Sandwich Chef of Texas, Inc. v. Reliance National Indemnity Insurance

Docket: No. Civ.A H-98-1484

Court: District Court, S.D. Texas; August 8, 2001; Federal District Court

EnglishEspañolSimplified EnglishEspañol Fácil
The Court, presided by Judge Hittner, has granted the Motion for Class Certification filed by Plaintiff Sandwich Chef of Texas, operating as Wall Street Deli. Wall Street operates delicatessens and purchased four workers' compensation insurance policies from Reliance Insurance Company between 1991 and 1994, each subject to retrospective rating via a specific endorsement. Wall Street alleges that Reliance and approximately 150 other insurance carriers conspired to overcharge policyholders by illegally inflating a regulated premium factor and misleading state regulators about the actual rates charged. The National Council on Compensation Insurance, Inc. (NCCI), which is controlled by the Defendants, is claimed to have facilitated this scheme by submitting misleading filings and providing support for unauthorized charges. Wall Street's complaint invokes the Racketeer Influenced and Corrupt Organizations Act (RICO), seeking damages for itself and a proposed class of employers who purchased retrospectively rated workers' compensation insurance across 44 states and the District of Columbia. The class definition excludes Large Risk Alternative Rating Option purchasers and those participating in captive insurance. The proposed class encompasses all purchasers of the specified policies effective from January 1, 1987, that were not finalized by May 6, 1994, thus ensuring uniformity in premium calculation and filing requirements under the designated endorsement.

The class membership begins on January 1, 1987, coinciding with the first alleged discussions among Defendants at NCCI regarding policyholders covering costs related to assigned risk pools. The cut-off date of May 6, 1994, ensures the class includes only those policyholders who received invoices for workers’ compensation premiums within the four-year limitations period before Wall Street's RICO complaint. The class excludes policies under the Large Risk Alternative Rating Option (LRARO), where terms are negotiable, and excludes policyholders with captive reinsurers to avoid conflicts of interest. Additionally, Defendants and co-conspirators are excluded to prevent intra-class conflicts.

The Proposed Trial Plan outlines three phases for managing the class action: 

1. **Legal Issues**: The Court will determine various legal questions, including whether Defendants were mandated to use filed rating plan factors for Option V coverage, the validity of filed rating-plan factors, the self-proving nature of reliance for paying policyholders, classification of disputed policies, the relevance of 'side agreements', the allowance of counterclaims by Defendants, and reviewing damage formulas based on actual account data.

2. **Factual Issues**: A jury will assess factual determinations, including whether Defendants colluded to overcharge Option V policyholders, engaged in mail fraud, misrepresented charges to regulators, utilized NCCI for conspiracy, and established proximate cause under RICO. The jury will also determine the total amount of overcharges against Wall Street and the class.

3. **Distribution of Damages**: If the class prevails, damages will be distributed based on records from Defendants and claims submitted by class members.

Defendants oppose class certification, arguing that Wall Street has not demonstrated the adequacy and typicality required under Rule 23(a), nor the predominance, manageability, and superiority under Rule 23(b)(3). They assert that proving the fraud-based RICO claims will necessitate examining the knowledge of numerous involved parties, including employers and insurance brokers.

Defendants argue that a trial would involve extensive evidence from thousands of communications relevant to negotiations, suggesting that individual issues related to these communications and the participants' knowledge would overshadow common issues. They highlight the necessity of addressing laws from forty-five jurisdictions regarding varying and potentially conflicting rate filings and the enforceability of related agreements. Additionally, they assert that compulsory counterclaims, defenses, and arbitration agreements undermine the motion for class certification.

For class certification under Rule 23, Wall Street must satisfy four prerequisites: numerosity, commonality, typicality, and adequacy, as per Fed. R. Civ. P. 23(a). Since Defendants concede numerosity, the court need not investigate it further. The commonality requirement under Rule 23(a)(2) necessitates shared legal or factual questions among class members, which is a relatively low threshold. Previous opinions have identified common issues related to whether there was an enterprise affecting interstate commerce, the association of Defendants with the enterprise, and their participation in racketeering activities.

