The Seventh Circuit recently provided additional guidance on the question of under what circumstances misconduct by plaintiff’s counsel can warrant denial of class certification.  In 2011, the Seventh Circuit addressed this issue in Creative Montessori Learning Ctrs. v. Ashford Gear, LLC, 662 F.3d 913 (7th Cir. 2011) (blog post), vacating and remanding an order granting class certification, explaining that “[m]isconduct by class counsel that creates a serious doubt that counsel will represent the class loyally requires denial of class certification.”  Id. at 918.  In its recent opinion, Reliable Money Order, Inc. v. McKnight Sales Co., No. 12-2599, 2013 U.S. App. LEXIS 501 (7th Cir. Jan. 9, 2013), a sequel to Creative Montessori, the Seventh Circuit further explicated its views on this subject. 

The case involved the Telephone Consumer Protection Act, which provides for penalties for unauthorized advertising sent to fax machines, known as “fax blasting.”  These penalties when aggregated in a class action can become very large.  The alleged misconduct by plaintiffs’ counsel involved: (1) obtaining a list of potential new clients (i.e., businesses that had received faxed advertisements) from a third party “fax blaster” in circumstances in which there allegedly was a promise by plaintiff’s counsel to the third party that the information would be protected as confidential under a protective order; (2) sending a solicitation letter to the potential new clients that was not registered in accordance with state bar rules; and (3) sending a $5,000 check to an attorney who represented the third party that had produced the aforementioned list, purportedly to compensate the third party for expenses arising from depositions and document production.  

The Seventh Circuit explained that “even ‘serious’ or ‘major’ ethical violations—not prejudicial to the class—can require denial of class certification,” and “reject[ed] the suggestion of plaintiff’s counsel that only misconduct directly harming the class is relevant to the class certification decision.”  Id. at *25.  “A ‘slight’ or ‘harmless’ breach of ethics will not impugn the adequacy of class counsel. . . . [U]nless the violation prejudices one of the parties or undermines the court’s ability to resolve the case justly, state bar authorities—not a court—should enforce the rules and sanction the attorney.”  Id. at *26.  If the misconduct is not prejudicial to the class, but “jeopardizes the court’s ability to reach a just and proper outcome in the case,” denial of certification is warranted.  Id. at *27. 

On the facts of Reliable Money Order, the court affirmed certification of the class, finding that the district court did not abuse its discretion.  The court concluded that the alleged promise of confidentiality to the third party did not prejudice the class or compromise the integrity of the lawsuit.  The court found that the same was true with respect to the solicitation letter.  With respect to the $5,000 payment, the court concluded that if that payment had been intended to influence the third party’s testimony or was contingent on the outcome of the case, it would warrant denial of certification.  To the extent that the recipient of the payment testified that he perceived it as a “payoff,” and plaintiff’s counsel denied that assertion, that was an issue of credibility on which the trial court was entitled to deference.  Id. at *28-34. 

If I take off my defense lawyer hat and look at this issue objectively, as a judge would, I think the Seventh Circuit may be raising the bar a bit too high here in terms of the standard it sets forth, although that may depend on how the standard is applied in future cases.  Understandably, a court would not want to create a standard that would encourage the defendant to raise minor borderline issues of ethics, or result in ethical debates in numerous class actions.  But in a class action, the court has a special, unusual obligation to protect the interests of the absent class members.  A named plaintiff often is not qualified to or capable of ensuring that his or her counsel is acting consistent with their ethical obligations.  I don’t think I’ve seen any case in which a named plaintiff has sought to discharge class counsel.  Holding class counsel to a higher standard than articulated in Reliable Money Order might be appropriate because the court needs to take the place of a client that is relatively uninvolved in the class proceedings, and needs to protect the absent class members.  Even if class members are not directly prejudiced, would thousands of absent class members actually want to be represented by counsel who does not adhere to ethical standards?  Can the court be confident that counsel is adequately representing them? 

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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.