Jonathon Rowles v. Chase Home Finance, LLC Response To Petition For TRO

9:10-cv-01756-MBS Date Filed 12/30/10 Entry Number 17 Page 1 of 24
UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA
BEAUFORT DIVISION
JONATHON ROWLES, individually and as Civil No. 9:10-cv-01756-MBS

a class representative of others similarly Hon. Margaret B. Seymour
situated,
Plaintiff, CHASE HOME FINANCE, LLC’S
v. RESPONSE TO PETITION FOR
TEMPORARY RESTRAINING ORDER
CHASE HOME FINANCE, LLC, AND MOTION FOR PRELIMINARY
INJUNCTION AND MOTION FOR
Defendant. ORDER GOVERNING PARTIES’
CONTACT WITH PUTATIVE CLASS
MEMBERS
Defendant Chase Home Finance, LLC (“Chase”) submits this response to plaintiff
Jonathon Rowles’ Petition for Temporary Restraining Order and Motion for Preliminary
Injunction (“Petition,” Docket Entry 10), filed with this Court on December 22, 2010, and
plaintiff’s Motion for Order Governing Parties’ Contact with Putative Class Members, filed on
December 23, 2010 (“Rule 23(d) Motion” or “Motion,” Docket Entry 15).
INTRODUCTION
Chase plans to refund potential overcharges to individuals who at some point in the last
six years were entitled to the benefits of the Servicemembers’ Civil Relief Act (“SCRA”). The
pending motions seek to prevent that refund or, alternatively, to have Chase send with the refund
a notice of this pending lawsuit that would refer individuals to plaintiff’s counsel. Both are
patently improper, and wholly unsupported by the governing law and the facts.
Chase seeks nothing in return for the planned refunds — no release, no waiver, and no
compromise of any claims the recipients may have. Chase’s return of potential overpayments to
Columbia: 1452454 v.4

customers is, by no stretch of the imagination, legal prejudice. In both the ordinary and the legal
sense, it is a benefit. Moreover, the planned refund is significantly broader in scope than this
lawsuit, both because it extends back further in time than any statute of limitations, and because
it uses admittedly more expansive standards for returning payments than even the SCRA itself
requires. Further, even if the Fourth Circuit were to decide a private right of action exists under
the SCRA, even if plaintiff were to survive a challenge to the viability of his claims, and even if
the Court were then to certify some form of a SCRA class, there are numerous individuals who
otherwise would receive a refund, but who would never become members of any putative class
here.
Chase also submits that the caselaw is uniformly against the relief sought by plaintiff.
While several courts have permitted materially identical refunds to proceed in the manner Chase
proposes (no release, pre-certification), plaintiff has not cited, and Chase has not found, a single
decision to the contrary. This fact is not surprising because the relief sought here — preliminary
injunction and pre-certification notice to putative class members under Rule 23(d) — requires a
showing of extraordinary circumstances. Indeed, in both his Petition and Rule 23(d) Motion,
plaintiff acknowledges that he has the burden of establishing that the refund is “coercive,
misleading, or abusive.” (Petition at 6, Motion at 5.) But he offers only speculation as to how
Chase’s proposal for returning potential overpayments to individuals would in any way meet that
standard. The Supreme Court has made it clear that such speculation is not enough — absent
concrete findings of abuse, the court lacks authority to impose the sort of limits on Chase’s
refund communication that plaintiff seeks. Moreover, the cases discussing communications with
putative class members make it abundantly clear that tying the refund to the pending class action,
and thereby claiming that it effects a waiver of the class members’ substantive or procedural
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rights, is precisely what this Court should prohibit.
In the end, without ever saying it directly, the only “harm” to which plaintiff alludes is
the prospect that the refund will make class members whole. There is nothing abusive, coercive,
or in any other sense wrong, with that outcome. This lawsuit, and the procedural device of class
actions, are not ends in and of themselves. They properly exist to vindicate substantive rights.
For the most obvious of reasons, our jurisprudence does not allow plaintiffs or the prospect of a
putative class action to stand in the way of making individuals whole, just so that they might
later participate in litigation.
For all the reasons explained below, plaintiff’s Petition and Motion fail to meet the
exacting and heavy burden for the extraordinary relief he seeks, either in the form of a
preliminary injunction or the regulation of communication with putative class members under
Rule 23(d).
FACTUAL BACKGROUND
Chase was initially contacted by the United States Attorney’s Office about SCRA
concerns arising out of plaintiff’s mortgage loan account, and was asked to provide information.
(Exhibit 1, Declaration of Michael J. Agoglia ¶ 2 (“Agoglia Decl.”).) In addition to providing
information to the United States Attorney’s Office, Chase initiated a broader review of the
mortgage and home equity loans that Chase services where there was some indication that the
borrowers may have been entitled to the protections afforded under the SCRA, 50 U.S.C. Appx.
§ 501, et seq. (Id.) The scope of that review extended to loans which were active from
January 1, 2005. (Exhibit 2, Declaration of Laura DeAtley ¶ 2 (“DeAtley Decl.”).) This lawsuit
was filed in July 2010, after the internal review began. (See Docket Entry 7.)
Chase committed significant resources to this review, including the development of a
project team involving a great number of Chase personnel, and months of transaction-by-
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transaction analysis of every implicated loan by subject matter experts. (DeAtley Decl. ¶ 2.) In
November 2010, the review progressed to the stage where Chase identified the potential
discrepancies in the accounts under review. (Id.)
In early December, Chase approached plaintiff through counsel to inform him of the
internal review and planned refunds. (Agoglia Decl. ¶ 3.) Chase provided plaintiff’s counsel
specific information regarding the nature and scope of the internal review, the amounts to be
refunded and the number of individuals who would receive a refund. (Id.) Chase also provided
a draft of the proposed refund cover letter, which was revised to include mention of the SCRA in
an unsuccessful attempt to address plaintiff’s concerns. (Id. ¶¶ 3-4.) It reads simply as follows:
Dear [name],
Chase recently conducted a review of accounts where borrowers may have been entitled
to the benefits of the Servicemembers’ Civil Relief Act. We are issuing a refund in
instances where our review noted a possible discrepancy. The enclosed refund check to
you contains interest at 7.25% from the date of any funds at issue collected.
Should you have questions, please call (XXX) XXX-XXXX.
(See Petition, Exh. A (Docket Entry 10-1).)
The toll-free number is included because, based on its considerable experience in
processing refunds and handling similar borrower communications, Chase expects that without it
a certain number of borrowers will call a general customer service number, where the operator
will not have background information. (DeAtley Decl. ¶ 4.) To avoid that, Chase proposes to
use a dedicated toll-free number where the customer service representatives will have the
following scripted Frequently Asked Questions and responses:
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1. Why did I receive a check/refund?
• Chase conducted a review of accounts where borrowers may have been entitled to the
benefits of the Servicemembers’ Civil Relief Act (SCRA). We issued a refund in
instances where our review noted a possible discrepancy. The amount refunded also
included interest.
2. Do I continue to have SCRA protection from here forward?
• Our review included both borrowers who were previously protected under the SCRA, and
those who are currently protected under the SCRA. The refund will not affect the period
in which you are entitled to SCRA protection. If you have questions regarding your
current SCRA status, please contact [name/department] at [phone number].1
3. What are the tax implications of this refund?
• Chase cannot provide tax advice, and any tax implications are dependent on your
particular financial circumstances. Please speak with your personal tax adviser regarding
any tax implications of this refund.
(Agoglia Decl. ¶ 3, Exh. A.) Contrary to the speculation in the Petition and Motion, the
customer service representatives will adhere strictly to this information. (DeAtley Decl. ¶ 4)
They will not have any information about the lawsuit, and they will not engage in any
discussions about the litigation, its claims, or seek in any way borrowers’ waiver or release. (Id.)
As explained to plaintiff’s counsel, Chase does not provide these refunds in exchange for a
waiver or release of class or individual claims. Neither the refund cover letter, nor the
Frequently Asked Questions, references the litigation, a release or waiver of claims in the
litigation (or any other matter), or a borrower’s rights under the SCRA. Chase does not
condition the refund on a release or on opting out of the putative class, nor will it make any
1
The final FAQs will identify in this section the group with the responsibility at Chase
for correctly determining the periods of SCRA protection for affected borrowers. (DeAtley
Decl. ¶ 5.) This is the group to whom inquiries about SCRA protection periods are routed in the
ordinary course of business. (Id.) They will not provide, or be in a position to provide, any
information about the lawsuit, its claims, or reading and interpreting military orders and related
materials. (Id.)
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representation to borrowers about their rights under the litigation or the SCRA.
As Chase further explained to plaintiff’s counsel, the refunds are necessarily broader in
time, scope, and amount than a likely class recovery could achieve. There remains a threshold
question of whether a private right of action exists under the SCRA for the claims in this lawsuit.
(See Consent Motion to Stay, Docket Entry 6.) Even were such a right available to plaintiff, the
statute of limitations will at most be no longer than four years. See 28 U.S.C. § 1658 (rights of
action created after 1990, and with no express statute of limitation, subject to four-year catch-
all). Plaintiff’s complaint was filed in July 2010 (Docket Entry 1), thereby limiting any class to
borrowers with active loans as of July 2006. Chase’s refund would repay potential overcharges
to borrowers with active loans as far back as January 2005, at least 15 months longer than the
most expansive class period would likely extend.
The refund is also broader in many respects than the statutory liability. For example, the
refund returns all fees paid during the period of SCRA protection, not just those which if paid
would cause the loan payments to exceed the 6% interest cap created by the statute. (DeAtley
Decl. ¶ 3). See 50 U.S.C. Appx. § 527 (capping SCRA-protected mortgage loans at 6% interest
rate, and defining “interest” as including certain fees and charges). Chase also provided
borrowers with the most expansive SCRA protection period, by triggering SCRA protection as of
the “order date” (the date of the written communication calling a servicemember to duty), rather
than the actual active duty start date (DeAtley Decl. ¶ 3), which courts have held to be the SCRA
protection start date. See Rodriguez v. Am. Express, et al., No. 03-5949, 2006 U.S. Dist. LEXIS
17727, at *18 (E.D. Cal. Apr. 7, 2006) (interest rate cap applies “as of the date of entry into
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active duty”).2 Moreover, the refund amount also includes interest on the amount of the refund
at 7.25% (DeAtley Decl. ¶ 3), though such interest is also likely beyond Chase’s strict legal
requirements. See Rodriguez, 2006 U.S. Dist. LEXIS 17727, at *24 (refund of charges in excess
of 6% rate limitation sufficient to make borrower whole); Fourte v. Countrywide Home Loans,
Inc., No. 07-1363, 2009 U.S. Dist. LEXIS 84146, at *20-21 (D.N.J. Sept. 15, 2009) (crediting
account for SCRA-related overcharge would satisfy claim).
ARGUMENT
I. THERE IS NO BASIS TO LIMIT OR ALTER CHASE’S REFUND

COMMUNICATIONS HERE.
Plaintiff argues, incorrectly, that Gulf Oil Co. v. Bernard, 452 U.S. 89 (1981), warrants
the Court’s restriction of Chase’s refund here. A careful examination of the case leads to the
opposite conclusion. Gulf Oil involved a pre-certification communication with putative class
members that offered backpay in exchange for a full release of pending discrimination claims.
452 U.S. at 92. The district court ordered a complete ban on all communications concerning the
pending action, with an exception for “communications in the regular course of business.” Id. at
95. The Fifth Circuit affirmed the district court opinion, with a dissenting opinion arguing that
the order limiting communications was not appropriate because the court did not make any
finding of actual or imminent abuse. Id. at 98. The Supreme Court agreed with the dissent, and
remanded, holding that “the mere possibility of abuses does not justify routine adoption of a
communications ban,” and “in many cases there will be no problem [with putative class
communications] requiring remedies at all.” Id. at 104.
2
Pursuant to LCR 7.05(4), DSC, copies of all out-of-region court decisions, decisions in
the Federal Rules Decisions reporter, and unpublished decisions are attached hereto collectively
as Exhibit C.
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Courts since Gulf Oil have held true to the directive that, “[a]bsent any specific evidence
that the communication is abusive, a limitation is inappropriate.” Kay Co., LLC v. Equitable
Prod. Co., 246 F.R.D. 260, 263 (S.D. W. Va. 2007). “Abusive” communications have been
defined as those that contain false, misleading, or confusing statements or those intended to
coerce prospective class members into excluding themselves from the suit. Id. at 261-63. The
court in Kay permitted communication with putative class members over the plaintiff counsel’s
objection because “[t]he plaintiffs have not directed the court to any evidence which indicates
that the defendants have attempted to coerce putative members into excluding themselves from
the class or undermined cooperation with or confidence in the plaintiffs’ counsel.” Id. at 263;
see also, Webb v. Discover Prop. & Cas. Ins. Co., No. 3:08cv1607, 2008 U.S. Dist. LEXIS
95431at *7-9 (M.D. Pa. Nov. 24, 2008) (denying plaintiff’s motion to “restrict defendants’
contact with prospective class members . . . in order to prevent defendants from [] initiating any
unfairly prejudicial, one-sided communications with these individuals that may misrepresent the
status and/or purpose of th[e] litigation” because “there is no clear record of abuse—or even
allegations of abuse—from which [the court] can make specific findings with regard to the
defendants’ contact with the putative class members”) (citation omitted).
The situation is no different in this case: plaintiff has not demonstrated any specific
evidence of abuse or coercion. The refund here is materially identical to the communication
approved in Rankin v. Board of Education Wichita Public Schools, 174 F.R.D. 695 (D. Kan.
1997). In Rankin, the plaintiffs claimed that the defendant school district had failed to provide
services to disabled children. Id. at 697. After the lawsuit was filed, and prior to class
certification, the school district sent letters to students, offering to provide make-up services. Id.
The letters did not mention the pending class action, nor did they seek to extinguish the students’
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rights under the pending suit in exchange for the make-up sessions. Id. Recognizing that such
letters were necessary for ongoing services, the court rejected the plaintiffs’ claim that the letters
were abusive, since they made no reference to the litigation and did not attempt to discourage
potential class members from participating in the suit. Id. (“Any prospective member of the
class could choose to take advantage of [the] defendants’ offer and still choose to participate in
this action should the class be certified. The court finds absolutely no merit in plaintiffs’
contention that any curative notice is required because of the . . . letter.”). See also Payne v. The
Goodyear Tire & Rubber Co., 207 F.R.D. 16, 21 (D. Mass. 2002) (permitting home inspections
of and communications with putative class members where there was “no evidence that there
was any discussion of litigation at all with the homeowners, or any attempt to obtain a release or
any type of waiver from the homeowners”).
Unlike in Gulf Oil, and the cases where Gulf Oil has been used to limit communications
with putative class members, the refund at issue here does not seek a waiver or release of any
claims. As Chase endeavors to do in the normal course of business when it discovers a possible
account discrepancy, Chase seeks here only to provide money to SCRA borrowers for whom it
has identified a potential overcharge. (DeAtley ¶ 3.) Consistent with those cases approving
defendants’ class communications, the actual communication at issue here does not purport to tie
the refund or related activity to the pending litigation. That is precisely the approach Chase
intends to take with this refund.
A. Courts Routinely Permit Refunds of This Kind.
Courts routinely permit refunds of this kind. For example, in Boulas v. J.P. Morgan
Chase & Co., et al., No. 1:09-cv-00348-PAG, filed in the Northern District of Ohio, the court
rejected a similar request for a temporary restraining order and preliminary injunction in
connection with a Chase refund of a credit card fee challenged by the plaintiff in the litigation.
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Id., Opp. to Mtn for Prelim. Inj. at 3 (N.D. Ohio Apr. 8, 2009) (Boulas Docket Entry 16). While
the action was pending, a state Attorney General investigated the same practice. Id. at 5-6. After
further review, Chase decided to issue refunds of the fee in question to putative class members
through a process similar to the one at issue here, with no waiver or release sought in return. Id.
at 5. The plaintiff tried to enjoin Chase from refunding the fee to putative class members, but the
only arguable prejudice identified was that class counsel’s contingency fee might suffer if class
members were made whole through such a refund. Id., Order at 1-2 (N.D. Ohio April 9, 2009)
(Boulas Docket Entry 17). The court denied the motion and permitted the refunds to go forward,
finding that possible limitations on what class counsel might recover in the litigation clearly did
not qualify as grounds to limit Chase’s planned refund. Id.
Courts have permitted refunds even where accepting such refunds would release claims,
so long as those consequences were clearly communicated to putative class members. For
instance, Cox Nuclear Medicine v. Gold Cup Coffee Services., Inc., 214 F.R.D. 696 (S.D. Ala.
2003), a case cited by plaintiff, also involved and permitted refunds to putative class members,
over the objection of the plaintiff’s counsel. In Cox, the defendant issued letters informing
putative class members that they had received boxes with 35 packets of coffee in each box,
though the label said each box carried 42 packets. Id. at 698. The defendant enclosed a check to
each customer for the difference in value between 35 and 42 packs, and explained in the
accompanying letter that “cashing or other endorsement of the check releases the defendant from
further liability.” Id. The court denied the plaintiff’s petition for sanctions, holding that the
letter was not misrepresentative and that the refund made the customers whole. Id. at 698-99.
See also Arriola v. Time Ins. Co., 751 N.E. 2d 221, 230-31 (Ill. App. 2001) (permitting refund to
putative class members in exchange for release of claims). Though Chase does not seek a
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release, these cases illustrate that, as here, where refunds are presented in good faith and without
any misrepresentation, courts have permitted them without a need for intervention.
Indeed, the few cases discussing SCRA-related claims have held that refunding amounts
owed under the SCRA is both a routine and favored approach. See, e.g., Rodriguez, 2006 U.S.
Dist. LEXIS 17727, at *24 (claim satisfied because Citibank and American Express credited
plaintiff’s account with all interest charges accrued in excess of 6% from the date of entry into
active service); Fourte, 2009 U.S. Dist. LEXIS 84146, at *20-21 (summary judgment denied
only because issues of fact regarding whether Countrywide previously credited plaintiff’s
account with the amount of alleged SCRA overcharge).
B. Plaintiff Has Not Identified Any Case Limiting Communication with

Putative Class Members in These Circumstances.
Plaintiff does not provide any caselaw to support his claim that refunds seeking no
release and making no mention of the pending class action are in some way misleading or
coercive. The cases cited by plaintiff involve communications with certified class members, or
communications that seek a release, neither of which is at issue here. See Kleiner v. First Nat’l
Bank of Atlanta, 751 F.2d 1193 (11th Cir. 1985) (defendant in a certified class action prohibited
from engaging in secret telephone campaign to solicit waivers in violation of district court order
barring contact with class members); In re Sch. Asbestos Litig., 842 F.2d 671, 684 (3d Cir. 1988)
(holding that the district court “lacked a proper basis under Rule 23(d) to issue [an order limiting
communications with a certified class]”); Cobell v. Norton, 212 F.R.D. 14 (D.D.C. 2002)
(defendant in a certified class action prohibited from distributing accounting statements that
included notice that a failure to object to the accuracy of the statements would extinguish class
members’ rights to contest them in the future); Hampton Hardware, Inc. v. Cotter and Co., Inc.,
156 F.R.D. 630 (N.D. Tex. 1994) (pre-certification, defendant prohibited from mailing letters to
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putative class urging them to opt out of class action).
The facts of Chase’s refund and analogous caselaw support Chase’s contention that its
refunds are permissible, not misleading, and in fact benefit the putative class. Accordingly, there
is no need for court intervention or regulation of the proposed communication with putative class
members.
C. Plaintiff’s Proposed Revisions to Chase’s Communication Serve Only to

Confuse and Mislead Borrowers.
Interestingly, plaintiff’s concern is not so much that Chase will communicate with
putative class members, but that the communication does not mention plaintiff’s counsel or the
litigation. In Cram v. Electronic Data Systems Corp., No. 07cv1842-LAB (NLS), 2008 U.S.
Dist. LEXIS 3669 (S.D. Cal. Jan. 17, 2008), a district court was faced with this exact request—
not outright limitation of the defendant’s communication with putative class members, but,
rather, a communication that named the pending litigation and discussed the relevant claims. At
issue in Cram was backpay allegedly owed under state law. Id. at *1. The defendant had
internally reviewed putative class members’ pay, determined under federal law the amount owed,
and provided those amounts in a check with an accompanying letter that did not mention the
litigation and did not seek a release of any claims. Id. at *2-3. The plaintiff sought a “curative
communication” mentioning the litigation and one’s rights under state law, arguing that
recipients of the refund may believe their claims to be settled or that the defendant would use
such pay as an affirmative defense against the claims for backpay. Id. at *3-4. The court refused
“to compel follow-up communications in a manner helpful to the advancement of plaintiffs’
position in this litigation.” Id. at *5. Citing to the defendant’s argument that the plaintiff was
attempting to “leapfrog the certification phase [] and proceed directly to class notification,” and
noting that the communication did not seek a release of claims, the court held that the plaintiff’s
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mere speculation of potential confusion was simply not enough to warrant the plaintiff’s
requested communication. Id. at *6-7. Similarly, plaintiffs’ proposed communication here
would amount to improper pre-certification notice under Fed. R. Civ. P. 23(d), unsupported by
more than plaintiff’s speculation of confusion and prejudice. On the contrary, it is plaintiff’s
proposed communication that would prejudice putative class members.
1. Plaintiff’s Proposed Revisions to Chase’s Communication
Prior to the filing of his Petition, plaintiff proposed that the letter accompanying the
refunds inform recipients that:
• The loan-level review was the result of the present action;
• The refund is for all SCRA-related overcharges;
• The refund is not a settlement of any rights under the SCRA;
• The present action is pending in South Carolina federal court (and providing the
caption for such action); and
• Recipients should contact plaintiff’s counsel with “questions regarding . . . rights under
the SCRA or the pending action” (providing counsel’s name and telephone number).
(Agoglia Decl. ¶ 4, Exh. B.)
2. The Extraordinary Step of Pre-Certification Notice Is Not Warranted
Plaintiff’s proposed revisions would create a confusing and incomplete pre-certification
notice, thereby corrupting the notice requirements of Rule 23(d). Rule 23(d)(1)(B)(i) permits
pre-certification notice only in the truly rare situation “where the facts of the case show that lack
of notice would unduly prejudice the ability of absent class members to bring independent
actions on their claims, either by limiting the right of absent class members to recover in a
subsequent suit, or by encouraging continued reliance by unnamed class members on the activity
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of named class members on their behalf.” Sanft v. Winnebago Indus., Inc., 216 F.R.D. 453, 460
(N.D. Iowa 2003); Schultzen v. Woodbury Cent. Cmty. Sch. Dist., 217 F.R.D. 469, 473 (N.D.
Iowa 2003) (“[I]f there is . . . no evidence of any prejudice to absent class members, then courts
have consistently found that notice to the absent class members is not required.”) (citation
omitted).3 Finding that the statute of limitations would soon run, the court in Sanft required pre-
certification notice of the dismissal of class claims so as not to prejudice putative class members
from asserting claims on their own behalf. Id. 216 F.R.D. at 460. In contrast, a dismissal is not
at issue here, and the proposed refund neither limits the rights of absent class members, nor does
it induce reliance on the activity of named class members.
As discussed in detail above, Chase does not seek a waiver or release from refund
recipients, nor are the refunds in any way meant to be an offer of settlement. Nevertheless,
plaintiff argues that cashing the check still has some bearing on class claims. Plaintiff’s
argument seems to be that, at worst, putative class members could be made whole with the
refunds. First, if, as plaintiff argues, consequential and punitive damages are available under the
SCRA (which Chase disputes), the fact that a borrower cashed a check for his potential actual
damages neither waives his request for other damages, nor determines the total amount of such
damages. Second, plaintiff has cited nothing to support the notion that making a plaintiff or
putative class member whole voluntarily and without a release before the conclusion of pending
litigation constitutes legally cognizable prejudice. In fact, courts have time and again held that
3
Pre-certification notice is rare, indeed, as both Rule 23(d) and comments thereto note
that notice is intended for “members of the class,” without any mention of notice prior to class
certification. See Fed. R. Civ. P. 23(d)(1)(B) (a court may issue orders that “require—to protect
class members and fairly conduct the action—giving appropriate notice to some or all class
members”) (emphasis added); Fed. R. Civ. P. 23 advisory committee notes to 1966 amends.,
subdiv. (d)(2) (discussing “notice to members of the class”) (emphasis added).
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making a plaintiff or putative class member whole prior to class certification is permissible. See
Susman v. Lincoln Am. Corp., 587 F.2d 866, 870 (7th Cir. 1978) (holding that tender of full
amount of damages to plaintiff is permissible and that such tender does not alone moot a pending
motion for class certification); Arriola v. Time Ins. Co., 751 N.E. 2d 221 (Ill. App. 2001) (“[I]t is
permissible for defendants to tender full amount of recovery to named plaintiffs and putative
members of the class prior to the filing of a motion for class certification.”) (citing cases in
accord).
From a practical perspective, even more outlandish is the notion that an individual would
benefit from delaying a full refund so that he may participate in a lawsuit seeking the same
recovery. If the argument is that the funds provided could make the borrower whole regarding
his SCRA claims, then the potential for a class action is of no matter. From the perspective of
the borrower, it does not matter whether his substantive rights are vindicated as part of a class
action, or on an individual basis. The only potential difference in those scenarios is attorneys’
fees. As in Boulas, this Court should reject the notion that harm to the fee recovery for counsel
would remotely justify the relief sought here. See e.g., Boulas, supra, Order at 2 (“Quite simply,
the Court does not look to whether the attorneys will be irreparably harmed.”) (emphasis in
original).
Understanding that there is no risk of prejudice to putative class claims, the next inquiry
is whether a lack of notice would prejudice putative class members “by encouraging continued
reliance . . . on the activity of named class members on their behalf.” Sanft, 216 F.R.D. at 460.
In fact, it is plaintiff’s proposed notice—not Chase’s refund—that would prejudice putative class
members by inducing their misplaced reliance on the pending action. Not only are plaintiff’s
proposed representations factually inaccurate (Chase’s internal review was not initiated as a
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result of plaintiff’s lawsuit, for one), but expressly linking the refund to the lawsuit is likely to
cause at least some individuals not to cash their refund checks because of a misplaced
assumption that their rights will be limited by cashing the check, even when as a matter of law
they would not be. That would be especially improper because there is no guarantee that any
private right of action will be found under the SCRA, that any refund recipient will ever be part
of a certified class, or that the class will succeed on the merits. In fact, because of the broader
time and substantive scope of the refund, the parties know for certain that a portion of those
individuals receiving the refunds would not be part of a class under any scenario.4 Yet, plaintiff
would have those individuals apprised of the pending lawsuit and the availability of plaintiff’s
counsel, and at Chase’s expense when the cost of class notice typically rests with the plaintiff.
See Eisen v. Carlisle, 417 U.S. 156, 177 (1974) (“[T]he petitioner must bear the cost of notice to
the members of his class.”); Sanft, 216 F.R.D. at 460 (holding that cost of mailing notice shall be
borne by plaintiff).
Even further misleading and prejudicial, borrowers could read plaintiff’s proposed letter
to mean that, if they do not cash the check, they have affirmatively opted in or otherwise acted
on their behalf in the pending litigation, when that is not the case. Plaintiff’s letter would also
convey the impression that if borrowers do not cash the check, they are guaranteed to receive in
the future at least the amount enclosed. That is untrue, of course, as the lawsuit may never
proceed past the dismissal stage, and the exact amount to be paid remains to be litigated.
4
Nor does (or could) plaintiff suggest a method short of the very detailed loan-by-loan
analysis by which he, the Court, or even Chase could segregate the putative class members from
the rest of the refund recipients. Indeed, it was precisely because of those enormously
time-consuming and costly impediments that Chase chose to make refunds in the manner
proposed (e.g., the broadest possible protection period, all fees instead of only those violating the
6% SCRA cap, etc.).
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Borrowers could also believe themselves to be represented by counsel, when they are not yet
represented, and some borrowers may never be as a result of statutes of limitations or lack of
damages. Even more alarming, putative class members could believe that court-ordered
pre-certification notice amounts to court endorsement of the validity of the underlying claims,
when there is no guarantee that plaintiff could ever be meritorious here. The court in Cherner
denied pre-certification notice for this very reason: “[T]he normal consequence [of such notice]
would be that many persons would incorrectly infer that this Court regarded the plaintiffs’
complaint as prima facie well-founded and had required a prompt notice to all who had been
victimized so that they might not be [sic] delay or inaction lose valuable rights.” Cherner v.
Transitron Elec. Corp., 201. F. Supp. 934, 936 (D. Mass. 1962).
Plaintiff’s proposed “Proper Order,” premised on Bublitz v. E.I. duPont de Nemours &
Co., 196 F.R.D. 545, 549 (S.D. Iowa 2000), is not any less prejudicial than his proposed
revisions to the refund letter. (Rule 23(d) Motion at 11-12.) First, Bublitz itself is inapposite.
Bublitz involved a communication between an employer/defendant and employee/putative class
members, wherein the employer sought release of class claims in exchange for certain benefits.
Id. at 547. Significantly, the court held that the at-will employment relationship between the
defendant and putative class members “produces a strong potential for coercion and thus justifies
minimal protections.” Id. There is no analogous “particularly high” risk of coercion here, as
there was in Bublitz. Id. at 548. Nor is there an offer of settlement, which the Bublitz court
carefully noted was the reason for plaintiff’s counsel to be involved with communications to
putative class members. Id. at 549 (“Plaintiffs’ counsel are concerned about not being able to
participate in the presentation of the settlement proposal and related communications, and not
being able to analyze the settlement proposal before it was presented to the putative class
- 17 -
members.”). Not only would providing notice under Bublitz misleadingly induce borrowers’
reliance for the same reasons provided above, but, in addition, plaintiff’s suggestion that the facts
at issue here are analogous to those in Bublitz raises the concern that plaintiff’s counsel would
themselves confuse borrowers. Plaintiff argues that the customer service hotline, the extent of
what will be said to callers is included in the attached FAQs, may confuse borrowers, when it is
more likely that plaintiff’s counsel’s communications with borrowers may themselves
misrepresent and obfuscate the nature of the refunds, such as by potentially representing that
Chase’s refund is an offer of settlement, or that it has some bearing on class claims, which it does
not.
Since there are no rights at risk of prejudice, and attorneys’ fees alone are insufficient to
warrant pre-certification notice, the only other purpose notice could serve is to solicit clients.
This not only contravenes express court precedent, but also undermines the purpose of Rule 23.
The Advisory Committee Notes to Rule 23(d), not only support the view that notice is
overwhelmingly reserved for certified classes, but also caution that any notice to an uncertified
class “should not be used merely as a device for the undesirable solicitation of claims.” See Fed.
R. Civ. P. 23 advisory committee notes to 1966 amends., subdiv. (d)(2). As a result, courts have
routinely denied such class notices which act as client solicitations. See e.g., Cherner, 201 F.
Supp. at 936 (“Rule 23 should not be used ‘as a device to enable client solicitation[.]’”) (citation
omitted); Marian Bank v. Elec. Payment Servs. Inc., No. 95-614-SLR, 1999 U.S. Dist. LEXIS
3097, at * 2-3 (D. Del. Mar. 12, 1999) (highlighting courts’ repeated warnings against using pre-
certification notice to encourage solicitation of lawsuits and rejecting plaintiff’s motion to issue
notice of denial of certification). Plaintiff’s request for a general “FYI” about the lawsuit to
putative class members is materially identical to that denied in Pan Am World Airways, Inc. v.
- 18 -
United States Dist. Ct., 523 F.2d 1073 (9th Cir. 1975). There, the appellate court overturned the
district court’s order permitting notice of the existence of the lawsuit to hundreds of putative
class members. Id. The appellate court reasoned that pre-certification notice would undermine
the purpose of Rule 23 certification and instead encourage joinder of multiple claims in cases
where certification could not be achieved. Id at 1079. Plaintiff’s proposed notice attempts to get
around class certification requirements in a number of ways, not least of which is by purporting
to represent putative class members that are not yet represented by counsel and communicating
with borrowers who even plaintiff would have to admit could never be members of a SCRA class
or represented by class counsel, and as a result should be denied by the Court for this additional
reason.
Ripe for confusion and misuse, it is understandable why class notice requires rigorous
court review to ensure that it meaningfully and accurately presents the parties’ views and class
member options, including the consequence of opting out or choosing to remain in the class. See
e.g., Fed. R. Civ. P. 23(c)(2); In re Serzone Prods. Liab. Litig., 231 F.R.D. 221, 231 (S.D. W.
Va. 2005) (noting that class notice must “inform potential class members (1) that they have an
opportunity to opt out; (2) that the judgment will bind all class members who do not opt out; (3)
and that any member who does not opt out may appear through counsel”). Plaintiff’s partial and
inaccurate revisions to the proposed refund letter fall far short of meaningful notice and only
serve to obfuscate the refund’s purpose and putative class members’ rights, making clear that
pre-certification notice is not required or helpful in this instance.
Finally, if the case were to proceed, and if the court were later to certify some class, it
would at that point have a full opportunity to decide what the content of a full, fair and adequate
class notice would be, including any information about the impacts, if any, of the prior refund
- 19 -
by Chase.
II. PLAINTIFF HAS NOT MET HIS BURDEN FOR A PRELIMINARY

INJUNCTION
For the reasons stated above, plaintiff’s Petition also fails to meet the four mandatory
elements required for this Court to enjoin Chase from issuing the refunds. Because preliminary
injunctions are “an extraordinary remedy,” a moving party must clearly establish “1) that he is
likely to succeed on the merits, 2) that he is likely to suffer irreparable harm in the absence of
preliminary relief, 3) that the balance of equities tips in his favor, and 4) that an injunction is in
the public interest.” Real Truth About Obama, Inc. v. F.E.C., 575 F.3d 342, 346 (4th Cir. 2009)
(citing Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 24 (2008)), vacated, 130
S. Ct. 2371, reaff’d in part, 607 F.3d 355 (4th Cir. 2010).
A. Plaintiff Is Not Likely to Succeed on the Merits.
Plaintiff’s Petition does not address whether plaintiff is likely to succeed on the merits of
the underlying claim, the first basic requirement of a request for preliminary injunction. Plaintiff
erroneously attempts to collapse both the Rule 23(d) Motion and the Petition into one by arguing
that his likelihood of prevailing on the Rule 23(d) Motion warrants the granting of his Petition.
Plaintiff’s conflation of the two ignores the longstanding requirement for a preliminary
injunction that the movant show the likelihood of winning on the merits of the underlying action.
Real Truth About Obama, Inc., 575 F.3d at 346.
Chase submits that plaintiff is not likely to do so. First, there remains the significant
threshold question of whether there is a private right of action under the SCRA.5 Second, it
5
The recent amendment to the SCRA, expressly adding a private right of action, is likely
to weigh heavily against finding that a private right of action existed prior to its addition. See 50
U.S.C. Appx. § 802 (added by P.L. 111-285, Oct. 13, 2010). The Fourth Circuit seems to have
acknowledged as much, by ordering supplemental briefing in Gordon v. Pete’s Auto on the issue
(Footnote continues on next page.)
- 20 -
remains far from clear whether plaintiff would succeed on his substantive claims, or whether a
class could be certified. Chase has not located a single instance where a court certified a class
under Section 518 or 527 of the SCRA, under which plaintiff brings his claims. Making matters
worse, plaintiff appears intent on arguing that he is entitled to seek emotional distress and
punitive damages under the SCRA, claims for which courts routinely deny class certification
because they are unavoidably individualized. See, e.g., Gunnells v. Healthplan Services, Inc.,
348 F.3d 417, 429 (4th Cir. 2003) (“Plaintiff’s other damages claims—those relating to injury to
credit, time lost, and loss of enjoyment of life—may require individualized inquiry.”); Doe v.
Chao, 306 F.3d 170, 183 (4th Cir. 2002) (emotional distress damages require fact-specific
inquiries); Williams v. Telespectrum, Inc., No. 3:05cv853, 2007 U.S. Dist. LEXIS 78415, at
*17-18 (E.D. Va. Jun. 4, 2007) (“[T]he issue of [defendant’s] liability for punitive damages to
each individual class member would overshadow the common issues that would be litigated.”);
Nelson v. Wal-Mart Stores, Inc., 245 F.R.D. 358, 376 (E.D. Ark. 2007) (“[A]n award of punitive
damages often must include an inquiry into each plaintiff’s individual circumstances in order to
determine the amount of punitive damages awardable to that plaintiff.”).6
For the reasons discussed at length above, even if this Court were to consider the merits
of plaintiff’s Rule 23(d) Motion, it is evident that he would not prevail.
(Footnote continued from previous page.)

of whether the newly-added private right of action is retroactive. Gordon v. Pete’s Auto, Order
Requesting Supplemental Briefing, No. 09-2393 (4th Cir. Oct. 26, 2010).
6
Damages aside, an additional hurdle to class certification is the unique, fact-specific
defense provided by Section 527 of the SCRA, which protects creditors from applying the 6%
interest rate cap if a servicemember’s ability to pay “is not materially affected by reason of the
servicemember’s military service.” 50 U.S.C. Appx. § 527(c).
- 21 -
B. Plaintiff Fails to Meet the Additional Requirements of a Preliminary

Injunction.
In addition to showing a likelihood of prevailing on the underlying merits, plaintiff must
show clear evidence: 1) of irreparable harm to the moving party, 2) that weighing of harm
balances in favor of his Petition, and 3) that a preliminary injunction would further the public
interest. Real Truth About Obama, Inc., 575 F.3d at 346.
Plaintiff’s claim that recipients face an “extreme” likelihood of irreparable harm because
acceptance “may” compromise their rights is not supported by the facts. (Petition at 9.) As
explained above, the refunds will benefit putative class members, without risk of any irreparable
harm. As demonstrated by a plain reading of the refund letter and FAQs, recipients face no
decision regarding their rights under the class action. (Docket Entry 10-1; Agoglia Decl., Ex. A.)
In fact, based on the uncertainty of the justiciability of the class action, immediate receipt of a
refund will benefit putative class members by guaranteeing them payment now.
As a result, there is no harm to plaintiff or putative class members to balance against
harm to Chase. On the other hand, there is likely to be harm to Chase’s normal course of
business, were it restricted from sending such refunds. (See DeAtley Decl. ¶ 3 (stating that
Chase’s normal course of business is to provide refunds to borrowers promptly once it receives
notice of any overcharges).)
Finally, Chase’s proposed refunds further the public interest and the intent of the SCRA.
Plaintiff argues that the refunds “thrust[] before the servicemembers the decision to accept or
reject a ‘refund’ based on little or no knowledge of their rights pertaining to that refund[,]” and
therefore “run[] contrary to the Act’s purpose ‘to enable such persons to devote their entire
energy to the defense needs of the Nation.’” (Petition at 11 (citations omitted).) Plaintiff’s
concern is premised on a mischaracterization of the refunds. A borrower’s decision to accept the
- 22 -
refund does not result in a waiver of his rights in general, or under the SCRA. As a matter of
fact, one can easily take the opposite view—these refunds benefit servicemembers and their
families by providing funds as soon as possible (and intended to be by the year’s end), especially
when those funds have been broadly interpreted in borrowers’ favor to provide payment even
where the law does not require it. (See “Factual Background” (explaining that refunds go
beyond what is clearly required by the SCRA, and include interest at 7.25%).)
C. Federal Rules Require that Plaintiff Post a Bond for the Relief He Seeks.
Federal Rule of Civil Procedure 65(c) requires that an applicant for a preliminary
injunction give security “in such an amount that the court considers proper to pay the costs and
damages sustained by any party who is found to have been wrongfully enjoined.” Id. Disrupting
the refund will affect the rights of Chase borrowers by preventing them from having such monies
now, as well as potentially prejudice Chase’s defense in the present action by costing Chase
pre-judgment interest. See Silvers v. TTC Indus., Inc., 395 F. Supp. 1318 (E.D. Tenn. 1974),
aff'
d, 513 F.2d 632 (6th Cir. 1975) (court awarded defendants damages from injunction bond,
including pre-judgment interest). Based upon the scope of the refund, Chase requests that as a
condition of any preliminary injunctive relief, plaintiff be directed to post a cash bond that
encompasses both the total refund amount, as well as any pre-judgment interest that could
potentially begin amassing against Chase on the date the refunds were ready for mailing.
- 23 -
CONCLUSION
For the foregoing reasons, plaintiff’s Petition and Motion should be denied.
Dated: December 30, 2010 By: s/James Y. Becker