Wall Street must also show that common issues predominate and that class treatment is superior for resolving the dispute, as outlined in Rule 23(b)(3). The burden of proof lies with Wall Street, and the court must conduct a rigorous analysis to confirm compliance with Rule 23 standards, potentially examining beyond the pleadings to evaluate claims, defenses, relevant facts, and applicable law. The common issues include proving the existence of an enterprise, the Defendants' engagement with it, and the predicate racketeering act of devising a scheme to defraud, which involves demonstrating the use of mail or wire in furtherance of the scheme and its resulting injury to the plaintiff.

Wall Street asserts a nationwide fraudulent scheme by the Defendants, claiming that any finding regarding the Defendants' involvement will be applicable to all class members. The case references Heastie v. Cmty. Bank of Greater Peoria, emphasizing that the essence of mail fraud lies in the scheme's intent, which is assessed solely based on the defendant's actions. Key common factual questions include the conspiracy's existence, membership, duration, and characteristics, with NCCI identified as the enterprise under the Defendants' joint control.

Wall Street is tasked with proving the conspiracy's existence, as a ruling in its favor on these charges would affect all class members. The document highlights the impracticality of requiring over half a million individuals to pursue individual fraud claims when a unified scheme underpins their allegations, supporting the establishment of commonality under Federal Rule of Civil Procedure 23(a)(2).

Regarding typicality, Rule 23(a)(3) mandates that the claims of representative parties must mirror those of the class. The claims arise from a single RICO cause of action grounded in mail and wire fraud, with all members experiencing similar injuries stemming from the alleged conspiracy to manipulate NCCI, mislead regulators, and impose fraudulent charges on policyholders. This shared source of injury establishes typicality among victims.

Defendants challenge Wall Street's typicality on four grounds, arguing that Wall Street's LRARO coverage makes it atypical of Option V policyholders. However, the language of Wall Street’s insurance policy, which includes a merger clause stating that no modifications can be made without a formal endorsement, contradicts this assertion. Legal precedents confirm that clear and unambiguous insurance contracts will be enforced as written, and parol evidence cannot alter the policy type or create ambiguity. Each of Wall Street’s policies includes a WC 00 05 endorsement but lacks any LRARO-specific endorsements, indicating that the determination of Wall Street’s coverage type must rely solely on the policy documents themselves.

Defendants assert that Option V policies were individually negotiated; however, even if some customization occurred, it does not negate Wall Street's claim that Defendants overcharged policyholders by inflating residual market subsidies established by filed rates, which were non-negotiable under the WC 00 05 endorsements. Defendants argue that certain policyholders had agreements requiring them to pay inflated rates, seeking to discount the fixed tax multipliers and subsidies. Nevertheless, expert testimony confirms that the filed rate doctrine prohibits price discrimination, mandating uniform rates for all policyholders under the WC 00 05 endorsement. This doctrine ensures that all policyholders are subject to identical, non-negotiable rating factors. The existence of side agreements or understandings that might differentiate class members cannot be recognized, as it would contravene the nondiscriminatory pricing principle that the filed rate doctrine enforces. Furthermore, the Court cannot question filed rates based on unfiled agreements. The challenge to Wall Street's typicality based on its failure to purchase insurance from every Defendant is unfounded, as civil conspiracy allows for vicarious liability among conspirators for misconduct affecting multiple victims. Wall Street’s claims are deemed typical of the class, as they arise from a common legal theory.

Rule 23(a)(4) mandates that class representatives must fairly and adequately protect the interests of the class, necessitating alignment of their interests with those of unnamed class members, as established in Mullen and In re Corrugated Container Antitrust Litig. The testimony from Wall Street’s leadership and the involvement of skilled legal counsel support their adequacy as representatives. Wall Street's significant claim reinforces its investment in the case, aligning with the encouragement of large-claim plaintiffs in class actions. Defendants' concerns about Wall Street's sole focus on a RICO claim potentially creating an intraclass conflict are countered by the Supreme Court's ruling that judgments on classwide claims do not preclude individual claims. Class members dissatisfied with outcomes can opt out, ensuring no intraclass conflict arises. Wall Street is deemed to understand its responsibilities to the class and has demonstrated adequate representation under Rule 23(a)(4). 

Moving to Rule 23(b)(3), for a class action to be maintainable, it must satisfy the requirements of Rule 23(a) and show that common questions of law or fact predominate over individual issues, as well as that a class action is the superior method for adjudication. The district court must evaluate factors such as the class members' interest in controlling their separate actions, the existence of related litigation, the suitability of the forum for consolidating claims, and the management challenges of a class action.

