"Serious Doubt" Regarding Class Counsels' Loyalty Requires Denial Of Class Certification
CREATIVE MONTESSORI LEARNING CENTERS v. ASHFORD GEAR LLC (November 22, 2011)
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Lawyers from a firm that specializes in bringing class-action suits under the Telephone Consumer Protection Act obtained information about advertising faxes from a fax broadcaster, in return for a promise of confidentiality. The information they obtained revealed that Ashford Gear had sent almost 15,000 advertising faxes. The Creative Montessori Learning Center was (or may not have been) one of the recipients. The firm communicated with the Center, indicating that a class action already existed. The Center became the named plaintiff in a suit filed by the firm. Plaintiffs sought class certification. Defendants opposed certification on the grounds that the lawyers' misconduct (in breaching their confidentiality promise and in misrepresenting to the Center the status of the action) demonstrated that the lawyers would not adequately represent the class. Judge Gettleman (N.D. Ill.) agreed that there had been misconduct but concluded that the misconduct was a subject for bar authorities and certified the class. Ashford Gear sought permission for leave to appeal from the class certification.
In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Cudahy and Posner vacated and remanded. The Court, as it has on several occasions recently, commented on the dangers of class actions, particularly in situations with statutes like the Telephone Consumer Protection Act. The Act provides for $500 in statutory damages for the recipient of an unsolicited fax advertisement (trebled if willful or knowing). But, in bringing it as a class action, counsel has turned it into a case worth over $11 million. The Court also emphasized the need for trustworthy class lawyers, given the incentives for class lawyers and defendants' lawyers to recommend settlements that reward the class lawyers at the clients' expense. Here, lawyers for the class have already exhibited their lack of integrity. Although the district court recognized that fact, it concluded that "only the most egregious misconduct" by class counsel was grounds for denial of class certification. The Court noted that that was an erroneous standard. Instead, any misconduct that casts serious doubts on class counsels’ loyalty is grounds for denial of certification. The Court remanded for a reevaluation of whether class counsel will adequately represent the class, given the misconduct.
Michael Rigney practices in the law offices of GVC Ltd. in Chicago. In this blog, he reports on select