Steve A. Matthews (Fed. ID No. 3689)
SMatthews@hsblawfirm.com
James Y. Becker (Fed. ID No. 5733)
JBecker@hsblawfirm.com
HAYNSWORTH SINKLER BOYD, P.A.
1201 Main Street, 22nd Floor
Columbia, South Carolina 29201-3232
Telephone: 803.540.7706
Facsimile: 803.765.1243
Michael J. Agoglia (Pro Hac Pending)

MAgoglia@mofo.com
MORRISON & FOERSTER LLP
425 Market Street
San Francisco, California 94105-2482
Telephone: 415.268.7000
Facsimile: 415.268.7522
Attorneys for Defendant Chase Home Finance,

LLC
- 24 -
9:10-cv-01756-MBS Date Filed 12/30/10 Entry Number 17-1 Page 1 of 2
UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA
BEAUFORT DIVISION
JONATHON ROWLES, individually and as Civil No. 9:10-cv-01756-MBS

a class representative of others similarly Hon. Margaret B. Seymour
situated,
Plaintiff, DECLARATION OF MICHAEL J.
v. AGOGLIA IN SUPPORT OF CHASE
HOME FINANCE, LLC’S RESPONSE TO
CHASE HOME FINANCE, LLC, PETITION FOR TEMPORARY
RESTRAINING ORDER AND MOTION
Defendant. FOR PRELIMINARY INJUNCTION AND
MOTION FOR ORDER GOVERNING
PARTIES’ CONTACT WITH PUTATIVE
CLASS MEMBERS
I, Michael J. Agoglia, declare as follows:
1. I am a partner in the law firm of Morrison & Foerster LLP, counsel of record (pro
hac vice motion pending) for Defendant Chase Home Finance, LLC (“Chase”). I have personal
knowledge of the matters set forth herein, and, if called as a witness, could and would
competently testify as follows:
2. In the Summer of 2010, Chase was contacted by the United States Attorneys’
Office about Servicemembers’ Civil Relief Act (“SCRA”) concerns arising out of plaintiff’s
mortgage loan account, and was asked to provide information. In addition to providing
information to the United States Attorney’s Office, Chase engaged us to conduct immediately a
broader review of the mortgage and home equity loans Chase serviced where there was some
indication that the borrowers may have been entitled to the protections afforded under the SCRA.
That review began approximately one month before this lawsuit was filed in July, 2010.
3. Beginning on December 9, 2010, I approached plaintiff through counsel on behalf
of Chase in an attempt to resolve this matter. In the course of those discussions, I informed
counsel about the internal review and Chase’s intention to refund any discrepancies identified as
a result of that review. I provided plaintiff’s counsel with information regarding the nature and
scope of the internal review, the amounts to be refunded and the number of individuals who
would receive a refund. I also provided plaintiff’s counsel a draft of the proposed refund cover
letter, as well as Frequently Asked Questions and responses thereto. A true and correct copy of
the email communicating the Frequently Asked Questions is attached as Exhibit A to this
declaration.
4. To address concerns raised by plaintiff’s counsel, Chase agreed to revise the
cover letter to include mention of the SCRA. A true and correct copy of the revised letter was
attached to Plaintiff’s Petition, as Exhibit A. (D.E. 10-1.) Plaintiff rejected these revisions, and
instead proposed the letter attached as a true and correct copy as Exhibit B to this declaration.
I declare under penalty of perjury that the foregoing is true and correct.
Executed this 30th day of December, 2010, at Truckee, California.
/s/ Michael J. Agoglia

Michael J. Agoglia
2937293
-2-
EXHIBIT A TO DECLARATION OF MICHAEL J. AGOGLIA

DATED DECEMBER 30, 2010
Agoglia, Michael J.
From : Agoglia, Michael J.
Sent: December22, 2010 7:00 AM
To: Richard A. Harpootlian (rah@ harpootlianlaw.com)
Subject: Chase Refund
Dick,
Here are the responsesprepared orthe customerservice representativeswho will be answering anycallson the toll free
numberprovided in the refund coverletter.
1. Why did I receive a check/refund?
x Chase conducted a review of accountswhere borrower may have been entitled tothe benefitsof the
Servicemembers’CivilRelief Act(SCRA). We issued a refund in instanceswhere our review noted a
possible discrepancy. The amountrefunded alsoincluded interest.
2. DoI continue tohave SCRA protection from here forward?

x Our review included both borrowerswhowere previously protected under the SCRA,and those whoare
currently protected under the SCRA. The refund willnotaffectthe period in which your are entitled to
SCRA protection. If you have questionsregardingyour currentSCRA status,please contact
[name/department]at[phone number].
3. Whatare the taximplicationsof thisrefund?
x Chase cannotprovide taxadvice,and any taximplicationsare dependenton your particular financial

circumstances. Please speak with your personaltaxadviser regardingany taximplicationsof this
refund.
1
EXHIBIT B TO DECLARATION OF MICHAEL J. AGOGLIA

DATED DECEMBER 30, 2010
Rowles Page 1 of 1
From: Dick Harpootlian [rah@harpootlianlaw.com]

Sent: Tuesday, December 21, 2010 10:57 AM
To: Agoglia, Michael J.
Subject: FW: Rowles
As a result of an action recently filed in the South Carolina Federal Court, Chase has conducted a review of all
accounts that involve adjustments made per the Servicemember’s Civil Relief Act (SCRA). We are sending you
the enclosed check as a refund for overcharges that were discovered on your account. This refund contains
interest at 7.25% from the date of any funds at issue collected. This is a refund, and is not a settlement of any
rights you may have under the SCRA. If you have questions regarding the amount of the refund, please call
(XXX) XXX-XXXX (Chase number). If you have questions regarding your rights under the SCRA or the pending
action, please contact Plaintiff’s Counsel: Dick Harpootlian, Esquire (803) 252-4848 or William Harvey, Esquire
(843)-524-3109.
The action is entitled:

Jonathan Rowles, individually and as class representative of others similarly situated VS. Chase Home Finance
LLC, Civil Action #9:10-cv-01756-MBS
12/30/2010
Page 1
LEXSEE 2006 U.S. DIST. LEXIS 17727
OSCAR RODRIGUEZ JR. dba PACIFIC CONSTRUCTION CONCEPTS,

Plaintiff, v. AMERICAN EXPRESS, ADVANTA, BANK ONE, BANK OF
AMERICA, CITIBANK, DISCOVER, FORD CREDIT, HOME DEPOT, LOWES
COMPANIES, INC., INTERNAL REVENUE SERVICE, NEXTEL
COMMUNICATIONS, PINE MOUNTAIN LAKE, U.S. BANKCORP, VALLEY
FIRST CREDIT UNION, WELLS FARGO BANK, NBMA, and DOES 1-100,
INCLUSIVE, Defendants
CV F 03-5949 AWI LJO
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF

CALIFORNIA
2006 U.S. Dist. LEXIS 17727
April 7, 2006, Decided

April 7, 2006, Filed
SUBSEQUENT HISTORY: Summary judgment For Ford Credit, Defendant: Regina J McClendon,
granted by Rodriguez v. Am. Express, 2006 U.S. Dist. Severson and Werson, San Francisco, CA.
LEXIS 41780 (E.D. Cal., June 8, 2006)
For Home Depot, Lowes Companies Inc, GE Capital
PRIOR HISTORY: Rodriguez v. Am. Express, 2005 Financial, Inc, Defendants: Tara Leigh Jones, Sedgwick
U.S. Dist. LEXIS 27126 (E.D. Cal., Nov. 8, 2005) Detert Moran and Arnold, San Francisco, CA.
COUNSEL: [*1] Oscar Rodriguez, Jr, dba Pacific For US Bank, Defendant: Holly A Hayes, Ivanjack and
Construction Concepts Doing business as Pacific Lambirth LLP, Los Angeles, CA.
Construction Concepts, Petitioner, Pro se, Modesto, CA.
For Valley First Credit Union, Defendant: Ted M Cabral,
For American Express Travel Related Services, Inc., Law Offices of Ted M. Cabral, Modesto, CA.
Defendant: Robert Lenz Meylan, Virginia Muntean,
For Lowe's Hiw, Inc, Respondent: Tara Leigh Jones,
Greenberg Traurig, LLP, Santa Monica, CA.
Sedgwick Detert Moran and Arnold, San Francisco, CA.
For Bank One, Defendant: George G Weickhardt, Ropers
For Ford Credit, Counter Claimant: Regina J McClendon,
Majeski Kohn and Bentley, San Francisco, CA.
[*2] Severson and Werson, San Francisco, CA.
For Bank of America, Defendant: Gwen Heather
Oscar Rodriguez, Jr, Counter Defendant, Pro se,
Vecchio, Wright, Finlay & Zak, LLP, Newport Beach,
Modesto, CA.
CA.
For Citibank, Cross Claimant: Michael D. Schulman,
For Citibank, Defendant: Michael D. Schulman, Law
Law Offices of Michael D. Schulman, Woodland Hills,
Offices of Michael D. Schulman, Woodland Hills, CA.
CA.
Page 2
2006 U.S. Dist. LEXIS 17727, *2
Oscar Rodriguez, Jr, Cross Defendant, Pro se, Modesto, August 26, 2005. On September 13, 2005, the deadline
CA. for opposition to the motions for summary judgment was
continued at Plaintiff's request. On September 19, 2005,
JUDGES: Anthony W. Ishii, UNITED STATES the dates for jury trial and pretrial hearing were vacated
DISTRICT JUDGE. pending resolution of the motions for summary judgment.
Filing dates were again continued [*4] upon Plaintiff's
OPINION BY: Anthony W. Ishii request on October 24, 2005, and again on December 15,
2005. Further stay of proceedings was denied on
OPINION February 7, 2006, and a final briefing schedule was set.
Plaintiff's opposition to the motions for summary
judgment was filed on March 10, 2006. Defendants' reply
MEMORANDUM OPINION AND ORDER briefs were filed between March 16, 2006, and March 22,
GRANTING IN PART AND DENYING IN PART 2006.
DEFENDANTS' MOTIONS FOR SUMMARY
JUDGMENT UNDISPUTED MATERIAL FACTS
Document Numbers: 84, 151, 154, 157, and 158 Each of the Defendant moving parties have
submitted their statements of undisputed facts. Plaintiff's
This is an action by plaintiff Oscar Rodriguez opposition to the motions for summary judgment does
("Plaintiff") pursuant to the Soldier's and Sailor's Act not include any response to Defendants' statements of
Civil Relief Act, renamed pursuant to 2003 amendments undisputed facts, nor has he submitted anything that
the Servicemembers Civil Relief Act ("SCRA"), for could be termed a statement of disputed facts. See Local
damages and injunctive relief. Of the defendants named Rule No. 56-260. Consequently, the court takes as
in the original complaint, four remain. Those are established the factual allegations of the moving parties.
CitiBank USA, ("Citibank"), Bank of America, American
Express Travel Related Services ("American Express"), The following facts are undisputed and common to
and Valley First Credit Union ("Valley First") all Defendants:
(collectively, "Defendants"). Now before the court are
motions for summary judgment on all claims for relief Plaintiff is a member of the active United States Air
alleged by Plaintiff by each Defendant. Federal question Force Reserve who entered into active duty within the
jurisdiction exists pursuant to 28 U.S.C. § 1331 [*3] . meaning of the SCRA beginning on February 13, 2002,
Venue is proper in this court. and continuing through and including February 12, 2003.
Plaintiff is sole proprietor of a company called Pacific
PROCEDURAL HISTORY Construction Concepts, and is solely liable for the [*5]
debts of that company. Defendants are financial
The original complaint in this case was filed on July institutions who extended to Plaintiff or to Pacific
11, 2003. The complaint was amended three times to Construction Concepts either secured or unsecured credit,
specifically name additional defendants. The last and to whom Plaintiff was indebted at the time of his
amendment was filed on December 24, 2003. However, entry into active duty.
the allegations set forth in the original complaint have not
been altered in the amendments. Reference hereinafter to Plaintiff's complaint makes four claims for relief, but
the "complaint" is to the original complaint as does not consistently specify which claims are being
subsequently modified to name new plaintiffs. The asserted against which Defendants. The court construes
complaint originally named some 18 defendants. the complaint as alleging each of the four claims for relief
Between December 2003 and March 17, 2005, all against each of the Defendants. First, Plaintiff alleges
defendant parties except the above-listed Defendants Defendants failed to reduce the interest rate on debts
were voluntarily dismissed or dismissed by stipulation. outstanding to Defendants as required by the SCRA.
On August 2, 2005, defendant Bank of America filed its Plaintiff's complaint makes no specific allegations in this
motion for summary judgment. Citibank filed its motion regard; it merely states that some Defendants did lower
for summary judgment on August 11, 2005, followed by their interest rates and others did not. Plaintiff seeks
defendants Valley First, and American Express on refunds of any interest charges paid in excess of the
Page 3
2006 U.S. Dist. LEXIS 17727, *5
statutory maximum to any of the Defendants. Second, Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct.
Plaintiff alleges the Defendants submitted unfavorable 2548, 91 L. Ed. 2d 265 (1986). When the moving party
credit reports that were retaliatory or otherwise actionable has the burden of proof at trial, that party must carry its
under the SCRA. Plaintiff's complaint requests injunctive initial burden at summary judgment by presenting
relief to require each Defendant to withdraw and/or repair evidence affirmatively showing, for all essential elements
the negative credit reports. Third, Plaintiff's complaint of its case, that no reasonable jury could find for the
contends [*6] that Plaintiff is entitled, pursuant to the non-moving party. United States v. Four Parcels of Real
SCRA, to stay the enforcement of the contracts requiring Property, 941 F.2d 1428, 1438 (11th Cir.1991) (en banc);
him to repay accrued debts, and to restructure his debts Calderone v. United States, 799 F.2d 254, 259 (6th Cir.
for a period of one year. Specifically, the complaint seeks 1986); see also E.E.O.C. v. Union Independiente De La
to require each Defendant to restructure Plaintiff's Autoridad De Acueductos Y Alcantarillados De Puerto
payments so that he may make his monthly payments at Rico, 279 F.3d 49, 55 (1st Cir. 2002) [*8] (stating that if
the rate of one-tenth the current monthly payment for a "party moving for summary judgment bears the burden of
period of one year. Fourth and last, Plaintiff seeks general proof on an issue, he cannot prevail unless the evidence
damages for harms that resulted from Defendants' alleged that he provides on that issue is conclusive.")
violations of the SCRA.
If the moving party meets its initial responsibility,
Defendants each allege the undisputed material facts the burden then shifts to the opposing party to establish
of this case do not support any of the first three of that a genuine issue as to any material fact actually does
Plaintiffs claims for relief. Further, Defendants each exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
allege the SCRA does not authorize recovery for general 475 U.S. 574, 586, 106 S. Ct. 1348, 89 L. Ed. 2d 538
damages. (1986); First Nat'l Bank of Arizona v. Cities Serv. Co.,
391 U.S. 253, 288-89, 88 S. Ct. 1575, 20 L. Ed. 2d 569
Undisputed material facts that are pertinent to (1968); Ruffin v. County of Los Angeles, 607 F.2d 1276,
individual Defendants' motions for summary judgment 1280 (9th Cir. 1979). In attempting to establish the
will be set forth in the discussion that follows. existence of this factual dispute, the opposing party may
not rely upon the mere allegations or denials of its
LEGAL STANDARD pleadings, but is required to tender evidence of specific
facts in the form of affidavits, and/or admissible
Summary judgment is appropriate when it is
discovery material, in support of its contention that the
demonstrated that there exists no genuine issue as to any
dispute exists. Rule 56(e); Matsushita, 475 U.S. at 586
material fact, and that the moving party is entitled to
n.11; First Nat'l Bank, 391 U.S. at 289; Strong v. France,
judgment as a matter of law. Fed. R. Civ. P. 56(c);
474 F.2d 747, 749 (9th Cir. 1973). The opposing party
Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S. Ct.
must demonstrate that the fact in contention [*9] is
1598, 26 L. Ed. 2d 142 (1970); [*7] Poller v. Columbia
material, i.e., a fact that might affect the outcome of the
Broadcast System, 368 U.S. 464, 467, 82 S. Ct. 486, 7 L.
Ed. 2d 458 (1962); Jung v. FMC Corp., 755 F.2d 708, suit under the governing law, Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202
710 (9th Cir. 1985); Loehr v. Ventura County Community
(1986); T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors
College Dist., 743 F.2d 1310, 1313 (9th Cir. 1984).
Ass'n, 809 F.2d 626, 630 (9th Cir. 1987), and that the
dispute is genuine, i.e., the evidence is such that a
Under summary judgment practice, the
reasonable jury could return a verdict for the nonmoving
moving party always bears the initial
party, Anderson, 477 U.S. 248-49; Wool v. Tandem
responsibility of informing the district
Computers, Inc., 818 F.2d 1433, 1436 (9th Cir. 1987).
court of the basis for its motion, and
identifying those portions of "the In the endeavor to establish the existence of a factual
pleadings, depositions, answers to dispute, the opposing party need not establish a material
interrogatories, and admissions on file,
issue of fact conclusively in its favor. It is sufficient that
together with the affidavits, if any," which "the claimed factual dispute be shown to require a jury or
it believes demonstrate the absence of a judge to resolve the parties' differing versions of the truth
genuine issue of material fact. at trial." First Nat'l Bank, 391 U.S. at 290; T.W. Elec.
Page 4
2006 U.S. Dist. LEXIS 17727, *9
Serv., 809 F.2d at 631. Thus, the "purpose of summary (2) to provide for the temporary
judgment is to pierce the pleadings and to assess the suspension of judicial and administrative
proof in order to see whether there is a genuine need for proceedings and transactions that may
trial.'" Matsushita, 475 U.S. at 587 (quoting Fed. R. Civ. adversely affect the civil rights of
P. 56(e) [*10] advisory committee's note on 1963 servicemembers during their military
amendments); International Union of Bricklayers v. service.
Martin Jaska, Inc., 752 F.2d 1401, 1405 (9th Cir. 1985).
50 App. U.S.C., section 502. 1
In resolving the summary judgment motion, the court
examines the pleadings, depositions, answers to Pertinent to Plaintiff's claims for relief against
interrogatories, and admissions on file, together with the Defendants for improper [*12] interest rate charges, the
affidavits, if any. Rule 56(c); Poller, 368 U.S. at 468; SCRA provides that "[a]n obligation or liability bearing
SEC v. Seaboard Corp., 677 F.2d 1301, 1305-06 (9th interest at a rate in excess of 6 percent per year that is
Cir. 1982). The evidence of the opposing party is to be incurred by a servicemember, or the servicemember and
believed, Anderson, 477 U.S. at 255, and all reasonable the servicemember's spouse jointly, before the
inferences that may be drawn from the facts placed servicemember enters military service shall not bear
before the court must be drawn in favor of the opposing interest at a rate in excess of 6 percent per year during the
party, Matsushita, 475 U.S. at 587 (citing United States v. period of military service." § 527(a)(1). Subdivision (2)
Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993, 8 L. Ed. provides that interest in excess of 6 percent that would
2d 176 (1962)(per curiam); Abramson v. University of otherwise be incurred is to be forgiven. § 527(a)(2). To
Hawaii, 594 F.2d 202, 208 (9th Cir. 1979). Nevertheless, receive protection under this section, the servicemember
inferences are not drawn out of the air, and it is the is responsible to provide notice of his entry into active
opposing party's obligation to produce a factual predicate military service within "180 days after the date of the
from which the inference may be drawn. Richards v. servicemembers termination or release from military
Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. service." § 527(b)(1).
Cal. 1985), aff'd [*11] , 810 F.2d 898, 902 (9th Cir.
1987). 1 References to section numbers hereinafter refer
to sections of Title 50 Appendix of the United
DISCUSSION States Code, unless otherwise specified.
I. Servicemembers' Rights Under the SCRA With regard to credit reports, the SCRA provides that
application by a servicemember for relief under the [*13]
The Soldiers and Sailors Civil Relief Act of 1940 SCRA "shall not itself (without regard to other
was substantially amended in 1991 and was renamed the considerations) provide a basis for [. . .]:"
Servicemembers Civil Relief Act by the 2003
amendments. The 2003 amendments provided that the (3) An adverse report relating to the
SCRA, as amended in 1991 and as reenacted in 2003, creditworthiness of the servicemember by
applies in any case that is not final before December 19, or to a person engaged in the practice of
2003, the date of reenactment. Because this case is not assembling or evaluating consumer credit.
yet final, the 2003 amendments are applicable.
§ 518.
The SCRA is codified at 50 App. U.S.C. § 501, et
seq. The purpose of the act is: Pertinent to Plaintiff's claims for relief by reducing
and restructuring his monthly payments, a servicemember
(1) to provide for, strengthen, and to who incurs a contractual obligation to make periodic
expedite the national defense through payments against a debt is entitled to a number of
protection extended by this Act [. . .] to protections under the SCRA that have the effect of
servicemembers of the United States to modifying the contractual obligation. The specific
Enable such persons to devote their entire protections vary somewhat with the nature of the debt
energy to the defense needs of the Nation; and the type of action instituted against the
and servicemember. See, e.g., §§ 532 (preventing recision or
Page 5
2006 U.S. Dist. LEXIS 17727, *13
termination of contract before or during military service), has already been a very protracted and often-delayed
533 (providing stay to enforce an obligation on real or proceeding. Further, Plaintiff suffers little prejudice as a
personal property for such time as is equitable), 591 result of the denial of leave to amend. Although an in
(providing stay of enforcement of contracts, conditions of depth review of Plaintiffs additional allegations is not
stay being dependant on whether the contracts are for real warranted here, a cursory glance at the additional claims
estate or other). Plaintiff's complaint specifically invokes [*16] indicates the success of those claims would depend
the protections afforded by section 591, which will be on the court's finding that the actions of the Defendants,
discussed in more detail infra. which would otherwise represent lawful steps to secure
their rights under the various loan and credit agreements
[*14] II. Plaintiff's Opposition and Further with Plaintiff, are unlawful under the SCRA. As will be
Amendment of the Complaint discussed in some detail below, Plaintiff, with only one
minor exception, has failed to allege specific facts that
Plaintiff's opposition to Defendants' motions for would sustain any claim of unlawful activity under the
summary judgment does not directly address any of the SCRA on the part of any Defendant. Plaintiff's opposition
legal issues raised by Defendants' motions, nor does it has failed to allege any specific facts that, if true, would
refute the facts Defendants allege in their statements of warrant relief under any of the additional statutes Plaintiff
undisputed material fact. Rather, Plaintiff's opposition wishes to add to the complaint.
consists of some generalized assertions concerning the
rights afforded by the SCRA, and a few factual The court will therefore deny Plaintiff's presumed
allegations that have only tangential relevance to the request to further amend the complaint.
claims set forth in the complaint. Specifically, Plaintiff
alleges that Bank of America attempted to repossess his III. Plaintiff's Claims Against Individual Defendants
home and sent "agents to illegally repossess his family's
recreational boat while petitioner is on active duty." A. Valley First Credit Union
Plaintiff's opposition also alleges Bank of America,
Valley First alleges the following facts, which
American Express and Valley First issued credit reports
plaintiff has not disputed. Plaintiff and his wife jointly
containing negative credit information. Plaintiff's
financed a balance of $ 41,276.40 for the purchase of a
opposition implies that the damages he suffered were the
new automobile on or about December 29, 2001. The
direct result of these negative credit reports.
interest rate at the time of financing was 7 percent. On or
Of particular concern to the court, Plaintiff states in about March 15, 2002, Valley First was notified that
his opposition that he "hereby amends the Petition" to Plaintiff had [*17] commenced active duty. Valley First
include claims for relief under the Fair Credit Reporting reduced the interest rate on the loan to 6 percent as of that
Act, the Federal Truth in Lending [*15] Act, and date. On or about April 1, 2002, Valley First wrote to
pursuant to a number of California state codes. Rule 15(a) Plaintiff's wife offering to reduce the monthly payment to
of the Federal Rules of Civil Procedure provides that "[a] reflect the reduction in interest charge and to make the
party may amend the party's pleading once as a matter of change retroactive. Valley First also offered to extend the
course at any time before a responsive pleading is served payment period to 84 months thereby reducing the
[. . . .] Otherwise, a party may amend the party's pleading monthly payments. Plaintiff and Plaintiff's wife did not
only by leave of the court or by written consent of the respond but continued making installment payments at
adverse party and leave shall be freely given when justice the previous rate on and off for several months. Plaintiff
so requires." The court notes that each of the Defendants was sometimes delinquent in his payment and on one
in this case have filed responsive pleadings. Simply put, occasion a late fee was assessed, however that late fee
Plaintiff may not amend his complaint without leave of was promptly credited back to Plaintiff's account.
the court and that leave has not been requested or
On or about May 16, 2002, Valley First made an
granted.
negative credit report reflecting a late payment of
Even if Plaintiff had requested leave to amend in his Plaintiff's loan. However, that negative report was
opposition, that leave would not be granted at this late formally withdrawn by Valley First on October 21, 2004.
stage of the proceedings because to do so would severely Plaintiffs credit report currently does not reflect any
prejudice the Defendant parties by further delaying what negative credit information generated by Valley First. On
Page 6
2006 U.S. Dist. LEXIS 17727, *17
January 22, 2003, Valley First was notified Plaintiff was of credit reports, it prohibits the issuance of a negative
coming off active duty and that Plaintiff wished to accept credit report that is based solely on fact the
Valley First's offer of extended and lowered monthly servicemember availed him or herself of the benefits of
payments. [*18] Valley First offered to extend payments the SCRA. That is, the provisions of section 518 protect
and lower the payment amount to $ 602 per month and to the servicemember from retaliatory credit reports or
continue the 6 percent interest rate for another six negative credit reports that are not based on actual
months. Plaintiff accepted the offer. Plaintiff remains in information reflecting credit problems. Plaintiff presents
possession of the automobile, and Valley First has never no support for the proposition that credit reports that
made any effort to repossess it. truthfully reflect credit problems, such as late payments
are actionable under this provision. Here, it is not
Valley First contends it is entitled to summary disputed that Plaintiff was late on one or more monthly
judgment on each of Plaintiff's claims. As to Plaintiff's payments and that fact was reflected in a credit report.
claims with regard to interest rates, Valley First is not Because the negative credit report was based on a factual
entitled to summary judgment. Section 527 provides that occurrence that may legitimately be reported in credit
the servicemember is entitled to the reduction of interest reports as a normal matter of course, Valley First did not
rates to 6 percent as of the date of entry into active duty, offend the terms of SCRA by issuing the report. Valley
not as of the date of notice. Valley First's undisputed facts First is entitled to summary judgment with respect to
indicate the interest rate was lowered as of March 15, Plaintiff's claims of issuance of an unlawful credit report.
2002; the date Valley First received notice. The
undisputed facts also establish that Valley First offered to In his complaint, Plaintiffs seeks relief pursuant to
restructure the payments and make the payments section 590 of the SCRA, which provides for the
retroactive and that Plaintiff's wife did not respond, but reorganization of debt and the staying of [*21]
continued to make monthly payments at the same rate. enforcement of contracts for a period of time following
While Valley First may have extended the lowered active duty. Specifically, Plaintiff seeks the reduction of
interest rate longer than required by statute or in some his current monthly payments to each Defendant to
other way offered greater accommodation than the SCRA one-tenth of the pre-active duty amount for a period of
requires, the [*19] court's focus for purposes of this twelve months. As previously noted, this case is governed
motion is strictly on the issue of whether there remains a by the terms of the 2003 amendments to the SCRA. As
material issue of fact as to Plaintiff's claim that Valley amended, section 590 has been deleted and replaced by
First did not adjust the interest rate and credit excess section 591. Pertinent to Plaintiff's claims against Valley
interest paid as required by law. Pursuant to the SCRA, First, section 591 provides that:
Valley First was obliged to lower the interest rate as of
the date Plaintiff entered active duty and to credit his A servicemember may, during military
account with the interest that was paid between the date service or within 180 days of termination
of entry and the date of notification. Defendant presents of or release from military service, apply
no authority that the obligation of Valley First to to a court for relief --
retroactively apply the credit paid between February and
March of 2002 is waived by Plaintiff's non-response to (1) from any obligation or liability
Valley first's offer. Whether or not Plaintiff's wife incurred by the servicemember before the
accepted Valley First's offer to restructure the payments, servicemember's military service [P . . . . P
Valley First should have credited the account with the ]
excess interest paid. Valley First's undisputed facts do not
(2) Stay of enforcement of other
establish that such a credit was applied to the account.
contracts
The court therefore finds summary judgment is not
warranted with respect to Plaintiffs claim regarding (A) in the case of any [non-tax]
interest rates assessed by Valley First. obligation, liability, [. . .], or assessment,
the court may grant a stay of enforcement
As to Plaintiff's claim that Valley First unlawfully
--
issued a negative credit report, Valley First correctly
[*20] contends the SCRA does not prohibit the issuance
(i) during the
Page 7
2006 U.S. Dist. LEXIS 17727, *21
servicemenber's military restructuring of his payments in the complaint, but a

service; and complaint is not a motion, and a stay pursuant to section
591 (or section 590) is not self-executing. Plaintiff had
(ii) from the date of the burden to file and serve a separate motion for stay and
termination of or release failed to do so.
from military service, or
from the date of application As Defendants point out, section 591 provides a stay
if made after termination or to continue from the time of application -- here not later
release from military than 180 days after February 12, 2003 -- for a period
service. equal to the time of military service, or one year in this
case. Plaintiff has provided no authority for the
proposition that a stay pursuant to section 591 is to be
(B) Any stay under this paragraph tolled during the pendency of the action that requests the
[*22] shall be -- stay. Any such tolling would be extraordinarily unfair in
(i) for a period of time a case such as the one at bar where Plaintiff has not
equal to the period of the brought the request for stay directly to the court's
servicemember's military attention and Plaintiff has been the source of numerous
service or any part of such delays in the case. Thus, the court must conclude that
period; even if the complaint did constitute a motion for stay
within the meaning of section 591(a), the time during the
(ii) subject to payment stay would be in force under the statute ended not later
of the balance of principal than mid-August of 2004. Plaintiff's request for stay is
and accumulated interest therefore now moot, as the court is without [*24]
due and unpaid at the date authority to grant a stay that could extend beyond August
of termination or release of 2004.
from military service, or
the date of application, in The court concludes Defendants have shown there
equal periodic installments remains no genuine issue of material fact to the court's
during this extended period authority to grant Plaintiff's requested stay. Summary
at the rate if interest as may judgment in favor of Valley First, as well as the other
be prescribed for this Defendants is therefore warranted as to Plaintiff's claim
obligation, liability, tax or for stay relief pursuant to section 591.
assessment, if paid when
due, and subject to other B. Defendant Citibank
terms as may be equitable.
Citibank's unopposed statement of undisputed
material facts establishes that Plaintiff opened a business
account credit card on or about March 17, 1999. The card
was issued in the names of Pacific Construction Concepts
The provisions of this section are essentially and Oscar Rodriguez. Citibank received notice in July of
identical with the provisions of the now-deleted section 2002, that Plaintiff had been ordered to active duty. Upon
590, as far as Plaintiff's request for relief is concerned. In receipt of notice, Citibank reduced Plaintiff's interest rate
both cases, a grant of relief requires the servicemember on the business credit card account to 0.0%, and credited
apply to a court for relief "within 180 days of termination Plaintiff's account with all interest charges that had
of or release from military service." As Valley First and accrued from the date of Plaintiff's entry into active
all the other Defendants point out, Plaintiff was service to the date of notice.
terminated or released from military service as that term
is defined in the statute on February 12, 2003. This action Plaintiff's claim for relief from credit charges in
was filed on July 11, 2003, which is within the statutory excess of the amount allowed by statute is factually
time period, however Plaintiff did not file a noticed unsupported as to Citibank. Although Plaintiff did not
motion for stay. Plaintiff requested [*23] a stay and make any specific allegations [*25] with respect to
Page 8
2006 U.S. Dist. LEXIS 17727, *25
Citibank's interest charges, Citibank points out that its facts, Citibank is entitled to summary judgment on this
credit charges on Plaintiff's account were considerably issue.
lower that required by law and were applied retroactively
to Plaintiff's date of entry into active service. With respect to relief through stay or restructuring of
Consequently, Citibank has alleged facts that are the debt pursuant to section 591, Citibank contends such
sufficient to show there remains no genuine issue of relief is not authorized for the same reason as discussed
material fact as to Citibank's assertion that it did not above. That is, Citibank alleges Plaintiff failed to
charge interest in violation of the SCRA during the time properly move the court stay of enforcement of his
of Plaintiff's active military service. contractual obligation to pay his credit card balance, and
the time that any such stay could have remained in effect
Citibank also points out that, of the three Citibank has long since passed. For the reasons discussed above,
credit card accounts that are listed by Plaintiff in his the court finds Citibank is entitled to summary judgment
complaint as being among those Plaintiff seeks stay relief as to Plaintiff's request for relief pursuant to section 591.
pursuant to section 591, two of those accounts belong to
Plaintiff's wife. With respect to the reduction of interest Plaintiff's complaint also presumably requests
charges, section 527 provides that the interest rate cap of damages against Citibank arising from violations to the
6% applies to interest on debts incurred by the SCRA. The court finds that Plaintiff has failed to allege
servicemember and by the servicemember's spouse where facts sufficient to establish a triable issue of material fact
the debts were incurred jointly. Neither Plaintiff's as to any violation of the SCRA. There being no violation
complaint nor Plaintiff's opposition to Defendants' of the SCRA, Plaintiff is not entitled to any damages.
motions for summary judgment allege that Plaintiff's Summary judgment is therefore warranted [*28] as to
wife's accounts with Citibank were joint accounts during Plaintiff's claims for damages against Citibank.
the period of time relevant to this action. [*26] Further,
C. Defendant Bank of America
Citibank alleges in its statement of undisputed material
facts that Citibank voluntarily afforded Plaintiff's wife's Defendant Bank of America's statement of
accounts all the benefits to which Plaintiff's account was undisputed material facts is not contradicted by Plaintiff,
otherwise entitled under the SCRA. In view of the and the facts set forth therein are therefore accepted as
foregoing, the court concludes Citibank has alleged facts undisputed by the court. Bank of America made two
that are sufficient to show the absence of any issue of loans to Plaintiff. The first was a mortgage on Plaintiff's
material fact as to Plaintiff's allegation of unlawful home and the second was for the purchase of a boat.
interest charges as to him or his wife. Summary Bank of America alleges, and Plaintiff does not dispute,
judgement in favor of Citibank is therefore warranted on that the interest rates on both loans was lowered to 6.0%
this issue. as of February 2002, and remained at that rate through
February, 2003. Bank of America also states that, to the
As to improper credit reports, Plaintiff's complaint
extent it issued credit reports pertaining to Plaintiff's
does not specify precisely which Defendants are alleged
loans, the information submitted for the credit report was
to have submitted negative credit reports, however
factual and not submitted in retaliation or any other
Citibank makes no mention in its statement of undisputed
improper purpose. Bank of America also states it did not
material facts of having submitted any credit reports
actually institute foreclosure or repossession proceedings
during the time in question nor does Plaintiff allege any
against Plaintiff's home, nor did Bank of America
such submission with respect to Citibank in its
actually repossess Plaintiff's boat.
opposition. Citibank states in its moving papers that, if
any credit reports were issued with respect to Plaintiffs Bank of America requests summary judgment on
credit card account, the reports merely reflected each of Plaintiff's claims for relief on essentially the same
non-payment or late payments. Citibank denies that there grounds as discussed above. That is, Bank of America
were any reports that were of an improper or retaliatory denies any factual basis [*29] for Plaintiff's claims for
nature. Because Citibank [*27] has alleged fact sufficient improper interest charges or submission of credit report
to establish the absence of a issue of disputed material information for improper purposes. Bank of America also
fact with respect to Plaintiff's claim of improper contends Plaintiff is not entitled to relief pursuant to
reporting, and because Plaintiff has not contradicted those section 591 because the period of time during which
Page 9
2006 U.S. Dist. LEXIS 17727, *29
Plaintiff's obligations to make payments under his loan revolving account during 2002, but no payments have
contracts could be stayed by the court has passed. Bank been made since October 2002. The revolving account
of America also correctly observes the SCRA does not was cancelled in April 2003 and an outstanding account
provide relief where there is no actual institution of balance of $ 11,111.77 remains unpaid.
proceedings against secured property or actual
repossession. Bank of America also correctly contends American Express states only relevant factual
the SCRA does not provide for damages for emotional information was provided for any credit report, and that
distress where, as here, there was no violation of the the information was not provided for purposes of
terms of the SCRA and were there was no actual retaliation or any otherwise improper purpose. Plaintiff
possession of the boat by Bank of America at any time. has not refuted this statement.
The court finds Bank of America had set forth As above, Defendant American Express has set forth
undisputed facts that establish the lack of any issue of undisputed material facts sufficient to establish there is
material fact as to Plaintiff's claims against Bank of no genuine issue of material fact to indicate American
America. Plaintiff has failed to set forth any claims or Express violated the SCRA by improperly charging credit
arguments that would tend to raise a triable issue of above the statutory maximum amount or to indicate
material fact. Summary judgment in favor of Bank of American Express ever submitted information for credit
America as to each of Plaintiff's claims is therefore reporting purposes that was retaliatory or otherwise
warranted. improper. As also discussed above, Plaintiff's claim for
stay relief pursuant to section 591 cannot be granted
D. Defendant American Express because the time during which such a stay could be
granted has passed. Finally, [*32] because Plaintiff has
[*30] As above, the statement of undisputed not shown American Express violated the SCRA in any
material facts submitted by American Express has not way, Plaintiff has not met his burden to show there
been objected to or contradicted by Plaintiff. The facts set remains a genuine issue of material fact as to his
forth therein are therefore taken as established. entitlement to an award of damages. American Express is
therefore entitled to summary judgment as to each of
Plaintiff opened two credit card accounts with Plaintiff's claims for relief against it.
American Express. The first was a non-revolving
commercial account, the terms of which required V. Citibank's Motion for Summary Judgment on its
payment in full for the outstanding balance each month, Counterclaim
and for which no interest rate was charged. The second
credit card account was a standard revolving charge So far as the court can discern, Citibank is the only
account that charged a rate of interest monthly on the defendant in this case to have filed a counterclaim against
unpaid account balance. Upon notice of Plaintiff's entry Plaintiff. The counterclaim was filed on April 2, 2004.
into active military duty, American Express reduced the The court has examined the docket and Plaintiff's
interest rate on the revolving charge account to 6%. opposition to Defendants' motions for summary judgment
Interest that had been charged since February 2002 was in this case and cannot find any indication that Plaintiff
calculated and credited back to Plaintiff's account has answered Citibank's counterclaim or has in any way
balance. Since no interest was charged on the responded to the counterclaim or acknowledged its
non-revolving commercial account, there was no existence. Rule 55(a) of the Federal Rules of Civil
obligation to adjust interest rates on that account. Procedure provides that:
Beginning in February 2002, Plaintiff became When a party against whom a judgment
delinquent in the payment on the non-revolving for affirmative relief is sought has failed to
commercial account. After missing three months' plead or otherwise defend as provided by
payments, the account was closed and the balance owed these rules and that fact is made to appear
was sent to collections [*31] in April 2002. Plaintiff by affidavit or otherwise, the clerk shall
made several payments to the commercial account after it enter the party's default. [*33]
was closed, reducing the balance due to $ 639.85, which
remains unpaid. Plaintiff made sporadic payments on the
Page 10
2006 U.S. Dist. LEXIS 17727, *33
The court concludes Citibank's motion for summary GRANTED in its entirety.
judgment on its counterclaim is procedurally improper in
view of Plaintiff's non-response to the counterclaim. 3. Defendant Bank of America's motion for summary
Citibank may properly move for default pursuant to Rule judgment on each of Plaintiff's claims is hereby
55(a) and then move for judgment pursuant to the GRANTED in its entirety.
procedure set forth in Rule 55(b)(2).
4. Defendant American Express's motion for
ORDERS summary judgment on each of Plaintiff's claims is hereby
GRANTED in its entirety.
Pursuant to the foregoing discussion, it is hereby
ORDERED that: 5. Defendant Citibank's motion for summary
judgment on its counterclaim against Plaintiff [*34] is
1. Defendant Valley First's motion for summary hereby DENIED as procedurally improper.
judgment is hereby DENIED as to Plaintiff's claim that
Valley First charged interest rates in excess of the IT IS SO ORDERED.
maximum permitted by the SCRA during Plaintiff's
Dated: April 7, 2006
period of active military service. Valley First's motion for
summary judgment is hereby GRANTED as to all other /s/ Anthony W. Ishii
claims by Plaintiff.
UNITED STATES DISTRICT JUDGE
2. Defendant Citibank's motion for summary
judgment on each of Plaintiff's claims is hereby
Page 1
MICHAEL FOURTE, Plaintiff, COUNTRYWIDE HOME LOANS, INC., et al.,

