORGAN-EAST LAWRENCE WATER AND SEWER AUTHORITY, et
al.,

                                              Plaintiffs-Appellees,


CHARLES OWENS, et al.,

                                              Interested Parties-Appellants,

versus

3M COMPANY,
DYNEON, LLC,
DAIKIN AMERICA, INC.,

                                              Defendants-Appellees.

                      ________________________

               Appeal from the United States District Court
                  for the Northern District of Alabama
                      ________________________

                             (June 4, 2018)
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Before WILSON and BLACK, Circuit Judges, and SCHLESINGER, * District
Judge.

PER CURIAM:

       Defendants 3M Company (3M), Dyneon, LLC (Dyneon), and Daikin

America, Inc. (Daikin) are manufacturing companies accused of polluting a water

supply in northern Alabama. Plaintiffs are parties allegedly affected by that

pollution—the West Morgan-East Lawrence Water and Sewer Authority (the

Water Authority) and a proposed class of individuals and businesses who

purchased water from the Water Authority (the Class). The district court, over the

objection of approximately 300 proposed class members (Objectors), certified a

class under Federal Rule of Civil Procedure 23(b)(2) and approved a partial class

settlement between Plaintiffs and Daikin.

       Objectors contend the district court abused its discretion in certifying the

class and approving the settlement because: (1) conflicting interests between the

Water Authority and the Class required separate counsel for negotiations; (2) the

settlement released absent class members’ individualized claims for monetary

damages; (3) the class representatives’ claims were not typical of all class

members’ claims; and (4) the settlement was not fair, reasonable, and adequate.


       *
         Honorable Harvey E. Schlesinger, United States District Judge for the Middle District
of Florida, sitting by designation.




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We conclude the district court abused its discretion because Plaintiffs’ counsel was

conflicted and because the settlement impermissibly released absent class

members’ individualized claims for monetary damages. 1 We therefore vacate the

class certification, reverse approval of the settlement, and remand for further

proceedings.2

                                     I. BACKGROUND

       Perfluorinated chemicals (PFCs) are used for a variety of industrial

purposes. Until recently, two of the most commonly used PFCs were

perfluorooctanoic acid (PFOA) and perfluorooctane sulfonate (PFOS). If ingested,
       1
        Because we reverse approval of the settlement for these reasons, we do not address
Objectors’ arguments concerning typicality or whether the settlement was otherwise fair,
reasonable, and adequate.
       2
          We asked the parties to respond to a jurisdictional question regarding diversity
jurisdiction, and the parties submitted a joint response. Plaintiffs also submitted an unopposed
motion to amend some of their jurisdictional allegations. We conclude that Plaintiffs’ operative
complaint fails to sufficiently allege the parties’ citizenships. But we grant the motion to amend
and allow the case to proceed because Plaintiffs’ amended allegations are adequate to establish
diversity jurisdiction. We also hold that the Water Authority is not an arm of the state for
purposes of determining its citizenship. See Univ. of S. Fla. Bd. of Trs. v. CoMentis, Inc., 861
F.3d 1234, 1235 (11th Cir. 2017) (explaining that “Eleventh Amendment immunity analysis
applies to determinations of citizenship for diversity jurisdiction purposes”); Tuveson v. Fla.
Governor’s Council on Indian Affairs, Inc., 734 F.2d 730, 732 (11th Cir. 1984) (stating four-
factor test for immunity under the Eleventh Amendment). The plain language of the statute
under which the Water Authority was formed indicates the Water Authority is an independent
instrumentality of the state, and Alabama neither controls nor funds it. See Ala. Code §§ 11-88-
2, 11-88-7(a)(2), 11-88-12. Further, Alabama courts have determined that water authorities are
independent from the state. See Water & Wastewater Bd. v. City of Athens, 17 So. 3d 241, 244
(Ala. Civ. App. 2009) (“[I]t is without question that the [Water and Wastewater] Board is not the
State or a county.”); Limestone Cty. Water & Sewer Auth. v. City of Athens, 896 So. 2d 531,
535–36 (Ala. Civ. App. 2004) (“[A] public corporation is an ‘instrumentality of the state’ in the
sense that it is created pursuant to the laws of the State and for the public benefit, but it is
‘independent’ of the State and ‘is not an agency of the state’ because the State does not own or
operate the corporation.”).

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PFOA and PFOS remain in the body for a long time and may pose serious health

risks. Defendants used these PFCs in their manufacturing facilities, located in

Decatur, Alabama, and they allegedly released these chemicals into the Tennessee

River.