The district court must evaluate state law variations and the trial's conduct when determining class certification, as established in Castano v. Am. Tobacco Co. The first factor, individual control over litigation, is significant for personal injury claims, but less so for economic losses, especially in commercial cases where companies prioritize maximizing recovery. Consequently, Wall Street argues that class members have minimal interest in individually controlling the litigation, a stance the Court supports.

Regarding the second and third factors—other pending litigation and the desirability of concentrating litigation in this forum—Wall Street posits that both favor certification. The current case is the first to invoke RICO as the primary cause of action, with few individual complaints compared to the proposed class size. The only competing lawsuit, a non-RICO class action in Arizona, involves only sixty plaintiffs and does not allege conspiracy. The scarcity of similar RICO cases indicates that class members are unlikely to pursue claims individually, and the Court notes that the costs of individual litigation likely outweigh potential recoveries. Additionally, concentrating litigation in this forum is advantageous due to the complex substantive issues and previous rulings by the Court.

The fourth factor examines potential management difficulties in a class action. Defendants present several challenges, including state law variations, the need for individualized proof of proximate cause and injury, counterclaims, and defenses that could disrupt class treatment. However, the Court finds these arguments unconvincing. While Defendants claim that varying state laws would complicate the case, the Court emphasizes that the RICO statute will be the sole focus for liability, distinguishing this case from Castano, which involved multiple common law causes of action.

In the Castano case, plaintiffs sought to apply conflicting state laws on liability concerning negligence and fraud. In the current case, although fraud requires proof that the Defendants inflated rates, all jurisdictions involved mandate that Defendants file and adhere to their rates for workers' compensation coverage. Wall Street's RICO claim aims to enforce these filed rates. The Court previously ruled that applying RICO complements state regulations rather than conflicting with them. Defendants' witnesses could not name any jurisdiction allowing carriers to charge un-filed rates, indicating that Wall Street's RICO claim does not necessitate conflicting state law application.

The filing requirements across jurisdictions serve significant regulatory purposes, including the uniform requirement for carriers to file all forms used in workers' compensation coverage. The forty-five jurisdictions permitting Option V coverage have standardized mandatory endorsements, ensuring all policies include the WC 00 05 endorsements, which enable Defendants to provide coverage risk under one policy. Thus, the regulations and contract language relevant to Wall Street's RICO claim are consistent across jurisdictions. Minor variations in state laws, such as differing numerical rates, do not hinder class certification, as other federal courts have successfully certified nationwide class actions despite state law variations.

Regarding proximate cause, Wall Street can utilize either the "target wing" or "reliance wing" as established in Summit Properties Inc. v. Hoechst Celanese Corp. Defendants contend that the individualized issues render class claims unmanageable. However, RICO requires both "but for" and "proximate" causation. The Fifth Circuit clarifies that proximate cause can be established by showing that the plaintiff was either the target of a fraud or relied on the fraudulent conduct of the defendants. Recent rulings reaffirm that third-party reliance on a fraudulent statement can establish proximate cause if it results in injury to the plaintiff. Wall Street asserts claims under both causation wings outlined in Summit.

Under the "target wing" of the Summit case, reliance by class members is not a necessary factor for establishing a RICO claim. It suffices to show that class members were harmed due to regulators’ reliance on the defendants' fraudulent representations. A previous court decision confirmed that Wall Street's allegations regarding fraud related to excessive workers’ compensation premiums meet RICO requirements. Wall Street's theory is supported by evidence indicating that defendants misrepresented their costs to insurance regulators, particularly in the R-1244 filing, which inaccurately claimed that costs from residual market pools were not included in filed rates while concealing that these costs were being charged to policyholders. Wall Street argues that this filing constituted a half-truth, meant to mislead regulators and facilitate overcharging.

Additionally, Wall Street asserts that individual defendants also made misleading statements directly to regulators, suggesting that the purpose of these filings was to create a false impression of compliance with filed rates. Defendants contend that the need for individual injury proof undermines class certification; however, the court disagrees, stating that Wall Street can demonstrate that regulators relied on the fraudulent filings. The defendants have not contested that regulators enforced the filed rates. The alleged misconduct affects all class members uniformly, establishing a common issue appropriate for class treatment under federal law. Therefore, the court concludes that Wall Street has successfully shown predominance and superiority for its "target wing" claim.

The document then addresses the "reliance wing" concerning the invoice theory, noting that it must determine if Wall Street can demonstrate proximate cause without necessitating individualized proof of reliance, as per Rule 23(b)(3).