Defendants.
Civil Action No. 07-1363
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY
September 15, 2009, Decided

September 15, 2009, Filed
NOTICE: NOT FOR PUBLICATION (collectively known as "Countrywide"). Also before the
Court is a motion to amend the complaint, brought by
COUNSEL: [*1] For MICHAEL FOURTE, Plaintiff: Fourte, and a motion to amend the answer, brought by
BARRY J. GAINEY, LEAD ATTORNEY, GAINEY & Countrywide. For the reasons that follow, Countrywide's
MCKENNA, ESQS., MIDLAND PARK, NJ. motion for summary judgment is denied, Fourte's motion
for summary judgment is granted in part and denied in
For Christopher Schroeder, Alisa Schroeder, Patrick J. part, and both the motion to amend the answer and the
Ferral, Plaintiffs: BARRY J. GAINEY, LEAD motion to amend the complaint are granted.
ATTORNEY, GAINEY & MCKENNA, ESQS.,
Paramus, NJ. Statement of Facts
For COUNTRY WIDE HOME LOANS, INC., a In January [*2] 2006, Fourte entered into an
California - based Corporation, COUNTRYWIDE agreement of sale to purchase a property located at 331
FINANCIAL CORPORATION, COUNTRYWIDE Orange Road, Montclair, New Jersey. Shortly thereafter,
BANK, Defendants: PHILIP S. ROSEN, WILLIAM T. in March 2006, Fourte obtained a purchase money
MARSHALL, JR., LEAD ATTORNEYS, ZEICHNER, mortgage in the amount of $ 544,000 and a home equity
ELLMAN & KRAUSE, LLP, ROSELAND, NJ. line of credit ("HELOC") in the amount of $ 68,000 from
Countrywide for the purchase of said property. Both
JUDGES: PETER G. SHERIDAN, U.S.D.J. loans had adjustable interest rates. The mortgage also
contained a "pay option," allowing for four different
OPINION BY: PETER G. SHERIDAN payment option methods for the mortgagor each month:
1) an option that would result in the entire loan being
OPINION paid off in 30 years; 2) an option that would result in the
entire loan being paid off in 15 years; 3) an option to pay
SHERIDAN, U.S.D.J. only the interest that accrued the month before (an
"interest only" option); and 4) a minimum payment that
Before this Court are cross-motions for summary
was less than the interest accrued the month before,
judgment filed by plaintiff, Michael Fourte ("Fourte"),
resulting in the remaining accrued interest being added to
and defendants, Countrywide Home Loans, Inc.,
the principal loan amount (a "minimum payment"
Countrywide Financial Corp., and Countrywide Bank
option). While payment amounts for the first three
Page 2
2009 U.S. Dist. LEXIS 84146, *2
options are recalculated monthly based upon the interest time period Countrywide claims. Fourte's initial orders
rate and principal amount left of the balance of the loan, were modified, and his term of service ended on March
the minimum payment option is recalculated annually in 14, 2007. On March 30, 2007, Fourte received another set
April, as it is not based [*3] on the interest amount due. of orders to report for duty from [*5] April 20, 2007
At the time, the interest rate on both loans was in excess through May 8, 2007. Subsequently, on June 14, 2007,
of 6%. Fourte received a third set of orders to report for duty
from June 18, 2007 through June 18, 2009. Despite these
On or about September 18, 2006, Fourte, a reservist orders being in place, and despite a letter sent to Fourte
in the United States Navy, received military orders to by Countrywide on July 26, 2007, lowering the minimum
report for duty on October 14, 2006. The next day, Fourte payment on Fourte's mortgage, as of December 31, 2008,
contacted Countrywide to notify them of same and to Countrywide indicates that Fourte is $ 20,493.90 past due
apply for relief under the Servicemembers' Civil Relief on his mortgage payments, including an alleged missed
Act ("SCRA") with regard to the interest rate on his payment from April 2007 in the amount of $ 2,997.48.
mortgage and HELOC, which at that point was in excess
of 6%. Copies of the orders were forwarded to 3 Countrywide claims that because both the cap
Countrywide on or about October 5, 2006. 1 Countrywide and the credits were in place during the November
originally asserted that it made an interest rate reduction 2006-October 2007 period, some measure of
pursuant to the SCRA 2 to Fourte's accounts effective double-crediting of Fourte's mortgage account
October 1, 2006, although it now acknowledges it never took place. However, Countrywide admits that it
applied the reduction to the HELOC loan and did not "inadvertently recalculated" the interest on
apply it to the home mortgage until October 24, 2006. Fourte's mortgage from 6% to 8.275% for the
Fourte maintains that Countrywide failed to keep the months of April, June, July, August, September,
interest rate at this lower level for much of the time that and October 2007. Thus, it would appear that no
he was on active duty. In any case, the minimum payment double-crediting took place during those months.
amount on the mortgage did not change on October 1,
2006, despite the interest cap. On November 13, 2006, On March 25, 2007, in the midst of these issues,
Fourte paid the HELOC off in full. Fourte, pro se, filed a complaint against Countrywide
with an Order to Show Cause, alleging violations of the
1 It is unclear from the briefs if this is [*4] the SCRA, and fraud with malice. After retaining counsel,
date of receipt by Countrywide, or the date on Fourte filed [*6] an amended putative class action
which Fourte forwarded the documents. Fourte complaint on June 20, 2007, alleging violations of the
indicates the date was much earlier, on September SCRA, fraud with malice, violations of the New Jersey
25, 2006. However, according to Countrywide, it Consumer Fraud Act ("CFA"), fraudulent
did not have the orders until October. misrepresentation, negligence, and a request for
2 Pursuant to Section 527(a)(1) of the SCRA that injunctive relief against Countrywide. Countrywide filed
was in effect at the time Fourte received his its answer to the amended complaint on September 19,
orders, "[a]n obligation or liability bearing interest 2007.
at a rate in excess of 6 percent per year that is
incurred by a service member . . . before the Discussion
service member enters military service shall not
There are several matters currently before the Court.
bear interest at a rate in excess of 6 percent per
They are:
year during the period of military service."
1. Countrywide has moved for summary judgment
Countrywide claims that, in addition to the interest
on all counts against it on the grounds that Plaintiff did
rate cap, it applied "Military Credits" to Fourte's
not suffer any actual losses and thus lacks standing;
mortgage from November 2006 through October 2007.
These credits worked to forgive the interest in excess of 2. Plaintiff seeks summary judgment on
6% that would normally have accrued on Fourte's Countrywide's liability and for injunctive relief;
mortgage had the interest cap not been in place. 3 Fourte
states that these credits were not applied for much of the 3. Countrywide seeks leave to amend its answer and
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2009 U.S. Dist. LEXIS 84146, *6
to assert new counterclaims; and; not conjectural or hypothetical." Lujan v. Defenders of

Wildlife, 504 U.S. 555, 560, 112 S. Ct. 2130, 119 L. Ed.
4. Plaintiff has moved to amend the complaint and 2d 351 (1992) (internal quotations omitted). Next,
add three new named plaintiffs. These matters are plaintiff must demonstrate "a causal connection between
addressed below. the injury and the conduct complained of." Id. Finally,
plaintiff must show that it is "likely, as opposed to merely
I. Motions for Summary Judgment - Stand of Review speculative, that the injury will be redressed by a
favorable decision." Id. at 560-61 (internal quotation
Under Fed. R. Civ. P. 56(c), summary judgment is
marks omitted). Countrywide claims that Plaintiff is
appropriate when the moving party demonstrates that
incapable of doing this for two reasons: First,
there is no genuine issue of material fact, and that the
Countrywide claims Plaintiff actually received a windfall,
evidence establishes the movant's entitlement to
not an injury, due to the double credits and the failure to
judgment as a matter of law. Celotex Corp. v. Catrett,
pay the April 2007 mortgage payment. Second,
477 U.S. 317, 322-23, 106 S. Ct. 2548, 91 L. Ed. 2d 265
Countrywide avers Plaintiff was not entitled [*9] to the
(1986). [*7] A genuine issue of fact exists only if a
benefits of the SCRA in the first place. Both of these
reasonable jury could return a verdict for the non-movant,
arguments fail.
and it is material only if it may affect the outcome of the
suit based upon substantive law. Anderson v. Liberty Countrywide's first argument is flawed because the
Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. issue of standing is not resolved by a determination of the
2d 202 (1986). "In considering a motion for summary actual facts of the underlying dispute because such facts
judgment, a district court may not make credibility are resolved by the trier of fact. Rather, the proper inquiry
determinations or engage in any weighing of the is whether the plaintiff has alleged sufficient facts to
evidence; instead, the non-moving party's evidence 'is to show an injury in fact, a causal connection between the
be believed and all justifiable inferences are to be drawn injury allegedly suffered and the conduct complained of,
in his favor.'" Marino v. Indus. Crating Co., 358 F.3d and that the injury will be redressed by the relief sought.
241, 247 (3d Cir. 2004) (quoting Anderson, 477 U.S. at Here, plaintiff has done so. He has proffered voluminous
255). evidence that Countrywide's actions have caused him
financial injury, and said injury is within this Court's
After the movant has satisfied this burden, the
power to redress. For this Court to grant Countrywide's
non-moving party must establish that a genuine issue of
motion, it would be required to ignore the traditional
material fact exists. Jersey Cent. Power & Light Co. v.
standard for summary judgment and to construe the
Lacey Twp., 772 F.2d 1103, 1109 (3d Cir. 1985).
disputed facts in the moving party's favor.
"[U]nsupported allegations . . . and pleadings are
insufficient to repel summary judgment." Schoch v. First Countrywide's second argument is based on the text
Fid. Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990). of § 527(c) of the SCRA, which provides:
Rather, the non-moving party must "set forth specific
facts showing that there is a genuine issue for trial." Fed. CREDITOR PROTECTION -- A court
R. Civ. P. 56(e). Moreover, only disputes over facts that may grant a creditor relief from the
might affect the outcome of the lawsuit [*8] under limitations of this section if, in the opinion
governing law will preclude the entry of summary of the court, the ability of the
judgment. Anderson, 477 U.S. at 247-48. servicemember to pay interest upon the
obligation or [*10] liability at a rate in
A. Countrywide's Motion for Summary Judgment as to
excess of 6 percent per year is not
Standing
materially affected by reason of the
Countrywide moves for summary judgment based servicemember's military service.
upon Plaintiff's lack of standing. In order to meet the
judicial prerequisites for standing, a plaintiff must first Countrywide argues that Plaintiff was not entitled to
prove that he or she has "suffered an injury in fact -- an SCRA credit because Plaintiff's income actually
invasion of a legally protected interest which is (a) increased after he began active duty, and thus was never
concrete and particularized, and (b) actual or imminent, injured by Countrywide's actions. This argument ignores
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2009 U.S. Dist. LEXIS 84146, *10
the text of the statute, which only asks whether the "The preemption doctrine is rooted in Article VI of
servicemember's ability to pay the mortgage is materially the United States Constitution, which states that the laws
affected by being called to active duty, not whether the of the United States 'shall be the supreme Law of the
servicemember's income increased. Here, Plaintiff, a Land; . . . any Thing in the Constitution or Laws of any
recent law school graduate and holder of multiple real State to the Contrary notwithstanding.'" Holk v. Snapple
estate licenses, has introduced credible evidence that his Bev. Corp., 575 F.3d 329, 334 (3d Cir. 2009) (quoting
potential income as a private citizen exceeded his actual U.S. Const. art. VI, cl. 2). There are three forms of
income as a servicemember. Moreover, Plaintiff has also preemption that may be applied to state law pursuant to
proffered evidence that he faced substantial expenses and the Supremacy Clause: express, field, and implied
financial hardships as a result of being called to active conflict preemption. Id. (citing Hillsborough County, Fla.
duty. Countrywide disputes Plaintiff's calculations, but v. Automated Med. Labs., Inc., 471 U.S. 707, 713, 105 S.
this only shows that there are still significant questions of Ct. 2371, 85 L. Ed. 2d 714 (1985)). Congressional intent
fact on this point that cannot be properly resolved in a is the guiding force behind the district court's preemption
summary judgment motion. inquiry. Id.; see also Altria Group, Inc. v. Good, 129 S.
Ct. 538, 543, 172 L. Ed. 2d 398 (2008); Medtronic, Inc. v.
For these reasons, Countrywide's motion for Lohr, 518 U.S. 470, 485, 116 S. Ct. 2240, 135 L. Ed. 2d
summary judgment for lack of standing is denied. [*11] 4 700 (1996).
4 In opposition to Countrywide's motion, In conducting this inquiry, however, the court must
Plaintiff also argued that the affidavit which begin "by applying a presumption against preemption."
formed almost the entire basis of Countrywide's Holk, 575 F. 3d at 334 [*13] (citing Cipollone v. Liggett
version of the facts should be completely Group, Inc., 505 U.S. 504, 516, 112 S. Ct. 2608, 120 L.
disregarded under the Sham Affidavit Doctrine. Ed. 2d 407 (1992)). This presumption requires courts to
The argument is that the affidavit is so riddled "start with the assumption that the historic police powers
with inaccuracies and contradictory statements, of the States were not to be superseded by the Federal
that the Court should dismiss it as not credible. Act unless that was the clear and manifest purpose of
Because Countrywide's motion for summary Congress." Rice v. Santa Fe Elevator Corp., 331 U.S.
judgment fails on other grounds, there is no 218, 230, 67 S. Ct. 1146, 91 L. Ed. 1447 (1947). Because
reason for the Court to make such a determination of this presumption against preemption, examples of
here. federal laws that are "so powerful as to displace entirely
any state cause of action" are rare. Franchise Tax Bd. v.
B. Countrywide's Motion for Summary Judgment on Constr. Laborers Vacation Trust, 463 U.S. 1, 23, 103 S.
counts related to the CFA Ct. 2841, 77 L. Ed. 2d 420 (1983). If a statute does not
expressly indicate that it preempts state law, then courts
Countrywide has also moved for summary judgment
can determine whether it does so implicitly by
as to all portions of the complaint dealing with the New
Jersey Consumer Fraud Act (N.J.S.A. § 56:8-1, et seq.). considering four factors: 1) the aim and intent of
Congress; 2) the pervasiveness of the federal regulatory
As a preliminary matter, one must first consider whether
scheme; 3) whether the subject matter of the regulation
§ 527 of the SCRA preempts any recovery for the Plaintiff
demands federal exclusivity in order to achieve
under the CFA, a state law. In October of 2008, § 527
uniformity; 4) whether the state law creates an obstacle to
was amended to include subsection (f) which states:
the workings of the federal law. Pac. Gfas & Elec. Co. v.
"[t]he penalties provided under subsection (e) are in
State Energy Res. Conservation & Dev. Comm'n, 461
addition to and do not preclude any other remedy
U.S. 190, 203-223, 103 S. Ct. 1713, 75 L. Ed. 2d 752
available under law to a person claiming relief under this
(1983). An application of these factors to § 527 of the
section, including any award for consequential or
SCRA demonstrates that Congress likely did [*14] not
punitive damages." Were [*12] this subsection in force
intend to preempt state laws like CFA.
at the time that Plaintiff alleges Countrywide mishandled
his loan, there would be no doubt as to his ability to Congress's intent in passing the SCRA can be
recover under the CFA. The question here is whether the gleaned from § 502, which declares that the Act's purpose
SCRA preempted state law before the addition of is "to provide for, strengthen, and expedite the national
subsection (f).
Page 5
2009 U.S. Dist. LEXIS 84146, *14
defense through protection extended by this Act to connection with the sale or advertisement
servicemembers of the United States to enable such of any merchandise or real estate . . . .
persons to devote their entire energy to the defense needs
of the Nation." 50 U.S.C. App. § 502(1). This stated N.J.S.A. 56:8-2. Countrywide argues that its provision of
purpose does not limit servicemembers to only federal credit to Plaintiff is not covered by this Act because the
remedies. Nor is the Act so pervasive as to crowd out term "sale" is defined as an "attempt directly or indirectly
laws like the CFA, which only occurs when a federal to sell, rent or distribute." N.J.S.A. 56:8-1. This argument,
statute regulates nearly all aspects of an industry or overlooks the New Jersey Supreme Court's holding that
practice. See, e.g., Hines v. Davidowitz, 312 U.S. 52, 68, the CFA does apply to provisions of credit made by
61 S. Ct. 399, 85 L. Ed. 581 (1941) (holding that a financial companies. See Lemelledo v. Beneficial Mgmt.
comprehensive federal statute governing the registration Corp. of Am., 150 N.J. 255, 696 A. 2d 546 (1997). "Given
of immigrant aliens preempts state laws on the same the broad language of the CFA, we conclude that its
subject). Here, the SCRA is clearly not meant to provide terms apply to the offering, sale, or provision of
a complete consumer lending regulatory system, but consumer credit." Id. at 551. Courts have since allowed
rather to address specific practices affecting only one suits to proceed under the CFA when the alleged fraud
class of citizen. The third and fourth factors are equally dealt specifically with the terms of a home mortgage. See
inapplicable to the relationship between the SCRA and Associates Home Equity Services, Inc. v. Troup, 343 N.J.
CFA. The amount of damages available to victims of Super. 254, 277, 778 A.2d 529 (App. Div. 2001); Busse v.
consumer fraud does not "demand" uniformity in the Homebank, LLC, No. 2: 07-cv-03495, 2009 U.S. Dist.
[*15] way that the Court has said that other practices do. LEXIS 13315, 2009 WL 424278, 7 (D.N.J. Feb. 18,
See Cloverleaf Butter Co. v. Patterson, 315 U.S. 148, 2009). Thus, Countrywide's first argument is without
168, 62 S. Ct. 491, 86 L. Ed. 754 (1942) (holding that merit.
regulations regarding the interstate shipment of butter
requires national uniformity); Pennsylvania R. Co. v. Countrywide also argues that Plaintiff cannot show
Public Service Commission of Com. of Pennsylvania, 250 an ascertainable loss, as required [*17] by the statute.
U.S. 566, 568, 40 S. Ct. 36, 63 L. Ed. 1142 (1919) "To state a claim under the CFA, a private plaintiff must
(holding that standards of railcar construction require allege each of three elements: (1) unlawful conduct by
uniformity). Finally, the CFA's provision of treble the defendants; (2) an ascertainable loss on the part of the
damages to victims of consumer fraud does not impede plaintiff; and (3) a causal relationship between the
the workings of the SCRA; if anything it provides further defendants' unlawful conduct and the plaintiffs'
incentive for mortgage companies to comply with the ascertainable loss." Dabush v. Mercedes-Benz USA, LLC,
federal statute's dictates. 378 N.J. Super. 105, 114, 874 A.2d 1110 (App. Div.
2005) cert. denied, 185 N.J. 265, 883 A.2d 1062
Countrywide makes two arguments in support of this (citations omitted). The term "ascertainable" means that
motion: first, that the CFA does not apply to the failure to the plaintiff must proffer evidence that is "quantifiable
adjust interest rates on real estate loans, and second, that and measurable," and not "hypothetical or illusory."
Plaintiff cannot make use of the CFA because he has not Thiedemann v. Mercedes-Benz USA, LLC, 183 N.J. 234,
suffered an "ascertainable loss" as required by the Act. 248, 872 A.2d 783 (2005). Summary judgment should
Both of these arguments fail. only be entered in favor of the defendant in a CFA claim
when "a plaintiff fails to produce evidence from which a
In relevant part, the CFA proscribes: finder of fact could find or infer that a plaintiff suffered a
quantifiable or otherwise measurable loss as a result of
The act, use or employment by any the alleged CFA unlawful practice." Id. at 238. Here,
person of any unconscionable commercial Plaintiff has introduced more than sufficient evidence to
practice, deception, fraud, false pretense, meet this burden. Plaintiff has provided specific details
false promise, misrepresentation, or the and calculations of the damages caused by Countrywide's
knowing, concealment, suppression, or actions. These allegations are supported by voluminous
omission of any material fact with [*16] documentary evidence [*18] from which a finder of fact
intent that others rely upon such could infer that Plaintiff suffered a "quantifiable or
concealment, suppression or omission, in otherwise measurable loss."
Page 6
2009 U.S. Dist. LEXIS 84146, *18
Thus, Countrywide's motion for summary judgment Countrywide did not have enough time to process
as to the CFA claims is denied. Plaintiff's request before the loan was paid off and
estimates that the benefits Plaintiff did not receive were
C. Plaintiff's Motion for Summary Judgment worth about $ 652. Because Countrywide has essentially
admitted liability, summary judgment is appropriate with
Plaintiff moves for summary judgment on liability respect to the HELOC loan, and is therefore granted.
only and for injunctive relief. Fourte argues that by
Countrywide's own admission it did not apply the Summary judgment is not appropriate, however, for
benefits of § 516 and § 527 of the SCRA properly to his Countrywide's handling of the home mortgage because
mortgage and HELOC loans and thus violated the statute. there are significant disputes of material fact. Plaintiff's
Section 527(a) of the SCRA requires a lender to reduce argument is that § 516 was violated when Countrywide
the interest rate on a servicemember's mortgage to six failed to apply the SCRA benefits on September 18,
percent "during the period of military service," 5 2006, and that § 527 was violated when Countrywide
beginning on "the date on which the servicemember is charged higher than six percent interest for several
called to military service." During that time, the lender is months while he was on active duty. Countrywide,
required to forgive any interest that would otherwise be however, has submitted affidavits and documentary
due in excess of six percent. It also states that "[t]he evidence showing that Plaintiff received credits to his
amount of any periodic payment due from a account that more than make up for any initial delay or
servicemember . . . shall be reduced by the amount of the inadvertent temporary increases to the interest rate.
interest forgiven . . . ." Section 516 applies to reservists, Plaintiff has challenged the veracity of this evidence and
like the Plaintiff, who are called to active duty, and it submitted numerous documents of his own, but it is not
applies the rate reduction requirement of § 527 to the the role of the Court to make credibility [*21]
time period between when a reservist servicemember determinations at the summary judgement stage. If all
[*19] receives his military orders and the date that he inferences are drawn in Countrywide's favor, there are
actually reports for active duty. Plaintiff seeks summary still questions of fact that must be resolved. Accordingly,
judgment on the issue of Countrywide's liability under summary judgment is denied with regard to
the SCRA and CFA on each loan and on the injunctive Countrywide's handling of the home mortgage because
relief he seeks. there are significant disputes of material facts.
5 Section 527 of the SCRA was amended in 2008 Fourte's motion for permanent injunctive relief is
to include a one year period of interest likewise denied. A permanent injunction should only be
reduction/forgiveness after the end of the granted after a plaintiff has succeeded on the merits of the
servicemember's period of active duty. claims at issue. See CIBA-GEIGY Corp. v. Bolar
Pharmaceutical Co., Inc., 747 F.2d 844, 850 (3d Cir.
With reference to the HELOC loan, both parties 1984) ("In deciding whether a permanent injunction
agree that Countrywide violated § 516 and § 527 of the should be issued, the court must determine if the plaintiff
SCRA. Section 516 required Countrywide to reduce the has actually succeeded on the merits . . ."); ACLU of N.J.
interest rate on the HELOC loan to six percent effective v. Black Horse Pike Reg'l Bd. of Educ., 84 F.3d 1471,
on September 18, 2006, the date on which Plaintiff 1477 nn. 2-3 (3d Cir. 1996) (moving party must show
received his military orders directing him to report for actual success on the merits prior to the issuance of a
active duty. Countrywide's representative, Jamie Taylor, permanent injunction). In addition to success on the
originally submitted an affidavit claiming that merits, a plaintiff seeking a permanent injunction must
Countrywide applied the benefits of the SCRA on also show that there is a real and immediate threat that he
October 1, an assertion that Plaintiff challenged in will again suffer the same kind of injury. See Brown v.
multiple briefs accompanied by documentary evidence. Fauver, 819 F.2d 395, 400 (3d Cir. 1987). Taken
Taylor corrected this initial statement during her together, these [*22] requirements foreclose any
deposition and later in an affidavit submitted on March 4,
possibility for issuing injunctive relief. Although
2009. In both instances, Countrywide admitted that it Countrywide has admitted liability on its handling of the
never applied the benefits of SCRA to the HELOC loan HELOC loan, that loan is now paid off and there is no
before [*20] Plaintiff paid it off in its entirety on risk that Plaintiff will suffer further harm. Furthermore,
November 13, 2006. Taylor claims that this is because
Page 7
2009 U.S. Dist. LEXIS 84146, *22
because Plaintiff has failed to show that he is entitled to original Answer to seek leave to amend [*24] will not be
summary judgment on the issue of Countrywide's deemed presumptively unreasonable.
handling of his home mortgage, he has not yet succeeded
on the merits and a permanent injunction would be Furthermore, delay alone does not justify denying a
premature. 6 motion to amend. Cureton v. Nat'l Collegiate Athletic
Ass'n, 252 F.3d 267, 273 (3d Cir. 2001). Rather, only
6 The Court is advised that Countrywide is now when the delay places an unwarranted burden on the
owned by Bank of America. Fourte has yet to court or on the opposing party is a denial on the basis of
prove that Bank of America, a non-party to this delay appropriate. Adams v. Gould, Inc., 739 F.2d 858,
action, improperly handles its obligations 868 (3d Cir. 1984). Moreover, unless the delay at issue
pursuant to the SCRA. will prejudice the non-moving party, a movant does not
need to establish a compelling reasons for its delay. Heyl
II. Motions to Amend - Standard of Review & Patterson Int'l, Inc. v. F. D. Rich Housing of Virgin
Islands, Inc., 663 F.2d 419, 426 (3d Cir. 1981). In
Fed. R. Civ. P. 15(a) allows a party to amend its gauging prejudice, the Court should consider "whether an
pleading by leave of court when justice so requires. amendment would 'require the opponent to expend
Leave to amend pleadings is to be freely given. Fed. R. significant additional resources to conduct discovery and
Civ. P. 15(a)(2); see also Foman v. Davis, 371 U.S. 178, prepare for trial' or 'significantly delay the resolution of
182, 83 S. Ct. 227, 9 L. Ed. 2d 222 (1962). The decision the dispute.'" Ruotolo v. City of New York, 514 F.3d 184,
to grant leave to amend rests within the discretion of the 192 (2d Cir. 2008) (citations omitted).
court. Foman, 371 U.S. at 182. Pursuant to Foman, leave
to amend may be denied on the basis of: (1) undue delay; Here, Fourte argues that granting Countrywide's
(2) bad faith or dilatory motive; (3) undue prejudice to motion would prejudice him because he had no notice of
the opposing [*23] party; and (4) futility of amendment. the proposed counterclaims when he was deposed by
Id. "Only when these factors suggest that amendment Countrywide and because he would have served
would be 'unjust' should the court deny leave." Arthur v. additional Interrogatories and Requests [*25] for
Maersk, Inc., 434 F.3d 196, 203 (3d Cir. 2006) (internal Production of Documents had he known of the
citations omitted). counterclaims. Both of these issues, however, could
easily be addressed by allowing further limited discovery.
A. Countrywide's Motion to Amend the Answer While the financial burdens of additional discovery might
create some burden, here Plaintiff has also submitted a
Countrywide seeks leave to amend its Answer to
motion to amend that will probably require further
include an additional affirmative defense, counterclaims
discovery. It would be disingenuous for Plaintiff to
alleging unjust enrichment, breach of contract, and
contend that additional discovery would prejudice him.
negligent misrepresentation, and a counterclaim for
For this reason, granting Countrywide's motion to amend
declaratory relief. Here, Fourte opposes Countrywide's
Motion with respect to the counterclaims on the basis of would not create an undue burden on the Plaintiff.
undue delay and futility of the proposed amendment. As a final point on the issue of undue delay, it is
These arguments will be addressed in turn. worth noting that the decision of whether to grant leave to
amend is always within the discretion of the Court.
i. Plaintiff contends that the amendments would
Although the four Forman factors listed above represent
cause undue delay
the most common grounds for denying a motion to
There is no presumptive period in which a motion for amend, courts have also considered their own
leave to amend is deemed "timely" or in which delay responsibility to conserve scarce judicial resources.
becomes "undue." In Arthur v. Maersk, the Third Circuit
found that a period of eleven months from Beyond prejudice to the parties, a trial
commencement of an action to the filing of a motion to court can deny amendment when
amend was not, on its face, so excessive as to be concerned with the costs that protracted
presumptively unreasonable. Id. at 205. Likewise, litigation places on the courts. Delay
Defendants' act of waiting one year from the filing of the impairs the "public interest in the prompt
Page 8
2009 U.S. Dist. LEXIS 84146, *25
resolution of legal disputes. The interests defendant's] proposed affirmative defenses and construe
of justice go beyond the interests of the those allegations in the light most favorable to [the
parties to the particular [*26] suit; . . . defendant]. Miller v. Beneficial Mgmt. Corp., 844 F.
delay in resolving a suit may harm other Supp. 990, 1001 [*28] (quoting Fireman's Fund Ins. Co.
litigants by making them wait longer in v. Krohn, No. 91 Civ. 3546, 1993 U.S. Dist. LEXIS
the court queue." 10772, 1993 WL 299268, at *4 (S.D.N.Y. Aug. 3, 1993)).
Fort Howard Paper Co. v. Standard Havens, Inc., 901 Here, Countrywide has pled sufficient facts to satisfy
F.2d 1373, 1380 (7th Cir. 1990) (citations omitted); see the liberal standards detailed above. Plaintiff argues that
also Perrian v. O'Grady, 958 F.2d 192, 195 (7th Cir. Countrywide's counterclaims are all based on the
1992) ("The burden to the judicial system can justify a factually inaccurate allegation that Plaintiff received a
denial of a motion to amend even if the amendment windfall because of double crediting and other errors
would cause no hardship at all to the opposing party."). made by Countrywide. Plaintiff also argues that the
This interest in judicial economy is used to deny a motion affidavit upon which Countrywide relies has so many
to amend when a trial is imminent. See Jackson v. inaccuracies that it should be disregarded under the sham
Columbus Dodge, Inc., 676 F.2d 120 (5th Cir. 1982) affidavit doctrine. 7 For purposes of this motion,
(holding that the trial court did not abuse its discretion however, it is not the role of the Court to determine the
when it refused to approve an amendment filed the day factual accuracy of Countrywide's allegations. As the
before the pretrial conference); Campbell v. Ingersoll question is only whether Countrywide has alleged
Milling Mach. Co., 893 F.2d 925, 927 (7th Cir. 1990) sufficient facts to survive a motion to dismiss, the Court
(holding that a district judge is entitled to deny a motion must assume that Countrywide's factual allegations are
to amend made three weeks before the start of a trial). true and only ask whether those facts are sufficient to
Here, no pre-trial conference has occurred, no trial date support a claim for relief. For this reason, Countrywide's
has been set, and the parties have not yet finished proposed counterclaims are not futile, and its motion
discovery. Although this litigation has now been ongoing should not be denied on these grounds.
for more than two years, it does not present the kind of
7 Use of the sham affidavit doctrine is usually
situation that has often led courts to deny [*27] a motion
confined to motions for summary judgment. In its
to amend in the interest of judicial economy.
classic form, the doctrine [*29] does not allow
ii. Plaintiff contends that the amendments would be the submission of affidavits that contradict prior
futile. deposition testimony as a way to defeat motions
for summary judgment. See Baer v. Chase, 392
Plaintiff's second argument is that Countrywide's F.3d 609, 623-24 (3d Cir. 2004). Here,
proposed amendments would be futile. An amendment is Countrywide is not using an affidavit to avoid a
considered futile if it advances a claim or defense that is ruling for summary judgment, but rather as a basis
legally insufficient on its face. Courts may properly deny for a motion to amend. The difference is that in
a motion to amend when the amendment would not the latter, the Court must assume that the facts
withstand a motion to dismiss. Massarsky v. Gen. Motors stated by Countrywide are true, which does not
Corp., 706 F.2d 111, 125 (3d Cir. 1983). Under Fed. R. allow an inquiry into the veracity of the affidavit.
Civ. P. 12(b)(6), dismissal should not be ordered unless
the alleged facts, taken as true, fail to state a claim. Because there are no legitimate reasons to deny
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950, 173 L. Ed. 2d Countrywide's motion to amend, Countrywide's motion
868 (2009). The question is whether the claimant can to amend its answer is granted.
prove any set of facts consistent with his or her
B. Plaintiff's Motion to Amend the Complaint
allegations that will entitle him or her to relief, not
whether that person will ultimately prevail. Semerenko v. Plaintiff wishes to amend the complaint in three
Cendant Corp., 223 F.3d 165, 173 (3d Cir. 2000), cert. ways. First, he seeks to clarify his existing allegations by
denied, Forbes v. Semerenko, 531 U.S. 1149, 121 S. Ct. adding new information that was revealed during
1091, 148 L. Ed. 2d 965 (2001). Under this standard, "the discovery. Second, he seeks to add new parties
court must accept as true the allegations in [the (Christopher Schroeder, Alisa Schroeder, and Patrick
Page 9
2009 U.S. Dist. LEXIS 84146, *29
Ferral) as plaintiffs. Third, he seeks leave to file evidence that the prospective plaintiffs were entitled to
supplemental pleadings which address transactions and the SCRA and that they were injured by Countrywide's
events that occurred after the complaint was filed but are failure to properly apply the statute.
relevant to the issues and allegations of the case. The
standard in determining whether this motion should For these reasons, Fourte's motion to amend the
[*30] be granted is detailed above. Briefly stated, the complaint is granted.
Court should grant leave to amend except in cases of: (1)
Conclusion
undue delay; (2) bad faith or dilatory motive; (3) undue
prejudice to the opposing party; and (4) futility of For the foregoing reasons, [*31] Countrywide's
amendment. See Foman, 371 U.S. at 182. motion for summary judgment is denied in its entirety;
Fourte's motion for summary judgment as to
The only aspect of Plaintiff's motion that
Countrywide's liability on the HELOC loan is granted,
Countrywide has challenged is the attempt to add new
and the remainder of Fourte's motion for summary
parties. Countrywide's argument is that the amendment
judgment is denied; and both the motion to amend the
would be futile because the prospective parties lack
answer and the motion to amend the complaint are
standing. Countrywide contends that none of the
granted.
prospective plaintiffs actually incurred the damages
alleged and in fact received financial windfall from /s/ Peter G. Sheridan
Countrywide and the Schroeders were not entitled to the
benefits of the SCRA in the first place. This argument PETER G. SHERIDAN, U.S.D.J.
ignores the standard for futility of amendment presented
above. The question at this stage is only whether the September 15, 2009
moving party has alleged sufficient facts that, if true,
would support a claim for relief. There is sufficient
Page 1
LEXSEE 246 FRD 260
THE KAY COMPANY, LLC, DIANA KILE GREEN, Individually and attorney-in-
fact for the Heirs of Luther E. Kile, THE H.A. ROBSON TRUST, by EDWIN N.
VINSON, Beneficiary & Trustee of the H.A. Robson Trust, DAVID H.
DAUGHERTY, Trustee of the H.A. Robson Trust, and MARY BLAIR V.
CHAPUISAT, Beneficiary of the H.A. Robson Trust, H. DOTSON CATHER, Trus-
tee of Diana Goff Cather Trusts, CLYDE EMERSON MCCLUNG, Individually,
and JAMES E. HAMRIC III, Individually, Plaintiffs, v. EQUITABLE PRODUC-
TION COMPANY, a qualified Pennsylvania corporation; EQUITABLE RE-
SOURCES, INC., a Pennsylvania corporation, Defendants.
CIVIL ACTION NO. 2:06-cv-0612
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF

WEST VIRGINIA, CHARLESTON DIVISION
246 F.R.D. 260; 2007 U.S. Dist. LEXIS 70328

SUBSEQUENT HISTORY: Class certification granted For Equitable Production Company, a qualified Pennsyl-
by, Objection overruled by Kay Co. v. Equitable Prod. vania corporation, Defendant: Natalie Chetlin Moritz, W.
Co., 2010 U.S. Dist. LEXIS 41892 (S.D. W. Va., Apr. 28, Thomas McGough, Jr., LEAD ATTORNEYS, REED
2010) SMITH, Pittsburgh, PA; Richard L. Gottlieb, LEAD
ATTORNEY, Joseph Anthony Tarantelli, LEWIS
GLASSER CASEY & ROLLINS, Charleston, [**2]
COUNSEL: [**1] For The Kay Company, LLC, Diana WV.
Kile Green, Individually and attorney-in-fact for the
Heirs of, Luther E. Kile, The H.A. Robson Trust, by, For Equitable Resources, Inc., a Pennsylvania corpora-
Edwin N. Vinson, Beneficiary & Trustee of The H.A. tion, Defendant: Joseph Anthony Tarantelli, Richard L.
Robson Trust, David H. Daugherty, Trustee of The H.A. Gottlieb, LEAD ATTORNEYS, LEWIS GLASSER
Robson Trust, and, Mary Blair V. Chapuisat, Beneficiary CASEY & ROLLINS, Charleston, WV.
of The H.A. Robson Trust, H. Dotson Cather, Trustee of
Diana Goff Cather Trusts, Clyde Emerson McClung, For Statoil North America, Inc., a Delaware corporation,
Individually, and, James E. Hamric, III, Individually, Statoil Energy, Inc., a Virginia corporation, Statoil En-
The H.A. Robinson Trust by, Plaintiffs: George M. Scott, ergy Holdings, Inc., a Delaware corporation; and, Defen-
LEAD ATTORNEY, CAREY SCOTT & DOUGLAS, dants: Alexander Macia, William M. Herlihy, LEAD
Spencer, WV; Mark R. Staun, Scott S. Segal, LEAD ATTORNEYS, SPILMAN THOMAS & BATTLE,
ATTORNEYS, THE SEGAL LAW FIRM, Charleston, Charleston, WV; Carter Lee Williams, Matthew O.
WV; Marvin W. Masters, LEAD ATTORNEY, THE Gatewood, LEAD ATTORNEYS, SUTHERLAND AS-
MASTERS LAW FIRM, Charleston, WV; Michael W. BILL & BRENNAN, Washington, DC; James A. Orr,
Carey, Robert E. Douglas, LEAD ATTORNEYS, LEAD ATTORNEY, SUTHERLAND ASBILL &
CAREY SCOTT & DOUGLAS, Charleston, WV; Tho- BRENNAN, Atlanta, GA; John H. Tinney, LEAD AT-
mas W. Pettit, LEAD ATTORNEY, Barboursville, WV; TORNEY, THE TINNEY LAW FIRM, Charleston, WV.
David J. Romano, LAW OFFICES OF DAVID J.
ROMANO, Clarksburg, WV. For Ashland Oil, Inc., a Kentucky corporation, Defen-
dant: J. David Bolen, LEAD ATTORNEY, HUDDLE-
Page 2
246 F.R.D. 260, *; 2007 U.S. Dist. LEXIS 70328, **
STON BOLEN BEATTY PORTER & COPEN, Hunt- A. Previous Agreements and Orders
ington, WV; Marc E. Williams, LEAD ATTORNEY,
The plaintiffs allege that the defendants' communi-
HUDDLESTON BOLEN, Huntington, WV.
cation with putative class members is "contrary to the
spirit and purpose" [*262] of the agreement contained
JUDGES: Joseph R. Goodwin, Chief Judge.
in the Report of Parties' Planning Meeting [Docket 12].
The plaintiffs quote the following passages from that
OPINION BY: Joseph R. Goodwin
agreement:
OPINION
The parties agree, however, that disclo-
sures will be in stages conducive to ex-
[*261] MEMORANDUM OPINION AND ORDER
ploring early resolution, as explained be-
Pending before the court is the plaintiffs' Motion for low.
Order Limiting Defendants' Discussions with Putative
...
Class Members [Docket 92] and the defendants' Motion
to Strike Plaintiffs' Request for Discovery and Eviden- The parties believe that it would be
tiary [**3] Hearing [Docket 100]. The plaintiffs filed beneficial for discovery to be conducted
their complaint on June 13, 2006 in the Circuit Court of in phases, particularly since the parties
Roane County alleging that the defendants breached con- wish to explore early resolution. There-
tractual and fiduciary duties to the plaintiffs, knowingly fore, [**5] the parties request that they be
and intentionally deprived the plaintiffs of rents and roy- given an opportunity to do a focused dis-
alties to which they are entitled, and violated W. Va. closure and discovery.
Code § 46A-6-101 [Docket 3]. The defendants timely
filed their notice of removal on August 7, 2006 [Docket ...
3]. For the following reasons the plaintiffs' motion is This action is suitable for designation
DENIED. as a complex case requiring special case
management procedures and additional
I. Background pretrial conferences. This case includes
thousands of potential class members,
The plaintiffs are lessors of oil and gas rights owned
by the defendants. Although the plaintiffs filed this ac- royalty owners with approximately 4,500
tion as a proposed class action, the class has not been leases, and spans a period of several years
of data and documents which reflect the
certified. The plaintiffs allege that the defendants have
contacted putative class members in an attempt to re- royalty and bases of calculating royalty
solve damage claims in this case (Pls.' Mot. Order Limit- for all royalty owners.
ing Defs.' Discussions 3). The defendants admit discuss-
ing settlement with a few large, sophisticated landown-
I find no support for the plaintiffs' argument in the
ers, and allege that these landowners have access to legal
counsel for purposes of the settlement negotiations quoted passages or in any order issued in this case.
(Defs.' Br. Opp'n 11). The plaintiffs ask this court to or- Therefore, I FIND that the defendants are not prohibited
from communicating with the putative class members
der the defendants to cease discussions with the putative
class members [Docket [**4] 92]. Additionally, the based on any previous order issued in this case.
plaintiffs ask that they be permitted to engage in discov-
B. Authority Under Rule 23 to Limit Communications
ery concerning the content of the communications and
request an evidentiary hearing [Docket 98]. The plaintiffs next allege that the court should exer-
In support of this motion, plaintiffs allege that the cise its power under Rule 23 of the Federal Rules of Civil
Procedure to limit the defendants' communication with
defendants' actions are contrary to the spirit and purpose
of previous agreements and orders issued in this case, putative class members. In Gulf Oil Co. v. Bernard, 452
that the court should exercise its power under Rule 23 of U.S. 89, 101 S. Ct. 2193, 68 L. Ed. 2d 693 (1981), the
Supreme Court addressed the Rule 23 power of a district
the Federal Rule of Civil Procedure to limit communica-
tion between the defendant and putative class members, court to "limit communications from named plaintiffs
and that this communication violates Rule 4.2 of the and their counsel to prospective class members" prior
[**6] to class certification. Id. at 91. The Supreme Court
Rules of Professional Conduct.
recognized that class actions present opportunities for
abuse. Id. at 100. Therefore, "a district court has both the
II. Discussion
duty and the broad authority to exercise control over a
Page 3
246 F.R.D. 260, *; 2007 U.S. Dist. LEXIS 70328, **
class action and to enter appropriate orders governing the mours and Co., 196 F.R.D. 545 (S.D. Iowa 2000), "[t]he
conduct of counsel and parties." Id. only evidence in the record concerning Defendants'
communications with putative class members [was] that
In Gulf Oil, the Supreme Court rejected a total ban
Defendants [were] the employers of the putative class
on communication between the plaintiff and putative
members, and wish[ed] to offer them . . . a settlement
class members, and held that an order that limits a party's
offer and have other related communications with them."
ability to communicate with putative class members
Id. at 548. The Court held that this evidence alone did
"should be based on a clear record and specific findings
"not support a requirement that all such communications
that reflect a weighing of the need for a limitation and
must first be approved [**9] by either the Court or
the potential interference with the rights of the parties."
Plaintiffs." 1 Id.
Id. at 101. The order should be based on "a specific re-
cord showing by the moving party of the particular
1 The court, in Bublitz, issued an order requiring
abuses by which it is threatened." Id. at 102 (quoting
that the defendant's communication with putative
Coles v. Marsh, 560 F.2d 186, 189 (3d Cir. 1977)). The
class members be in writing and filed with the
result should be "a carefully drawn order that limits
court and plaintiffs because it recognized the risk
speech as little as possible, consistent with the rights of
of coercion present when the putative plaintiffs
the parties under the circumstances," and the court must
are at-will employees of the defendant. 196
give "explicit consideration to the narrowest possible
F.R.D. at 548-49. The court also recognized that
relief which would protect the respective parties." [**7]
"[p]laintiffs have no right to participate in the
Id. The Court rejected the limitation the district court
presentation of the settlement proposal and re-
placed on the plaintiffs' communication with putative
lated communications, nor do they have the right
class members because the district court "identified noth-
to analyze it before hand." Id. at 549.
ing in [the communication] that it thought was improper
and . . . gave no reasons" that supported the limitation. The plaintiffs must show not only that communica-
Id. at 103. Courts have applied this standard to commu- tion has occurred, but that the particular form of commu-
nication between the defendant and putative class mem- nication is abusive. The plaintiffs do not have to show
bers. See, e.g., Keystone Tobacco Co. v. U.S. Tobacco that actual harm has occurred, but there must be some
Co., 238 F. Supp. 2d 151, 154 (D.D.C. 2002). basis on which the court can rely to limit the communi-
cation. Burrell v. Crown Cent. Petroleum, Inc., 176
Applying this standard requires that I first determine
F.R.D. 239, 244 (E.D. Tex. 1997). "Abusive practices
whether a limitation on the defendants' communication
that have been considered sufficient to warrant a protec-
with putative class members is necessary. In order for the
tive order include communications that coerce prospec-
moving party to show that a limitation is necessary,
tive class members into excluding themselves from the
"[t]wo kinds of proof are required. First, the movant
litigation; communications that contain false, misleading
must show that a particular form of communication has
or confusing statements; and communications [**10]
occurred or is threatened to occur. Second, the movant
that undermine cooperation with or confidence in class
must show that the particular form of communication at
counsel." Cox Nuclear Med., 214 F.R.D. at 698 (internal
issue is abusive in that it threatens the proper functioning
citations omitted).
of the litigation." Cox Nuclear Med. v. Gold Cup Coffee
Servs., Inc., 214 F.R.D. 696, 697-98 (S.D. Ala. 2003) The plaintiffs fail to provide a specific record that
(internal citations omitted). Both parties [*263] agree justifies the need to limit the defendants' discussions with
that the defendants have initiated communication with putative class members. There are no allegations that the
[**8] putative class members in an attempt to settle dam- defendants have distributed false, misleading, or confus-
age claims in this case. Courts have recognized that, gen- ing statements. The plaintiffs have not directed the court
erally, a defendant may discuss settlement offers with to any evidence which indicates that the defendants have
putative class members prior to class certification. Chris- attempted to coerce putative members into excluding
tensen v. Kiewit-Murdock Inv. Corp., 815 F.2d 206, 213 themselves from the class or undermined cooperation
(2d Cir. 1987) ("prior to class certification, defendants with or confidence in the plaintiffs' counsel. Claims that
do not violate Rule 23(e) by negotiating settlements with the defendant merely communicated a settlement offer to
potential members of a class"); see also Cox Nuclear a putative plaintiff will not provide the basis for a limita-
Med., 214 F.R.D. at 699; Jenifer v. Del. Solid Waste tion. Absent any specific evidence that the communica-
Auth., 1999 U.S. Dist. LEXIS 2542, 1999 WL 117762, 3 tion is abusive, a limitation is inappropriate.
(D. Del. 1999). Therefore, a limiting order should not be
Because the plaintiffs have failed to provide a spe-
granted based solely on allegations that the defendant
cific record showing the particular abuses by which it is
wishes to communicate a settlement offer to the putative
threatened, it is unnecessary to reach the question of how
plaintiffs. For example, in Bublitz v. E.I. duPont de Ne-
Page 4
246 F.R.D. 260, *; 2007 U.S. Dist. LEXIS 70328, **
carefully drawn an order must be to protect the defen- tionship with the lawyer nor a legal sub-
dants' speech. stitute for consent, there is no representa-
tion. [**13] Therefore, putative class
C. West Virginia Rule of Professional Conduct 4.2 members are not represented parties for
purposes of the Model Rules prior to cer-
The plaintiffs additionally allege that the communi-
tification of the class and the expiration of
cation between [**11] the defendants and putative class
the opt-out period.
members violates the Rules of Professional Conduct.
Attorneys appearing before this court must "conduct
themselves in accordance with the Rules of Professional
Id. Additionally, this opinion reflects the majority rule
Conduct and the Standards of Professional Conduct
that prior to class certification there is no lawyer-client
promulgated and adopted by the Supreme Court of Ap-
relationship between the plaintiff's counsel and the puta-
peals of West Virginia, and the Model Rules of Profes-
tive class members. Debra Lyn Bassett, Pre-Certification
sional Conduct published by the American Bar Associa-
Communication Ethics in Class Actions, 36 GA. L. REV.
tion." L. R. Civ. P. 83.7 (2006). Rule 4.2 is substantially
353, 353-54 (2002); see also, RESTATEMENT (THIRD)
the same in the West Virginia Rules of Professional
OF THE LAW GOVERNING LAWYERS § 99 cmt. 1
Conduct and the ABA Model Rules of Professional Con-
(2000) ("prior to certification, only those class members
duct. Rule 4.2 directs that "a lawyer shall not communi-
with whom the lawyer maintains a personal client-lawyer
cate about the subject of the representation with a party
relationship are clients"). Therefore, I FIND that the de-
the lawyer knows to be represented by another lawyer
fendants' communication with putative class members
[*264] in the matter, unless the lawyer has the consent
does not violate Rule 4.2 of the West Virginia Rules of
of the other lawyer or is authorized by law to do so." W.
Professional Conduct.
VA. RULES OF PROF'L CONDUCT R. 4.2. The plain-
tiffs allege that the defendants have violated this rule by
D. Plaintiffs' Request for Discovery and an Evidentiary
communicating with putative class members.
Hearing
The West Virginia Supreme Court of Appeals has
The plaintiffs additionally, request that the court
not addressed the question of whether communication
grant discovery concerning the subject matter and con-
with putative class members violates Rule 4.2. The West
tent of the communications between the defendants and
Virginia Supreme Court has, however, previously cited
the putative class members and an evidentiary hearing
with approval [**12] the Formal Opinions of the Ameri-
subsequent to discovery [Docket 98]. The plaintiffs al-
can Bar Association Committee on Ethics and Profes-
lege that they cannot [**14] know whether the defen-
sional Responsibility when it faced an unresolved ques-
dants' contacts are abusive unless they are made aware of
tion about Rule 4.2. State ex rel. Charleston Area Med.
the subject matter and content of those communications.
Ctr. v. Zakaib, 190 W. Va. 186, 437 S.E.2d 759, 763-64
Just as the defendants are free to communicate with puta-
(W. Va. 1993). The ABA Committee on Ethics and Pro-
tive class members, so may the plaintiffs engage putative
fessional Responsibility recently issued a Formal Opin-
class members in communications about the defendants'
ion on this precise topic. ABA Comm. on Ethics and
contacts absent a discovery order issued by this court.
Prof'l Responsibility, Formal Op. 07-445 (2007). That
Should the plaintiffs discover that defendants' communi-
opinion concluded that communication between the de-
cation with putative class members was abusive, a limit-
fendant and putative class members does not violate
ing order may become necessary. Therefore, the plain-
Model Rule 4.2. Id. The opinion stated:
tiffs' request for discovery and an evidentiary hearing is
DENIED.
Before the class has been certified by a
court, the lawyer for plaintiff will repre- The defendants' ask this court to strike the plaintiffs'
sent one or more persons with whom a request for discovery and an evidentiary hearing and to
client-lawyer relationship clearly has been strike the plaintiffs' reply brief [Docket 100]. In light of
established. As to persons who are poten- this opinion and order, those motions are DENIED as
tial members of a class if it is certified, moot.
however, no client-lawyer relationship has
Therefore, the court FINDS that an order limiting
been established. A client-lawyer relation-
communication between the defendant and putative class
ship with a potential member of the class
members is not necessary. Accordingly, the plaintiff's
does not begin until the class has been
Motion for Order Limiting Defendant's Discussions with
certified and the time for opting out by a
Putative Class Members is DENIED.
potential member of the class has expired.
If the client has neither a consensual rela-
Page 5
246 F.R.D. 260, *; 2007 U.S. Dist. LEXIS 70328, **
The Clerk is directed to forward copies of this writ- ENTER: September 21, 2007
ten opinion and order to all counsel of record and to pub-
Joseph R. Goodwin, Chief Judge
lish the decision on the [**15] court's website at
www.wvsd.uscourts.gov.
Page 1
LEROY WEBB, ANNA WEBB, HERMAN DOUGLAS and CYNTHIA DOUGLAS,

Individually and on behalf of all others similarly situated, Plaintiffs v. DISCOVER
PROPERTY & CASUALTY INSURANCE COMPANY, THE TRAVELERS IN-
DEMNITY COMPANY, THE TRAVELERS INDEMNITY COMPANY OF
AMERICA, THE TRAVELERS INDEMNITY COMPANY OF CONNECTICUT,
TRAVELERS PROPERTY AND CASUALTY COMPANY OF AMERICA, THE
CHARTER OAK FIRE INSURANCE COMPANY and THE PHOENIX INSUR-
ANCE COMPANY, Defendants
No. 3:08cv1607
UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF

PENNSYLVANIA
November 24, 2008, Filed
SUBSEQUENT HISTORY: Motion denied by Webb v.

Discover Prop. & Cas. Ins. Co., 2009 U.S. Dist. LEXIS OPINION BY: JAMES M. MUNLEY
86609 (M.D. Pa., Sept. 22, 2009)
OPINION
COUNSEL: [*1] For Leroy Webb, Anna Webb, Her-
man Douglas, Cynthia Douglas, Plaintiffs: Donald H. MEMORANDUM
Yablon, LEAD ATTORNEY, Philadelphia, PA; Girard J
Before the court for disposition is the plaintiffs mo-
Mecadon, LEAD ATTORNEY, Pittston, PA; Scott B.
tion to remand this action to the Court of Common Pleas
Cooper, LEAD ATTORNEY, Schmidt, Ronca &
of Luzerne County. The matter has been fully briefed
Kramer, P.C., Harrisburg, PA.
and is ripe for disposition.
For The Travelers Indemnity Company, The Travelers
Background
Indemnity Company of America, Travelers Indemnity
Company of Connecticut, Travelers Property and Casu- Plaintiffs [*2] Leroy Webb and Herman Douglas
alty Company of America, The Charter Oak Fire Insur- were injured in separate automobile accidents while op-
ance Company; St. Paul Travelers Companies, Inc., The erating vehicles in the scope of their employment. (Doc.
St. Paul Travelers Companies, Inc., The Travelers Com- 1, Compl. P P 7, 24). The vehicles driven by Webb and
panies, Inc., Standard Fire Insurance Company of Con- Douglas were both insured by Defendant Discover Prop-
necticut, Travelers Insurance Group Holdings, Inc., erty & Casualty Insurance Company (hereinafter "Dis-
Travelers Property Casualty Corp., The Phoenix Insur- cover"). (Id. at P P 10, 25). The policies, which were
ance Co., Defendants: Bradley J. Vance, Bryan M. Fer- issued to the plaintiffs' respective employers, were writ-
ris, LEAD ATTORNEYS, Thomas J. Wehner, Reger & ten so as not to provide underinsured motorist bodily
Rizzo & Darnall, LLP Philadelphia, PA; Robert J. Fos- injury coverage. (Id. at P P 11, 26). Plaintiffs allege that
ter, LEAD ATTORNEY, Reger & Rizzo, LLP, King of the forms used by Discover that provide for the rejection
Prussia, PA. of underinsured motorist coverage are invalid and void
under section 1731 of the Pennsylvania Motor Vehicle
JUDGES: JAMES M. MUNLEY, United States District Financial Responsibility Law, 75 PENN. CONS. STAT.
Judge. § 1731(c.1). (Id. at P 14, 27).
Page 2
2008 U.S. Dist. LEXIS 95431, *
Accordingly, plaintiffs brought the instant three- cise our jurisdiction not to hear it as it involves
count complaint. The counts are as follows: 1) declara- merely issues of state law. We are unconvinced
tory judgment; 2) insurance bad faith; and 3) appoint- by the argument. We agree generally that we
ment of special master. have discretion to refuse to hear declaratory
judgment actions. This case, however, includes
Plaintiffs seek to bring the case as a class action.
more than a declaratory judgment. It also in-
They propose to represent the following class:
cludes a cause of action for bad faith and it seeks
the appointment of a master to oversee the pro-
All persons injured in motor vehicle ac-
posed class members' arbitration. We do not have
cidents while covered (including but not
discretion with regard to hearing such claims if
limited to derivative claims) under a pol-
the other jurisdictional requisites are met. It
icy issued by any of the Defendants [*3]
would be inappropriate to remand a portion of the
and were not provided uninsured or un-
case and keep other portions. Such piecemeal
derinsured motorist benefits even though
litigation is disfavored.
the form used to reject any such coverage
is void and not valid. Diversity [*5] jurisdiction is appropriate where the
parties are citizens of different states and the amount in
controversy is in excess of $ 75,000.00. 28 U.S.C. §
(Doc. 1, Compl. P 31). 1332(a). Instantly, no dispute exists regarding whether
the parties are citizens of different states. We must de-
Plaintiffs filed the instant action in the Luzerne
termine therefore, if the defendants have established that
County Court of Common Pleas on August 5, 2008. On
the amount in controversy exceeds $ 75,000.00.
August 27, 2008, the defendants removed the case to this
court. Plaintiffs moved to remand the case to state court In their second brief the plaintiffs dispute whether
on September 4, 2008, and the plaintiffs filed a motion to defendants have established that the amount in contro-
limit defendants contact with the proposed class. 1 We versy is greater than $ 75,000. 3 Defendants argue that
will address each motion in turn. because plaintiff seeks punitive damages, the amount in
controversy threshold has been met. After a careful re-
1 Defendants have also filed a motion to dismiss view, we agree with the defendants.
the complaint. We will not address the motion to
dismiss the complaint in this memorandum. 3 Interestingly, in their motion to remand plain-
tiffs admit that "[t]he amount in controversy most
Discussion likely exceeds $ 75,000" and "this court has ju-
risdiction pursuant to the diversity statute" (Doc.
A. Plaintiffs' motion to remand 5, Motion To Remand P P 10-11). Thus, in their
initial brief they did not dispute the amount in
Defendants removed this case pursuant to 28 U.S.C.
controversy and solely raised the issue of this
§ 1441(a), which gives a defendant the right to remove
court's discretion to hear a declaratory judgment
"'any civil action brought in a State court of which the
action discussed in footnote 1.
district courts of the United States have original jurisdic-
tion.'" 28 U.S.C. § 1441(a). Thus, "[t]he propriety of We must remand this action unless it appears "to a
removal . . . depends on whether the case originally legal certainty that [plaintiffs'] claim is really for [*6]
could have been filed in federal court." City of Chicago less than the jurisdictional amount[.]" Huber v. Taylor,
v. Int'l College of Surgeons, 522 U.S. 156, 162, 118 S. 532 F.3d 237, 244 (3d Cir. 2008) (quoting St. Paul Mer-
Ct. 523, 139 L. Ed. 2d 525 (1997). The notice of removal cury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288-
asserts that this court has [*4] jurisdiction under the di- 89, 58 S. Ct. 586, 82 L. Ed. 845 (1938)). Where an ap-
versity statute. 28 U.S.C. § 1332. Hence, we must deter- propriate claim for punitive damages is made, the
mine whether the prerequisites for diversity jurisdiction amount in controversy requirement is generally met "be-
are met. As a general matter, "the party asserting diver- cause it cannot be stated to a legal certainty that the value
sity jurisdiction bears the burden of proof." McCann v. of the plaintiff's claim is below the statutory minimum."
George Newman Irrevocable Trust, 458 F.3d 281, 286 Id. at 244 (internal citation, emphasis and quotation
(3d Cir. 2006). Here, therefore, the defendant, who seeks marks omitted).
to exercise the court's jurisdiction through the removal
In the instant case, the plaintiffs have made a claim
statute, bears the burden of proof. 2
for punitive damages under their bad faith cause of ac-
tion. Under Pennsylvania's Automobile Insurance Bad
2 Plaintiff initially argues that this case is a de-
Faith Statute, punitive damages may be awarded. 42 PA.
claratory judgment and we should merely exer-
Page 3
2008 U.S. Dist. LEXIS 95431, *
CONS. STAT. § 8371. Accordingly, as an appropriate Further, as the Third Circuit noted, our authority is
claim for punitive damages has been made, we cannot derived from Rule 23(d)(1) of the Federal Rules of Civil
find to a legal certainty that the value of plaintiffs' claims Procedure, which provides:
are below the statutory threshold and therefore remand is
"In conducting [a class action], the court may issues
inappropriate. Plaintiff's motion to remand will be de-
orders that: . . . (C) impose conditions on the representa-
nied. 4
tive parties or on intervenors . . . [and] (E) deal with
similar procedural matters."
4 Defendants also argue that removal is appro-
priate under 28 U.S.C. § 1332(d)(2), which gen- "However, a remedy should be restricted to the
erally provides for removal of class actions where minimum necessary to correct the effects of improper
at least one defendant and one plaintiff are citi- conduct under Rule 23." Id. at 311 (citing Coles v.
zens of different states and [*7] the amount in Marsh, 560 F.2d 186, 189 (3d Cir. 1977)).
controversy exceeds five million dollars. We
need not address this issue as we have found that "[A]n order limiting communications between par-
jurisdiction is appropriate under 28 U.S.C. § ties and potential class members should be based [*9] on
a clear record and specific findings that reflect a weigh-
1332(a).
ing of the need for a limitation and the potential interfer-
ence with the rights of the parties[.]" Gulf Oil Co., 452
B. Plaintiffs' motion to limit defendants' contact with
U.S. at 100-101 quoted in In re Community Bank of
putative class members
Northern Virginia, 418 F.3d at 310.
The second motion we have before us is the Plain-
tiffs' motion to limit the defendants' contact with putative Instantly, before the court there is no "clear record"
of abuse -- or even allegations of abuse -- from which we
class members. Plaintiffs seek, prior to class certifica-
tion, "to restrict defendants' contact with prospective can make specific findings with regard to the defendants'
class members without prior notification to plaintiffs' contact with the putative class members. See In re
School Asbestos Litigation, 842 F.2d 671, 681 (3d Cir.
counsel, and prior court approval, in order to prevent
defendants from (1) initiating any unfairly prejudicial, 1988)(indicating that an evidentiary hearing is appropri-
one-sided communications with these individuals that ate to meet the requirements of Gulf Oil). Therefore, the
plaintiffs' motion will be denied.
may misrepresent the status and/or purpose of this litiga-
tion, (2) contacting these individuals without first provid-
ing notice to plaintiffs' counsel and giving them the op- Conclusion
portunity to respond accordingly, and (3) attempting to For the reasons set forth above, the plaintiffs' motion
unilaterally settle potential claims in the absence of full for remand and the plaintiffs' motion to limit the defen-
and fail disclosure about this litigation." (Doc. 11, Mo- dants' contact with putative class members will both be
tion To Limit Contact, P 7). denied. An appropriate order follows.
Defendants' position is that merely citing a potential
for abuse is insufficient to justify limiting defendants' ORDER
contact with the putative class [*8] members. According AND NOW, to wit, this 24th day of November
to the defendants, for such a motion to be granted there 2008, the plaintiffs' motion to remand (Doc. 5) is hereby
must first be a clear record with specific findings that DENIED. Plaintiffs' motion to limit the defendants' con-
support the need for limiting communications. After a tact with putative class members (Doc. 11) is hereby
careful review, we agree. DENIED without prejudice to the plaintiffs filing an-
other such motion in the future [*10] if circumstances
The Third Circuit Court of Appeals has explained
that as a district court, we have "both the duty and broad warrant such a filing.
authority to exercise control over a class action and to BY THE COURT:
enter appropriate orders governing the conduct of coun-
sel and parties." In re Community Bank of Northern Vir- /s/ James M. Munley
ginia, 418 F.3d 277, 310 (3d Cir. 2005)(quoting Gulf Oil
Co. v. Bernard, 452 U.S. 89, 100, 101 S. Ct. 2193, 68 L. JUDGE JAMES M. MUNLEY
Ed. 2d 693 (1981). United States District Court
Page 1
LEXSEE 174 F.R.D. 695
DEAN RANKIN, et al., Plaintiffs, vs. BOARD OF EDUCATION OF THE

WICHITA PUBLIC SCHOOLS, U.S.D. 259, et al., Defendants.
Case No. 97-1196-JTM
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS
174 F.R.D. 695; 1997 U.S. Dist. LEXIS 13700
July 25, 1997, Decided

July 25, 1997, Filed
communications with plaintiffs or prospective members

COUNSEL: [**1] For DEAN RANKIN, OPAL of the class for which plaintiffs seek certification (Doc.
RANKIN, plaintiffs: Douglas W. Phelps, K A P S, 19). Plaintiffs also seek a curative notice at defendants'
Manhattan, KS. expense. This court issued a temporary order on June 24,
1997, which was modified on June 26, 1997. The matter
For DEAN RANKIN, OPAL RANKIN, plaintiffs: Robert has been fully briefed by the parties and the court is ready
D. Ochs, Sherry L. Collier-Diel, K A P S, Topeka, KS. to rule.
For UNIFIED SCHOOL DISTRICT NO. 259, An order limiting communications between parties
SEDGWICK COUNTY, KANSAS, LARRY R and potential class members should be based [**2] on a
VAUGHN, CLARADINE JOHNSON, JANET clear record and specific findings that reflect a weighing
DANITSCHEK, CAROL RUPE, CHIP GRAMKE, of the need for a limitation and the potential interference
MARTY MARSHALL, JEROME WILLIAMS, with the rights of the parties. Such a weighing should
MARSHALL JONES, THERESA JOHNSON, TERRY result in a carefully drawn order that limits speech as
K BACHUS, JERRY STEWART, MARK HARTKE, little as possible, consistent with the rights of the parties
RON OLSON, JEAN SCHODORF, SONJA SEEMANN, under the circumstances. Courts should not limit
defendants: David M. Rapp, Hinkle, Eberhart & Elkouri, communication without a specific record showing by the
Wichita, KS. moving party of the particular abuses by which it is
threatened. If an order is entered which limits
JUDGES: JOHN THOMAS REID, United States communications, explicit consideration should be given
Magistrate Judge. to the narrowest possible relief which would protect the
[*697] respective parties. Gulf Oil Co. V. Bernard, 452
OPINION BY: JOHN THOMAS REID U.S. 89, 101-102, 101 S. Ct. 2193, 2200-2201, 68 L. Ed.
2d 693 (1981). A district court has looked at the
OPINION following four factors in determining whether good cause
has been shown to limit communications: (1) the severity
[*696] MEMORANDUM AND ORDER
and likelihood of the perceived harm, (2) the precision
On June 10, 1997, plaintiffs filed a motion for an with which the order is drawn, (3) the availability of a
order to prohibit defendants from engaging in less onerous alternative, and (4) the duration of the order.
Hampton Hardware, Inc. v. Cotter & Co., Inc., 156
Page 2
174 F.R.D. 695, *697; 1997 U.S. Dist. LEXIS 13700, **2
F.R.D. 630, 633 (N.D. Tex. 1994). certified. The court finds absolutely no merit in plaintiffs'
contention that any curative notice is required because of
Plaintiff have brought this action seeking class action the May 27, 1997 letter.
[**3] certification on behalf of all U.S.D. 259 students
identified as speech-language impaired. The lawsuit was The only possible concern with unlimited
filed on May 5, 1997. On May 27, 1997, U.S.D. 259 communication would be if the defendants sought to
wrote a letter to the parents of selected pupils regarding directly lobby the prospective members of the class
speech-language services. The letter acknowledges that action concerning their possible participation in the class
certain speech-language services were not provided in action, should it be certified. There is no legitimate
1996-97 for their children. The letter further states that purpose for defendants' to communicate with prospective
compensatory speech-language services would be members of the class concerning the lawsuit; such
provided to make up for the missed services, possibly in communications could invite abuse. Hampton
the summer of 1997. The parents are asked to contact Hardware, Inc., 156 F.R.D. at 634. Therefore, the court
U.S.D. 259 if they wish to have such services provided. will continue the provision of the June 26, 1997 order
The letter further apologizes for the fact that the services that, as to any prospective members of the class action for
were not provided. The letter concludes by stating that which plaintiffs seek certification, defendants and their
the services will be provided during the 1997-98 school counsel shall not make any contact or communication
year. with them which expressly refers to this litigation. This
provision permits defendants to continue to communicate
As to the presently named plaintiffs, contact with with prospective class members so long as the
them should generally be made through plaintiffs' communication is made in the ordinary course of
counsel. However, the court believes an exception to this providing educational services to the students, even
ethical requirement should apply when necessary for the though such communications may necessarily implicate
maintenance of services which are presently being the subject matter of the [**6] litigation. The only
provided to the plaintiffs, or in which the plaintiffs are limitation on the defendants is that such communications
currently enrolled. It would be very difficult, if not not expressly refer to the litigation.
impossible, for the defendants to continue to [**4]
provide services if all communications had to be made IT IS THEREFORE ORDERED that defendants' and
through counsel. Therefore, the court will maintain the their counsel shall not have any contact or
conditions of the order as set forth on June 26, 1997 as to communication with plaintiffs concerning the subject
the named plaintiffs through the course of this litigation. matter of this litigation, except through plaintiffs'
counsel. This order [*698] does not prevent defendants
The next issue concerns prospective members of the and their agents or employees from contacting or
class action for which plaintiffs seek certification. The communicating with the plaintiffs when necessary for the
court finds that plaintiffs have failed to make the maintenance of services which are presently being
necessary showing that the May 27, 1997 letter is an provided to the plaintiffs, or in which the plaintiffs are
abusive action that requires protection from the court. As currently enrolled.
defendants acknowledge, they became aware of the
problem when the lawsuit was filed and sent out the letter IT IS FURTHER ORDERED that, as to any
to all parents of applicable children that the necessary prospective members of the class action for which
services would be provided. The court does not find that plaintiffs seek certification, defendants and their counsel
a letter of apology and an offer to provide needed shall not make any contact or communication with them
services, even if they are a subject of this litigation, is an which expressly refers to this litigation. This provision
abusive practice requiring the protection of the court. The shall remain in effect until the court rules on the class
letter makes no reference to the litigation and does not certification.
even attempt to seek to discourage or prevent the
recipients of the letter from participating in the lawsuit. Copies of this order shall be mailed to counsel of
Any prospective member of the class could choose to record for the parties.
take advantage of defendants' offer and still choose to
Dated at Wichita, Kansas, on July 25, 1997.
participate in this action [**5] should the class be
Page 3
174 F.R.D. 695, *698; 1997 U.S. Dist. LEXIS 13700, **6
JOHN THOMAS REID United States Magistrate Judge

Page 1
STEPHEN PAYNE, et al., Plaintiffs, v. THE GOODYEAR TIRE & RUBBER CO.,
Defendant.
CIVIL ACTION NO. 01-10118-NG
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF

MASSACHUSETTS
207 F.R.D. 16; 2002 U.S. Dist. LEXIS 8973
April 24, 2002, Decided
DISPOSITION: [**1] Plaintiffs' Motion for Order DEIN, U.S.M.J.