         The Water Authority draws its water from the Tennessee River,

approximately thirteen miles downstream from Defendants’ facilities. That water

is then treated and distributed to at least 57,000 customers. 3 Since 2009, the Water

Authority has tested its water supply and consistently found levels of PFOA and

PFOS exceeding the maximum allowable under guidelines issued by the

Environmental Protection Agency (EPA). The Water Authority attributes the

excessive PFOA and PFOS levels to Defendants’ alleged pollution.

         In October 2015, the Water Authority and three of its customers, all

represented by the same counsel, sued Defendants for contaminating the water

supply. Although the Water Authority sued on its own behalf, the three customers

purported to act on behalf of a proposed class of “all owners and possessors of

property who use water provided by [either the Water Authority or one of its

wholesale customers].”




         3
         The Water Authority services approximately 25,000 to 35,000 customers directly; it
provides water on a wholesale basis to other utilities that, in turn, provide the water to an
additional 32,000 to 44,000 individual customers.

                                                4
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      In their operative amended complaint, Plaintiffs allege counts for

negligence, nuisance, and battery. The remedies sought by the Water Authority,

however, differ significantly from the relief sought by its customers. The Water

Authority seeks damages “sufficient to compensate it for real property damage,

loss of use of property, out-of-pocket expenditures, and reasonably ascertainable

future expenditures.” Its customers, on the other hand, seek damages “sufficient to

compensate them for real property damage, loss of use and enjoyment of property,

loss of quality of life, aggravation and inconvenience, mental anguish, and out-of-

pocket expenditures and reasonably ascertainable future expenditures.” Both the

Water Authority and its customers seek punitive damages, as well as “an injunction

requiring Defendants to remove their chemicals and toxins from the water supplies

of Plaintiffs and to prevent these chemicals and toxins from continuing to

contaminate Plaintiffs’ water supplies.”

      Months after Plaintiffs filed their initial complaint, the EPA released a new

health advisory that drastically reduced the threshold levels at which PFC

consumption was deemed unsafe. It also advised providers of public drinking

water to “promptly notify consumers” if PFOA and PFOS levels in their systems

exceeded EPA guidelines. The Water Authority therefore notified its customers of

the contamination. And because its treatment methods were (at that time)




                                           5
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incapable of reducing the contamination to safe levels, the Water Authority began

exploring other options for providing safe water to its customers.

      The Water Authority eventually determined it would need a new treatment

process. In the short term, it would need to install a Granular-Activated-Carbon

(GAC) system to remove PFOS and PFOA, at a cost of approximately $4 million.

That system, which was financed through a bond issuance, is now in place and

appears to be functioning as planned. But a Reverse-Osmosis System, which is

highly effective at removing PFOA, PFOS, and other PFCs, will eventually be

needed.

      For the month following the EPA’s May 2016 health advisory, the Water

Authority continued to bill its customers as usual, despite advising them not to

drink the water. In August 2016, a separate group of approximately 400 Water

Authority customers filed suit in Alabama state court, asserting claims against the

Defendants and the Water Authority (the Billings case). Soon after, Plaintiffs

executed a memorandum of understanding with Daikin outlining the principal

terms of a partial settlement in the case now on appeal. That memorandum of

understanding was superseded by a settlement agreement executed and filed with

the district court for approval in November 2016.




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       Under the terms of the settlement agreement, Daikin agreed to pay $5

million, with estimated benefits to class members of $6 million.4 Of the $5

million, $4 million was earmarked to go to the Water Authority to fund the costs of

the GAC system that otherwise would be passed on to the Class, 5 $450 thousand

was to go to the Water Authority to be used to credit the accounts of class

members who were billed during the period when they were unable to drink the

water, 6 and the last $550 thousand was for Plaintiffs’ attorney’s fees and costs. In

exchange for the $5 million payment, the class members agreed to release their

claims against Daikin—except for claims involving manifest personal injury7 or

property damage unrelated to the delivery of water from the Water Authority.

       Plaintiffs and Daikin moved for conditional class certification and

preliminary approval of the settlement. Meanwhile, before the district court ruled


       4
        The estimated $1 million additional benefit is based primarily on the interest saved on
the $4 million bond issued by the Water Authority to fund the GAC system. Because the Water
Authority is obligated by law to pass its operating costs on to its customers, the class members
would ultimately be responsible for paying that interest.
       5
           See Ala. Code § 11-88-12.
       6
         Residential class members and water utilities would receive a full credit, commercial
customers would receive a partial credit, and utilities that stopped purchasing water from the
Water Authority during June or July 2016 would receive a credit in the form of forgiveness of
contracted minimum water purchases.
       7
          Under Alabama law, manifest personal injuries are those characterized by “observable
signs or symptoms or the existence of which is medically identifiable,” “even if the injured
person is ignorant of [the injury] for some period after its development.” Griffin v. Unocal
Corp., 990 So. 2d 291, 293, 310 (Ala. 2008) (adopting Justice Harwood’s definition of
“manifest” in his dissenting opinion in Cline v. Ashland, Inc., 970 So. 2d 755, 773 (Ala. 2007)).