The Fifth Circuit has reversed orders certifying Rule 23(b)(3) classes in cases requiring individual proof of reliance, which undermines the economic benefits of class actions. In the cases of Patterson, Bolin, and Castano, class certification was denied due to the numerous individual issues each claimant presented. Castano dealt with mass tort claims across varying state laws, Bolin involved numerous claims for consequential losses due to alleged illegal collection practices, and Patterson required individual showings of reliance related to workers' compensation. 

In contrast, Wall Street's invoice theory claim is straightforward, focusing solely on direct economic injuries from inflated invoices and not involving the complex individual claims seen in Patterson, Bolin, or Castano. Wall Street's claim asserts that the defendants engaged in a scheme of overcharging through misrepresented invoices, which are alleged to contain phantom premiums. The claim posits that these invoices misrepresented the lawful amounts due, as they lacked necessary regulatory filings, thus constituting mail fraud. Wall Street argues that under the filed rate doctrine, policyholders should not owe more than the filed rate at the time of invoicing.

The Fifth Circuit has not ruled out the possibility of maintaining a RICO fraud class action under Rule 23(b)(3), contrary to the Supreme Court's recognition that class action requirements can be satisfied in consumer or securities fraud cases. Class certification is particularly suitable for widespread commercial abuses, such as price-fixing conspiracies. In this instance, individualized proof of reliance is not a barrier to certification because the act of invoice payment could serve as circumstantial evidence of reliance. In RICO-fraud cases alleging overcharges, reliance and injury can be established through circumstantial evidence linked to the transactions that led to the overcharges.

The district court determined that excessive charge payments demonstrated detrimental reliance, referencing Chisolm, which established that payment of inflated interest charges indicated Sherman Act impact. Wall Street contends that reliance can be inferred from circumstantial evidence, specifically that class members were misled by invoices containing inflated premiums and subsequently overpaid. Defendants argue that Chisolm's reliance on the "fraud on the market" theory, rejected by the Fifth Circuit in Summit, undermines this position. However, Chisolm did not solely depend on this theory and clarified that it did not presume reliance but found it proven through circumstantial evidence. The court emphasized that reliance could be established through circumstantial proof, citing California law, which supports the notion that direct evidence of reliance is not always necessary. If the trial court finds that misrepresentations occurred, an inference of reliance for the entire class can be drawn. The Northern District of Texas also applied this reasoning to omissions in a similar context. Wall Street alleges that class members received misleading invoices, asserting that these misrepresentations led to overcharges. The court ruled that Wall Street is entitled to use these invoices and the payments as circumstantial evidence of reliance. Additionally, Wall Street can present expert testimony on the expectation of accuracy in invoices, particularly from regulated entities. Defendants further argue against class certification due to potential compulsory counterclaims from absent class members related to alleged undercharges.

Defendants claim they undercharged many putative class members for workers’ compensation insurance and provided additional financial benefits beyond those in filed rate programs. They argue that the transactions were highly customized, necessitating individualized adjudications that involve multiple state laws, and that this creates significant conflicts with Wall Street, which could face substantial counterclaims from insurers. The Court reviewed additional briefing and determined that the potential counterclaims do not prevent class certification. Defendants’ claims of undercharge counterclaims are deemed speculative; notably, a month prior to the certification hearing, Reliance filed a counterclaim against Wall Street for breach of contract related to unpaid premiums, which does not align with the alleged undercharges. Since absent class members are not considered parties, they are not subject to compulsory counterclaims under Rule 23, as supported by case law. The Fifth Circuit's ruling in Roper v. Consurve, Inc. emphasizes that the potential for counterclaims should not obstruct class action legitimacy, particularly when it could deny relief to a significant number of class members. The Court concluded that the counterclaim issue does not render the case unmanageable for trial, as Wall Street’s Trial Plan addresses it, and the Court can sever counterclaims if necessary, along with tailored jury instructions to mitigate confusion.

Defendants’ allegations of potential counterclaims do not prevent class certification. The Court finds that materiality of invoices charging phantom premiums can be established on a class-wide basis, as materiality is determined objectively; thus, individual evidence from policyholders is unnecessary. The jury will assess if a reasonable business would find such invoices significant, establishing materiality as a common issue. 