Preventing Defendant from Ex Parte Communications
with Absent Class Members DENIED. This matter is before the court on "Plaintiffs' Motion
for Order Preventing Defendant [*18] from Ex Parte
Communications with Absent Class Members" (Docket #
COUNSEL: For STEPHEN PAYNE, et al., Plaintiff: 55). After consideration of the pleadings, counsels'
Kevin T. Peters, Todd & Weld, Boston, MA. argument and the post-hearing submissions to the court,
the motion is DENIED. However, the defendant is
For THE GOODYEAR TIRE & RUBBER CO., ordered to maintain all samples taken during home
Defendant: James K. Archibald, Venable, Baetjer, inspections and notes or other documents relating to such
Howard & Civiletti, Washington, DC. Jeffrey A. Dunn, inspections for later production [**2] if requested by the
Douglas R. Kay, Venable, Baetjer, Howard & Civiletti, plaintiffs.
Washington, DC. Michelle I. Schaffer, Richard L.
Edwards, Campbell, Campbell Edwards & Conroy, BACKGROUND
Boston, MA.
This case arises out of a putative class action brought
JUDGES: Judith Gail Dein, United States Magistrate by plaintiffs seeking to represent a class of homeowners
Judge. in New England dissatisfied with the performance of a
Goodyear hose known as "Entran II" utilized in radiant
OPINION BY: Judith Gail Dein floor heating systems distributed by "Heatway." Plaintiffs
claim that Goodyear's hose was defective as
OPINION manufactured and that Goodyear failed to warn
consumers of the defect. Similar suits are pending in
Colorado and New Mexico.
[*17] ORDER ON PLAINTIFFS' MOTION FOR
ORDER PREVENTING DEFENDANT FROM EX Plaintiffs now move this court for an order providing
PARTE COMMUNICATIONS WITH ABSENT that defendant Goodyear be prohibited from engaging in
CLASS MEMBERS any communications with putative class members. The
motion was motivated by a web page sponsored by
April 24, 2002 Goodyear which contains information about the Entran II
Page 2
207 F.R.D. 16, *18; 2002 U.S. Dist. LEXIS 8973, **2
hose and in which Goodyear offers free inspections of potential for interference with the rights of the parties.
any system using the hose. 1 Plaintiffs contend that the Only such a determination can ensure that the court is
information on the web page is false and misleading, and furthering, rather than hindering, the policies embodied in
that improper communications may be taking place the Federal Rules of Civil Procedure, especially Rule 23.
during the home inspections which are being conducted In addition, such a weighing--identifying the potential
by as many as eight experts at one time. [**5] abuses being addressed--should result in a
carefully drawn order that limits speech as little as
1 Plaintiffs contend that they learned about the possible, consistent with the rights of the parties under
inspections during a recent deposition taken in the the circumstances." Id. at 101-02, 101 S. Ct. at 2200-01.
New Mexico litigation. [*19] Finally, any order imposing a serious restraint on
expression must be "justified by a likelihood of serious
[**3] By this motion, plaintiffs seek to prevent abuses." The "mere possibility of abuses" is insufficient
Goodyear's ex parte inspections of homes of absent class to support a ban on communications. Id. at 104, 101 S.
members. In the alternative, plaintiffs request an order Ct. at 2202.
requiring Goodyear to: (1) notify plaintiffs' attorneys
immediately upon communicating with homeowners; (2) A review of the record establishes that plaintiffs have
provide homeowners with information about this not shown a likelihood of serious abuse warranting this
litigation; (3) notify plaintiffs' attorneys ten days prior to court's interference, at this time, with Goodyear's ex parte
any home inspections; (4) provide plaintiffs' attorneys communications.
with an inventory of items removed from homes during
inspection; and (5) provide plaintiffs' attorneys with all The Home Inspections
reports generated from inspections. For its part, Goodyear
contends that plaintiffs have failed to present sufficient Plaintiffs have submitted excerpts from the
evidence to support the motion and that granting such a deposition of Gary Tompkin, a Goodyear consultant,
motion would violate its First Amendment rights. In which establishes the following. Mr. Tompkin inspected
addition, Goodyear has voluntarily modified its web page the Heatway systems in the homes of some of the named
to serve primarily as an installation and maintenance plaintiffs in this action, as well as other homes with
manual, and to eliminate references to litigation. Because, Entran II in New England. He has performed these free
as detailed herein, this court finds that plaintiffs' evidence inspections when consumers contacted Goodyear in
is insufficient to support a ban on communications, the response to an offer posted on its website. The testimony
plaintiffs' motion is DENIED. indicates that at times he inspected a home alone, but on
at least one occasion, [**6] eight individuals
Standard of Review representing Goodyear were present.
"Because of the potential for abuse [in class actions], Mr. Tompkin evaluated the homeowners' radiant
a district court has [**4] both the duty and the broad heating systems and, at times, made recommendations on
authority to exercise control over a class action and to the spot. For example, the plaintiffs have submitted a
enter appropriate orders governing the conduct of counsel portion of Mr. Tompkin's deposition in which he testified
and parties." Gulf Oil Co. v. Bernard, 452 U.S. 89, 100, he told a homeowner why her system failed to work
101 S. Ct. 2193, 2200, 68 L. Ed. 2d 693 (1981). "But this properly, attributing it to poorly installed valves and
discretion is not unlimited, and indeed is bounded by the running the system at an excessively high temperature,
relevant provisions of the Federal Rules" of Civil and suggested corrective measures.
Procedure, including Rule 23(d), governing class actions
which gives the court discretion to "make appropriate Mr. Tompkin has taken samples of hoses, valves,
orders: . . . (3) imposing conditions on the representative pumps and/or the fluid running through the system for
parties or on interveners . . . [and] (5) dealing with similar evaluation. He also has taken notes concerning the
procedural matters." Id. at 99-100, 101 S. Ct. at 2199. systems which he has inspected, and indicated he has
Since limiting communications causes its own problems, sent, or plans to send, reports to homeowners.
an exercise of discretion limiting communication must be
The Website
supported by a "clear record and specific findings that
reflect a weighing of the need for a limitation and the
Page 3
207 F.R.D. 16, *19; 2002 U.S. Dist. LEXIS 8973, **6
The plaintiffs also submitted a copy of a website plaintiffs' counsel's webpage. However, Goodyear did
sponsored by Goodyear. The evidence before the court is remove its "Facts" section. The "Maintenance Notice"
that, for an unspecified time, Goodyear's website featured remains in an altered form. In the modified Maintenance
several pages addressing Heatway radiant heating Notice, Goodyear does continue to assert that the "vast
systems and related issues. One page, entitled majority of the more than 10,000 installations throughout
"Installation and Maintenance Notice to Heatway Entran the nation continue to perform satisfactorily" and that to
II Systems Users," contains what Goodyear contends are the extent that a "small number of systems" have been
corrective measures for malfunctioning Heatway systems experiencing problems, including damage to the Entran II
("Maintenance Notice"). Of more [**7] concern to the [**9] hose, such problems arose because of "design,
plaintiffs for the purposes of this motion is a page called installation, operation and maintenance problems [which]
"Facts About Entran II Hose and Heatway (CPS) Radiant should be corrected." There is no longer any reference to
Heating Systems" ("Facts"). The "Facts" page references Heatway's bankruptcy or the jury verdict. The remainder
litigation between Goodyear and Heatway, the distributor of the site includes information of industry standards for
of the radiant heating systems which incorporated the design, installation, operation and maintenance of
Goodyear's Entran II hose, and the fact that Heatway hydronic heating systems.
declared bankruptcy. It also states that after a three week
trial, a jury "unanimously rejected Heatway's arguments ANALYSIS
and ruled that Entran II hose was fit for sale and use."
Considering all the evidence put forth by the
There is no mention of the various other suits against
plaintiffs, an order barring ex parte communication with
Goodyear involving the Entran II hose, including suits
absent plaintiffs is not justified by the record currently
which are pending and suits in which homeowners have
before the court. The plaintiffs have failed to show that
prevailed.
the defendant has engaged in any threatened or actual
Goodyear in the website claims that the "vast abusive or unethical communications with putative class
majority" of the systems are functional, and that members.
non-functional systems are due to bad design,
The evidence does not show that the website provides
installation, operation or maintenance. It claims that
"coercive" or "misleading" information
Heatway's statements that Entran II is defective are
"untrue" and that Goodyear relied on Heatway's design Goodyear's presentation of fact on its website, as
and installation expertise. The site states further that initially submitted, gave the court pause. In particular, the
"Heatway let homeowners down by not carefully court was concerned that the limited reference to
supervising the installation" of the systems. The site Heatway's bankruptcy and the Heatway verdict could
contains an offer to conduct an inspection and [**8] potentially have created some confusion in consumers'
provide a written report and provides a toll-free number minds as to their right or opportunity to participate in
to contact Goodyear. subsequent lawsuits. However, that potential problem
[**10] has been eliminated by the voluntary changes
New Developments
made by Goodyear. 2
At oral argument, the court learned that plaintiffs'
2 There does remain a passing reference to
counsel also had a website concerning the Entran II hose.
litigation with Heatway and Goodyear's belief that
The court requested that the parties provide supplemental
it was Heatway's legal obligation to provide
information, namely (1) whether the plaintiffs' counsel's
maintenance and installation materials to
own website provided a link or otherwise referred to
consumers. That reference does not relate to the
Goodyear's website, and (2) whether Goodyear would be
principal issue in contention in this litigation, i.e.,
willing to provide a link to plaintiffs' website on the
whether the hose is defective. Nor is this
"Facts" page. In response, the plaintiffs' counsel indicated
reference likely to affect potential class members'
that while their website did not contain a link to
interest in joining the litigation.
Goodyear, they were agreeable to inserting one if
Goodyear did [*20] likewise. Goodyear notified the What remains on Goodyear's website regarding
court that it was not prepared to provide a link to Entran II hose is, in essence, the company's opinion on
Page 4
207 F.R.D. 16, *20; 2002 U.S. Dist. LEXIS 8973, **10
the hose's functionality. Plaintiffs claim that Goodyear's likelihood of serious abuses." Gulf Oil Co. v. Bernard,
statements to homeowners that the hose is not defective 452 U.S. at 101, 104, 101 S. Ct. at 2200, 2202.
and that malfunctioning systems are due to improper
design, installation, maintenance or operation are Admitting that there is no evidence of actual or
"factually incorrect and therefore misleading." The text, threatened coercion of homeowners, plaintiffs claim that
however, concerns disputed issues of fact in this case and Goodyear's unsupervised inspections are "inherently
may not for that reason alone be characterized as coercive" and, therefore, [**13] must be controlled.
"misleading." Plaintiffs' contention revisits issues Plaintiffs cite to Kleiner v. First Nat'l Bank of Atlanta,
addressed [**11] in this court's December 21, 2001 order 751 F.2d 1193 (11th Cir. 1985), where the court
which held that "plaintiffs' arguments are ill-suited for a precluded unsupervised communications between the
ruling limiting discovery. These arguments may be more defendant bank and class members relating to the
appropriately presented in connection with a motion litigation, where the bank was seeking and did obtain a
squarely raising the legal issues for resolution." large number of "opt-outs" from the class. See id. at
1202. In Kleiner, however, the situation was inherently
The court finds that what the defendant represents as coercive because the "class consisted of Bank borrowers,
the text remaining on Goodyear's website with regard to many of whom were dependent on the Bank for future
Entran II is neither coercive nor misleading, and therefore financing." Id. Moreover, "the high number of exclusion
does not support an order requiring Goodyear to alter its requests was witness to the inherent coercion of the
presentation to viewers of its website. Bank's machinations." Id.
There is insufficient evidence that the inspections are Unlike Kleiner and other cases cited by the plaintiffs,
actually or inherently coercive or misleading 3 there is no evidence before the court that the
relationship between Goodyear and absent class members
Goodyear also removed from its website the offer for is inherently coercive. Without commenting on potential
a no-cost inspection. However, its toll-free phone number theories of liability of the defendant, it is clear for the
remains on the site and defendant did not indicate it purposes of this motion that the plaintiffs neither have,
would cease conducting such inspections. The court nor ever had, a direct business relationship with
therefore assumes the inspections are continuing under Goodyear, a provider of a component part in a system
the same or similar circumstances described in the marketed by Heatway directly to the consumers. The fact
deposition of Mr. Tompkin. With regard to the of Goodyear's indirect [**14] commercial relationship
inspections, the plaintiffs delineated several areas of with absent class members cannot, without more, sustain
concern: the conditions of the inspections (the number of a finding that contact between them concerning the
Goodyear representatives present and the length of the radiant heating systems involves inherent opportunities
inspections); the fact [**12] that inspectors offer for coercion. See Great Rivers Corp. of Southeastern
diagnoses and suggest corrective measures in person and Iowa v. Farmland Indus., Inc., 59 F.3d 764, 766 (8th Cir.
in subsequent reports; and the inspectors' removal of 1995) (absent proof of misrepresentation and likelihood
system parts from the homeowners' premises. Plaintiffs of serious abuses, no restriction on defendant
claim that the effect of [*21] Goodyear's inspections is cooperative's communication with potential plaintiff
that "homeowners may well conclude that it is a waste of members).
time to participate in this action." However, there is no
evidence that there was any discussion of litigation at all 3 See, e.g., Hampton Hardware v. Cotter & Co.,
with the homeowners, or any attempt to obtain a release 156 F.R.D. 630, 633-34 (N.D. Tex. 1994)
or any type of waiver from the homeowners. (evidence of letters directly discouraging
participation in lawsuit, the fact of an ongoing
The defendant does not contest the veracity of the business relationship between the parties, and
statements in Mr. Tompkin's deposition concerning the dependence of plaintiffs on defendant for
circumstances of the inspections, but rather points to a wholesale supplies sufficient for court to prohibit
lack of proof evidencing coercive conduct on Goodyear's all litigation-related communication prior to class
part. This court agrees with Goodyear that the plaintiffs certification); Bublitz v. E.I. Dupont de Nemours
have not provided evidence which would lead to "a clear & Co., 196 F.R.D. 545, 547 (S.D. Iowa 2000)
record and specific findings" tending to show "a
Page 5
207 F.R.D. 16, *21; 2002 U.S. Dist. LEXIS 8973, **14
(court found at-will employer-employee Lee v. Am. Airlines, Inc., 2002 U.S. Dist. LEXIS 2232,
relationship inherently coercive, applying No. 3:01- CV-1179-P, [*22] 2002 WL 226347, at *2
restrictions to contact between defendant and (N.D. Tex. Feb. 12, 2002) (mere possibility of abuse
absent class members). insufficient to limit defendant's communications with
potential class members); Jenifer v. Del. Solid Waste
[**15] Notably, the record here contains no Auth., 1999 U.S. Dist. LEXIS 2542, No. 98-270 MMS,
evidence allowing the inference that Goodyear is either 98-565 MMS, 1999 WL 117762, at *5-7 (D. Del. Feb.
pressuring plaintiffs to opt out of the litigation or covertly 25, 1999) (absent evidence of coercion or misleading
robbing plaintiffs of their opportunity to participate in the information, no limits on communication except if release
instant litigation: the record does not establish any sought from potential class member, then notice of
communication with potential plaintiffs concerning litigation must be given); Burrell v. Crown Cent.
litigation at all. Compare Carnegie v. H & R Block, 180 Petroleum, Inc., 176 F.R.D. 239, 245 (E.D. Tex. 1997)
Misc. 2d 67, 687 N.Y.S.2d 528, 531-32 (N.Y. Sup. Ct. (employer may communicate with employees about
1999) (defendant's requirement that putative plaintiffs litigation, including its opinion that lawsuit was simply a
sign misleading mandatory arbitration clause without union strategy, absent evidence communications
informing them of ongoing litigation "patently misleading, coercive or an attempt to encourage putative
deceptive"); Fraley v. Williams Ford Tractor & Equip. class members not to join the suit).
Co., 339 Ark. 322, 342-43, 5 S.W.3d 423, 436 (1999)
(financier of agricultural equipment coerced borrowers CONCLUSION
into signing release of claims). Plaintiffs' belief that
homeowners will feel "discouraged" about the instant "Plaintiffs' Motion for Order Preventing Defendant
lawsuit is insufficient to warrant the court placing from Ex Parte Communications with Absent Class
limitations on Goodyear's communications. See, e.g., Members" (Docket # 55) is DENIED. Defendant is to
Basco v. Wal-Mart Stores, Inc., 2002 U.S. Dist. LEXIS preserve all samples, [**17] notes and reports obtained
3780, No. 00-3184, 2002 WL 272384, at *4 (E.D. La. or generated in connection with the home inspections.
Feb. 25, 2002) (mere fact of employee-employer
Judith Gail Dein
relationship insufficient to find coercion, absent [**16]
evidence of abusive conduct or attempts to prevent United States Magistrate Judge
participation in litigation, no limit on defendant's
communication with potential employee class members);
Page 1
COX NUCLEAR MEDICINE, etc., Plaintiff, v. GOLD CUP COFFEE SERVICES,

INC., Defendant.
CIVIL ACTION 02-0831-WS-M

ALABAMA, SOUTHERN DIVISION
214 F.R.D. 696; 2003 U.S. Dist. LEXIS 7822
May 7, 2003, Decided

May 7, 2003, Filed
DISPOSITION: [**1] Plaintiff's motion to show show cause why sanctions should not be imposed against
cause was denied. it in consequence of its contacts with members of the
proposed class. The defendant has filed a response to the
motion, to which the plaintiff has replied, (Docs. 19, 20),
COUNSEL: For COX NUCLEAR PHARMACY, and the motion is now ripe for resolution. After carefully
plaintiff: Steven A. Martino, Esq., Bryan Neil Cigelske, considering the foregoing materials, as well as all other
Esq., Taylor, Martino & Hedge, P.C., Mobile, AL. relevant materials in the file, the Court concludes that the
plaintiff's motion is due to be denied.
For GOLD CUP COFFEE SERVICES, INC., defendant:
L. Graves Stiff, III, Esq., Joel Scott Dickens, Starnes & "An order limiting communication [**2] between
Atchison, LLP, Birmingham, AL. parties and potential class members should be based on a
clear record and specific findings that reflect a weighing
For GOLD CUP COFFEE SERVICES, INC., defendant: of the need for a limitation and the potential interference
John Peter Crook McCall, Starnes & Atchison, LLP, with the rights of the parties." Gulf Oil Co. v. Bernard,
Mobile, AL. 452 U.S. 89, 101, 68 L. Ed. 2d 693, 101 S. Ct. 2193
(1981). Bernard involved contact by plaintiff's counsel,
JUDGES: WILLIAM H. STEELE, UNITED STATES but lower courts have applied Bernard to contact by
DISTRICT JUDGE. defendants and their counsel as well. 1
OPINION BY: WILLIAM H. STEELE 1 See, e.g., Great Rivers Co-Operative v.

Farmland Industries, Inc., 59 F.3d 764, 766 (8th
OPINION Cir. 1995); Kleiner v. First National Bank, 751
F.2d 1193, 1201-03 (11th Cir. 1985); In re:
School Asbestos Litigation, 842 F.2d 671, 680
[*696] ORDER ON MOTION TO SHOW CAUSE (3rd Cir. 1988); Ralph Oldsmobile, Inc. v.
General Motors Corp., 2001 U.S. Dist. LEXIS
This cause is before the Court on the plaintiff's
13893, 2001 WL 1035132 at *2 (S.D.N.Y. 2001);
motion to show cause, (Doc. 16), in [*697] which the
Abdallah v. Coca-Cola Co., 186 F.R.D. 672, 675
plaintiff seeks an order that the defendant be ordered to
n.1 (N.D. Ga. 1999); In re: Potash Antitrust
Page 2
214 F.R.D. 696, *697; 2003 U.S. Dist. LEXIS 7822, **2
Litig., 896 F. Supp. 916, 920 (D. Minn. 1995); 2002)(the plaintiff "failed to allege or prove that
Babbitt v. Albertson's, Inc., 1993 U.S. Dist. LEXIS Defendant was engaged in any abusive or
18801, 1993 WL 128089 at *5 (N.D. Cal. 1993); unethical communications"); Payne v. Goodyear
Cohen v. Apache Corp., 1991 U.S. Dist. LEXIS 1, Tire & Rubber Co., 207 F.R.D. 16, 20 (D. Mass.
1991 WL 1017 at *2 (S.D.N.Y. 1991). But cf. 2002)("Considering all the evidence put forth by
Bower v. Bunker Hill Co., 689 F. Supp. 1032, the plaintiffs, [they] have failed to show that the
1033-34 (E.D. Wash. 1985)(Bernard does not defendant has engaged in any threatened or actual
govern defense contacts with class members after abusive or unethical communications with
a class is certified). putative class members."); Hammond v. City of
Junction City, 2002 U.S. Dist. LEXIS 5645, 2002
[**3] "'To the extent that the district court is WL 169370 at *3 (D. Kan. 2002)("The record
empowered ? to restrict certain communications in order must show the particular abuses that have
to prevent frustration of the policies of Rule 23, it may occurred or that are threatened ...."); Jenifer v.
not exercise the power without a specific record showing Delaware Solid Waste Authority, 1999 U.S. Dist.
by the moving party of the particular abuses by which it LEXIS 2542, 1999 WL 117762 at *4 (D. Del.
is threatened.'" Gulf Oil v. Bernard, 452 U.S. at 102 1999)("There must be some evidence that justifies
(emphasis added)(quoting Coles v. Marsh, 560 F.2d 186, an interference with [the defendant's] speech.");
189 (3rd Cir. 1977)). In compliance with Bernard, courts Burrell v. Crown Central Petroleum, Inc., 176
have routinely recognized that the moving party must F.R.D. 239, 244 (E.D. Tex. 1997)("Absent a clear
present an evidentiary showing of actual or threatened record and specific findings of realized or
abuse by the party sought to be restrained. 2 Two kinds of threatened abuses, an order cannot be justified
proof are required. First, the movant must show that a under the relevant standard."); id. at 245
particular form of communication has occurred or is ("Without evidence of coercion, misleading
threatened to occur. 3 Second, the movant must show that statements, or efforts to undermine the purposes
the particular [*698] form of communication at issue is of Rule 23, the court cannot make the proper
abusive in that it threatens the proper functioning of the findings required by the Supreme Court in Gulf
litigation. Abusive practices that have been considered Oil Co. v. Bernard."); Bublitz v. E.I. DuPont de
sufficient to warrant a protective order include Nemours & Co., 196 F.R.D. 545, 547 (S.D. Iowa
communications that coerce prospective class members 2000)(Bernard "set forth a broad principle that
into excluding themselves from the litigation; 4 limitations on communications with potential
communications that contain false, misleading or class members must derive from evidence in the
confusing statements; [**4] 5 and communications that record"); Hoffman v. United Telecommunications,
undermine cooperation with or confidence in class Inc., 111 F.R.D. 332, 336 (D. Kan. 1986)("To
counsel. 6 Restrictions on the communication of support limitations against its communicating
settlement offers are subject to the same proof with individual employees who may be claimants,
requirements. E.g., Bublitz v. E.I. DuPont de Nemours & the moving party should supply the court with
Co., 196 F.R.D. 545, 548 (S.D. Iowa 2000). facts, supported by the record, as distinguished
from stereotyped or conclusory statements.").
2 See, e.g., O'Brien v. Morse, 2002 U.S. Dist. [**5]
LEXIS 10495, 2002 WL 1290392 at *2 ("A 3 An order "involving serious restrictions on
protective order should only be issued if the expression [must be] justified by a likelihood of
record reflects a clear finding of potential serious abuses." Gulf Oil v. Bernard, 452 U.S. at
abuse."); Basco v. Wal-Mart Stores, Inc., 2002 104 (emphasis added). No matter how abusive a
U.S. Dist. LEXIS 3780, 2002 WL 272384 at *3 particular communication might be if it occurs,
(E.D. La. 2002)("Courts should not limit there cannot be a "likelihood of serious abuse"
communications without a specific record unless there is a likelihood that the feared
showing by the moving party of the particular communication will in fact occur. See, e.g., Basco
abuses by which it is threatened."); Lee v. v. Wal-Mart, 2002 U.S. Dist. LEXIS 3780, 2002
American Airlines, Inc., 2002 U.S. Dist. LEXIS WL at 272384 at *3-4 (a protective order is
2232, 2002 WL 226347 at *2 (N.D. Tex. warranted if "it is clear that the defendant is
Page 3
214 F.R.D. 696, *698; 2003 U.S. Dist. LEXIS 7822, **5
attempting to engage in conduct which would 842 F.2d 671, 682 (3rd Cir. 1988); Hampton
undermine the purposes of [Rule 23]"; a "belief" Hardware v. Cotter & Co., 156 F.R.D. at 632;
that the defendant "may attempt to communicate Haffer v. Temple University, 115 F.R.D. 506, 512
with potential members of the class about the (E.D. Penn. 1987).
lawsuit" is insufficient)(emphasis added);
Hammond v. City of Junction City, 2002 U.S. There is no question that the defendant has
Dist. LEXIS 5645, 2002 WL 169370 at *3 ("The communicated with class members. The plaintiff has
record must show the particular abuses that have submitted a sample letter from the defendant to a class
occurred or that are threatened ....")(emphasis member. (Doc. 16, Exhibit A). The plaintiff asserts that
added); Gottstein v. National Association for the the defendant has sent similar letters to other class
Self Employed, 186 F.R.D. 654, 658 (D. Kan. members, (Doc. 16, P 2), an assertion the defendant
1999)("unsubstantiated fears" do not demonstrate effectively concedes as accurate. (Doc. 19 at 1, 3). The
a likelihood of serious abuses); Barnes v. Julien J. plaintiff has thus satisfied its burden of showing that a
Studley, Inc., 1989 U.S. Dist. LEXIS 18349, 1989 particular form of communication has occurred or is
WL 27405 at *2 (D.D.C. 1989)(a motion for threatened to occur.
protective order based on the "possibility of
The letter at issue informs customers that, between
abusive tactics" should the plaintiff be allowed to
January 2000 and June 2001, the defendant delivered to
contact prospective class members is
customers boxes labeled as containing 42 packs of
"premature")(emphasis added); see also note 2,
Maxwell House Master Blend coffee but in fact
supra.
containing only 35 packs. The letter encloses a check
[**6]
which the defendant "believes is the value of the
4 See, e.g., Equal Employment Opportunity
difference between 35 and 42 packets of each [**8] box
Commission v. Morgan Stanley & Co., 206 F.
of Maxwell House Master Blend coffee that [the
Supp. 2d 559, 562 (S.D.N.Y. 2002)(Ellis, Mag. J.),
customer] purchased, according to Gold Cup's records,
aff'd, 2002 U.S. Dist. LEXIS 11877, 2002 WL
between January of 2000 and June of 2001." The letter
1431685 (S.D.N.Y. 2002); Lee v. American
and the check reflect that cashing or other endorsement of
Airlines, 2002 U.S. Dist. LEXIS 2232, 2002 WL
the check releases the defendant from further liability.
226347 at *2; Payne v. Goodyear Tire & Rubber,
(Doc. 16, Exhibit A).
207 F.R.D. at 21; Basco v. Wal-Mart, 2002 U.S.
Dist. LEXIS 3780, 2002 WL 272384 at *3; Ralph The plaintiff complains that the letter "[1]
Oldsmobile Inc. v. General Motors Corp., 2001 misrepresents material facts of this case, [2] may well be
U.S. Dist. LEXIS 13893, 2001 WL 1035132 at *4 a fraudulent attempt to terminate these proceedings
(S.D.N.Y. 2001); Jenifer v. Delaware Solid Waste without full or adequate compensation, and [3]
Authority, 1999 U.S. Dist. LEXIS 2542, 1999 WL intentionally interferes with the proposed class members'
117762 at *4; Burrell v. Crown Central ability to make an informed decision as to whether they
Petroleum, 176 F.R.D. at 244; In re: Potash should remain in the class, if one is certified." (Doc. 16, P
Antitrust Litig., 896 F. Supp. 916, 920 (D. Minn. 2). As discussed below, none of these allegations satisfies
1995); O'Neil v. Appel, 165 F.R.D. 479, 1995 WL the plaintiff's burden of showing that the defendant's
351371 at *2 (W.D. Mich. 1995). communication with putative class members is "abusive."
5 See, e.g., In re: School Asbestos Litigation,
842 F.2d at 683; Lester v. Percudari, 2002 WL The alleged misrepresentation is that the letter
1460763 at *2 (M.D. Penn. 2002); Basco v. describes the defendant's conduct as [*699]
Wal-Mart, 2002 WL 272384 at *3; Jenifer v. "inadvertent," while the plaintiff would characterize it as
Delaware Solid Waste Authority, 1999 U.S. Dist. "knowing, willful and intentional." (Doc. 16, PP 3, 5).
LEXIS 2542, 1999 WL 117762 at *2; O'Neil v. This might be significant had the plaintiff sued for fraud,
Appel, 165 F.R.D. 479, 1995 WL 351371 at *2; opening the door to the possibility of extra-contractual
Hampton Hardware, Inc. v. Cotter & Co., 156 damages. The plaintiff, [**9] however, explicitly limits
F.R.D. 630, 632 (N.D. Tex. 1994). this lawsuit to one for breach of contract and seeks only
[**7] compensatory damages representing "the benefit of the
6 See, e.g., In re: School Asbestos Litigation, bargain." (Doc. 1, First Amended Complaint, P 22). The
Page 4
214 F.R.D. 696, *699; 2003 U.S. Dist. LEXIS 7822, **9
plaintiff's pleading thus renders the defendant's mental "A defendant ? has the right to communicate
state irrelevant to the damages sought in this action and settlement offers directly to putative class member[s]."
equally irrelevant to the instant motion. Bublitz v. DuPont, 196 F.R.D. at 548. The discovered
cases in which the court conditioned the transmission of
The alleged attempt to settle without paying full settlement offers involved class members in an inherently
compensation is based on the letter's provision of "only coercive dependent relationship with the defendant and/or
Defendant's version of the amount of compensation settlement offers for less than that sought in the lawsuit.
supposedly due, with no verification of that amount." See id. at 548, 550; Freeman v. Celebrity Cruises, Inc.,
(Doc. 16, P 5). The plaintiff, however, bears the burden 1994 U.S. Dist. LEXIS 17455, 1994 WL 689809 at *4-6
of showing that information in the letter is false; simply (S.D.N.Y. 1994), modified on other grounds, 1995 U.S.
implying that it might be false does not meet that burden. Dist. LEXIS 18, 1995 WL 4139 (S.D.N.Y. 1995). Here, no
inherently coercive relationship is alleged or apparent
The alleged interference with class members' ability and, as discussed above, the settlement offer is for the full
to make an informed decision as to class participation is amount for which suit is brought.
based on the letter's "failure to advise that a putative class
action lawsuit has been filed on [the] customers' behalf." For the reasons set forth above, the plaintiff's [**11]
(Doc. 16, P 5). The failure to recognize the existence of a motion to show cause is denied. This denial is without
putative class action, however, could be abusive only if prejudice to the plaintiff's right to seek similar relief
the class action sought recovery in excess of that based on an adequate factual showing.
proposed by the defendant, because only then could the
[**10] class action vehicle offer the possibility of a more DONE and ORDERED this 7th day of May, 2003.
favorable result than the proposed settlement. As
discussed above, the class action seeks only recovery of WILLIAM H. STEELE
the benefit of the bargain, the defendant's letter purports
to restore the benefit of the bargain, and the plaintiff has
offered no evidence that the settlement offer does not in
fact restore the benefit of the bargain.
Page 1
LEXSEE 751 N.E. 2D 221
RICHARD ARRIOLA, on behalf of Himself and All Others Similarly Situated,

Plaintiff-Appellant, v. TIME INSURANCE COMPANY, Defendant-Appellee.
No. 1-99-2136
APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIFTH DIVISION
323 Ill. App. 3d 138; 751 N.E.2d 221; 2001 Ill. App. LEXIS 423; 256 Ill. Dec. 168
June 8, 2001, Decided
SUBSEQUENT HISTORY: [***1] Released for class action suit challenging Time Insurance Company's
Publication July 27, 2001. (Time) collection of subrogation payments from its own
insureds, where the applicable insurance policies had no
PRIOR HISTORY: Appeal from the Circuit Court of provisions for subrogation. After the case was filed on
Cook County. Honorable Sidney A. Jones, III Judge August 30, 1993, but before plaintiff filed a motion for
Presiding. class certification, Time refunded payments to 44 of the
46 putative members of the class who resided in Illinois.
DISPOSITION: Dismissed in part and remanded in [***2] Time tendered refunds to the remaining two
part. insureds, including the plaintiff, but plaintiff refused the
tender. On November 4, 1994, Time filed a motion to
dismiss the case pursuant to section 2-619 of the Illinois
COUNSEL: For Appellant: Alvin W. Block & Code of Civil Procedure. 735 ILCS 5/2-619 (West 1998).
Associates, of Chicago (Alvin W. Block, Jerome E. On May 15, 1995, the trial court dismissed the case with
Boyle and Raymond P. Schmitz of counsel). prejudice, holding that as there were only two potential
members of the class in Illinois, plaintiff did not meet the
For Appellee: Johnson & Bell, Ltd., of Chicago (William numerosity prerequisite [*141] as defined in section
G. Beatty and Marilyn McCabe Reidy of counsel). 2-801 of the Illinois Code of Civil Procedure ( 735 ILCS
5/2-801 (West 1998)). The trial court held that,
JUDGES: PRESIDING JUSTICE QUINN delivered the consequently, plaintiff could not maintain a multi-state
opinion of the court. GREIMAN, and THEIS, JJ., concur. class action in Illinois.
OPINION BY: QUINN In a prior appeal, this court reversed the trial court's
dismissal, holding that a motion to dismiss under section
OPINION 2-619 may not be based on an asserted lack of
numerosity. Arriola v. Time Insurance Co., 296 Ill. App.
[*140] [**223] PRESIDING JUSTICE QUINN
3d 303, 308, 694 N.E.2d 649, 230 Ill. Dec. 680 (1998)
delivered the opinion of the Court:
(Arriola I). In doing so, we relied upon the holding in
This case involves a permissive appeal of a certified Levy v. Metropolitan Sanitary District of Chicago, 92 Ill.
question pursuant to Supreme Court Rule 308 (155 Ill. 2d 2d 80, 83, 440 N.E.2d 881, 65 Ill. Dec. 26 (1982). [***3]
R. 308). The underlying litigation involves a multi-state There, our supreme court held:
Page 2
323 Ill. App. 3d 138, *141; 751 N.E.2d 221, **223;
2001 Ill. App. LEXIS 423, ***3; 256 Ill. Dec. 168
This court granted plaintiff's application for leave to