                                                7
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on the request, approximately 300 Water Authority customers—the Objectors in

this case—filed their own state-court lawsuit against Defendants (the Owens case).

The district court preliminarily accepted the settlement in February 2017 and

conditionally certified a settlement class under Federal Rule of Civil Procedure

23(b)(2) as “all owners and possessors of property as of February 21, 2017 who

use water provided by [either the Water Authority or one of its wholesale

customers].” It also scheduled a fairness hearing to be held in May 2017.

      A month before the hearing, Objectors filed their objections to the

settlement, arguing: (1) class counsel had a conflict of interest because it purported

to represent the interests of both the Water Authority and the Class; (2) the

proposed class did not meet the requirements of Rule 23(b)(2); and (3) Rule

23(a)(3) was not satisfied because the representative plaintiffs’ claims were not

typical of all class members.

      The district court conducted a fairness hearing, at which the Objectors were

the only objecting participants. Notably, the Billings plaintiffs, who had filed

claims directly against the Water Authority, did not object to the settlement on the

basis of a potential conflict. At the conclusion of the hearing, the district court

announced its inclination to overrule the objections.

      As to the Objectors’ Rule 23(b)(2) argument, the district court opined that

because the issue involved a settlement, the analysis of whether the class may be


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certified under Rule 23(b)(2) must focus on the relief that’s being provided as part

of the settlement. That relief, according to the district court, “is injunctive in

nature and certainly predominates over any individual damages that the class may

have.” The district court further rejected the suggestion of a settlement allowing

class members to opt out, because class members should not be allowed to benefit

from injunctive relief funded by Daikin (the GAC system) without giving up their

claims. 8

       The district court also rejected the idea that an impermissible conflict was

present:

             I don’t believe that there’s a conflict, but I am worried that I
       may be overly dismissive of the points that [Objectors’ counsel]
       made. My thinking is this: The interests of the authority and the
       customers are aligned. And both -- the authority obviously is charged
       with providing clean water to its customers. That clean water has
       been impacted by the contaminants, and both the authority and the
       customer class were affected by the contamination.

              And so, from my perspective, I don’t see a conflict. And I
       certainly also don’t see a conflict in the settlement that’s proposed
       here, as well.

              The clean water component of the settlement not only benefits
       the authority, but also benefits the customers by providing them with
       clean water. And then, . . . in addition to the clean water is also a cost
       benefit to the customers by them not having to pay any costs for
       upgrading this system going forward.

       8
          The district court did not explain how this reasoning was consistent with allowing class
members to retain their individualized claims for manifest personal injury and property damage
as part of the settlement.

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      The district court therefore entered an order approving the settlement and

certifying a settling class under Rule 23(b)(2) as “[a]ll owners and possessors of

property as of February 21, 2017, who use water provided by the [Water Authority

or its wholesale customers].” Final judgment was entered dismissing with

prejudice all of the Class’s released claims against Daikin, certifying that all class

members would be bound by the judgment, and noting that all claims against

defendants 3M and Dyneon would remain pending. Objectors filed a timely notice

of appeal.

                                  II. DISCUSSION

A. Standard of Review

      We review the district court’s approval of a class settlement for abuse of

discretion. Faught v. Am. Home Shield Corp., 668 F.3d 1233, 1240 (11th Cir.

2011). As long as the district court’s “decision does not amount to a clear error of

judgment we will not reverse even if we would have gone the other way had the

choice been ours to make.” Aldana v. Del Monte Fresh Produce N.A., Inc., 578

F.3d 1283, 1288 (11th Cir. 2009). Nevertheless, “[a] district court by definition

abuses its discretion in relying on an erroneous interpretation of applicable law.”

Jackson v. Crosby, 437 F.3d 1290, 1295 (11th Cir. 2006). And we review de novo

“[w]hether the district court applied the correct legal standard in reaching its




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decision on class certification.” London v. Wal-Mart Stores, Inc., 340 F.3d 1246,

1251 (11th Cir. 2003) (quotation omitted).

