Tuesday, December 6, 2011

FYI: 7th Cir Vacates Class Cert in TCPA Case, Based on Misconduct of Class Counsel

The U.S. Court of Appeals for the Seventh Circuit recently held that the
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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Sunday, December 4, 2011

FYI: 7th Cir Breaks From Other Circuits, Holds Full Settlement Offer Prior to Motion for Class Cert Moots Putative Class Action

The U.S. Court of Appeal for the Seventh Circuit recently confirmed that a
complete offer of settlement made prior to a plaintiff's filing for class
certification moots that plaintiff's claim. A copy of the opinion is
attached.

Plaintiff-consumer brought a putative class-action claim against Clearwire
Corporation ("Clearwire"), alleging that Clearwire sent unsolicited text
messages to cellphone users in violation of the Telephone Consumer
Protection Act. Before the plaintiff moved for class certification,
Clearwire offered him the full relief he requested, removed the case to
federal court, and moved to dismiss on the grounds that the case was moot.
The lower court granted Clearwire's motion, and plaintiff appealed.

As you may recall, in the Seventh Circuit, "[o]nce the defendant offers to
satisfy the plaintiff's entire demand, there is no dispute over which to
litigate." Rand v. Monsanto Co., 926 F.2d 596, 598 (7th Cir. 1991).
However, if a plaintiff moves for class certification prior to receiving
such an offer, the action may continue.

The plaintiff noted that both the Supreme Court and the Seventh Circuit
have emphasized the importance of preventing individual "buy-offs" from
mooting class actions. Therefore, he argued that the Seventh Circuit
should create an exception to mootness where an offer is made prior to the
plaintiff moving for class certification.

The Seventh Circuit acknowledged that the approach urged by the plaintiff
has been adopted by four other circuits. The four other circuits have
fashioned a new rule that, "absent undue delay, a plaintiff may move to
certify a class and avoid mootness even after being offered complete
relief."

However, the Seventh Circuit declined to join them. The Court explained
that concerns regarding "buy-offs" mooting class actions could be
addressed by class action plaintiffs moving "to certify the class at the
same time that they file their complaint."

The plaintiff argued that the Seventh Circuit's approach could cause
plaintiffs to file for class certification prematurely, without having
developed the facts necessary to obtain certification. The Seventh
Circuit did not find this argument convincing, noting that in such a
circumstance plaintiffs could simply ask a court to "delay its ruling to
provide time for additional discovery or investigation."

Therefore, the Seventh Circuit affirmed the decision of the lower court.


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


NOTICE: We do not send unsolicited emails. If you received this email in
error, or if you wish to be removed from our update distribution list,
please simply reply to this email and state your intention. Thank you.


Our updates are available on the internet, in searchable format, at:
http://updates.kw-llp.com

CONFIDENTIALITY NOTICE: This communication (including any related attachments) is intended only for the person/s to whom it is addressed, and may contain confidential and/or privileged material. Any unauthorized disclosure or use is prohibited. If you received this communication in error, please contact the sender immediately, and permanently delete the communication (including any related attachments) and permanently destroy any copies.

IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed by law.