"Neither an order denying class appeal. The following are the pertinent facts contained in
certification or decertifying a class nor an the record. [**224] Plaintiff Richard Arriola, an Illinois
order dismissing class action allegations is resident, was injured in an auto accident in 1992. At the
final and *** such orders may be appealed time of the accident, Arriola was named as an insured on
from prior to the termination of the a policy issued by Time. Arriola recovered $ 554.40 for
litigation only under the interlocutory medical expenses from Time under the aforementioned
appeal provisions of the Supreme Court policy. Arriola proceeded to file a complaint against the
Rules. [Citation.]" Levy, 92 Ill. 2d at 83. person responsible for the accident. [*142] Time
contemporaneously notified Arriola of its subrogation
lien for $ 554.40 with respect to any judgment or any
The court in Levy further stated that such orders settlement arising from that action. Arriola ultimately
must be appealed pursuant to Supreme Court Rule 308. tendered a check to Time for $ 554.40.
Supreme Court Rule 308 provides, in pertinent part:
On August 30, 1993, Arriola filed a complaint
"Rule 308. Interlocutory Appeals by [***5] individually and on behalf of a class of other
Permission similarly situated individuals alleging that Time
intentionally misrepresented its right to subrogation in the
(a) Requests. When the trial court, in absence of an express policy provision establishing such
making an interlocutory order not a right. In its answer, Time denied the allegations of the
otherwise appealable, finds that the order complaint and denied that plaintiff was entitled to an
involves a question of law as to which order certifying this case as a class action. The record
there is substantial ground for difference indicates that Time subsequently acknowledged that a
of opinion and that an immediate appeal medical insurer has no right of subrogation in the absence
from the order may materially advance the of an express policy provision allowing subrogation. This
ultimate termination of the litigation, the was the holding in Schultz v. Gotlund, 138 Ill. 2d 171,
court shall so state in writing, identifying 561 N.E.2d 652, 149 Ill. Dec. 282 (1990), decided
the question of law involved. Such a September 26, 1990.
statement may be made at the time of the
entry of the order or thereafter on the Arriola correctly points out that Time first began to
court's own motion or on motion of any seek subrogation from its insureds only after the Schultz
party. The Appellate Court may thereupon decision was handed down. After this class action
in its discretion allow an appeal [***4] complaint was filed, the trial court limited discovery to
from the order." 155 Ill. 2d R. 308(a). potential members of the class who resided in Illinois.
Time subsequently proceeded to attempt to reimburse the
46 Illinois policyholders from whom it had sought and
Upon remand, the trial court certified the issue as received subrogation payments since September 1990,
follows: including Arriola. Time obtained releases from 44 of the
[***6] 46 policyholders.
"May a national class be certified under
Section 2-801 of the Code of Civil There is a split in the authorities as to the scope of
Procedure where: (1) the class action review of an appeal under Rule 308 as it relates to
complaint alleges a national class, (2) the certified questions. One view is that review is strictly
Court assumes there are sufficient class limited to the question identified by the circuit court
members outside Illinois to satisfy the order and will not be expanded on appeal to encompass
numerosity requirement, but (3) there are other matters that could have been included but were not.
only two remaining Illinois residents who Levy v. Markal Sales Corp., 311 Ill. App. 3d 552, 724
are members of the class? N.E.2d 1008, 244 Ill. Dec. 120 (2000). Another view is
that the appellate court is not limited to reviewing the
Page 3
323 Ill. App. 3d 138, *142; 751 N.E.2d 221, **224;
question presented but may also consider the 5/ 2-801 West 1998) governs class action suits in Illinois.
appropriateness of the order giving rise to the appeal. It provides:
Billerbeck v. Caterpillar Tractor Co., 292 Ill. App. 3d
350, 685 N.E.2d 1018, 226 Ill. Dec. 563 (1997), appeal § 2-801. Prerequisites for the
denied, 176 Ill. 2d 570, 690 N.E.2d 1379, 229 Ill. Dec. 52 maintenance of a class action. An action
(1998). may be maintained as a class action in any
court of this State and a party may sue or
Our supreme court recently addressed this issue, be sued as a representative party of the
finding it appropriate not to answer a certified question class only if the court finds:
where the record revealed that there were disputed
questions of fact. Dowd & Dowd, Ltd. v. Gleason, 181 "(1) The class is so numerous that
Ill. 2d 460, 469-70, 693 N.E.2d 358, 230 Ill. Dec. 229 joinder of all members is impracticable.
(1998). The court held that under those circumstances,
any answer the court gave would [***7] be "advisory (2) There are questions of fact or law
and provisional." common to the class, which common
questions predominate over any questions
This court addressed the scope of review of a affecting only individual members.
certified question in the context of a multi-state class
action suit in Gordon v. Boden, 224 Ill. App. 3d 195, 586 (3) The representative parties will
N.E.2d 461, 166 Ill. Dec. 503 (1991). There, the plaintiffs fairly and adequately protect the [***9]
alleged that the defendant companies had sold orange interest of the class.
juice which had been [*143] watered down and
(4) The class action is an appropriate
contained additives to the point that the product was only
method for the fair and efficient
60% orange juice. The trial court certified as a class all
adjudication of the controversy." 735 ILCS
persons in the United States who had purchased the
5/2-801 (West 1998).
adulterated orange juice products manufactured or sold
by the defendants. Gordon, 224 Ill. App. 3d at 198. The
trial court also certified a question that pertained to the In Miner v. Gillette Co., 87 Ill. 2d 7, 428 N.E.2d 478,
assessment and distribution of damages among the class 56 Ill. Dec. 886 (1981), our supreme court held that
members, who could number in [**225] the millions. Illinois courts may hear multistate class action suits. The
This court concluded that we would need to address the court reversed the appellate court and trial court's refusal
question of the propriety of the class certification as well to certify a nationwide class based on a purported
as the certified question, because "we cannot neatly violation of due process. The court held that any due
compartmentalize and independently resolve one issue process concerns arising from an Illinois court's exercise
and not the other." Gordon, 224 Ill. App. 3d at 199. of jurisdiction over non-Illinois class [*144] members
Based on the facts of the case sub judice, we are similarly would be obviated by proper notice and the "adequate
compelled to expand our review [***8] beyond the representation" requirement of Section 2-801(3):
certified question.
"'Because a class action must necessarily
Commentators have noted that multi-state class
proceed in the absence of almost every
actions place a tremendous administrative burden on the
class member, we hold the residential
state's court system, the state's taxpayers, and also upon
makeup of the class membership is not
the absent class members who would be bound by an
controlling. [Citation.] What is important
Illinois judgment. R. Foster, Multi-State Consumer Class
is that the nonresident plaintiffs be given
Actions in the Illinois Courts, 84 Ill. B.J. 418 (1996).
notice and an opportunity to be heard and
However, no procedural mechanism exists for the joinder
that their rights be justly protected by
of claimants in multiple states other than a multi-state
adequate representation. These are the
class action.
essential requirements of due process, and
Section 2-801 of the Illinois Code of Civil Procedure they must be satisfied in [***10] any
( 2-801 2-801 2-801 2-801 2-801 2-801 2-801 735 ILCS class action by every court, state or
Page 4
323 Ill. App. 3d 138, *144; 751 N.E.2d 221, **225;
federal, regardless of the residences of the Equipment Co., 339 Ark. 322, 334, 5 S.W.3d 423, 435-36
absent class members. Therefore, *** the (1999). [***12] There was evidence that the defendant
element necessary to the exercise of made misrepresentations in obtaining the releases. The
jurisdiction over nonresident plaintiff class Arkansas Supreme Court held that communications
members is procedural due process. between defendants and plaintiffs in class action cases
(Emphasis omitted.)'" Miner, 87 Ill. 2d at that are likely to substantially reduce member
12-13, quoting Shutts v. Phillips participation or that indicate a likelihood of coercion
Petroleum Co., 222 Kan. 527, 542-43, 567 should be restricted or prohibited when brought to the
P.2d 1292, 1305 (1977), cert denied: 434 attention of the trial court. The court held that the
U.S. 1068, 98 S. Ct. 1246, 55 L. Ed. 2d circumstances surrounding the attainment of the releases
769 (1978). indicated there was a likelihood of coercion, and the trial
court abused its discretion in considering the releases in
determining whether the numerosity requirement had
Time acknowledges the holding in Miner but argues been met. Fraley, 339 Ark. At 340, 5 S.W.3d at 436.
that Miner is inapplicable as there was a large subclass of
Illinois residents in the class in Miner and, in this case, In our case, plaintiff does not question the validity of
there are only two potential class members who reside in the releases obtained by Time. There is no evidence that
Illinois. Of course, this is true only because Time made a any of the putative class members who signed releases
tender of settlement to the entire Illinois [**226] were indebted to Time or that Time had any influence of
subclass and almost all of the members of the subclass any kind over them. There was also no evidence that
accepted that tender. Time made misrepresentations in obtaining the releases.
Throughout the proceedings below and in both This court's research reveals that Illinois has long
appeals, Arriola has argued that Time's actions in recognized that, prior to class certification, settlements
obtaining general releases from 44 of the 46 affected with persons falling within a proposed class are [***13]
policyholders in Illinois were an effort to avoid liability not prohibited. In Jankousky v. Jewel Cos., 182 Ill. App.
to the larger group of affected policyholders in other 3d 763, 538 N.E.2d 689, 131 Ill. Dec. 314 (1989), the
states. [***11] Accepting this argument as being true, it plaintiffs had signed releases after settling with Jewel in
begs the question of whether Time's actions were proper regard to a salmonella outbreak in the Chicagoland area.
and, whether or not they were proper, what effect does The plaintiffs alleged that the defendant had fraudulently
Time's tender to the named plaintiff and settlements with concealed information concerning the pendency of the
almost all of the prospective class members in Illinois class action suit of which they were potential members.
have on this case? In his reply brief, Arriola asserts: In affirming the trial court's dismissal of plaintiffs' action,
"Whether a defendant's effort to obtain releases from this court held: "There is no prohibition against
putative class members amounts to impermissible communications, negotiations, or settlements with
misconduct depends upon the specific facts of the effort persons who fall within the proposed class prior to class
which, in this case, are unknown because of the discovery certification. The only limitation in such situations is
limitation. See e.g. Fraley v. Williams Ford Tractor & when the settlements affect the rights of the nonsettling
Equip., 339 Ark. 322, 5 S.W.3d 423 (1999) (collecting class members. ( Weight Watchers of Philadelphia, Inc. v.
cases)." Weight Watchers International. Inc. (2d Cir. 1972), 455
F.2d 770, 775; Vernon J. Rockler & Co. Minneapolis
We find Fraley to be inapposite. There, the defendant Shareholders Co. (D. Minn 1977), 425 F. Supp. 145,
contacted putative class members and obtained releases 149-50.)" [**227] Jankousky v. Jewel Cos., 182 Ill.
from many of them. This was done after the plaintiffs had App. 3d at 767.
filed a motion for class certification but before the motion
was heard. All of the putative class members who signed In Weight Watchers, the court of appeals reviewed a
releases were indebted to the defendant for vehicle and district court's order allowing the defendant franchisor the
farm equipment loans and only two or three received right [***14] to communicate and settle with its
money from the defendant in exchange for signing the franchisees who were potential members of a class where
releases. Fraley v. Williams [*145] Ford Tractor & the plaintiff was the named representative. The court held
Page 5
323 Ill. App. 3d 138, *145; 751 N.E.2d 221, **227;
that the defendant could seek settlements with individual class."'" Magnuson v. City of Hickory Hills, 933 F.2d
potential class members even if the cumulative result of 562, 565 (7th Cir. 1991), quoting O'Shea v. Littleton, 414
the settlements was that a class action was no longer U.S. 488, 494, 94 S. Ct. 669, 675, 38 L. Ed. 2d 674, 682
maintainable due to an insufficient number of remaining (1974)." Yu 314 Ill. App. 3d at 898-99.
class members. Weight Watchers of Philadelphia, Inc. v.
Weight Watchers International, Inc., 455 F.2d 770, 775 Unlike the named plaintiffs in Jankousky, Wheatley
(2d Cir. 1972). and Yu, Arriola never accepted the tender made by Time.
"'Tender' is an unconditional offer of payment consisting
[*146] In Wheatley v. Board of Education of of the actual production of a sum not less than the amount
Township High School District 205, 99 Ill. 2d 481, 459 due on a particular obligation, and tender must be without
N.E.2d 1364, 77 Ill. Dec. 115 (1984), two teachers who conditions to which the creditor can have a valid
had been terminated from their employment filed a class objection or which will be prejudicial to his rights."
action suit against the school board on behalf of all Brown & Kerr, Inc. v. American Stores Properties, Inc.,
teachers similarly situated. After the named plaintiffs and 306 Ill. App. 3d 1023, 1032, 715 N.E.2d 804, 240 Ill.
a majority of the other discharged teachers had been Dec. 117 (1999). "A party who receives [**228] all that
offered and accepted reemployment, the board moved for he has [*147] sought generally is not [***17] aggrieved
dismissal. The trial court granted the dismissal, holding by the judgment affording the relief and cannot appeal
that the action was moot. Wheatley, 99 Ill. 2d at 483-84. from it." Deposit Guaranty National Bank v. Roper, 445
On appeal, the appellate court reversed, holding that the U.S. 326, 333, 100 S. Ct. 1166, 1171, 63 L. Ed. 2d 427,
case was not moot because relief could still be [***15] 436 (1980), citing Public Service Comm'n v. Brashear
granted to the teachers who had not been offered Freight Lines, Inc., 306 U.S. 204, 59 S. Ct. 480, 83 L. Ed.
reemployment. In affirming the dismissal, our supreme 608 (1939).
court concluded that the named plaintiffs could not
maintain the action because they were no longer proper This court recently addressed the question of the
class representatives and no remaining class member had effect of an unaccepted tender in the context of a class
moved to substitute himself as a named representative. action suit in Hillenbrand v. Meyer Medical Group, S.C.,
Wheatley, 99 Ill. 2d at 486-87. As here, the named 308 Ill. App. 3d 381, 720 N.E.2d 287, 241 Ill. Dec. 832
plaintiffs in Wheatley had not filed a motion for class (1999). There, we held that no controversy exists between
certification prior to being tendered the relief they sought. parties when the defendant tenders the payment requested
by the plaintiff, plus interest. "The plaintiffs cannot
This court recently followed Wheatley in Yu v. perpetuate the controversy by merely refusing Meyer's
International Business Machines Corp., 314 Ill. App. 3d tender." Hillenbrand, 308 Ill. App. 3d at 389.
892, 732 N.E.2d 1173, 247 Ill. Dec. 841 (2000). There, Consequently, the payment tendered by Meyer made the
plaintiff had bought a computer system from the plaintiffs' individual claims moot even though they did
defendants after being assured that the system was "Y2K not accept it.
compliant."
The court in Hillenbrand addressed a situation in
Upon learning that the computer system required an which the defendant's tender to the plaintiffs occurred
expensive upgrade to make it "Y2K compliant," plaintiff prior to class certification, but while a motion for
filed a class action suit against the defendants on behalf certification was pending. The court held that when
of all purchasers of the particular computer system. The [***18] a motion for class certification has been pursued
defendants upgraded the plaintiff's computer system at no with reasonable diligence and is pending in court, a case
charge after the class action suit was filed but before does [*148] not become moot merely because of the
plaintiff moved for class certification. This court affirmed tender to the named plaintiffs of their individual money
[***16] the dismissal of the suit, finding that the plaintiff damages. Under those circumstances, the trial court is
was no longer an appropriate representative of the obligated to rule on the pending motion for class
interests of the class. "'"If none of the named plaintiffs certification before considering the effect of the
purporting to represent a class establishes the requisite of defendant's tender of the named plaintiff's individual
a case or controversy with the defendants, none may seek claims. "To hold otherwise would allow a party to avoid
relief on behalf of himself or any other member of the ever defending a class action suit by simply tendering
Page 6
323 Ill. App. 3d 138, *148; 751 N.E.2d 221, **228;
payment to the named plaintiffs, in each class action filed action to pursue their individual claims. A
against it, prior to the trial court's ruling on their motion separate consideration, distinct from their
for class certification." Hillenbrand, 308 Ill. App. 3d at private interests, is the responsibility of
389-90, adopting Susman v. Lincoln American Corp., 587 named plaintiffs to represent the collective
F.2d 866, 870 (7th Cir, 1978), cert. denied, 445 U.S. 942, interests of the putative class. Two other
100 S. Ct. 1336, 63 L. Ed. 2d 775 (1980). The court also interests are implicated: the rights of
held that the plaintiffs were not entitled to conduct putative class members as potential
discovery in order to determine the identity of other class intervenors, and the responsibilities of a
members or representatives. Hillenbrand, 308 Ill. App. district court to protect both the absent
3d at 392. class and the integrity of the judicial
process by monitoring the actions of the
In Susman, the defendant tendered payment to the parties before it." Roper, 445 U.S. at 331,
named class representatives [***19] during the pendency 100 S. Ct. at 1170, 63 L. Ed. 2d at 435.
of the plaintiff's motion for class certification. The named
plaintiffs refused the tender but the district court
dismissed the class action complaints as being moot. In The [***21] Court then held that the named
reversing the dismissal, the court of appeals pointed out plaintiffs' "individual interest in the litigation - as
that, in addition to the interests of the named plaintiffs, distinguished from whatever may be their representative
"the interests of the unnamed class members are before responsibilities to the putative class - is sufficient to
the court during the pendency of a motion for class permit their appeal of the adverse certification ruling."
certification." Susman, 587 F.2d at 869. Because of this, (Emphasis omitted.) Roper, 445 U.S. at 340, 100 S. Ct. at
"when a motion for class certification has been pursued 1175, 63 L. Ed. 2d at 440.
with reasonable diligence and is then pending before the
district court, a case does not become moot merely From these cases, it can be seen that whether a
because 'of the tender to the named plaintiffs of their motion to certify a class has been filed is an important
individual money damages. The district court *** should consideration in determining the effect a tender offer has
hear and decide that motion prior to deciding whether or on a class action suit. Section 2-802 (a) of the Code of
not the case is mooted by the tender." Susman, 587 F.2d Civil Procedure provides that "as soon as practicable after
at 870. the commencement of an action brought as a class action,
the court shall determine by order whether it may be so
In Deposit Guaranty National Bank v. Roper, 445 maintained." 735 ILCS 5/2-802(a)(West 1998). This
U.S. 326, 100 S. Ct. 1166, 63 L. Ed. 2d 427 (1980), the language mirrors that of Federal Rule of Civil Procedure
defendant made an unaccepted tender offer, in settlement 23 (c)(1). Case law also requires that motions to certify a
of the individual putative representatives' claims after the class be filed expeditiously, especially in cases where the
district court denied the plaintiffs' motion to certify named representatives' claims may become moot.
[***20] the class. The district court entered judgment in "Prompt decision one way or the other is imperative not
favor of the plaintiffs, over their objections, and then only so that the parties know whose interests are at issue
dismissed the action. The federal court of appeals but also so that representative [***22] [*149] plaintiffs
reversed. The Supreme [**229] Court granted with live claims may be substituted for those whose
certiorari, limited to the question of mootness. claims have become moot." Nelson v. Murphy, 44 F.3d
497, 500 (7th Cir. 1995).
"We begin by identifying the interests to
be considered when questions touching on "'As soon as practicable' does not mean *** that a
justiciability are presented in the court [must] delay ruling on a motion to dismiss until
class-action context. First is the interest of after it has ruled on the issue of class certification." Dixon
the named plaintiffs: their personal stake v. Mercury Finance Co., 296 Ill. App. 3d 353, 360, 694
in the substantive controversy and their N.E.2d 693, 230 Ill. Dec. 724 (1998), citing Schlessinger
related right as litigants in a federal court v. Olsen, 86 Ill. 2d 314, 320, 427 N.E.2d 122, 56 Ill. Dec.
to employ in appropriate circumstances 42 (1981). In Dixon, the plaintiffs delayed moving for
the procedural device of a Rule 23 class class certification until after the defendants had made a
Page 7
323 Ill. App. 3d 138, *149; 751 N.E.2d 221, **229;
number of motions, including one for summary 870 (7th Cir. 1978), cert. denied, 445 U.S.
judgment. Summary judgment was entered after the 942, 100 S. Ct. 1336, 1337, 63 L. Ed.
plaintiffs filed a motion for class certification but before [*150] 2d 775 (1980). As the Seventh
the trial court ruled on that motion. The appellate court Circuit explained, 'Just as necessity
affirmed the trial court's order granting the defendant's required the development of the relation
motion for summary judgment. The appellate court back doctrine in cases where the
reasoned that the plaintiffs suffered no prejudice from underlying factual situation naturally
this procedure because, if the appellate court were to changes so rapidly that the courts cannot
reverse the summary judgment order, plaintiffs could still keep up, so necessity compels a similar
move to certify a class. Dixon, 296 Ill. App. 3d at 361. result [where defendants tender full
[***23] amount of recovery to individual plaintiffs
while the motion for certification is still
The opinion in Lusardi v. Xerox Corp., 975 F.2d 964 pending.]' Susman, 587 F.2d at 870; see
(3d Cir. 1992), has an excellent discussion of the also Zeidman, 651 F.2d at 1050 [***25]
evolution of the mootness doctrine in the context of class (noting that tender to successive named
action suits. The "relation back" doctrine is an exception plaintiffs by a wealthy defendant could, as
to the mootness rule and it is applicable to transitory a practical matter, make a decision on
claims. "Some [**230] claims are so inherently class certification just as difficult to
transitory that the trial court will not have even enough produce as it was in Gerstein)." Lusardi,
time to rule on a motion for class certification before the 975 F.2d at 982.
proposed representative's individual interest expires."
United States Parole Comm'n v. Geraghty, 445 U.S. 388,
399, 100 S. Ct. 1202, 1210, 63 L. Ed. 2d 479, 492 (1980), The Lusardi court pointed out that all of the cases
citing Gerstein v. Pugh, 420 U.S. 103, 110 n.1, 95 S. Ct. cited "still require the named plaintiff to have a personal
854, 861 n.h, 43 L. Ed. 2d 54, 63 n.h (1975). Under these stake when the class certification motion at issue was
circumstances, a trial court may decide an outstanding filed. Just as appellate review may relate back to an
class certification motion even though the named plaintiff adverse certification decision made when plaintiffs had a
no longer has a live individual claim. Geraghty was live claim, so district court review of a pending
decided contemporaneously with Roper. certification motion relates back to its filing, if plaintiff
had a live claim at that time." (Emphasis added.) Lusardi,
After discussing Geraghty, the Lusardi opinion went 975 F.2d at 982. The defendant in Lusardi had tendered
on: the named representative the individual damages he had
sought and he accepted the tender prior to filing a motion
"Roper injected concerns about claims for class certification. The court of appeals held that the
that, while not expiring naturally, were district court correctly dismissed the motion for class
deliberately mooted [***24] by certification "even if Xerox engaged in deliberate efforts
defendants who could afford to 'pick off' to prevent class formation." Lusardi, 975 F.2d at 982
successive plaintiffs and forestall the n.31. "Without a rule that plaintiff have a live claim at
formation of a class. Combining these [***26] least when the motion to certify is filed, the
innovations, some courts extended the 'case or controversy' requirement would be almost
'relation back' doctrine to situations where completely eviscerated in the class action context, since
the individual claims became moot due to almost anybody might be deemed to have standing to
tender of full settlement before the district move to certify a class." Lusardi, 975 F.2d at 983.
court was reasonably able to reach the
class certification question. See, e.g., Wheatley, Jankousky Yu and Lusardi all held that
Wilson v. Secretary of Health & Human when a named plaintiff accepts the tender, he no longer is
Servs., 671 F.2d 673, 679 (1st Cir. 1982); a proper representative of the class and the class action is
Zeidman v. J. Ray McDermott & Co., 651 dismissed unless a new named representative is
F.2d 1030 (5th Cir. 1981); Susman v. substituted. These cases also show that, in the absence of
Lincoln American Corp., 587 F.2d 866, a court order to the contrary, it is permissible for
Page 8
323 Ill. App. 3d 138, *150; 751 N.E.2d 221, **230;
defendants to tender full amount of recovery [**231] to this. Therefore, when defendant tendered plaintiff's
named plaintiffs and putative members of the class prior recoverable monetary damages, plaintiff's right to
to the filing of a motion for class certification. This is true proceed in this matter as a class action became moot.
even if the purpose behind making the tender is to Hillenbrand, 308 Ill. App. 3d at 391-92.
prevent class formation. The fact that, in the case sub
judice, Time made a tender to the entire subclass rather Consequently, he is no longer a proper class
than only to the named representative does not change representative. Lusardi, 975 F.2d at 984. As Arriola has
our analysis. not established the requisite of a case or controversy with
Time, he may not seek relief on behalf of any other
The analysis is different in cases where a motion for member of the [***29] class. Yu 314 Ill. App. 3d at
class certification has been filed. If the named 898-99. As no remaining class member has moved to
representative's claims become moot after the motion for substitute himself as a named representative, the class
class certification has [***27] been granted, the case is action claims are dismissed. Wheatley, 99 Ill. 2d at
not moot as to the remaining class members. Franks v. 486-87.
Bowman [*151] Transportation Co., 424 U.S. 747,
755-56, 96 S. Ct. 1251, 1259-60, 47 L. Ed. 2d 444, Our holding in this case is largely based on the
456-57 (1976). If, after a named representative's motion failure of the plaintiff to file a motion to certify a class
for class certification has been denied, judgment is and the lengthy delay between (1) the day the complaint
entered in his favor after he has rejected tender, he may was filed (August 30, 1993), (2) the day defendant filed
still appeal the denial of his motion for class certification. the motion to dismiss (November 4, 1994), and (3) the
Roper, 445 U.S. at 332-36, 100 S. Ct. at 1170-73, 63 L. day the trial court granted that motion (May 15, 1995).
Ed. 2d at 435-38. Had the defendant tendered payment to the named
plaintiff early in the litigation [*152] and then sought to
If a defendant tenders full amount of recovery to a dismiss this action, the result could have been very
named representative while a motion for class different. As the Supreme Court held in Roper, one of
certification is pending, and that motion has been pursued [**232] the interests to be considered by courts when
with reasonable diligence, the trial court must still rule on presented with a question concerning justiciability in a
the motion for class certification. Hillenbrand, 308 Ill. class action case is "the responsibilities of a district court
App. 3d at 391-92; Susman, 587 F.2d at 870. "These [last to protect both the absent class and the integrity of the
two] exceptions (in Roper and Susman) to the general judicial process by monitoring the actions of the parties
mootness rule are intended to ensure proper resolution of before it." Roper, 445 U.S. at 331, 63 L. Ed. 2d at 435,
any certification motion filed at a time when the named 100 S. Ct. at 1171.
plaintiff's own claims were still at issue." Lusardi, 975
F.2d at 975. Under this precept, if a defendant in a class action
[***30] case were to tender the full amount of recovery
None of the above three exceptions to the mootness to the named plaintiff before the court has had a
doctrine [***28] applies to plaintiff. In the present case, reasonable opportunity to consider and decide a motion
plaintiff never filed a motion for class certification. The for certification, the court would have the authority to
defendant filed a motion to dismiss more than 14 months deny a motion to dismiss based on the unaccepted tender.
after the complaint was filed. The trial court granted this The court could then proceed to determine the issue of
motion more than 20 months after the complaint was class certification at the appropriate time. As the court
filed. said in Susman: "If the class action device is to work, the
courts must have a reasonable opportunity to consider
Taking all of the above into consideration, it is clear and decide a motion for certification." Susman, 587 F.2d
that the instant plaintiff has not pursued a motion for at 870. It is implicit in this holding that the plaintiff must
class certification with reasonable diligence. While have a reasonable opportunity to file a motion for
Hillenbrand, Susman and Roper allow plaintiffs who certification. The trial court in the instant case had a great
have refused tenders of full settlement to appeal orders deal of time in which to consider a motion for
dismissing class action suits to do so, plaintiff must have certification, had one been filed. As defendant tendered
filed a motion for class certification and pursued it with plaintiff the recoverable monetary damages he sought
reasonable diligence. We hold that plaintiff did not do
Page 9
323 Ill. App. 3d 138, *152; 751 N.E.2d 221, **232;
prior to plaintiff filing a motion to certify the class, we Illinois must demonstrate the existence of an Illinois
remand this matter to the trial court to determine the subclass sufficiently numerous to meet the numerosity
plaintiff's individual damages, confined to $ 554.40 plus prerequisites of section 2-801 of the Illinois Code of Civil
interest from the date plaintiff sent that amount to Time Procedure ( 735 ILCS 5/2-801 (West 1998)) in order to
to the date Time tendered that amount to plaintiff. We have a national class certified. Under the circumstances
find that [***31] plaintiff is not entitled to recover costs present here, we find that it is appropriate to not answer
or attorney fees for the reasons stated in Hillenbrand, 308 the certified question as any answer we give would be
Ill. App. 3d at 389-90. "advisory and provisional." Dowd & Dowd, Ltd. v.
Gleason, 181 Ill. 2d at 469-70. The answer to this
Finally, based on the facts of this case and the question is best left for another day and another case.
foregoing analysis, we answer the certified question in
the negative as it applies to this particular case. However, Dismissed in part and remanded in part.
we do not answer the question of whether a named
representative in a multi-state class action suit filed in GREIMAN, and THEIS, JJ., concur.
Page 1
ELOUISE PEPION COBELL, et al., Plaintiffs, v. GALE A. NORTON, Secretary of

the Interior, et al., Defendants.
Civil Action Number 96-1285 (RCL)
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
212 F.R.D. 14; 2002 U.S. Dist. LEXIS 24500
December 23, 2002, Filed
SUBSEQUENT HISTORY: Motions ruled upon by Kilpatrick Stockton, LLP, Washington DC USA.
Cobell v. Norton, 212 F.R.D. 24, 2002 U.S. Dist. LEXIS
24499 (D.D.C., 2002) For Mildred Cleghorn, PLAINTIFF: Keith M Harper,
Reconsideration denied by Cobell v. Norton, 213 F.R.D. Native American Rights Fund, Washington DC USA.
33, 2003 U.S. Dist. LEXIS 2813 (D.D.C., 2003)
For Mildred Cleghorn, PLAINTIFF: Dennis Marc
Amended by Cobell v. Norton, 2005 U.S. Dist. LEXIS
Gingold, Washington DC USA.
13757 (D.D.C., July 12, 2005)
For Mildred Cleghorn, PLAINTIFF: Elliott H Levitas,
PRIOR HISTORY: Cobell v. Norton, 231 F. Supp. 2d
Kilpatrick Stockton, LLP, Washington DC USA.
315, 2002 U.S. Dist. LEXIS 21729 (D.D.C., 2002)
For Thomas Maulson, PLAINTIFF: Keith M Harper,
DISPOSITION: [**1] Request granted. Native American Rights Fund, Washington DC USA.
For Thomas Maulson, PLAINTIFF: Dennis Marc

COUNSEL: For Elouise Pepion Cobell, PLAINTIFF: Gingold, Washington DC USA.
Keith M Harper, Native American Rights Fund,
Washington DC USA. For Thomas Maulson, PLAINTIFF: Elliott H Levitas,
For Elouise Pepion Cobell, PLAINTIFF: Dennis Marc
Gingold, Washington DC USA. For James Louis Larose, PLAINTIFF: Keith M Harper,
Native American Rights Fund, Washington DC USA.
For Elouise Pepion Cobell, PLAINTIFF: Elliott H
Levitas, Kilpatrick Stockton, LLP, Washington DC USA. For James Louis Larose, PLAINTIFF: Dennis Marc
Gingold, Washington DC USA.
For Earl Old Person, PLAINTIFF: Keith M Harper,
Native American Rights Fund, Washington DC USA. For James Louis Larose, PLAINTIFF: Elliott H Levitas,
For Earl Old Person, PLAINTIFF: Dennis Marc Gingold,
Washington DC USA. For Kevin Gover, Assistant Secretary of the Interior,
FEDERAL DEFENDANT: Mark E Nagle, US Attorney's
For Earl Old Person, PLAINTIFF: Elliott H Levitas, Office, Washington DC USA.
Page 2
212 F.R.D. 14, *; 2002 U.S. Dist. LEXIS 24500, **1
For Kevin Gover, Assistant Secretary of the Interior, For Kevin Gover, Assistant Secretary of the Interior,
FEDERAL DEFENDANT: Robert Craig Lawrence, US FEDERAL DEFENDANT: Cynthia L Alexander, US
Attorney's Office, Washington DC USA. Department of Justice Commercial Litigation Branch,
Washington DC USA..
For Kevin Gover, Assistant Secretary of the Interior,
FEDERAL DEFENDANT: J Christopher Kohn, US For Kevin Gover, Assistant Secretary of the Interior,
Department of Justice Commercial, Washington DC FEDERAL DEFENDANT: John Charles Cruden, US
USA. Department of Justice Environment & Natural Resources
Division, Washington DC USA.
FEDERAL DEFENDANT: Brian L Ferrell, US For Kevin Gover, Assistant Secretary of the Interior,
Department of Justice Enrd, Washington DC USA. FEDERAL DEFENDANT: John Stemplewicz, US
Department of Justice Ben Franklin Station, Civil
For Kevin Gover, Assistant Secretary of the Interior, Division, Washington DC USA.
FEDERAL DEFENDANT: Charles Walter Findlay, III,
United States Department of Justice Environment and For Kevin Gover, Assistant Secretary of the Interior,
Natural Resources, Washington DC USA. FEDERAL DEFENDANT: Amalia D Kessler, US
Department of Justice Commercial Litigation Branch,
For Kevin Gover, Assistant Secretary of the Interior, Washington DC USA.
FEDERAL DEFENDANT: Henry A Azar, Jr, US
Department of Justice Federal Programs Branch, For Department of Interior, FEDERAL DEFENDANT:
Washington DC USA. Mark E Nagle, US Attorney's Office, Washington DC
USA.
For Kevin Gover, Assistant Secreary of the Interior,
FEDERAL DEFENDANT: Seth Brandon Shapiro, US For Department of Interior, FEDERAL DEFENDANT:
Department of Justice Civil Division/Ben Franklin Robert Craig Lawrence, US Attorney's Office,
Station, Washington DC USA. Washington DC USA.
For Kevin Gover, Assistant Secretary of the Interior, For Department of Interior, FEDERAL DEFENDANT: J
FEDERAL DEFENDANT: Jonathan Brian New, US Christopher Kohn, US Department of Justice Commercial
Department of Justice Civil Division, Federal Programs Litigation Branch Ben Franklin Station, Washington DC
Branch, Washington DC USA. USA.
For Kevin Gover, Assistant Secretary of the Interior, For Department of Interior, FEDERAL DEFENDANT:
FEDERAL DEFENDANT: Jennifer R Rivera, US Brian L Ferrell, US Department of Justice Enrd, Ben
Department of Justice Civil Division, Washington DC Franklin Station, Washington DC USA.
USA.
For Department of Interior, FEDERAL DEFENDANT:
For Kevin Gover, Assistant Secretary of the Interior, Phillip Martin Seligman, US Department of Justice Civil
FEDERAL DEFENDANT: Sandra Peavier Spooner, US Division, Ben Franklin Station, Washington DC USA.
Department of Justice Commercial Litigation Branch,
Washington DC USA. For Department of Interior, FEDERAL DEFENDANT:
Henry A Azar, Jr, US Department of Justice Federal
For Kevin Gover, Assistant Secretary of the Interior, Programs Branch, Washington DC USA.
FEDERAL DEFENDANT: David J Gottesman, US
Department of Justice Commercial Litigation Branch, For Department of Interior, FEDERAL DEFENDANT:
Washington DC USA. Michael John Quinn, US Department of Justice Civil
Division/Ben Franklin Station, Washington DC USA.
FEDERAL DEFENDANT: Peter Blaze Miller, US For Department of Interior, FEDERAL DEFENDANT:
Department of Justice Commercial Litigation Branch, Seth Brandon Shapiro, US Department of Justice Civil
Washington DC USA. Division/Ben Franklin Station, Washington DC USA.
Page 3
212 F.R.D. 14, *; 2002 U.S. Dist. LEXIS 24500, **1
For Department of Interior, FEDERAL DEFENDANT: For Gale Norton, Secretary of the Interior, FEDERAL
Jonathan Brian New, US Department of Justice Civil DEFENDANT: J Christopher Kohn, US Department of
Division, Federal Programs Branch, Washington DC Justice Commercial Litigation Branch Ben Franklin
USA. Station, Washington DC USA.
Jennifer R Rivera, US Department of Justice Civil DEFENDANT: Mark E Nagle, US Attorney's Office,
Division, Washington DC USA. Washington DC USA.
Sandra Peavier Spooner, US Department of Justice DEFENDANT: Henry A Azar, Jr, US Department of
Commercial Litigation Branch, Washington DC USA. Justice Federal Programs Branch, Washington DC USA.
John Warshawsky, US Department of Justice DEFENDANT: Seth Brandon Shapiro, US Department of
Commercial Litigation Branch, Washington DC USA. Justice Civil Division/Ben Franklin Station, Washington
DC USA.
For Department of Interior, FEDERAL DEFENDANT:
David J Gottesman, US Department of Justice For Gale Norton, Secretary of the Interior, FEDERAL
Commercial Litigation Branch, Washington DC USA. DEFENDANT: Jonathan Brian New, US Department of
Justice Civil Division, Federal Programs Branch,
For Department of Interior, FEDERAL DEFENDANT: Washington DC USA.
Peter Blaze Miller, US Department of Justice
Commercial Litigation Branch, Washington DC USA. For Gale Norton, Secretary of the Interior, FEDERAL
DEFENDANT: Jennifer R Rivera, US Department of
For Department of Interior, FEDERAL DEFENDANT: Justice Civil Division, Washington DC USA.
Terry M Petrie, US Department of Justice Commercial
Litigation Branch, Washington DC USA. For Gale Norton, Secretary of the Interior, FEDERAL
DEFENDANT: Herbert Lawrence Fenster, McKenna &
For Department of Interior, FEDERAL DEFENDANT: Cuneo, LLP, Washington DC USA.
John J Siemietkowski, US Department of Justice
Commercial Litigation Branch, Washington DC USA. For Gale Norton, Secretary of the Interior, FEDERAL
DEFENDANT: Sandra Peavier Spooner, US Department
For Department of Interior, FEDERAL DEFENDANT: of Justice Commercial Litigation Branch, Washington
Tracy Lyle Hilmer, US Department of Justice Civil DC USA.
Division, Washington DC USA.
For Gale Norton, Secretary of the Interior, FEDERAL
For Department of Interior, FEDERAL DEFENDANT: DEFENDANT: David J Gottesman, US Department of
Dodge Wells, US Department of Justice, Washington DC Justice Commercial Litigation Branch, Washington DC
USA. USA.
John Stemplewicz, US Department of Justice Ben DEFENDANT: Peter Blaze Miller, US Department of
Franklin Station, Civil Division, Washington DC USA. Justice Commercial Litigation Branch, Washington DC
USA.
For Gale Norton, Secretary of the Interior, FEDERAL
DEFENDANT: Mark E Nagle, US Attorney's Office, For Gale Norton, Secretary of the Interior, FEDERAL
Washington DC USA. DEFENDANT: Cynthia L Alexander, US Department of
Justice Commercial Litigation Branch, Washington DC
For Gale Norton, Secretary of the Interior, FEDERAL USA.
DEFENDANT: Robert Craig Lawrence, US Attorney's
Office, Washington DC USA. For Gale Norton, Secretary of the Interior, FEDERAL
Page 4
212 F.R.D. 14, *; 2002 U.S. Dist. LEXIS 24500, **1
DEFENDANT: Tracy Lyle Hilmer, US Department of For Edward B Cohen, FEDERAL DEFENDANT: Robert
Justice Civil Division, Washington DC USA. D Luskin, Patton Boggs LLP, Washington DC USA.
For Gale Norton, Secretary of the Interior, FEDERAL For Edward B Cohen, FEDERAL DEFENDANT: Seth
DEFENDANT: Dodge Wells, US Department of Justice, Brandon Shapiro, US Department of Justice Civil
Washington DC USA. Division/Ben Franklin Station, Washington DC USA.
For Gale Norton, Secretary of the Interior, FEDERAL For Edward B Cohen, FEDERAL DEFENDANT:
DEFENDANT: John Stemplewicz, US Department of Jonathan Brian New, US Department of Justice Civil
Justice Ben Franklin Station, Civil Division, Washington Division, Federal Programs Branch, Washington DC
DC USA. USA.
For Gale Norton, Secretary of the Interior, FEDERAL For Edward B Cohen, FEDERAL DEFENDANT:
DEFENDANT: Amalia D Kessler, US Department of Jennifer R Rivera, US Department of Justice Civil
Justice Commercial Litigation Branch, Washington DC Division, Federal Programs Branch, Washington DC
USA. USA.
For John D Leshy, FEDERAL DEFENDANT: Robert D For Edward B Cohen, FEDERAL DEFENDANT: David
Luskin, Patton Boggs LLP, Washington DC USA. J Gottesman, US Department of Justice Civil Division,
Litigation Branch, Washington DC USA.
For John D Leshy, FEDERAL DEFENDANT: Henry A
Azar, Jr, US Department of Justice Federal Programs For Edward B Cohen, FEDERAL DEFENDANT: Peter
Branch, Washington DC USA. Blaze Miller, US Department of Justice Civil Division,
For John D Leshy, FEDERAL DEFENDANT: Seth
Brandon Shapiro, US Department of Justice Civil For Edward B Cohen, FEDERAL DEFENDANT:
Division/Ben Franklin Station, Washington DC USA. Cynthia L Alexander, US Department of Justice
Commercial Litigation Branch, Washington DC USA.
For John D Leshy, FEDERAL DEFENDANT: Jonathan
Brian New, US Department of Justice Civil Division, For Edward B Cohen, FEDERAL DEFENDANT:
Federal Programs Branch, Washington DC USA. Amalia D Kessler, US Department of Justice Commercial
For John D Leshy, FEDERAL DEFENDANT: Jennifer R
Rivera, US Department of Justice Civil Division, For Michael G Rossetti, Counselor to the Secretary,
Washington DC USA. Department of Interior, FEDERAL DEFENDANT:
Elizabeth Wallace Fleming, Preston, Gates, Ellis &
For John D Leshy, FEDERAL DEFENDANT: David J Rouvelas Meeds, Washington DC USA.
Gottesmans, US Department of Justice Federal Programs
Branch, Litigation Branch, Washington DC USA. For Michael G Rossetti, Counselor to the Secretary,
Department of Interior, FEDERAL DEFENDANT:
For John D Leshy, FEDERAL DEFENDANT: Peter Henry A Azar, Jr, US Department of Justice Federal
Blaze Miller, US Department of Justice Commercial Programs Branch, Washington DC USA.
For Michael G Rossetti, Counselor to the Secretary,
For John D Leshy, FEDERAL DEFENDANT: Cynthia L Department of Interior, FEDERAL DEFENDANT: Seth
Alexander, US Department of Justice Commercial Brandon Shapiro, US Department of Justice Civil
Litigation Branch, Washington DC USA. Division/Ben Franklin Station, Washington DC USA.
For John D Leshy, FEDERAL DEFENDANT: Amalia D For Michael G Rossetti, Counselor to the Secretary,
Kessler, US Department of Justice Commercial Litigation Department of Interior, FEDERAL DEFENDANT:
Branch, Washington DC USA. Jonathan Brian New, US Department of Justice Civil
Division, Federal Programs Branch, Washington DC
Page 5
212 F.R.D. 14, *; 2002 U.S. Dist. LEXIS 24500, **1
USA. For Neal McCaleb, Assistant Secretary of the Interior for