B. Conflicted Counsel

      Objectors contend the Class’s interests could not adequately be represented

by counsel purporting to negotiate on behalf of both the Water Authority and the

Class, because their interests were inherently conflicted. We agree.

      “[C]lass actions are rife with potential conflicts of interest between class

counsel and class members.” Mirfasihi v. Fleet Mortg. Corp., 356 F.3d 781, 785

(7th Cir. 2004). District courts must therefore “give careful scrutiny to the terms

of proposed settlements in order to make sure that class counsel are behaving as

honest fiduciaries for the class as a whole.” Id. A class action may only be

maintained if class counsel “fairly and adequately represent[s] the interests of the

class.” Fed. R. Civ. P. 23(g)(4). This requirement, aimed at ensuring the rights of

absent class members are vigorously protected, is not satisfied where class counsel

represents parties whose interests are fundamentally conflicted. See Ortiz v.

Fibreboard Corp., 527 U.S. 815, 856, 119 S. Ct. 2295, 2319 (1999); Amchem

Prods., Inc. v. Windsor, 521 U.S. 591, 626 n. 20, 117 S. Ct. 2231, 2251 n.20

(1997); Valley Drug Co. v. Geneva Pharm., Inc., 350 F.3d 1181, 1189 (11th Cir.

2003); London, 340 F.3d at 1253.




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       The district court in this case determined there was no conflict because both

the Water Authority and the Class share a common interest in pursuing injunctive

relief against Defendants. The district court was partially correct—the Water

Authority and the Class do indeed share a common interest in obtaining injunctive

relief from Defendants. And if the settlement had limited its breadth to providing

that injunctive relief in exchange solely for release of the Class’s claims for that

relief, the district court might have been within its discretion to determine the

Class’s interests were sufficiently aligned for purposes of the settlement. The

settlement in this case, however, extended significantly further.

       In addition to the injunctive relief sought by the Water Authority, class

members asserted claims for monetary damages addressing individualized harms

such as mental anguish 9—claims not shared by the Water Authority. In fact, some

class members asserted claims directly against the Water Authority for

contributing to their injuries. As such, the Water Authority had an interest in

maximizing the amount of injunctive relief obtained from Defendants while

minimizing the value of (if not undermining entirely) class members’

individualized claims for compensatory damages. Class counsel was thus placed

in a position where advocating zealously for one client (the Water Authority) could

       9
          Under Alabama law, “[m]ental anguish includes anxiety, embarrassment, anger, fear,
frustration, disappointment, worry, annoyance, and inconvenience.” Horton Homes, Inc. v.
Brooks, 832 So. 2d 44, 53 (Ala. 2001).

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adversely affect the interests of its other client (the Class). And this conflict may

have manifested itself in the proposed settlement, which reimburses the Water

Authority in full for the costs of the GAC system while partially releasing absent

class members’ individualized claims against Daikin. This presented a

fundamental conflict prohibiting dual representation under Rule 23(g).

         We reject any assertion that the conflict may be overlooked simply because

the district court found “that the Settlement Agreement is the product of informed,

arm’s length negotiation by counsel and is fair, just, reasonable, valid, and

adequate, notwithstanding the objections that were raised at the Fairness Hearing.”

The district court’s determination that the settlement was “the product of informed,

arm’s length negotiation” was based on its mistaken conclusion that the Class’s

interests were aligned with the Water Authority’s. The district court clearly erred

in that regard. And its conclusion that the settlement was otherwise “fair, just,

reasonable, valid, and adequate” does not mean the negotiating process itself

sufficiently ensured representation of the Class’s interests as required under Rule

23(g).

         Moreover, the district court could not evaluate whether class counsel

adequately advanced the interests of absent class members by looking simply at

whether the result of the negotiations seemed fair. See Amchem, 521 U.S. at 621,

117 S. Ct. at 2248 (“[T]he standards set for the protection of absent class members


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serve to inhibit appraisals of the chancellor’s foot kind—class certifications

dependent upon the court’s gestalt judgment or overarching impression of the

settlement’s fairness.”). That is why it was critical to accurately determine at

certification whether potential conflicts of interest could adversely affect the ability

of either class counsel or the class representatives to protect the interests of absent

class members. Given the conflicting interests between the Class and the Water

Authority in this case, and in light of the settlement’s sacrificing individual claims

in exchange for injunctive relief, we cannot be confident the settlement

negotiations were structured to adequately protect the interests of absent class

members.

       This conclusion is reinforced by the Alabama Rules of Professional

Conduct, which suggest dual representation was inappropriate under these

(admittedly unusual) circumstances.10 Alabama Rule of Professional Conduct

1.8(g) states: “A lawyer who represents two or more clients shall not participate in

making an aggregate settlement of the claims of or against the clients . . . unless

each client consents after consultation . . . .” Ala. R. Prof’l Conduct 1.8(g).

