lower court erred in granting class certification in a TCPA unsolicited
fax case, where misconduct by class counsel raised doubts about counsel's
trustworthiness to act as a conscientious fiduciary on behalf of class
members.
A copy of the opinion is available at:
http://www.ca7.uscourts.gov/fdocs/docs.fwx?submit=showbr&shofile=11-8020_0
01.pdf.
The defendant, a small home furnishings wholesaler, allegedly distributed
unsolicited faxed advertisements to a large number of recipients in
violation of the Telephone Consumer Protection Act, 45 U.S.C. § 227
("TCPA"), through a business that faxes advertisements on behalf of
advertisers.
In order to obtain information on unsolicited faxes, the plaintiff's
counsel, consisting of a group of lawyers specializing in class actions
under the TCPA, requested fax transmission reports from the owner of the
fax distribution business, and promised her that the information would be
kept confidential. Based on this assurance of confidentiality, the
plaintiff's counsel obtained transmission reports allegedly showing that
over 22,000 advertisements were faxed from the defendant to the
approximately 14,000 individuals constituting the class.
In addition, despite the promise of confidentiality, the plaintiff's
counsel sent a letter to the plaintiff implying that there already was a
certified class of which the plaintiff was a member. In response to
counsel's letter, the plaintiff contacted the lawyers and eventually
became the named plaintiff and class representative.
In ruling on class certification, the district court noted that the
plaintiff's counsel had improperly obtained the contact information for
the fax recipients and improperly implied the existence of a certified
class in its letter to the plaintiff. Nevertheless, the lower court
certified the class, because in its view the misconduct on the part of the
plaintiff's counsel did not constitute "egregious conduct" that would
require denial of class certification.
The defendant then petitioned the Seventh Circuit, seeking an
interlocutory appeal of the class certification. The Seventh Circuit
vacated the class certification and instructed the lower court to
re-evaluate the gravity of the misconduct in light of the requirement that
class counsel, as fiduciaries, adequately and fairly represent the
interests of the class.
Referring to the Supreme Court's opinion in Wal-Mart Stores v. Dukes, 131
S. Ct. 2541, 2551 (2011), the court noted that a "class action may be
certified only if 'the trial court is satisfied, after a rigorous
analysis, that the prerequisites [for class certification] have been
satisfied.'" The Court further noted that no such analysis occurred in
this case. Specifically, the Court took issue, first, with the district
court's suggestion that "only the most egregious misconduct" should
require denial of class certification on grounds of lack of adequate
representation and, second, with the lower court's ruling that only such
extreme misconduct "could ever arguably justify denial of class status."
The Seventh Circuit referred to the standard set forth in Culver v. City
of Milwaukee, 277 F.3d 908 (7th Cir. 2002), which held that as
fiduciaries, class counsel must prosecute class actions in the interest of
the class and that when class members are consumers, the fiduciary
obligation to them is one of "particular significance."
The Court also noted the growing concern that class actions can create
perverse incentives for class counsel, and that Fed. R. Civ. P. 23(g), in
response to that concern, requires class counsel to "fairly and
adequately" represent the entire class.
Concluding that the demonstrated lack of integrity on the part of the
plaintiff's counsel raised doubt as to their trustworthiness as
representatives of the class, the appellate court specifically instructed
the district court to apply the standard articulated in Culver and to
abandon the "egregious conduct" standard the lower court previously used.
Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
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