Indian Affairs, FEDERAL DEFENDANT: David J
For Michael G Rossetti, Counselor to the Secretary, Gottesman, US Department of Justice Commercial
Department of Interior, FEDERAL DEFENDANT: Litigation Branch, Washington DC USA.
Jennifer R Rivera, US Department of Justice Civil
Division, Washington DC USA. For Neal McCaleb, Assistant Secretary of the Interior for
Indian Affairs, FEDERAL DEFENDANT: Tracy Lyle
For Michael G Rossetti, Counselor to the Secretary, Hilmer, US Department of Justice Civil Division,
Department of Interior, FEDERAL DEFENDANT: Washington DC USA.
David J Gottesman, US Department of Justice
Commercial Litigation Branch, Washington DC USA. For Neal McCaleb, Assistant Secretary of the Interior for
Indian Affairs, FEDERAL DEFENDANT: Dodge Wells,
For Michael G Rossetti, Counselor to the Secretary, US Department of Justice, Washington DC USA.
Department of Interior, FEDERAL DEFENDANT: Peter
Blaze Miller, US Department of Justice Commercial For Eleni M Constantine, NON PARTY: Lawrence H
Litigation Branch, Washington DC USA. Wechsler, Janis, Schuelke & Wechsler, Washington DC
USA.
For Michael G Rossetti, Counselor to the Secretary,
Department of Interior, FEDERAL DEFENDANT: For Roberta McInerney, NON PARTY: Donald Michael
Cynthia L Alexander, US Department of Justice Barnes, Porter, Wright, Morris & Arthur, Washington DC
Commercial Litigation Branch, Washington DC USA. USA.
For Michael G Rossetti, Counselor to the Secretary, For James Regan, NON PARTY: David Booth Beers,
Department of Interior, FEDERAL DEFENDANT: Shea & Gardner, Washington DC USA.
Amalia D Kessler, US Department of Justice Commercial
Litigation Branch, Washington DC USA. For Daniel Mazella, NON PARTY: William Aaron
Dobrovir, Warrenton VA USA.
For Neal McCaleb, Assistant Secretary of the Interior for
Indian Affairs, FEDERAL DEFENDANT: B Michael For Randall Lewis, NON PARTY: Pamela J Marple,
Rauh, Manatt, Phelps & Phillips, LLP, Washington DC Manatt, Phelps & Phillips, LLP, Washington DC USA.
USA.
For United States of America, NON PARTY: Timothy
For Neal McCaleb, Assistant Secretary of the Interior for Patrick Garren, US Department of Justice Civil Rights
Indian Affairs, FEDERAL DEFENDANT: Henry A Division, Washington DC USA.
Azar, Jr, Manatt, US Department of Justice Federal
For Department of the Treasury, NON PARTY: Brian L
Programs Branch, Washington DC USA.
Ferrell, US Department of Justice Enrd, Ben Franklin
For Neal McCaleb, Assistant Secretary of the Interior for Station, Washington DC USA.
Indian Affairs, FEDERAL DEFENDANT: Seth Brandon
For Department of the Treasury, NON PARTY: John
Shapiro, US Department of Justice Civil Division/Ben
Warshawsky, US Department of Justice Commercial
Franklin Station, Washington DC USA.
For Department of the Treasury, NON PARTY: Terry M
Indian Affairs, FEDERAL DEFENDANT: Jonathan
Petrie, US Department of Justice Enrd, General Litigation
Brian New, US Department of Justice Civil Division,
Section, Washington DC USA.
Federal Programs Branch, Washington DC USA.
For Department of the Treasury, NON PARTY: John J
Siemietkowski, US Department of Justice Commercial
Indian Affairs, FEDERAL DEFENDANT: Jennifer R
Rivera, US Department of Justice Civil Division,
Washington DC USA. For Ingrid D Falanga, NON PARTY: Erik Lloyd Kitchen,
Page 6
212 F.R.D. 14, *; 2002 U.S. Dist. LEXIS 24500, **1
Steptoe & Johnson, LLP, Washington DC USA. Briggs, Jr, Ross, Dixon & Bell, LLP, Washington DC
USA.
For Timothy S Elliott, Deputy Assistant Solicitor,
Department of the Interior, NON PARTY: Martha Purcell For Phillip A Brooks, NON PARTY: Laura C Zimmitti,
Rogers, Ober, Kaler, Grimes & Shriver, Washington DC Ross, Dixon & Bell, LLP, Washington DC USA.
USA.
For John S Most, NON PARTY: Thomas Edward
For Edith R Blackwell, Deputy Associate Solicitor, Wilson, Berliner, Corcoran & Rowe, LLP, Washington
Department of Interior, NON PARTY: Michael R DC USA.
Bromwich, Fried, Frank, Harris, Shriver & Jacobson,
Washington DC USA. For Glenn Schumaker, NON PARTY: Plato Cacheris,
The Law Offices of Plato Cacheris, Washington DC
For Edith R Blackwell, Deputy Associate Solicitor, USA.
Department of Interior, NON PARTY: Amy Berman
Jackson, Trout & Richards, PLLC, Washington DC USA. For Glenn Schumaker, NON PARTY: Sydney Jean
Hoffmann, The Law Offices of Plato Cacheris,
For Robert Lamb, NON PARTY: Roger Eric Zuckerman, Washington DC USA.
Zuckerman Spaeder, LLP, Washington DC USA.
For Glenn Schumaker, NON PARTY: John Francis
For James Douglas, Chief of Staff, Office of the Special Hundley, The Law Offices of Plato Cacheris, Washington
Trustee for American Indians, United States Department DC USA.
of the Interior, NON PARTY: Kathleen Elizabeth
Voelker, Washington DC USA. For Chester Mills, NON PARTY: Mary Lou Soller,
Miller & Chevalier, Chartered, Washington DC USA.
For Dominic Nessi, NON PARTY: Stephen M Byers,
Crowell & Moring, LLP, Washington DC USA. For Lois J Schiffer, NON PARTY: Jeffrey David
Robinson, Baach, Robinson & Lewis, Washington DC
For M Sharon Blackwell, NON PARTY: Michael R USA.
Bromwich, Fried, Frank, Harris, Shriver & Jacobson,
Washington DC USA. For Lois J Schiffer, NON PARTY: Melissa Heltmann
McNiven, Baach, Robinson & Lewis, Washington DC
For Hilda Manuel, NON PARTY: Leslie B Kierman, USA.
Zuckerman Spaeder, LLP, Washington DC USA.
For Anne Shields, NON PARTY: Dwight Phillip
For Steven Swanson, NON PARTY: L Barrett Boss, Bostwick, Baach, Robinson & Lewis, Washington DC
Asbill, Moffitt & Boss, Chartered, Washington DC USA. USA.
For John Berry, NON PARTY: Plato Cacheris, The Law For Anne Shields, NON PARTY: Melissa Heltmann
Offices of Plato Cacheris, Washington DC USA. McNiven, Baach, Robinson & Lewis, Washington DC
USA.
For John Berry, NON PARTY: Sydney Jean Hoffmann,
The Law Offices of Plato Cacheris, Washington DC For David Shuey, NON PARTY: Larry Allen Nathans,
USA. Bennett & Nathans, LLP, Baltimore MD USA.
For John Berry, NON PARTY: John Francis Hundley, For David Shuey, NON PARTY: Robert W Biddle,
The Law Offices of Plato Cacheris, Washington DC Bennett & Nathans, LLP, Baltimore MD USA.
USA.
For Terry Steele, NON PARTY: John Kenneth Zwerling,
For James A Eichner, NON PARTY: Barbara Ann Van Zwerling & Kemler, PC. Alexandria VA USA.
Gelder, Wiley Rein & Fielding, LLP, Washington DC
USA. For Terrance Virden, NON PARTY: Mary Lou Soller,
Miller & Chevalier, Chartered, Washington DC USA.
For Phillip A Brooks, NON PARTY: William Holt
Page 7
212 F.R.D. 14, *; 2002 U.S. Dist. LEXIS 24500, **1
For Deborah Maddox, NON PARTY: Lisa Bondareff Hogan & Hartson Commercial Practice, McLean VA
Kemler, Zwerling & Kemler, PC, Alexandria VA USA. USA.
For John A Bryson, NON PARTY: Russell David For Will B Perimutter, NON PARTY: William Leonard
Duncan, Coburn & Schertler, Washington DC USA. Gardner, Morgan, Lewis & Bockius, LLP, Washington
DC USA.
For John A Bryson, NON PARTY: Lisa Ann Freiman
Fishburg, Coburn & Schertler, Washington DC USA. For Will B Perimutter, NON PARTY: Brian Michael
Privor, Morgan, Lewis & Bockius, LLP, Washington DC
For William G Myers, III, NON PARTY: E Lawrence USA.
Barcella, Jr, Paul, Hastings, Janofsky & Walker, LLP,
Washington DC USA. For Alan Lee Balaran, SPECIAL MASTER: Alan Lee
Balaran, Washington DC USA.
For David Shilton, NON PARTY: Russell David Duncan,
Coburn & Schertler, Washington DC USA. For Dow Jones & Company, Inc, MOVANT: Richard
Lee CYS, Davis Wright Tremaine, Washington DC USA.
For David Shilton, NON PARTY: Lisa Ann Freiman
Fishberg, Coburn & Schertler, Washington DC USA. For Dow Jones & Company, Inc, MOVANT: Jonathan K
Tycko, Tycko Zavareei, LLP, Washington DC USA.
For Daryl W White, NON PARTY: David Sidney
Krakoff, Beveridge & Diamond, PC, Washington DC For Kenneth F Rossman, MOVANT: Christopher B
USA. Mead, London & Mead, Washington DC USA.
For Daryl W White, NON PARTY: Alessio D For Albert Lee Bynum, MOVANT, Pro se, Gadsden AL
Evangelista, Beveridge & Diamond, PC, Washington DC USA.
USA.
For Albert Lee Bynum, MOVANT: Nathaniel Davis
For Tom C Clark, II, NON PARTY: Michael D Owens, Sr, Anniston AL USA.
Goodstein, Resolution Law Group, PC, Washington DC
USA. For Intertribal Monitoring Association for Indian Trust
Funds, MOVANT: Jill Elise Grant, Washington DC
For Sabrina McCarthy, NON PARTY: Bradley Stuart USA.
Lui, Morrison & Foerster, LLP, McLean VA USA.
For Native American Industrial Distributors, Inc,
For Peter D Coppelman, NON PARTY: Stanley M MOVANT: Neil James Ruther, Towson MD USA.
Brand, Brand & Frulla, PC, Washington DC USA.
JUDGES: Royce C. Lamberth, United States District
For Peter D Coppelman, NON PARTY: Andrew Dewald Judge.
Herman, Brand & Frulla, PC, Washington DC USA.
OPINION BY: Royce C. Lamberth
For Michael B Jandreau, NON PARTY: Marshall L
Matz, Olsson, Frank & Weeda, PC, Washington DC OPINION
USA.
For Kenneth Paquin, NON PARTY: Jefferson McClure [*15] MEMORANDUM AND ORDER
Gray, Arent, Fox, Kintner, Plotkin & Kahn, Washington
DC USA. This matter comes before the Court on plaintiffs'
motion for a preliminary injunction [1534-2], which was
For Kenneth Russell, NON PARTY: Jefferson McClure filed on September 20, 2002, and other related motions.
Gray, Arent, Fox, Kintner, Plotkin & Kahn, Washington During oral argument, this Court directed both parties to
DC USA. prepare supplemental briefs on the issues raised by
plaintiffs' motion. Those briefs have been filed with the
For Accenture LLP, NON PARTY: Emily M Yinger,
Page 8
212 F.R.D. 14, *15; 2002 U.S. Dist. LEXIS 24500, **1
Court. In their supplemental reply brief [1651-1], permitted to participate in the administrative
plaintiffs amended their motion to include an alternative process, pending further rulings from the Court.
request for entry of an order under Rule 23(d) of the See Order dated December 12, 2001.
Federal Rules of Civil Procedure. 1 Upon consideration
of plaintiffs' motion, [*16] the opposition thereto, On September 10, 2002, in a motion filed with this
defendants' reply brief, the oral arguments of counsel, the Court, defendants announced that they were preparing to
supplemental briefs filed by the parties, and the send historical statements of account to nearly eight
applicable law, the Court finds that entry of an order thousand individual Indian account holders, among which
under Federal Rule of Civil Procedure 23(d) is were class members in this litigation. Defendants did not
appropriate at this time. seek prior authorization from the Court regarding these
communications with class members. In response,
1 The caption of plaintiffs' supplemental reply plaintiffs moved for a temporary restraining order and
brief states that relief is sought under Rule 23(e). preliminary injunction barring defendants from sending
This is obviously a typographical error by the historical statements of account to the individual
plaintiffs, because subsection (e) governs Indian account holders without first obtaining permission
dismissal and settlement of class actions, not from this Court. On October 9 and 28, 2002, while [**4]
orders to be entered in pending class actions. The these motions were pending before the Court, defendants
remainder of the brief makes it clear that relief is mailed historical statements of account to approximately
sought under subsection (d) of Rule 23. 1200 individual account holders. A cover letter mailed
with each of the statements contained the following
[**2] I. BACKGROUND language:
On March 1, 2000, defendants moved for entry of an If you have concerns about the
order by this Court in conjunction with a public Historical Statement of Account included
administrative process that defendants planned to hold. with this letter or if you believe it is in
Because the administrative process involved a series of error, you may wish to file a challenge
public meetings at which class members in this litigation with OHTA [the Office of Historical Trust
would be afforded an opportunity for notice and Accounting]. . . . . If you do not
comment, defendants requested an order finding that any challenge the historical account
communications between defendants (or their counsel) statement or request an extension
and class members that occurred in the course of this within 60 calendar days of the postmark
administrative process would not violate ethical rules on the envelope containing this letter,
prohibiting attorney contacts with represented parties. the enclosed Historical Statement of
This Court granted defendants' motion in an order filed Account will be final and cannot be
on March 28, 2000. In that order, the Court explained that appealed . . . . You may appeal OHTA's
although it found that the communications that final response to the Interior Board of
defendants anticipated would occur during the Indian Appeals (IBIA) by filing a Notice
administrative process would not contravene the of Appeal with IBIA within 30 calendar
applicable ethical rules, it would "make[] no ruling at this days of the date you receive OHTA's
time on any other legal question presented by response. [emphasis in original].
[defendants'] Proposed Notice." On December 11, 2001,
defendants filed an emergency motion for entry of an
order by this Court clarifying the ethical obligations of On October 10, 2002, plaintiffs filed a request for
their attorneys in conjunction with another public referral of defense counsel to the disciplinary panel of
administrative [**3] process that defendants planned to this Court for violation of attorney ethics rules. On
hold. The Court granted defendants' motion the following November 1, this Court heard oral arguments from
day. 2 counsel on the issues raised by plaintiffs' motion [**5]
for a preliminary injunction, and ordered both parties to
2 None of the attorneys who were at that time file supplemental briefs with the Court. Defendants filed
subject to a motion for an order to show cause their supplemental brief on November 15, 2002. Plaintiffs
(except for Solicitor William G. Myers) were
Page 9
212 F.R.D. 14, *16; 2002 U.S. Dist. LEXIS 24500, **5
filed a brief in opposition thereto on December 2, 2002 non-appealable historical statements of account. In effect,
renewing their request for a preliminary injunction and, these members will be involuntarily opted out of Phase II
in the alternative, for an order from this Court under Rule of this litigation, because they will not receive the
23 of the Federal Rules of Civil Procedure. Defendants benefits of any remedy that might be ordered. It is thus
filed their reply brief on December 9. difficult [**7] for this Court to imagine a form of
communication that would relate more directly to the
[*17] II. ANALYSIS claims involved in this litigation. However, in none of the
briefs that defendants have filed with this Court is there
A. Plaintiffs' Request for an Order Pursuant to Rule any attempt to defend the proposition that defendants
23(d) of the Federal Rules of Civil Procedure may engage in communications that purport to extinguish
the rights of class members. Defendants also fail to
The premiere treatise on class actions speaks directly
explain why they failed to seek prior authorization from
to the issue now before the Court:
this Court to engage in communications with class
members, as they did when this issue arose in 2000 and
After a court has certified a case as a
2001. 3
class action and the time for exclusions
has expired, the attorney for the named 3 The sole attempt at an explanation comes in a
plaintiff represents all class members who footnote in defendants' supplemental opposition
are otherwise unrepresented by counsel. brief, in which defendants feebly assert that "the
Defense counsel must observe the rules of communications involved in those motions were
ethical conduct in these circumstances and different from the communication involved here
communicate with the opposing parties where Interior believes it is required to transmit
through their attorney, who is counsel for the historical statements of account to the account
the class. . . . holders for whom they were prepared." Defs.'
Supp. Opp. Br. at 3 n.3.
The court may allow the defendant to
communicate with actual class members in First, it is incorrect to assert that in their
the ordinary course of business, as long as previous motions, defendants did not represent to
the communications do not relate [**6] to the Court that the communications for which they
the claims involved in the litigation. . . . sought prior authorization were not "required." To
Furthermore, [the] defendant may not the contrary, on the first page of their 2000
attempt to solicit dismissals with motion, defendants argued that "the public
prejudice, releases, or covenants not to sue administrative process is authorized by, and
from individual members of the existing necessary to implement, the American Indian
class after the class has been certified and Trust Fund Management Reform Act of 1994 . . .
the time for exclusion has expired, except and other congressional actions." Mot. for Entry
under conditions specified by the court to of an Order Regarding a Public Administrative
protect the rights of absent class members. Process to Implement the American Indian Trust
Fund Management Reform Act of 1994 ("Defs.'
2000 Mot.") at 1. Despite their belief that the
3 NEWBERG ON CLASS ACTIONS § 15.18 (3d
contacts were not only appropriate but required by
ed. 1992). The statements mailed by defendants to
law, defendants did not proceed with these
individual class members have the effect of extinguishing
communications until they had obtained an order
the class members' rights to a full and accurate
from this Court that the communications would
accounting after defendants have "fixed the system." The
not constitute a violation of Rule 4.2(a) "or any
entitlement of class members to such an accounting is the
other rule of professional conduct." Id. Similarly,
subject of Phase II of current litigation. Because of the
defendants asserted that the second administrative
wording in the notices included in the statements, any
process was "based on the Secretary's statutory
ruling by this Court following Phase II will not apply to
duty -- recognized by this Court -- to administer
the class members who have received these statements
IIM trust accounts, and is being undertaken to
because the statements purport to be final and
Page 10
212 F.R.D. 14, *17; 2002 U.S. Dist. LEXIS 24500, **7
improve the management of IIM trust assets in litigation. The order thus did not impinge
accordance with this Court's directives." Interior on the Bank's ability to speak with
Defs.' Emergency Mot. for Entry of an Order customers about routine business matters
Clarifying Ethical Obligations of Attorneys unrelated to the lawsuit.
Regarding Public Administrative Notice at 5.
Thus, defendants' purported distinction between Id. at 1206.
the present situation and the situations in 2000
and 2001 is an illusory one. The facts of the instant case do not differ
significantly from Kleiner. 4 In both cases, while the
Second, as the Court repeatedly stated during issue of contacts with class members was pending before
oral argument, the impropriety at issue did not the court, the defendants engaged in communications
consist of the sending of the statements of with individual class members, the effect of which was to
account, but rather of the inclusion of a notice extinguish the very rights of the class members that were
purporting to extinguish the rights of class at issue in the ongoing class action. It is true that most of
members. The Court certainly hopes that the class members contacted in Kleiner had not yet
defendants are not seriously attempting to argue received notice of the class action, because the class had
that they believe that they were somehow only been recently certified. But this distinction does not
"required to transmit" such notices. diminish its applicability to the instant case, especially
considering the fact that the statements mailed to the
[**8] [*18] There is no apparent support in the class [**10] members in this case failed to inform them
available case law that permits an opposing party to of the ongoing class litigation or to suggest that they
engage in communications with class members that have might wish to obtain the advice of class counsel before
the effect of extinguishing the rights of those class making any decision regarding the statements.
members. For example, in Kleiner v. First Nat'l Bank of
Atlanta, 751 F.2d 1193 (11th Cir. 1985), while the issue 4 Although the Kleiner class was certified under
of unsupervised contacts by the defendant bank with subsection (b)(3) of Rule 23 of the Federal Rules
putative class members was pending before the district of Civil Procedure, not (b)(2) as in the instant
court, the bank contacted over 3000 of its customers litigation, there is nothing in the Kleiner opinions
urging them to opt out of the litigation. Id. at 1197-98. that would limit their applicability to actions in
The district court found the decisions of the putative class which the class was certified under the less
members to opt out to be voidable, id. at 1199, and stringent requirements of subsection (b)(3).
entered an order proscribing either party from discussing
the issues involved in the case with class members, Nor does the Supreme Court's decision in Gulf Oil
although it permitted the bank to engage in ordinary Co. v. Bernard, 452 U.S. 89, 68 L. Ed. 2d 693, 101 S. Ct.
business affairs with its clients who were putative class 2193 (1981), avail defendants. In Gulf Oil, employees
members. Kleiner v. First Nat'l Bank of Atlanta, 99 alleging racial discrimination had entered into a
F.R.D. 77, 79 (N.D. Ga. 1983). conciliation agreement brokered by the Equal
Employment Opportunity Commission, under which the
The Eleventh Circuit held that the district court had company agreed to provide individual employees with a
"ample discretion" under Rule 23 of the Federal Rules of fixed amount of back pay in exchange for releases of
Civil Procedure to enter such an order. Kleiner, 751 F.2d liability. Id. at 91. Apparently dissatisfied with the
at 1203. [**9] The court also concluded that the order [**11] agreement, the employees filed a class action
complied with the dictates of the First Amendment: against the company. Id. at 92. Before the class was
certified, the company sought an order limiting
The trial court's order was narrowly communications by parties and their counsel with
drawn to avoid suppressing utterances putative class members. Id. The company alleged that
worthy of first amendment protection. As counsel for plaintiffs had advised potential class members
a directive addressed to counsel for the not to sign the releases sent under the conciliation
Bank, the ambit of the order was restricted agreement because they stood to recover larger sums
to communications regarding the through the class action. Id. at 93. Without corroborating
Page 11
212 F.R.D. 14, *18; 2002 U.S. Dist. LEXIS 24500, **11
the company's unsworn allegations or making any to influence the threshold decision whether to remain in
findings of fact, the court entered an order prohibiting all the class." Id. 5 Rather, the Court "has the duty and
communications relating to the case without the consent authority to restrict communications that interfere with
of the court. Id. The Supreme Court declined to address the proper administration of a class action and to restrict
the First Amendment issue, concluding instead that the conduct that abuses the rights of members of the class."
court had exceeded its discretion under Rule 23 because Jack Faucett Assocs., 1985 U.S. LEXIS 792, 1985-2
"the record reveals no grounds on which the District Trade Cases P66,830, [WL] at *5.
Court could have determined that it was necessary or
appropriate to impose this order." Id. at 103. The Court 5 Defendants are therefore mistaken in their
recognized, however, that "in the conduct of [*19] a assertion that "the focus must be on whether the
case, a court often finds it necessary to restrict the free information about the administrative procedure
expression of participants, including counsel, witnesses, supplied to the account holder is untruthful or
and jurors. [**12] " Id. at 104 n.21. misleading." Defs.' Supp. Opp. Br. at 6.
By contrast to Gulf Oil, defendants have conceded [**14] As stated during oral argument, this Court
that this Court possesses the authority to enter an order does not find objectionable the fact that defendants
under Rule 23 restricting their communications with class mailed statements of account to individual class
members. Defs.' Supp. Opp. Br. at 3; Defs.' Surreply at members. Instead, what this Court considers improper is
5-6. However, they claim that, under Gulf Oil, such an sending notices to individual class members that have the
order cannot be entered without first conducting a hearing effect of extinguishing the rights of those class members
on whether such an order is "needed to protect the class without first seeking the approval of this Court. The
from undue interference and false or misleading notice contained in the transmittal letter that defendants
statements." Id. But Gulf Oil contains no such directive. included with each statement of account purports to
It provides only that such an order "should be based on a extinguish the rights of the individual class members who
clear record and specific findings that reflect a weighing receive them to a full and accurate accounting unless the
of the need for a limitation and the potential interference members object within sixty days. Defendants have
with the rights of the parties." Id. at 101; see also Jack conceded that they did not include any language about
Faucett Assocs., Inc. v. Am. Tel. & Tel. Co., 469 U.S. the present litigation in this notice "precisely because any
1196, 83 L. Ed. 2d 982, 105 S. Ct. 980, 1985-2 Trade reference to the litigation without prior approval of the
Cases P66,830, 1985 WL 25746 (D.D.C. 1985) at *5 Court might have been misleading." Defs.' Surreply at 4
("Gulf Oil Co. v. Bernard supports an order restricting the n.4. The Court is thus at an utter loss to understand why
communications with class members when the evidence defendants thought this Court would consider it
establishes that the restricted communications have the acceptable for them to include language that extinguishes
potential of interfering with the rights of the class the very rights that are at the heart of this class action
members."). litigation without prior consultation with the Court.
Rule 23(d)(3) of the Federal Rules of Civil Nevertheless, and in no uncertain terms, defendants
Procedure provides [**13] a court presiding over a class [**15] have signaled to this Court that they intend to
action with the authority to "impose conditions on the continue in this course of action. Their most recent brief
representative parties." "Rule 23(d) does not, however, "urges the Court to rule on this dispute as soon as
require a finding of actual harm; it authorizes the possible" because "Interior has completed 14,235
imposition of a restricting order to guard against the historical statements of account and is ready to resume
'likelihood of serious abuses.'" In re School Asbestos mailing them to the IIM account holders." Defs.' Surreply
Litig., 842 F.2d 671, 683 (3d Cir. 1988) (citing Gulf Oil at 4. There is not a word, however, about whether these
Co. v. Bernard, 452 U.S. 89, 68 L. Ed. 2d 693, 101 S. Ct. statements will contain notices that will extinguish the
2193) (emphasis in original). Additionally, "[a] district rights of these thousands of class members. The prospect
court's duty and authority under Rule 23(d) to protect the of this mass mailing thus presents a significant risk of
integrity of the class and the administration of justice serious interference with the rights of the class members,
generally is not limited only to those communications and the Court possesses the duty and the authority to
that mislead or otherwise threaten to create confusion and restrict communications [*20] that threaten to interfere
Page 12
212 F.R.D. 14, *20; 2002 U.S. Dist. LEXIS 24500, **15
with those rights. See NEWBERG ON CLASS business communications with class members that occur
ACTIONS § 15.02, at 15-6 (3d ed. 1992) ("When the in the ordinary course of business. The Court does not
court finds that the class action has been abused to the find such communications objectionable because they do
potential prejudice of class members, the court has full not purport to extinguish the rights of the class members
power to take appropriate remedial action to avoid or in this litigation.
minimize any prejudice to the class."). Therefore, the
Court will enter an order under Rule 23 to ensure the B. Plaintiffs' Request for Referral to the Disciplinary
continued proper administration of this class action. Panel
In doing so, the Court is mindful of its obligation to Also before this Court is a request by plaintiffs for a
protect [**16] the free speech rights of defendants. The referral of defense counsel to the Disciplinary Panel of
order therefore will comply with the applicable standard the U.S. District Court for the District of Columbia. At
set forth by the court in Kleiner: issue is whether counsel violated [**18] Rule 4.2(a) of
the District of Columbia Rules of Professional Conduct
In general, an order limiting by permitting defendants to send notices to class
communications regarding ongoing members that had the effect of extinguishing those
litigation between a class and class members' rights to a full and accurate accounting. 7
opponents will satisfy first amendment
7 This Court has adopted the District of
concerns if it is grounded in good cause
Columbia Rules of Professional Conduct as
and issued with a "heightened sensitivity"
applicable to its proceedings, and has mandated
for first amendment concerns. In
that violations of those rules "shall be grounds for
ascertaining the existence of good cause,
discipline." Rule 83.15(a) of the Local Rules of
four criteria are determinative: the severity
the U.S. District Court for the District of
and the likelihood of the perceived harm;
Columbia.
the precision with which the order is
drawn; the availability of a less onerous Rule 4.2(a) of the District of Columbia Rules of
alternative; and the duration of the order. Professional Conduct, also known as the "anti-contact
rule," mandates that
Kleiner, 751 F.2d at 1205-06 (citation omitted). The
statements that defendants are preparing to send out during the course of representing a
impinge upon the rights of the class members who client, a lawyer shall not communicate or
receive them to a full and accurate accounting. The Court cause another to communicate about the
must frame a remedy that will protect the rights of these subject matter of the representation with a
class members. Accordingly, defendants will be party known to be represented by another
prohibited from contacts with any class members during lawyer in the matter, unless the lawyer has
the pendency of this litigation that discuss this litigation, the prior consent of the lawyer
or the claims that have arisen therein, without the prior representing such other party or is
authorization of this Court. [**17] 6 authorized by law to do so.
6 Plaintiffs have not sought relief in relation to
Accordingly, prior to any decision [**19] as to whether
the class members who have already received the
referral to the disciplinary panel is warranted, the Court
statements of account. Therefore, the issue of
must first determine whether defense counsel (1)
what form of relief, if any, might be warranted in
"communicated or caused another to communicate" with
relation to those class members is not properly
class members 8 (2) "about the subject matter of the
before the Court at this time.
representation" (3) and were not "authorized by law to do
The Court's order will be tailored to protect the rights so."
of defendants. The order will not be a blanket prohibition
8 It is undisputed that the class members
on communications with class members. Defendants will
constitute a represented party, for purposes of the
be permitted to continue engaging in the regular sorts of
Rule. As defendants asserted in an earlier motion
Page 13
212 F.R.D. 14, *20; 2002 U.S. Dist. LEXIS 24500, **19
filed with this Court, "as a general matter, 'the unauthorized communications, it held defense counsel in
rules governing communications apply as though contempt, disqualified him from further participation in
each class member is a client of class counsel.'" the case, and imposed a $ 50,000 fine against his firm. Id.
Defs.' 2000 Mot. at 3 (citations omitted). at 1199. The court explained that the charges against
counsel were based in part on their violation of Rules 4.2
[*21] 1. Communication or Causing Another to and 8.4(d) of the Model Rules of Professional Conduct, 9
Communicate and concluded that "by actively assisting the Bank in
preparing the information to be given to prospective class
Defendants assert that "although Solicitor's Office members, some of which was legal in nature, and
and DOJ attorneys participated in the effort to produce organizing the contact system, [counsel] [**22] did
these statements of accounts to ensure that the Court's effectively communicate with persons represented by
orders in this case were followed during this process, no counsel." Id. at 1208-09. Although the contempt sanction
lawyer communicated with, or 'caused another to was later vacated by the district court, the disqualification
communicate' with a represented party in this litigation." and monetary sanctions that it ordered were upheld by the
Defs.' Opp. at [**20] 4 n.4. Accordingly, defendants Eleventh Circuit. Id. at 1199, 1209-10.
argue, the actions of defense counsel did not violate any
applicable ethics rules. Defendants contend that they are 9 Rule 8.4(d) provides that "it is professional
"unaware of any ethical rule that requires counsel to misconduct of a lawyer to . . . engage in conduct
instruct a client to restrict its communications where the that is prejudicial to the administration of justice."
proposed communications themselves are not improper." The analogous provision in the D.C. Rules of
Defs.' Supp. Opp. Br. at 7 n.7. Professional Conduct inserts the word "seriously"
before "prejudicial."
The problem with defendants' argument is that, as
explained above, the communications were improper Similarly, in Impervious Paint Indus. v. Ashland Oil,
because the effect of the notices included with each 508 F. Supp. 720 (W.D. Ky. 1981), appeal dismissed, 659
statement was to undermine the rights of the class F.2d 1081 (6th Cir. 1981), following certification of the
members who received them to a full and accurate class, one defendant's representatives began contacting
accounting. By undermining those rights, defendants class members to discuss the suit. Id. at 722. The district
interfered with the claims that lie at the heart of Phase II court called attention to the fact that the defendant's
of this class action litigation: namely, the claims that all affidavits "recited that the procedures for contacting
class members are entitled to a corrected historical [**23] the class members were developed 'after
accounting of their individual accounts after defendants consulting with counsel.'" Id. After citing Disciplinary
have reformed the management of those accounts such Rule DR 7-104 of the Code of Professional
that defendants are in compliance with their fiduciary Responsibility, 10 the court declared that
obligations. The question thus becomes whether defense
counsel's "participation in the efforts to produce these it is undisputed that counsel did not
statements of account," which included the improper personally contact any class member.
notices, warrants sanctions under the applicable [**21] Neither can we conclude that counsel
rules of professional conduct. instructed the corporate officers to begin
this educational campaign. However, we
Contrary to defendants' arguments, there is ample believe the circumstantial indications are
authority to support the contention that knowing clear that counsel had full knowledge of
participation in the efforts of a defendant to engage in [*22] their client's intention to attempt to
improper communications with members of a class action sabotage the class notice, and, in
litigation constitutes a violation of attorney ethics rules. derogation of their duty as officers of the
In Kleiner, for example, although defense counsel did not Court, they did not advise against the
directly communicate with the class members, they
course of action.
advised the defendant bank regarding the legality of its
proposed communications and reviewed the proposed Id. at 723. The court ordered that any members contacted
format of the communications. Kleiner, 751 F.2d at by the defendant who had opted out of the class would be
1197-98. When the district court learned of the
Page 14
212 F.R.D. 14, *22; 2002 U.S. Dist. LEXIS 24500, **23
restored to the class, and that the members would be sent anti-contact rule may sometimes be difficult. However,
a special notice informing them that it had found the American Bar Association has provided a useful gloss
defendant's contacts to be improper. Id. at 724. 11 on this troublesome phrase, explaining that "Rule 4.2
would not prohibit a lawyer from communicating with a
10 DR 7-104 is the forerunner of Rule 4.2(a) of represented person about a matter in which the person is
the Model Rules of Professional Conduct. not being represented, if the lawyer has an independent
11 It is worth noting that in Impervious Paint, as justification for doing so. In this scenario, the person is
in the instant case, no communications ban was in not 'represented in the matter' for Rule 4.2 purposes."
effect at the time of the defendant's contacts with ANNOTATED MODEL RULES OF PROFESSIONAL
class members, and the contacts were made CONDUCT 403 (4th ed. 1999).
independently of any regular business contacts.
Id. at 722. It follows from this interpretation that
communications occurring in [**26] the ordinary course
[**24] Additionally, a recent commentator notes of business between litigants would not constitute
that "because a lawyer may not 'violate . . . the rules of communications "about the subject matter of the
professional conduct, through the acts of another,' a representation." Thus, for example, the quarterly
lawyer may not induce or assist a client or others to statements of account distributed by defendants to
engage in types of communication with putative class account holders who are also class members would not
members that the lawyer may not undertake directly." implicate Rule 4.2 because defendants possess an
Vincent R. Johnson, The Ethics of Communicating with independent reason to send out such statements. These
Putative Class Members, 17 REV. OF LITIG. 497, statements would be distributed anyway, regardless of the
506-07 (1998) (emphasis added). The two leading instant litigation. By contrast, defendants have proffered
treatises on class action litigation warn against permitting no justification whatsoever for sending notices to class
defendants to communicate directly with class members. members that have the effect of extinguishing their rights
See NEWBERG ON CLASS ACTIONS § 15.19, at to a full historical accounting. Those rights represent the
15-59 (3d ed. 1992) ("Unsupervised contacts between core of the claims at issue in Phase II of the present
defendants and class members . . . may result in sanctions litigation, on which the class members are represented by
for both the offending defendant and, when appropriate, counsel. Attempts to extinguish those rights
the defendant's counsel."); ANNOTATED MANUAL fundamentally alter the class members' ability to enjoy
FOR COMPLEX LITIGATION § 30.24, at 276 (3d ed. the benefits of any relief that the Court might order in
2002) ("Under accepted ethical principles, defendants and conjunction with Phase II. It cannot, therefore, be
their attorneys may communicate on matters regarding seriously disputed that the improper notices sent to
the litigation with class members who have not opted out, individual class members constitute communications
but only through class counsel."). "about the subject matter of the representation."
It is therefore established, in both the case law and [*23] 3. Authorization by Law
secondary legal commentaries, that participation in
[**25] the efforts of a defendant to engage in improper A demonstration that the communications [**27] at
contacts with class members can give rise to a violation issue were "authorized by law" functions as an
of Rule 4.2(a). "affirmative defense" to the strictures imposed by the
anti-contact rule. According to the ABA's Committee on
2. Subject Matter of the Representation Ethics and Professional Responsibility, a communication
is "authorized by law" if there exists
Defendants assert that "given the nature of Plaintiffs'
claims related to accountings and general trust reform, a constitutional provision, statute or
coupled with the wide scope of Interior's statutorily court rule, having the force and effect of
mandated responsibilities to class members, virtually any
law, that expressly allows a particular
communication could be described as 'related to the communication to occur in the absence of
litigation.'" Defs.' Supp. Opp. Brief at 4. It is true that, in counsel - such as court rules providing for
any case, determining precisely what constitutes the service of process on a party, or a statute
"subject matter of the representation" for purposes of the
Page 15
212 F.R.D. 14, *23; 2002 U.S. Dist. LEXIS 24500, **27
authorizing a government agency to that plaintiffs had filed both a motion and a reply brief
inspect certain regulated premises. asserting that the proposed communications might
Further, in appropriate circumstances, a constitute violations of Rule 4.2(a). Pls.' Consolidated
court order could provide the necessary Mot. for a TRO and Prelim. Inj. at 11-12; Pls.' Reply Br.
authorization. at 4. Nevertheless, defense counsel failed to seek prior
authorization from this Court for communications with
ABA Comm. on Ethics and Prof. Responsibility, Formal the class members, as they had done in 2000 and 2001. 14
Op. 95-306 (1995). Defendants have not pointed to any Instead, they knowingly permitted their clients to include
constitutional provision, statute, court rule, or court order in their letters to over a thousand individual class
that expressly authorizes the particular communication at members a notice that purported to exterminate the rights
issue -- namely, a notice that purports to extinguish the of those class members to relief on their claims asserted
rights of class members. Instead, defendants simply in this [*24] litigation. The Court finds troubling the
allude to the absence of any "local rule, statute or other fact that defense counsel did not object to either of the
regulation imposing a blanket prohibition on two mass mailings to class members, the second of which
communication between Interior and the class member coincided [**30] with the date this Court noticed a
account holders." [**28] Defs.' Supp. Opp. Br. at 3-4. hearing on plaintiffs' motion for an order proscribing
But the mere absence of prohibition is not tantamount to such communications with class members. In the face of
express authorization. Lacking any such authorization, such misconduct, it would be an act of negligence for this
this Court cannot conclude that the communications at Court to stand idly by.
issue were "authorized by law."
13 Rule 8.4 provides, in relevant part, that "it is
4. Conclusion professional misconduct for a lawyer to . . .
violate or attempt to violate the Rules of
Canon 3B(3) of the Code of Conduct for United Professional Conduct, knowingly assist or induce
States Judges mandates that "[a] judge should initiate another to do so, or do so through the acts of
appropriate action when the judge becomes aware of another."
reliable evidence indicating the likelihood of 14 Ironically, the very same attorneys who
unprofessional conduct by a judge or lawyer." 12 The entered an appearance on the motion announcing
Court finds that there is reliable evidence to indicate that that defendants were planning to send out the
defense counsel's participation in the efforts to produce statements of account were the ones who, less
the statements of account constituted a violation of Rule than a year before, had filed the motion seeking
4.2(a). However, because not every violation of the ethics an order from this Court finding that defense
rules deserves punishment, there remains the question as counsel's involvement in the second public
to whether this matter warrants a referral to the administrative process would not violate Rule
Disciplinary Panel for further proceedings. 4.2(a). Compare Interior Defs.' Emergency Mot.
for Entry of an Order Clarifying Ethical
12 Cf. Canon 3D(2) of the ABA Model Code of Obligations of Attorneys Regarding Public
Judicial Conduct: "A judge who receives Administrative Process [1055], at 6 with Interior
information indicating a substantial likelihood Defs.' Mot. and Supporting Mem. for Order
that a lawyer has committed a violation of the Permitting the Provision of Historical Statements
Rules of Professional Conduct should take of Account to Class Counsel [1471], at 2.
appropriate action."
[**31] Accordingly, it is hereby ORDERED that
[**29] The Court must take into account the fact plaintiffs' request for entry of an order pursuant to Rule
that, at the time of their participation, defense counsel 23(d) [1651-1] be, and hereby is, GRANTED. It is further
was aware that "some courts and at least one
commentator have suggested that attorneys who ORDERED that, pursuant to Rule 23(d) of the
knowingly permit communications between a party and Federal Rules of Civil Procedure, during the pendency of
absent class members violate these rules [Rules 4.2(a) the instant litigation, the parties to the litigation, their
and 8.4(a) of the D.C. Rules of Professional Conduct]." agents and officials, and their counsel shall not
13 Defs.' 2000 Mot. at 5. Defense counsel was also aware
Page 16
212 F.R.D. 14, *24; 2002 U.S. Dist. LEXIS 24500, **31
communicate, through the United States mail or any other Committee on Grievances of the U.S. District Court for
mode of communication, with any class member in this the District of Columbia for an investigation of the
litigation regarding this litigation or the claims involved conduct of defense counsel who appeared on defendants'
therein, except as specifically permitted by order of this Motion and Supporting Memorandum for Order
Court. This restriction includes, but is not limited to, any Permitting the Provision of Copies of Historical
communications that affect the rights of class members to Statements of Account to Class Counsel (filed on
a full and accurate accounting of their Individual Indian September 10, 2002) 15 and any other attorneys that the
Money trust accounts. Committee determines to have been involved in
connection with the improper transmission of the
The instant Order does not prohibit defendants from statements of account, and for such further proceedings
communicating with class members in the ordinary as it may deem appropriate.
course of business on routine matters unrelated to the
instant litigation. It is further 15 The attorneys who appeared on this motion
are Robert D. McCallum, Stuart E. Schiffer, J.
ORDERED that plaintiffs' motion for a preliminary Christopher Kohn, Sandra P. Spooner, John T.
injunction [1534-2] be, and hereby is, DENIED as moot, Stemplewicz, and Cynthia L. Alexander.
in light of the relief provided above under Rule 23(d). It
is further SO ORDERED.
ORDERED that, pursuant to [**32] Rule Royce C. Lamberth

83.16(d)(2) of the Rules of the U.S. District Court for the
District of Columbia, this matter shall be referred to the United States District Judge
Page 1
HAMPTON HARDWARE, INC. v. COTTER & COMPANY, INC.
CIVIL ACTION 3:93-1722-J
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF

TEXAS, DALLAS DIVISION
156 F.R.D. 630; 1994 U.S. Dist. LEXIS 15821
February 9, 1994, Decided