       10
           Although state ethical rules may be relevant to our determination of whether approval
of the settlement was appropriate, a violation of state ethical rules is neither necessary nor
sufficient to establish a violation of federal Rule 23(g). The issue in this case is not whether
class counsel should have been disqualified; it is whether, under the circumstances, adequate
structural safeguards ensured absent class members’ legal interests were protected, such that it
would be fair to bind those absent class members to the settlement. See Ortiz, 527 U.S. at 846,
119 S. Ct. at 2314–15. That determination does not depend on whether the Alabama Rules of
Professional Responsibility were violated.

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Because Alabama Rule 1.8(g) is based on American Bar Association (ABA)

Model Rule 1.8(g), and because both the comments to Model Rule 1.8(g) and an

ethics opinion issued by the ABA suggest that rule does not apply to class

settlements, Appellees argue Alabama Rule 1.8(g) should not apply to the class

settlement at issue in this case. See Model Rules of Prof’l Conduct R. 1.8(g) &

cmt. 13 (2003); ABA Comm. on Ethics & Prof’l Responsibility, Formal Op. 06-

438 (2006).

      Appellees’ reliance on the class-action exception to Model Rule 1.8(g) is

misplaced. The ABA’s determination that Model Rule 1.8(g) does not apply to

class settlements is both sensible and a practical necessity. Requiring class counsel

to obtain the consent of each class member before agreeing to a class-wide

settlement would be practically impossible in the majority of circumstances. And

such a requirement would eviscerate many of the benefits of class resolution. For

that reason, among others, it makes sense the ABA does not consider class counsel

to “have a full client-lawyer relationship with each member of the class.” Model

Rules of Prof’l Conduct R. 1.8(g) & cmt. 13 (2003) (emphasis added).

Consequently, the ABA also does not consider a certified class settlement to be an

aggregate settlement requiring the consent of each class member under Rule 1.8(g).

See ABA Formal Op. 06-438.




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       But here we are not dealing with allegations of individual class members’

conflicting interests, and we are not faced with determining whether each class

member needed to consent to a conflict with the Water Authority. Rather, we are

dealing with a situation in which the putative Class, as a whole, has interests that

conflict with the interests of another co-plaintiff, the Water Authority, who is not

part of the Class. The question is thus whether it was permissible for class counsel,

without consent, to represent the conflicting interests of multiple plaintiffs, one of

which is not part of any class, in an aggregate settlement involving a class. In

other words, this is not the sort of class settlement contemplated by the ABA’s

class-action exception to Rule 1.8(g), and the reasoning underlying that exception 11

does not apply in this context.

       Further, the ABA has explained that Rule 1.8(g) “supplements Rule 1.7 by

requiring an additional level of disclosure by the lawyer.” ABA Formal Op. 06-

438 at 2 (emphasis added). Thus, regardless of whether the ABA’s class-action

exception would negate any additional obligations under Rule 1.8(g), it does not




       11
          The exception articulated by the ABA is based in part on its conclusion that individual
class counsel does not “have a full client-lawyer relationship with each member of the class.”
Model Rules of Prof’l Conduct R. 1.8(g) & cmt. 13 (2003). We need not determine whether,
when, or the extent to which, class counsel had an attorney-client relationship with individual
members of the Class. We merely point out that the reasoning articulated by the ABA does not
apply in the context of a conflict between a putative class as a whole and a co-plaintiff who is not
a member of that class.

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affect class counsel’s underlying obligations under Alabama Rule 1.7(b), which

states:

          A lawyer shall not represent a client if the representation of that client
          may be materially limited by the lawyer’s responsibilities to another
          client or a third person, or by the lawyer’s own interests, unless:

                (1) The lawyer reasonably believes the representation will not
                be adversely affected; and

                (2) The client consents after consultation. When representation
                of multiple clients in a single matter is undertaken, the
                consultation shall include explanation of the implications of the
                common representation and the advantages and risks involved.

Ala. R. Prof’l Conduct 1.7(b). 12

          Nothing in the record suggests class counsel ever consulted Plaintiffs

concerning a potential conflict, much less obtained consent. Indeed, class counsel

has consistently maintained there was no conflict. We therefore are not persuaded

by Appellees’ arguments that class counsel complied with the Alabama Rules of

Professional Responsibility, and we conclude the district court abused its discretion

by approving the settlement.