Defendants contend that the statute of limitations poses individual issues, but the Court disagrees, noting that policies closed by a final premium adjustment beyond the statute of limitations are excluded. Citing the "separate accrual" rule from Love v. National Medical Enterprises, fraudulent invoices issued within four years of the complaint’s filing represent separate injuries within the limitations period, allowing for class certification.

Additionally, Defendants argue that the equitable defense of in pari delicto creates individual issues, referencing Bateman Eichler’s criteria for barring a plaintiff's damages claim based on their own culpability. The Court highlights that plaintiffs must have equal or greater responsibility for the violations to invoke this defense. No evidence suggests class members participated in the alleged misconduct, indicating that the in pari delicto defense does not inhibit class certification.

Lastly, Defendants assert that class certification is improper due to arbitration agreements with some class members. However, Wall Street is the sole party involved in this proceeding.

Policies with Reliance lack arbitration clauses, and no such agreements exist between Wall Street and other carriers. Defendants' arbitration agreements are not filed for workers' compensation insurance and were not included in any policy by endorsement. The merger clause within the filed policy negates any non-endorsed agreements, rendering the arbitration clauses irrelevant to premium determinations. Furthermore, it is questionable whether the Defendants can invoke the Federal Arbitration Act (FAA) to enforce these agreements, as the McCarran-Ferguson Act preempts federal laws that could undermine state regulation of insurance. Courts have previously preempted the FAA when it conflicts with state insurance regulations.

Even if a Defendant could invoke arbitration agreements, they would not significantly impact class-wide RICO claims, as arbitration cannot govern RICO claims against non-issuing Defendants. Each policyholder is entitled to recover from all Defendants involved in the alleged conspiracy to overcharge, meaning arbitration objections do not prevent class certification. The Court finds class treatment preferable, influenced by Wall Street’s comprehensive Trial Plan, although it does not formally adopt it at this point. 

Despite Defendants' arguments regarding the complexities of trial due to individual knowledge of policy negotiations, the Court believes Wall Street has adequately addressed these issues. Therefore, the Court concludes that a class action is a more effective method for litigating the dispute and grants Wall Street's motion for class certification. The certified class includes all purchasers of workers’ compensation insurance policies with specific endorsements, effective from January 1, 1987, to May 6, 1994, with certain exclusions noted. Preliminary legal determinations have already been made as specified in the document.

RQS, or NCCI's Retro Quote System, is a comprehensive database of lawful rates for Option V coverage across states during the class period. The Court established several key points: 1) Intentional overbilling constitutes a violation under RICO; 2) Inflated invoices represent misrepresentations of fact; 3) The "filed rate doctrine" does not prevent Option V policyholders from pursuing claims to enforce the filed rate; 4) Proximate cause can be demonstrated if policyholders were directly targeted in the overcharging conspiracy; and 5) The McCarran-Ferguson Act does not bar class member claims. 

Legal precedents affirm that class actions are suitable when a "standardized sales pitch" is used, and commonality exists if mail fraud involves a uniform approach or if claims arise from standard documents. Parties to a contract are deemed to rely on the representations within it. Workers' compensation insurance policies must adhere strictly to filed rates, as agreements for coverage at non-filed rates are ineffective. Courts have consistently held that the regulation of workers' compensation rates is outside the realm of private negotiation, meaning such rates cannot be altered or nullified by private agreements or insurer actions. Statutes dictate that any contract not explicitly included in the policy is void, reinforcing the requirement that workers' compensation rates must comply with filed rates.

The filed rating plan is integral to the contract, determining the final premium payable by an employer based on the filed rates. Wall Street does not argue that premium payment agreements are inherently invalid but contends that Defendants cannot employ side agreements to justify premiums exceeding filed rates. Enforceable side agreements must not contradict filed rates, as established in case law (e.g., Cananwill, Inc. v. EMAR Group, Inc. and Tankersley v. Durish). An illegal side agreement does not invalidate a policy. The district court must ensure that the lawyers representing the case are competent, with the proposed class represented by McClanahan, Clearman, L.L.P., along with Professors Susan Klein and Charles Silver, all of whom have significant experience in relevant legal fields. Defendants acknowledge that Wall Street's counsel meets adequacy requirements. A sophisticated individual with a substantial claim is considered an appropriate named plaintiff, as supported by the Private Securities Litigation Reform Act of 1995, which designates the plaintiff with the largest financial interest as presumptively adequate to select class counsel. Defendants reference an opinion from Ford v. NYLcare Health Plans of the Gulf Coast, Inc. regarding the classification of negative value suits, clarifying it does not preclude class representatives from pursuing claims with nominal values. Additionally, concerns about a class representative subjecting class members to compulsory counterclaims will be addressed later. The Castaño case illustrates various claims against tobacco companies, including fraud and consumer protection violations, highlighting the legal context for similar actions.