          12
          The commentary to ABA Model Rule 1.7 contains its own class-action exception, but
the exception applies only to unnamed members of the class. Model Rules of Prof’l Conduct R.
1.7 & cmt. 25 (2003). Thus, under the ABA version of the rule, class counsel would appear to
have an obligation to both consult the named representatives of the class concerning the potential
conflict and obtain their consent.

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C. Rule 23(b)(2)

       The district court also abused its discretion by certifying a settlement class

under Rule 23(b)(2)13 and approving a settlement that released absent class

members’ individualized claims for monetary damages. In Wal-Mart Stores, Inc.

v. Dukes, a unanimous Supreme Court concluded that individualized claims for

monetary damages cannot be resolved through a class certified under Rule

23(b)(2). 564 U.S. 338, 360–61, 131 S. Ct. 2541, 2557 (2011). Rather, such

individualized claims should be resolved under Rule 23(b)(3). Id. at 362, 131 S.

Ct. at 2558 (“Given [the structure of Rule 23], we think it clear that individualized

monetary claims belong in Rule 23(b)(3).”).

       As the Court explained:

       The procedural protections attending the (b)(3) class—predominance,
       superiority, mandatory notice, and the right to opt out—are missing
       from (b)(2) not because the Rule considers them unnecessary, but
       because it considers them unnecessary to a (b)(2) class. When a class
       seeks an indivisible injunction benefitting all its members at once,
       there is no reason to undertake a case-specific inquiry into whether
       class issues predominate or whether class action is a superior method
       of adjudicating the dispute. Predominance and superiority are self-
       evident. But with respect to each class member’s individualized claim
       for money, that is not so—which is precisely why (b)(3) requires the
       judge to make findings about predominance and superiority before
       allowing the class. Similarly, (b)(2) does not require that class
       members be given notice and opt-out rights, presumably because it is
       13
          Rule 23(b)(2) allows certification where “the party opposing the class has acted or
refused to act on grounds that apply generally to the class, so that final injunctive relief or
corresponding declaratory relief is appropriate respecting the class as a whole.” Fed. R. Civ. P.
23(b)(2).

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      thought (rightly or wrongly) that notice has no purpose when the class
      is mandatory, and that depriving people of their right to sue in this
      manner complies with the Due Process Clause. In the context of a
      class action predominantly for money damages we have held that
      absence of notice and opt-out violates due process. See Phillips
      Petroleum Co. v. Shutts, 472 U.S. 797, 812, 105 S. Ct. 2965, 86 L. Ed.
      2d 628 (1985). While we have never held that to be so where the
      monetary claims do not predominate, the serious possibility that it
      may be so provides additional reason not to read Rule 23(b)(2) to
      include the monetary claims here.

Id. at 362–63, 131 S. Ct. at 2558–59.

      The Court went on to clarify that Rule 23(b)(2) “should [not] be read to

nullify [the protections of Rule 23(b)(3)] whenever a plaintiff class, at its option,

combines its monetary claims with a request—even a ‘predominating request’—for

an injunction.” Id. at 364, 131 S. Ct. at 2559. Otherwise, the mere fact that a class

might be entitled to significant injunctive relief could lead to “the

possibility . . . that individual class members’ compensatory-damages claims

would be precluded by litigation they had no power to hold themselves apart

from.” Id. This “possibility underscores the need for plaintiffs with individual

monetary claims to decide for themselves whether to tie their fates to the class

representatives’ or go it alone—a choice Rule 23(b)(2) does not ensure that they

have.” Id.

      Dukes thus offers a simple dichotomy: claims seeking declaratory or

injunctive relief equally applicable to the entire class may be resolved through



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mandatory class litigation under Rule 23(b)(2)14; individualized claims for relief

(such as the mental-anguish claims at issue here)15 should be resolved under Rule

23(b)(3), which provides absent class members notice and an opportunity to opt

out.

       The district court in this case did not apply the rule from Dukes. Instead, it

determined that a class could be certified (and individualized claims released)

under Rule 23(b)(2), as long as the relief provided by the settlement was

predominantly injunctive. In other words, the district court applied the

predominance test rejected by Dukes.

       Appellees suggest Dukes should not apply here because this case involves

class certification for purposes of settlement, whereas Dukes involved certification

for purposes of litigation. They further contend Rule 23(b)(3)’s procedural

safeguards are unnecessary in the settlement context because, under Rule 23(e)(2),

the district court can protect absent class members by rejecting settlements that are

unfair, unreasonable, or inadequate. See Fed. R. Civ. P. 23(e)(2); Bennett v.

Behrig Corp., 737 F.2d 982, 986 (11th Cir. 1984) (identifying standards by which

a district court must assess whether a settlement is fair, reasonable, and adequate).

       14
          The Court left open the question of whether claims seeking non-individualized
monetary damages that are incidental to the requested declaratory or injunctive relief may be
resolved under Rule 23(b)(2).
       15
          See Murray v. Auslander, 244 F.3d 807, 812 (11th Cir. 2001) (describing “pain and
suffering, mental anguish and humiliation” as “inherently individual injuries”).

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       As an initial matter, we see no basis for exempting settlements from the rule

announced in Dukes. See Amchem, 521 U.S. at 621, 117 S. Ct. at 2248 (“The

safeguards provided by the Rule 23(a) and (b) class-qualifying criteria, we

emphasize, are not impractical impediments—checks shorn of utility—in the

settlement-class context.”); Pettway v. Am. Cast Iron Pipe Co., 576 F.2d 1157,

1169 (5th Cir. 1978) 16 (“Because of the limited control exercised by any particular

class member over the decision to engage in these compromises, . . . the settlement

process is more susceptible than adversarial adjudications to certain types of

abuse. . . . For this reason, . . . the law accords special protections, primarily

procedural in nature, to individual class members whose interests may be

compromised in the settlement process.”); In re Payment Card Interchange Fee &

Merch. Disc. Antitrust Litig., 827 F.3d 223, 241–42 (2d Cir. 2016) (Leval, J.,

concurring) (“Dukes did not involve a settlement agreement, but that does not

make its precedent any less applicable to this case.”). If anything, the need for

Rule 23’s procedural protections is greater in the settlement context. See Pettway,

576 F.2d at 1169 (“[T]he potential for abuse is much greater when class actions are

resolved through a settlement.”)




       16
          In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this
Court adopted as binding precedent all decisions of the former Fifth Circuit handed down prior
to close of business on September 30, 1981.

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      Moreover, Appellees’ suggestion that Rule 23(b)(3)’s notice and opt-out

protections need not apply to a settlement because the district court can reject any

settlement deemed unfair to absent class members is foreclosed by binding

precedent. See Amchem, 521 U.S. at 621–22, 117 S. Ct. at 2248–49 (“[T]he

standards set for the protection of absent class members serve to inhibit appraisals

of the chancellor’s foot kind—class certifications dependent upon the court’s

gestalt judgment or overarching impression of the settlement’s

fairness. . . . Federal courts, in any case, lack authority to substitute for Rule 23’s

certification criteria a standard never adopted—that if a settlement is ‘fair,’ then

certification is proper.”); Pettway, 576 F.2d at 1169 (“[I]n addition to requiring

that the trial court evaluate whether a class action settlement is fair, adequate and

reasonable and is not the product of collusion between the parties, the law accords

special protections, primarily procedural in nature, to individual class members

whose interests may be compromised in the settlement process.” (emphasis added)

(quotation omitted)). The district court cannot deprive absent class members of the

procedural protections of Rule 23(b)(3) merely because it believes a proposed

settlement treats those class members fairly. For the same reason, this Court

cannot allow its own evaluation of the Class’s best interests to dictate its

conclusion as to whether the requirements of Rule 23 were satisfied.




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      Finally, we reject Appellees’ contention that approval of the settlement was

permissible because it only partially foreclosed the Class’s individualized claims.

Appellees point out that, because the settlement releases only Daikin, class

members can still pursue their individualized claims against 3M and Dyneon. But

neither Dukes nor Rule 23 allows parties to preclude absent class members’

individualized claims against one defendant, as long as those claims can still be

pursued against other parties who may have different defenses, levels of

culpability, and resources with which to satisfy a judgment.

      Put simply, the parties may not accomplish through class settlement what

they otherwise would be unable to accomplish through class litigation—precluding

absent class members’ individualized claims for monetary damages without

providing notice and an opportunity to opt out. The district court abused its

discretion by failing to apply the correct legal standard for certification under Rule

23(b)(2). See Dukes, 564 U.S. at 361–65, 131 S. Ct. at 2557–60.

                                 III. CONCLUSION

      The district court abused its discretion by determining the Class was

adequately represented by counsel laboring under an inherent conflict of interest.

It also abused its discretion by certifying a class under Rule 23(b)(2) and approving

a settlement that released absent class members’ individualized claims for




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monetary damages. We therefore vacate the class certification, reverse approval of

the settlement, and remand for further proceedings.

      VACATED IN PART, REVERSED IN PART, AND REMANDED.