Insurers are mandated to submit their policy forms for review by state authorities across all states. While some premium factors for Option V policies can be negotiated, tax multipliers and residual market subsidies are established by law and remain fixed. Concerns from Wall Street primarily focus on discrepancies from these fixed rates rather than negotiable rates. A related case, In re Consol. Non-Filing Ins. Fee Litig., highlighted that damages were contingent upon differing state UCC-1 filing fees, reflecting the complexities within the regulatory and legal landscape affecting insurance premiums and filings.

A nationwide class was certified in T, 179 F.R.D. 342 (S.D.Ga.1998) for alleged RICO violations associated with a telephone gambling game, contingent upon whether the game contravened state gambling laws. The target analysis has been endorsed by various circuits in cases where fraud is directed at regulators to defraud a protected class. Notable examples include Rodriguez v. McKinney, where vocational school students were misled regarding the program's benefits to the Department of Education; United States v. Cavin, involving misrepresentations to insurance policyholders; and Learjet Corp. v. Spenlirihauer, which dealt with false statements to the FAA. It is established that statements can be considered false if they are half-truths or conceal material facts with fraudulent intent. All jurisdictions prohibit defendants from making deceptive statements to state regulators, as evidenced by various state codes. The Fifth Circuit indicated in Bolin that (b)(3) certification was not conclusive, as only (b)(2) certification was under consideration, but it seems to have accepted that individual reliance findings required for RICO liability would preclude both (b)(2) and (b)(3) certification. Additionally, the case referenced previous litigation involving several defendants from Weatherford Roofing Co. v. Employers National Insurance Co.

In Cause No. 91-05637-F, the 116th Judicial District Court of Dallas County, Texas, a case involving allegations against insurance carriers for charging policyholders excessive rates for retrospectively rated workers’ compensation insurance is highlighted. This case settled as a class action with court approval. The complaint does not allege oral misrepresentations, setting it apart from other cases cited by Defendants that suggest individualized proof of fraud is necessary. For mail fraud claims, the required fraud element pertains to a violation of honesty and fair dealing principles, as established in Gregory v. United States. The Court acknowledges that other district courts have allowed class actions to proceed even when reliance proof is necessary, referencing cases such as In re Consol. Non-Filing Ins. Fee Litig. and Chisolm v. TranSouth Fin. Corp. However, the Court rejects alternative reliance proof methods proposed by Wall Street, including "presumed reliance" and the Ute presumption, which are generally disfavored in civil RICO cases. Defendants argue that the Fifth Circuit’s Patterson case rejected reliance based on circumstantial evidence, but Patterson did not address Chisolm or the use of such evidence. The Court has severed Defendant Reliance's automobile and general liability insurance premium counterclaim from the current action, but the workers' compensation counterclaim remains. Reliance's breach of contract claim is based solely on Wall Street’s alleged failure to pay premiums. Defendants cite Heaven v. Trust Co. Bank to support denial of certification, but the Court finds this case distinguishable, as Wall Street has not conceded that a debt counterclaim exists, nor has it been filed. Additionally, Wall Street questions whether an undercharge counterclaim will be made. The Court also references the definition of "materiality" in the federal mail fraud statute, as noted in Neder.

A false statement is considered material if it can influence the decision-making body it is addressed to. This principle is supported by case law, including Kungys v. United States and several other cases where the Federal Arbitration Act (FAA) was found to be reverse preempted by state statutes under the McCarran-Ferguson Act. There is uncertainty regarding whether an Arkansas statute would allow for evasion of policyholder protections through separate agreements containing premium provisions. The court may create subclasses based on arbitration agreements if necessary. The Fifth Circuit has indicated that if defendants win on liability, the issue of damages becomes irrelevant, a factor that supports class manageability. This is illustrated in Wall Street’s Trial Plan, which suggests that a favorable outcome for the defendants would render damage calculations moot. Relevant procedural rules, including Federal Rules of Civil Procedure 23(c)(4) and 53(a)(b), are referenced as guiding this process.