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WILSON, Circuit Judge, dissenting:

      The district court concluded that there was no fundamental conflict and that

the settlement was fair, reasonable, and adequate. That conclusion falls well

within the bounds of its discretion, and resulted in a practical resolution of the

issues under the unique circumstances of this case. See Aldana v. Del Monte Fresh

Produce N.A, Inc., 578 F.3d 1283, 1288 (11th Cir. 2009) (“[A]buse of discretion

review acknowledges that there is a range of choice for the district court and so

long as its decision does not amount to a clear error of judgment we will not

reverse . . . .”). Nothing that the district court decided concerning this settlement

amounted to clear error. The district court undertook a fact-intensive inquiry

guided by a limited body of legal precedent and came to a reasonable conclusion in

approving the settlement. See id. This was, quite simply, not an abuse of

discretion.

      The Supreme Court’s precedent does not prohibit this settlement. Dukes

concerned whether claims for back pay could be certified in a non-opt out Rule

23(b)(2) litigation class. The Supreme Court was clear that its holding only

applied to certification in a Rule 23(b)(2) class, “at least where . . . the monetary

relief is not incidental to the injunctive or declaratory relief.” Wal-Mart Stores,

Inc. v. Dukes, 564 U.S. 338, 360, 131 S. Ct. 2541, 2557 (2011). The Court

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emphasized “the need for plaintiffs with individual monetary claims to decide for

themselves whether to tie their fates to the class representatives’ or go it alone.” Id.

at 364, 131 S. Ct. at 2559 (emphasis in original). Dukes does not prohibit the

settlement here because (1) plaintiffs did not move for class certification for their

mental anguish claims under Rule 23(b)(2) and (2) the structure of the partial

settlement allows the plaintiffs to litigate for full recovery of their mental anguish

claims against the remaining defendants.

      Likewise, nothing in Rule 23 prohibits this settlement. Because the

settlement was concerned primarily with injunctive relief, it could fit under a non-

opt out Rule 23(b)(2) settlement class. See Dukes, 564 U.S. at 360, 131 S. Ct. at

2557. Both the Water Authority and the Class want clean water. The Water

Authority wants clean water so that it can be serviceable to its customers, and the

customers want what they had been paying for—clean water. We cannot speculate

as to what the Water Authority and the Class may want in the future. Based on the

record before us, their interests are aligned. And pursuant to Rule 23(e)(2), the

district court approved the binding class settlement “after a hearing and on finding

that it is fair, reasonable, and adequate.” Fed. R. Civ. P. 23(a)(2).

      Nothing in Rule 1.8 of the Alabama Rules of Professional Conduct forbids

what the district court did here. The American Bar Association (ABA) decided

that its Model Rule 1.8 did not apply to class action settlements, see Model Rules


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of Prof’l Conduct r. 1.8(g) & cmt. 13 (Am. Bar Ass’n 1983), and Alabama’s

corresponding rule is modeled after the ABA rule, see Ala. R. Prof’l Conduct

1.8(g). That rule makes sense, because it would be virtually impossible for counsel

to obtain the consent of thousands of class members for every decision made in a

settlement. Rather, in a comment to ABA Model Rule 1.8, the ABA states that

counsel should comply with all “applicable rules regulating notification of class

members and other procedural requirements designed to ensure adequate

protection of the entire class.” Model Rules of Prof’l Conduct r. 1.8(g) & cmt. 13.

Class counsel did exactly that, and there is no dispute over whether it gave notice

of the settlement and an opportunity to object to all class members.

      Finally, the practicality of this settlement weighs strongly in favor of

affirming the district court. Settlement guidelines such as “the complexity,

expense and duration of litigation,” “the substance and amount of opposition to the

settlement,” and “the stage of proceedings at which the settlement was achieved,”

all support the district court’s decision. Bennett v. Behring Corp., 737 F.2d 982,

986 (11th Cir. 1984). A reversal will result in substantial litigation expenses,

whereas relatively few members of the Class object to the settlement. It will result

in the Class not receiving credit for the June 2016 water bill at this time. It will

forestall the pursuit of additional remedies, including mental anguish damages,

against the remaining defendants. And it will result in significantly more interest


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on the bond for the granular activated carbon filtration system, which will lack

settlement proceeds to pay for it. 1 This interest will be passed on to the Class. See

Ala. Code § 11-88-12.

       The district court did not abuse its discretion in determining that the

settlement was fair, reasonable, and adequate, and that there was no fundamental

conflict of interest. Therefore, I would affirm.




       1
        The appeal was expedited because the Water Authority anticipated using the settlement
proceeds to pay for the bond and did not want to acquire unnecessary interest on the bond.

                                             28