February 9, 1994, Filed
action process warranting an order prohibiting such

JUDGES: [**1] Boyle contacts pursuant to Rule 23(d) Fed. R. Civ. [**2] P..
OPINION BY: JANE J. BOYLE By way of background, Cotter is a member-owned

wholesaler of hardware and other related merchandise.
OPINION Individually owned True Value Hardware Stores and V &
S Variety Stores own Cotter. Cotter operates on a
cooperative basis for the benefit of its members. A
[*631] ORDER benefit of membership is the ability to purchase hardware
goods at lower prices. Cotter is a nationwide organization
Pursuant to the District Court's Order of Reference with approximately 10,000 members.
filed December 7, 1993, came on to be heard February 9,
1994, plaintiff's Motion to Limit Defendant's Contact Plaintiff, Hampton, operates a member hardware
with Class Members, filed August 5, 1993. 1 The store in Oak Cliff, Texas. Plaintiff has filed this suit
undersigned held a hearing on this issue on January 19, alleging usury, breach of contract and conversion.
1994, and having heard the arguments of the parties, Hampton brings the action against Cotter on behalf of "all
ORDERS that the plaintiff's motion be GRANTED as individuals or organizations which, during any time from
modified below. May 28, 1989, to the present, have owned, in whole or in
part, a "True Value" hardware store located in the State
1 This case was originally filed in the 116th of Texas and have ever contracted for, been charged, or
Judicial District Court, Dallas County, Texas, have paid a 3% ( or greater) per month "service charge"
Cause No. 93-05718-5. The case was removed to (interest) with, by or to Cotter & Company, Inc."
the United States District Court for the Northern (Plaintiff's First Amended Petition at 4).
District of Texas on August 26, 1993.
Shortly after the lawsuit was filed the three letters at
This is a potential class action brought by plaintiff, issue were sent potential class members by Daniel Cotter,
Hampton Hardware, Inc. ("Hampton") against defendant President and CEO of Cotter & Company. The letters,
Cotter. The issue to be determined is whether three letters admitted in evidence at the hearing [**3] as plaintiff's
sent to potential class members by defendant, Cotter & Exs. 1, 2 and 3, respectively, contain information about
Company, Inc. ("Cotter") constitute an abuse of the class the lawsuit and urge the potential class members not to
Page 2
156 F.R.D. 630, *631; 1994 U.S. Dist. LEXIS 15821, **3
participate in the lawsuit. Specifically, the July 16, 1993, [*632] By not participating in this
letter contained the following language regarding the suit, you will help save your Company
Hampton suit: expense in dollars and time.
While we believe that Cotter will win

this case for many reasons, it is important The October 26, 1993, letter stated:
that you understand the enormous
potential cost to your Company due to this As many of you know one East Texas
class action. Your team in Chicago will Member is so supportive of his Company,
spend thousands of hours on this lawsuit, and so strongly believes that this case is
pulling old documents, reconstructing improper and without justification, he
records, traveling to Dallas and explaining began sending releases and waivers to
the service charge policy and how your several other Members. He has been
Company operates. Teams of lawyers will forwarding back to us copies of these
be required, all at a huge cost. These and waivers which many of you have signed.
other expenses needed to protect your
I believe the support you are showing
company in this suit will be endless. All of
your Company, after having [**5]
this will cost you precious dollars and us
invested so much of your time and money
time from our mission which is to make
in it, is sensible and proper. By asking you
you succeed in the hardware and variety
to join the class, Hampton is asking you to
business.
sue yourself.
What can you do to avoid this waste
of time and money? Decide not to
Hampton contends that these contacts are improper
participate in this lawsuit. Under the law
and overreaching and should be prohibited by the court. It
you may be given the opportunity to join
requests an order prohibiting the defendant from
the class. By refusing to join the class, you
contacting prospective class members concerning this
save your Company time and expenses
litigation.
which ultimately will be returned to you
[**4] in the form of your patronage Cotter opposes the motion maintaining that such an
dividend. Every member who joins the order limiting class contacts would violate the First
class adds to the expense and time needed Amendment based on Gulf Oil Co. v. Bernard, 452 U.S.
to protect your Company and you. The 89, 101 S. Ct. 2193, 68 L. Ed. 2d 693 (1981). It is also
expense will, ultimately, come out of your Cotter's position that the contacts in question were
pocket. required by SEC disclosure rules and were part of a
routine dissemination of information to its members.
The August 16, 1993, letter stated: Against this backdrop, the undersigned reviews the
relevant authority on limiting class contacts.
It is extremely important that you are
fully aware of the class action lawsuit that Analysis
one Texas Member is filing against Cotter
& Company. Considering the expense and "Class actions serve an important function in our
potentially negative impact on your system of civil justice. They present, however,
Company, awareness of this case and your opportunities for abuse as well as problems for courts and
support are vital. The case is called counsel in the management of cases." Gulf Oil, 452 U.S.
Hampton, et al v. Cotter & Company, and at 2199, 2200, 452 U.S. at 99, 100. [**6] Due to
is filed by a Member from Dallas. He and possible abuses a district court may enter orders in class
his lawyer want to represent all Texas actions which govern the conduct of counsel and parties.
Members against Cotter & Company. Id. Communications found violative of the principles of
Page 3
156 F.R.D. 630, *632; 1994 U.S. Dist. LEXIS 15821, **6
Rule 23 include misleading communications to the class lawsuit that they will pay.
members concerning the litigation. Communications that
misrepresent the status or effect of the pending action 2 In Kleiner, the court found as to the
also have been found to have a potential for confusion communications at issue: "Numerous facts lead to
and/or to adversely affect the administration of justice. the almost inescapable conclusion that the point
Id., 452 U.S. at 101 n.12, 101 S. Ct. at 2200 n.12. Courts of the communications campaign was not, as the
have also condemned attempts in a communication to Bank would have it, to alleviate consumer
affect a class member's decision to participate in the confusion, but rather to solicit as many exclusions
litigation, or to undermine a class plaintiff's cooperation as possible before the court was alerted to the
with confidence in class counsel. In re: School Asbestos operation."
Litigation, 842 F.2d 671, 682 n.23 (3rd Cir. 1988).
The fact that the defendant [**9] and potential class
Letters to class members warning them that they might be
members are involved in an on-going business
liable for costs should they participate in the class action
relationship, further underscores the potential for
and urging them to disassociate themselves from the suit
coercion. Kleiner, 751 F.2d at 1202 (other citations
have also been held improper. Erhardt v. Prudential
omitted). Members must necessarily rely upon the
Group, Inc., 629 F.2d 843, 845 (2nd Cir. 1980). [**7]
defendant for dissemination of factual information
Before a district court can issue an order limiting regarding hardware goods and for lower prices in
class contacts the Supreme Court requires "a clear record purchasing those goods. They are therefore particularly
and specific findings that reflect a weighing of the need susceptible to believing the defendant's comments that
for a limitation and the potential interference with the the lawsuit will cost them money. Cotter, on the other
rights of the parties." Gulf Oil, 452 U.S. 89 at 101, 101 S. hand, an interested party in the litigation faces a conflict
Ct. 2193 at 2200, 68 L. Ed. 2d 693. Such an undertaking of interest in advising members on the merits of
should result in "a carefully drawn order that limits participation in the lawsuit due to its direct pecuniary
speech as little as possible consistent with the rights of interest in the outcome.
the parties under the circumstances" Id. 452 U.S. at 102,
Testimony at the hearing by member Houston
101 S. Ct. at 2201. Finally, in issuing such an order the
Maddox, owner of a member hardware store, established
district court must give "explicit consideration to the
a serious potential for harm to the interests of the class
narrowest possible relief which would protect the
action by these three letters. (Hrg. Tr. at 20, 21) Actual
respective parties." Id.
harm need not be proven to justify an order limiting class
Having reviewed the guiding principles in contacts. Rather, an order limiting contacts is justified
determining whether to limit class contacts, the upon a finding of "a likelihood of serious abuses." In re:
undersigned now turns to the facts at hand. School Asbestos Litigation, 842 F.2d at 671 citing Gulf
Oil, 452 U.S. at 104, 101 S. Ct. at 2202 [**10] (other
The first issue to be determined in this case is citations omitted). That the interests embodied in Rule
whether the three letters constitute the type of misleading 23 might be hindered is a sufficient finding upon which
communications justifying court intervention. The letters to base an order limiting contacts. "Rule 23 expresses 'a
clearly fall within this category. Regardless of the stated policy in favor of having litigation in which common
purpose [**8] of the letters - a routine dissemination of interests, or common questions of law or fact prevail,
information to members - any common sense reading of disposed of where feasible in a single lawsuit.'" Gulf Oil,
them reveals that they are an attempt to prevent member 452 U.S. at 99 n.11, 101 S. Ct. 2199, n.11. The three
participation in the class action. See Kleiner, 751 F.2d at letters work directly against this principle by attempting
1201 n.16. 2 [*633] Members are warned of the to reduce the class members participation in the lawsuit
potential cost to them. (July 16, 1993, letter). They are based on threats to their pocketbooks. For all of these
specifically advised not to participate in the lawsuit (July reasons, communications by Cotter to the members
16, 1993, letter; August 16, 1993, letter). They are told regarding the lawsuit must be prohibited.
that by participating in the lawsuit they are suing
themselves. (October 26, 1993, letter). In short, the clear Having decided that the contacts are improper and
message is that if they participate in this "improper" must be limited, the next issue for determination is the
appropriate and most narrow possible relief to protect the
Page 4
156 F.R.D. 630, *633; 1994 U.S. Dist. LEXIS 15821, **10
parties to this suit. [**13] given Cotter's interest in the suit. Therefore, as to
the third factor above, there is no less onerous alternative
In framing the order, care must be taken to limit than to prohibit all communications regarding the
speech as little as possible. However, as with Kleiner, lawsuit. This prohibition, however, should not be read to
supra, this case does not involve the type of protected, suggest that members will receive no information
non-commercial political expression protected by the regarding the lawsuit. Rather, pursuant to Rule 23(c) Fed.
Fifth Circuit in Gulf Oil. Kleiner, 751 F.2d at 1204-05. R. Civ. P.; once the lawsuit has been conditionally
[**11] Rather the communications at issue here, involve certified as a class action by the District Court and the
commercial speech which does not call "into play the full Court requires notice be given to the potential class
panoply of First Amendment safeguards against prior members, information regarding the action will be then
restraint" Id. at 1205 citing Gulf Oil, 619 F.2d at 473. filtered through the "impartial and open medium of court
Rather, the type of speech involved in this case, supervised notice." Kleiner, 751 F.2d at 1207. The
encouraging potential class members not to join in the objective of notifying class members of the class action
suit, is grounded in the "economic interests of the speaker and their opportunity to participate along with
and the audience." Id. at 1203 n.22 (other citations information about the nature of the action will be
omitted). Orders limiting this type of commercial speech accomplished. This manner of communication eliminates
are appropriate if "grounded in good cause and issued the potential for influencing class members with
with a 'heightened sensitivity' for First Amendment one-sided information.
concerns." Id. A finding of good cause has been found to
rest upon four criteria including: "the severity and Finally, focusing on the fourth factor, the duration of
likelihood of the perceived harm; the precision with the order, the order should limit defense contacts with
which the order is drawn; the availability of a less potential class members up through the time of trial. Id.
onerous alternative; and the duration of the order." Id. at at 1207 citing In re: [**14] San Juan Star, 662 F.2d
1206 citing Athena Products, 654 F.2d 362, 367-68 (5th 108, 117 (1st Cir. 1981). Any order shorter in duration
Cir. Unit B 1981) cert. denied, 456 U.S. 915, 102 S. Ct. could prove problematic and is unnecessary. Because of
1768, 72 L. Ed. 2d 173 (1982). [**12] the on-going business relationship between the defendant
and class members, the business relationship will not be
With respect to the first factor, the perceived harm, disrupted in any manner by the duration of this order.
the fact that the members must rely upon the defendant Additionally, given the court required notice regarding
for crucial information as to pricing renders potential the class action, potential class members will receive
class members particularly vulnerable to coercion. Cotter impartial information regarding the lawsuit. In short,
determines pricing for its members and is now warning there is no legitimate purpose for defendant's to
them that prices will go up if the lawsuit continues. communicate with class members regarding the lawsuit
Members are thus less likely to feel that participation in prior to trial, and such communications as discussed
the lawsuit is in their best interest. This in [*634] turn previously invite abuse. 3
undermines the goals of Rule 23. Thus all
communications regarding the suit should be prohibited. 3 Defendant argues that the Securities and
Exchange Commission may require disclosure of
As to the second factor above, a balance must be this lawsuit and an order prohibiting contacts may
struck between protecting potential class members from run contrary to SEC rules and regulations.
making decisions based upon one-sided information from However, in the event of this type of conflict, a
an interested party, while at the same time taking care not motion to the Court for leave to make the required
to interfere with the on-going business relationship disclosures would certainly remedy this problem.
between class members and the defendant. Therefore,
business communications must continue, however, In sum, the [**15] order in this case, consistent with
communications as to the instant litigation must end. the principles set forth in Gulf Oil, should prohibit
contacts between defendants and potential class members
As to the third factor, an order any less restrictive, up through the time of trial. The court supervised notice
would not effect the purposes of Rule 23. It is difficult to will provide objective information to potential class
conceive of any advice from Cotter regarding the lawsuit members upon which they can base a decision to
that is not rife with the potential for confusion and abuse
Page 5
156 F.R.D. 630, *634; 1994 U.S. Dist. LEXIS 15821, **15
participate or not participate in this action. Business would be premature and potentially confusing. If the
related communications, will, as in the past, continue Court determines that the class should be certified, it's
between Cotter and the class members. notice to class members will provide objective
information about the case to members as required by
The final matter which must be addressed is Rule 23(c). For these reasons, a corrective notice should
plaintiff's counsel's specific request that a corrective not be sent.
notice be sent to perspective class members at defendant's
expense. In support of this position, plaintiff cites In re: Accordingly, for the foregoing reasons, plaintiff's
Federal Skywalk Cases, 97 F.R.D. 370, 378 (W.D. Mo. Motion to Limit Defendant's contact with Class
1983), Pollar v. Judson Steel Corp., 33 Fair. Empl. Members, is GRANTED as follows:
Prac. Cas. (BNA) 1870 (N.D. Cal. 1984), and
Impervious Paint Industries, Inc. v. Ashland Oil, 508 F. [**17] It is ORDERED that the defendant and
Supp. 720, 724 (W.D. Ky. 1981). These cases, however, defendant's counsel are prohibited from contacting
are distinguishable from the case at bar. Specifically, in potential class members in any manner with regard to the
two cases the offending actions took place after class instant litigation.
certification and court-approved notice to the [**16]
It is FURTHER ORDERED that this limitation on
class members. Federal Skywalk, 508 F. Supp. at 722,
contacts will remain in effect until the date of trial or
723 (improper contact included a copy of the class
alternatively a court's order denying motion for
notice along with oral legal advice which had been
certification.
specifically omitted from the notice prepared by the
Court); Impervious Paint, 97 F.R.D. at 376 (defendants It is FURTHER ORDERED that defendant's
made a "end-run" around the court's supervisory contacts with class members for business purposes may
authority.) The Pollar case provides insufficient continue.
information to make a valid comparison and is not
controlling. SO ORDERED this 9th day of February, 1994.
[*635] In this case although a clear potential for Jane J. Boyle

abuse was established there was little evidence of actual
harm. Moreover, the class has yet to be certified. To send UNITED STATES MAGISTRATE JUDGE
a corrective notice at this point with little evidence of
actual harm prior to the court's certification of this class,
Page 1
JOEL M. CRAM, MINH D. NGUYEN, and ROES 1 through 10, individually, and
on behalf of all others similarly situated, Plaintiffs, vs. ELECTRONIC DATA SYS-
TEMS CORPORATION, a Delaware corporation, and DOES 1 through 100, inclu-
sive, Defendants.
CASE NO. 07cv1842-LAB (NLS) [Dkt No. 38]

CALIFORNIA
January 16, 2008, Decided

January 17, 2008, Filed
PRIOR HISTORY: Cram v. Elec. Data Sys. Corp., court Order directing EDS to circulate a "curative com-
2008 U.S. Dist. LEXIS 2847 (S.D. Cal., Jan. 10, 2008) munication" to prospective class members to ensure: (1)
they are aware of the pendency of this lawsuit; (2) they
COUNSEL: [*1] For Joel M Cram, Minh D. Nguyen, are aware they may have claims under California labor
Joel M Cram, Plaintiffs: David J Gallo, LEAD ATTOR- law which differ from and may survive any waiver [*2]
NEY, Law Offices of David J Gallo, San Diego, CA. of claims arising under the federal Fair Labor Standards
Act ("FLSA"), the subject matter of the EDS communi-
For Electronic Data Systems Corporation, Defendant: cations plaintiffs find objectionable; and (3) they remain
Margaret Rosenthal, LEAD ATTORNEY, Jenkens and eligible to participate in this lawsuit, in the event the
Gilchrist, Los Angeles, CA; Gregory V. Mersol, Martin court certifies it as a class action, even if they accept
T. Wymer, Baker & Hostetler LLP, Cleveland, OH; K back overtime compensation owed under federal law and
Elizabeth Dunn, Butz Dunn Desantis and Bingham, San have signed or will sign EDS' proferred receipt. EDS
Diego, CA; Sabrina Layne Shadi, Baker & Hostetler filed an Opposition, and plaintiffs filed a Reply. Pursuant
LLP, Los Angeles, CA. to Civil Local Rule 7.1(d)(1), the court finds the issues
presented appropriate for decision on the papers and
JUDGES: HONORABLE LARRY ALAN BURNS, without oral argument. For the reasons discussed below,
United States District Judge. plaintiffs' Motion For Order Directing A Curative Com-
munication ("Motion") is DENIED.
OPINION BY: LARRY ALAN BURNS
EDS communicated with certain of its employees or
former employees using a U.S. Department of Labor
OPINION
("DOL") form associated with the tender of back over-
time compensation as calculated under the federal Fair
ORDER DENYING PLAINTIFFS' MOTION FOR
Labor Standards Act ("FLSA"). A cover letter from EDS
ORDER DIRECTING CURATIVE COMMUNICA-
to those employees explained EDS conducted a volun-
TION
tary job code review under the supervision of the DOL to
Defendant Electronic Data Systems Corporation identify job functions appropriately re-classified as over-
("EDS") removed to federal court this putative class ac- time eligible, EDS records indicated the recipient may
tion alleging solely state labor law and unfair competi- have performed one [*3] of those re-classified functions
tion claims associated with allegations of failure to pay within the past three years, and EDS "has decided to
its employees owed overtime compensation. The matter compensate you for back overtime you may have worked
is before the court on the named plaintiffs' motion for a during this period." Hittle Decl. Exh. A-5. The commu-
Page 2
2008 U.S. Dist. LEXIS 3669, *
nications were accompanied by a DOL receipt to be exe- to disclose the grounds on which the court could have
cuted and returned by the recipient and expressly alerted determined the Order was necessary or appropriate.
the recipients state labor law may differ from federal
This Motion seeks not to restrain EDS' communica-
law, including with respect to the period of recoverable
tions but rather to compel follow-up communications in
back overtime pay. Id.
a manner helpful to the advancement of plaintiffs' posi-
Despite the purely federal law auspices under which tion in this litigation. However, plaintiffs fail to persuade
the communications and tendered compensation were the court their fears and speculation regarding possible
distributed, plaintiffs perceive a "danger that Prospective misunderstandings by potential class members need to be
Class Members may be left with the inaccurate under- addressed at this pre-notice, pre-certification phase in the
standing" that by accepting EDS' payments proferred litigation. Moreover, from the face of the FLSA-based
under federal labor law, they "are somehow barred from communications, no recipient accepting the [*6] prof-
recovering back overtime recoverable under" California fered back overtime pay calculated under federal law is
law. Mot. P&A 5:2-7. Plaintiffs worry "Prospective asked to waive state law rights nor does the communica-
Class Members may also be left with an inaccurate belief tion propose an election of remedies. Plaintiffs fail to
that any overtime compensation earned between three (3) make the case for any compelling need to explain all
and four (4) years ago cannot be recovered" because of a such distinctions and eligibilities in advance of an even-
reference in the communication to two-year and three- tual notice to class members, nor do they provide any
year recovery periods. Id. 5:8-9. They predicate their principled basis upon which the court can weigh the
Motion on their opinion "it would seem appropriate" to competing rights and obligations of the parties on any
inform [*4] prospective class members of the pendency record permitting the specific findings a district court
of this lawsuit "prior to being asked to execute any must make before issuing orders affecting the rights of
document which may be construed as a release of any the parties to communicate with potential class members.
kind or character." Id. 5:9-12. Without a "curative com- It is insufficient to assert simply, as do plaintiffs here, "it
munication" providing prospective class members with would seem appropriate" for the court to intervene at this
such information "in the near future, they may conclude . time.
. . they need not read any notices which this Court may
EDS characterizes the Motion as "frivolous" because
order" in this action "because they may believe they have
"it is undisputed [EDS] has voluntarily paid back over-
'settled' their claims." Id. 5:12-15. They also express
time to certain current and prior employees in exchange
"concern" that EDS might try to use the Receipts to as-
for a waiver of their right to pursue an action under the
sert an affirmative defense of release of claims for all
federal Fair Labor Standards Act, 29 U.S.C. ss 201 et seq
back overtime payments. Id. 5:15-17.
(the 'FLSA') . . . [and] plaintiffs in this matter have not
Plaintiffs rely on the court's "duty to supervise pre- sought to pursue a claim under the FLSA on behalf of
certification communications with Prospective Class themselves or the putative class members." Opp. 2:2-7.
members" to protect "the integrity of the class and the "Furthermore, [*7] these payments were largely mailed
administration of justice," citing FED. R. CIV. P. out prior to the filing of this case." 1 Id. 2:7. Plaintiffs do
("Rule") 23(d) and Gulf Oil v. Bernard, 452 U.S. 89, not dispute the waiver form EDS tendered along with the
100-102, 101 S. Ct. 2193, 68 L. Ed. 2d 693 (1981) (hold- payments is "a standard form prepared by the [DOL] . . .
ing that while a district court has "broad authority to ex- [which] specifically notifies the recipient that the waiver
ercise control over a class action and to enter appropriate applies only to FLSA claims," and the cover letter "ex-
orders governing the conduct of counsel and parties," pressly advises that state laws may differ from the
orders limiting communications between parties and po- FLSA." Id. 2:8-13. EDS further objects the requested
tential class members "should be based on a clear record "curative communication" to each employee who re-
and [*5] specific findings that reflect a weighing of the ceived a waiver would have to be distributed "whether or
need for the limitation and the potential interference with not the employee would be part of the purported putative
the rights of the parties" upon a specific "showing by the class in this case." Id. 2:14-16. They argue the forms
moving party of the particular abuses by which it is EDS sent "were noncoercive and completely accurate,"
threatened," and any such Order should be "consistent and plaintiffs' "request is an improper attempt to leapfrog
with the narrowest possible relief which would protect the certification phase of this matter and proceed directly
the respective parties"). The Gulf Oil court found a dis- to class notification." Id. 2:14-22.
trict court's "sweeping restraint order," restricting com-
munications from named plaintiffs and their counsel to 1 In reliance on the Evans Declaration provided
prospective class members during the pendency of a in support of their Opposition, EDS represents
class action, failed to weigh competing factors and failed checks were mailed to employees included in
EDS' voluntary audit "in several phases begin-
Page 3
2008 U.S. Dist. LEXIS 3669, *
ning in April 2007." Op. P&A 4:1 6-17. "Of the where defendants misrepresent the nature of a class-
58 checks sent to putative class members who are action lawsuit or attempt to counsel potential class mem-
still employed by EDS, only one was sent after bers to opt out of particular litigation. See Great Rivers
August 21, 2007 (the [*8] date the Complaint in Cooperative of Southeastern Iowa v. Farmland Indus-
this matter was filed) . . . [and the] final phase of tries, Inc., 59 F.3d 764 (8th Cir. 1995) (holding the dis-
the self-audit was completed on September 27, trict court's Order granting plaintiffs' motion to regulate
2007 when checks were mailed to employees defendant's communications under Rule 23(d) both re-
who had been separated from EDS prior to or straining and enforcing speech did not arise from im-
during the audit." Id. 4:17-21. EDS removed the proper communications with plaintiffs and lacked a clear
action to federal court on September 20, 2007 record, lacked specific findings regarding what was mis-
pursuant to the Class Action Fairness Act of leading and why, and failed to weigh the need for the
2005, 28 U.S.C. s 1332(d), and the federal case limitation in consideration of potential interference with
recently survived plaintiffs' Motion To Remand. the rights of the parties under the Gulf Oil standard, so
that a curative notice from the court was not justified).
Plaintiffs identify no actual "abuse" or "threat[] to
The challenged communication here does not omit any
create confusion and influence the threshold decision
critical information and actually alerts recipients their
whether to remain in the class" in the procedural posture
rights under state law may differ from their rights under
of this case. Mot. P&A 5:25-6:2 (emphasis added), quot-
federal law.
ing In re School Asbestos Litig., 842 F.2d 671, 683 (3rd
Cir. 1988) (addressing post-class-certification communi- The court finds the objectives of plaintiffs' proposed
cations regarding the very subject matter of the litigation "curative communication" can be effectively achieved in
which urged particular conduct by actual class members, the normal course at the class notice phase of this [*11]
where the reviewing court held the district court lacked a litigation. Plaintiffs do not make the case for urgency to
proper Rule 23(d) basis to restrict communications with explain to potential class members the distinctions be-
the class as expansively as had been ordered) and In re tween federal labor law rights and issues outside the
Currency Conversion Fee Antitrust Litigation, 361 scope of this litigation and the independent state law
F.Supp.2d 237, 252 (S.D.N.Y. 2005) (substantiating "one claims advanced in this lawsuit. Plaintiffs' conjecture
policy of Rule 23 is the protection [*9] of class members offers no basis for specific findings the court must make
from 'misleading communications from the parties or before it may properly compel or restrict EDS' commu-
their counsel'") (citation omitted). A mere possibility of nications, particularly when they were not inherently
confusion is insufficient to justify the district court's ex- abusive nor coercive and do not appear to have compro-
ercise of supervisory authority over parties' communica- mised the state law rights of any potential class member.
tions with potential class members. Plaintiffs' purely The court finds on balance EDS' challenged communica-
speculative concerns regarding what the individuals re- tion with potential putative class members was neither
ceiving the communications from EDS "may believe," in misleading nor improper so as to justify the court's inter-
light of the absence of any actual misinformation likely vention at this time.
to affect the rights of potential class members, convince
For all the foregoing reasons, IT IS HEREBY OR-
the court judicial intervention to compel EDS to issue
DERED plaintiffs' Motion For Order Directing Curative
"corrective" communications at this time is unnecessary
Communication is DENIED. Each side shall bear its
and would be inappropriate. See, e.g., Parks v. Eastwood
own costs associated with the Motion.
Ins. Servs., 235 F.Supp.2d 1082, 1084 (C.D. Cal. 2002)
(denying application to prevent defense communications
IT IS SO ORDERED.
with potential "opt-in" class members in a FLSA class
action, noting "pre-certification communication from the DATED: January 16, 2008
defense to prospective plaintiffs is generally permitted"
/s/ Larry A. Burns
and holding "a defendant employer may communicate
with prospective plaintiff employees who have not yet
'opted in,' unless the communication undermines or con- HONORABLE LARRY ALAN BURNS
tradicts the Court's own notice to prospective plaintiffs"). United States District Judge
Plaintiffs' Motion [*10] complains EDS made no men-
tion of this action, quite the opposite of circumstances
Page 1
THOMAS SANFT and EDWARD LUPPEN, on their own behalf, and as

representatives of a class of all other persons similarly situated, Plaintiffs, vs.
WINNEBAGO INDUSTRIES, INC.; WINNEBAGO INDUSTRIES, INC.
DEFERRED COMPENSATION PLAN; WINNEBAGO INDUSTRIES, INC.
DEFERRED INCENTIVE FORMULA BONUS PLAN; and, WINNEBAGO
INDUSTRIES, INC. DEFERRED COMPENSATION PLAN AND DEFERRED
BONUS PLAN TRUST, Defendants.
No. C01-3067-MWB

IOWA, CENTRAL DIVISION
216 F.R.D. 453; 2003 U.S. Dist. LEXIS 13146; 31 Employee Benefits Cas. (BNA) 1591
July 28, 2003, Decided
DISPOSITION: [**1] Plaintiffs' Motion for Deferred Compensation Plan, WINNEBAGO

Amendment of Order Denying Class Certification INDUSTRIES, INC. DEFERRED INCENTIVE
granted in part and denied in part. FORMULA BONUS PLAN, WINNEBAGO
INDUSTRIES, INC. DEFERRED COMPENSATION
TRUST, winnebago industries, inc. Deferred
COUNSEL: For Thomas Sanft, on his own behalf, and compensation plan and deferred bonus plan trust,
as representative of a class of all other persons similarly Defendants: Deborah M Tharnish, LEAD ATTORNEY,
situated, Edward Luppen, on his own behalf, and as Gene R La Suer, [**2] LEAD ATTORNEY, Davis
representative of a class of all other persons similarly Brown Koehn Shors & Roberts, Des Moines, IA.
situated, Plaintiffs: Donald G Thompson, LEAD
ATTORNEY, Paul David Burns, LEAD ATTORNEY, JUDGES: MARK W. BENNETT, CHIEF JUDGE, U. S.
William T McCartan, LEAD ATTORNEY, Bradley & DISTRICT COURT, NORTHERN DISTRICT OF
Riley, Cedar Rapids, IA. IOWA.
For Thomas Sanft, on his own behalf, and as OPINION BY: MARK W. BENNETT
representative of a class of all other persons similarly
situated, Plaintiff: Kevin C Papp, Bradley & Riley, Cedar OPINION
Rapids, IA.
For Edward Luppen, on his own behalf, and as [*455] ORDER REGARDING PLAINTIFFS'
representative of a class of all other persons similarly MOTION FOR AMENDMENT OF ORDER
situated, Plaintiff: Kevin C Papp, LEAD ATTORNEY, DENYING CLASS CERTIFICATION AND
Bradley & Riley, Cedar Rapids, IA. DEFENDANTS' MOTION TO STRIKE THE
AFFIDAVIT OF DONALD THOMPSON
For Winnebago Industries, Inc., Winnebago Industries
Page 2
216 F.R.D. 453, *455; 2003 U.S. Dist. LEXIS 13146, **2;
31 Employee Benefits Cas. (BNA) 1591
TABLE OF CONTENTS Industries, Inc., Deferred Incentive

Formula Bonus Plan, who were vested in
I. INTRODUCTION AND BACKGROUND their right to receive benefits under one or
both of these plans at the time Defendants
II. LEGAL ANALYSIS retroactively reduced the benefits [**4] of
some participants under the Plans, and
A. Motion To Strike Affidavit
whose benefits were reduced as a result of
B. Motion For Amendment Of Order Denying Class actions of the Defendants.
Certification
Plaintiff's Mot. For Class Certification at P 3. On May 7,
1. Reconsideration of class certification decision 2003, following oral argument on plaintiff Sanft's Motion
for Class Certification, the court concluded, upon
2. Alternative requests considering the totality of the circumstances, that plaintiff
Sanft had failed to demonstrate that the proposed class
III. CONCLUSION meets the numerosity requirement of Federal Rule of
Civil Procedure 23(a)(1). The court, therefore denied
I. INTRODUCTION AND BACKGROUND
plaintiff Sanft's Motion for Class Certification.
On August 20, 2001, plaintiff Thomas Sanft, on his
Plaintiffs filed a Motion for Amendment of Order
own behalf and as representative of a class of persons
Denying Class Certification on May 12, 2003. In their
similarly situated, filed this lawsuit under the Employee
motion, plaintiffs request that the court reconsider its
Retirement Income Security Act of 1974 ("ERISA"), 29
decision to deny class certification in this case and grant
U.S.C. § 1001, et seq., against his former employer,
class certification to the proposed class. In the alternative,
Winnebago Industries, Inc. ("Winnebago"), Winnebago
plaintiffs request that the court amend the order denying
Industries, Inc. Deferred Compensation Plan ("Deferred
class certification in the following respects: (1) to require
Compensation Plan"), Winnebago Industries, Inc.
that defendant Winnebago provide plaintiffs' counsel
Deferred Incentive Formula [**3] Bonus Plan ("Deferred
with a current list of names and addresses of putative
Bonus Plan") and, Winnebago Industries, Inc. Deferred
class members; (2) direct plaintiffs to give notice as of a
Compensation Plan And Deferred Bonus Plan Trust ("the
date certain to the absent class members; (3) provide that
Trust").
the denial [**5] order shall not be effective until ninety
On December 28, 2001, plaintiff Sanft filed an days from the date the court establishes for giving notice
amended complaint in this matter. On January 31, 2003, to the putative class members, and (4) provide that the
United States Magistrate Judge Paul A. Zoss granted deadline for joinder of additional parties, be extended to
plaintiff Sanft's motion to amend the complaint for a the date that is ninety days from the date the court
second time to add Edward Luppen as a named establishes for the giving of notice to the absent class
representative plaintiff in this matter. In their Second members. Defendant Winnebago filed a timely resistance
Amended and Substituted Complaint and Jury Demand, to plaintiffs' Motion for Amendment of Order Denying
plaintiffs seek relief against defendants for improperly Class Certification. On July 7, 2003, defendant
and illegally reducing Sanft's rightful retirement benefits. Winnebago filed a supplemental resistance to plaintiffs'
Motion for Amendment of Order Denying Class
[*456] Plaintiff Sanft subsequently filed his Motion Certification.
For Class Certification in which he sought to have the
court certify a class under Federal Rule of Civil Defendant Winnebago filed its Motion To Strike
Procedure 23(b)(2) or, alternatively, under Federal Rule Affidavit Of Donald Thompson on May 30, 2003.
of Civil Procedure 23(b)(1)or 23(b)(3), described as Plaintiffs attached the affidavit of Donald Thompson to
follows: their brief in support of their Motion for Amendment of
Order Denying Class Certification. Defendant
All persons who made deferrals into the Winnebago seeks to strike Thompson's affidavit on the
Winnebago Industries, Inc. Deferred grounds that it contains only hearsay regarding
Compensation Plan or the Winnebago conversations Thompson had With plan participants and
Page 3
216 F.R.D. 453, *456; 2003 U.S. Dist. LEXIS 13146, **5;
conversations that plaintiff Sanft had with plan 3. On December 3, 2002, Tom Sanft
participants. Plaintiffs filed a timely resistance to sent a letter to many Class "C" KEYSOP
defendant Winnebago's Motion To Strike Affidavit Of Participants informing them of the suit and
Donald Thompson. Defendant Winnebago then [**6] our intent to seek certification of the
filed a reply brief in support of its motion on July 2, lawsuit as a class action. In the letter, he
2003. asked the recipients to consider joining
him as a representative plaintiff.
Before addressing plaintiffs' Motion For Amendment
Of Order Denying Class Certification, the court will first 4. On December 9, 2002, a Class "C"
take up defendant Winnebago's Motion To Strike KEYSOP Participant contacted me after
Affidavit Of Donald Thompson since the outcome of that receiving Mr. Sanft's letter. He informed
motion may have some bearing on plaintiffs' motion. me that he was still employed by
Winnebago. Eventually he decided not to
II. LEGAL ANALYSIS join the suit as a named plaintiff.
A. Motion To Strike Affidavit 5. On December 12, 2002, another

Class "C" KEYSOP Participant who
Defendant Winnebago seeks to strike Thompson's received a letter from Mr. Sanft contacted
affidavit on the grounds that it contains hearsay regarding me about the possibility of joining the suit
conversations Thompson had with plan participants and as [**8] a named plaintiff.
conversations that plaintiff Sanft had with plan
participants. Plaintiff Sanft responds that the statements 6. On January 6, 2003, this Participant
from putative class members constitute "mental called again and said that he was not
impressions" that are an exception to the hearsay rule willing to join the suit as a named plaintiff
pursuant to Federal Rule of Evidence 803(3). Plaintiff because of his continued employment at
Sanft further asserts that the entirety of Thompson's Winnebago.
affidavit need not be stricken because paragraph seven
does not contain hearsay statements but rather a 7. I have reviewed the content of
chronology of events. footnote number 4 to Plaintiffs'
Memorandum in Support of Motion for
In his affidavit, Donald G. Thompson, counsel for Amendment of Order Denying Class
plaintiff Sanft, avers as follows: Certification. I have personal knowledge
of the matter set forth therein and believe
1. I am counsel of record for Plaintiffs the content thereof to be true and correct.
Thomas Sanft and Edward Luppen.
Thompson Aff. at 1-2.
[*457] 2. In November 2001, I met
with [**7] a Class "C" Participant who As noted above, plaintiffs contend that the
was still employed by Winnebago. In May statements contained in Thompson's affidavit are
2002, that Winnebago employee informed admissible pursuant to Federal Rule of Evidence 803(3),
me that he had decided against becoming a the so-called "state of mind" exception. Defendant
named plaintiff in this suit because he was Winnebago disputes the applicability of Rule 803(3) on
still employed by Winnebago. On the the ground that the statements in question do not have to
same date, this employee informed me that do either with the putative participants' intent or feelings.
he had been approached by two other
Class "C" Participants about joining the Rule 803(3) excepts from the hearsay rule the
suit as named plaintiffs. He said they were following:
both still employed by Winnebago.
Neither of these employees contacted me (3) Then existing mental, emotional,
or anyone else at Bradley & Riley P.C. or physical condition. A statement of the
about becoming named plaintiffs. declarant's then existing state of mind,
Page 4
216 F.R.D. 453, *457; 2003 U.S. Dist. LEXIS 13146, **8;
emotion, sensation, or physical condition statements of memory or belief, not of

(such as intent, plan, motive, design, emotion or intent, and the only purpose for
mental feeling, pain, and bodily health), which the Benedicts can reasonably be
but not including a statement [**9] of introducing these statements is to prove
memory or belief that prove the fact that [**11] Benedict had, in fact, been
remembered or believed unless it relates to laid off before the crash, and was therefore
the execution, revocation, identification, not a Mid-Plains employee at the time of
or terms of declarant's will. the crash. Such statements are not
admissible under Rule 803(3), and the
Fed. R. Evid. 803(3). Thus, the Eighth Circuit Court of district court did not abuse its discretion in
Appeals has explained, "'A declarant's out-of-court excluding the testimony of these
statement of intention is admissible to prove that the witnesses.
declarant subsequently acted in conformity with that
intention, if the doing of that act is a disputed material The one statement that, from the
fact.'" Firemen's Fund Ins. Co. v. Thien, 8 F.3d 1307, record before us, appears to be properly
1312 (8th Cir. 1993) (quoting United States v. Calvert, admissible under Rule 803(3) is that of
523 F.2d 895, 910 (8th Cir. 1975), cert. denied, 424 U.S. Chad Benedict, who had been told by
911, 47 L. Ed. 2d 314, 96 S. Ct. 1106 (1976)). In United Benedict that he intended to study for his
States v. Dolan, 120 F.3d 856 (8th Cir. 1997), a case in pilot's license and build flying hours
which the defendant was prosecuted for aiding and during his time off. See Firemen's Fund, 8
abetting in the concealment of bankruptcy estate F.3d at 1313.
property, the Eighth Circuit Court of Appeals held that
the trial court had properly admitted pursuant to Rule Id. Thus, as the rule itself states, a hearsay statement
803(3) the testimony of the debtor's office manager that concerning what a declarant believes or remembers is not
the debtor had said he had the defendant "by the balls." admissible.
Id. at 869. The court held that the statement was
Here, the only statements in Thompson's affidavit
admissible as showing [**10] the debtor's "then existing
that conceivably fall within the ambit of Rule 803(3) are
state of mind indicating a plan, motive, and design
contained in paragraphs 2 and 6, in which Thompson
concerning his transactions and relationship with [the
avers that a "Winnebago employee informed me that he
defendant]." Id.
had decided against becoming a named plaintiff in this
However, the statement in Dolan should be suit because he was still employed by Winnebago" and
contrasted with statements the Eighth Circuit Court of that another employee told him "he was not willing to
Appeals found inadmissible under Rule 803(3) in join the suit as a named plaintiff because of his continued
Firemen's Fund Ins. Co. v. Thien, 63 F.3d 754 (8th Cir. employment at Winnebago." Thompson Aff. at [**12] P
1995). In the Thien case, which concerned an insurer's or 2 and 6. The court concludes that these are statements of
a co-employee's liability for the death of another Winnebago employee's present motive and intent to
employee, the proffered hearsay was testimony of forego becoming a named plaintiff in this case and are
witnesses that the decedent had said he had been or admissible under Rule 803(3). See Callahan v. A.E.V.
[*458] was going to be laid off from his employment. Id. Inc., 182 F.3d 237, 252 (3d Cir. 1999) (holding that
at 760. In that case, the court of appeals wrote, customers' statements that they no longer came to
plaintiffs' business because defendants' stores offered
We find, however, that the statements lower prices were admissible as evidence of customers'
the Benedicts seek to have admitted are states of mind, i.e., their reasons for no longer shopping
offered to prove the fact remembered or at plaintiffs' stores). Therefore, the court denies defendant
believed, not to show Benedict's state of Winnebago's motion to strike with respect to these
mind. Excepting one, which we will statements.
discuss briefly below, each statement
The remaining statements in Thompson's affidavit do
consists of Benedict's stating that he had
not fall within the ambit of Rule 803(3). 1 In the
been or was about to be laid off. These are
Page 5
216 F.R.D. 453, *458; 2003 U.S. Dist. LEXIS 13146, **12;
remainder of paragraph 2, Thompson states that: an Certification

unnamed Winnebago employee "informed me that he had
been approached by two other Class 'C' Participants about 1. Reconsideration of class certification decision
joining the suit as named plaintiffs. He said they were
In their motion, plaintiffs contend that the court
both still employed by Winnebago." Thompson Aff. at P
should reconsider its decision regarding the certification
2. The first portion of this statement does not involve the
of a class in this case. A district [**15] court may
present sense impression of the speaker, but a statement
reconsider its order denying class certification and the
of the speaker's recollection of a past events. Rule 803(3)
Court has broad discretion with respect to such a ruling.
explicitly excludes [**13] from its purview any
See Armstrong v. Martin Marietta Corp., 138 F.3d 1374,
"statement of memory or belief to prove the fact[s]
1380 (11th Cir.), cert. denied, 525 U.S. 1019, 142 L. Ed.
remembered or believed." Fed. R. Evid. 803(3); see
2d 453, 119 S. Ct. 545 (1998); Calderon v. Presidio
Thien, 8 F.3d at 1312. A statement about a past
Valley Farmers Ass'n, 863 F.2d 384, 388 (5th Cir. 1989);
remembrance does not fall within the state of mind
Kamerman v. Steinberg, 123 F.R.D. 66, 69 (S.D.N.Y.
exception to the hearsay rule because in the words of
1988). Here, plaintiffs assert that the court erred in
Justice Cardozo, "the testimony now questioned face[s]
concluded that the numerosity had not been met.
backward and not forward. . . ." Shepard v. United States,
Plaintiffs specifically argue that the court erred in
290 U.S. 96, 106, 78 L. Ed. 196, 54 S. Ct. 22 (1933).
concluding that there was insufficient evidence to support
Similarly, the later portion is merely a statement of the
plaintiffs' assertion that class members would not join the
speaker's belief about the employment status of two
litigation because they were still employed by
individuals and does not involve the speaker's existing
Winnebago and feared retribution if they joined the
mental, emotional, or physical condition. Therefore, the
lawsuit. Plaintiffs assert that the court should take judicial
court grants defendant Winnebago's motion to strike with
notice of the fact that employees are fearful of suing their
respect to these statements.
employer. The court is unaware of any federal appellate
1 Paragraphs 1, 5, and 7 do not include any out decision mandating that the court take judicial notice of
of court statements. Therefore, the court denies such a fact and the court's own research has not disclosed
defendant Winnebago's motion to strike with any authorities requiring such a presumption. Moreover,
respect to these paragraphs. even [**16] if such a general presumption existed, the
court has serious reservations that such a presumption
Paragraph 3 also includes an out of court statement, would apply when the employees in question include
Sanft's [**14] asking other Class "C" KEYSOP executives occupying the highest positions within the
participants to consider joining him as a class company.
representative. However, the court does not view this
statement as being offered to prove the truth of the matter In an effort to buttress their position, plaintiffs have
asserted and therefore does not constitute hearsay. Fed. produced the affidavit of their counsel, Donald G.
R. Evid. 801(c). Rather, this [*459] statement, merely Thompson, in which he relates being told by two
serves as background for events that subsequently unnamed class members that they were unwilling to join
transpired. However, the out of court statement contained the lawsuit due to their continued employment with
paragraph 4 regarding the current employment status of a Winnebago. Thompson Aff. at PP 2 and 6. Given the
Class "C" participant, is being used to prove the truth of total absence of information regarding these two
the matter asserted, that the individual is employed by unnamed and otherwise unidentified class members, the
Winnebago. This Statement clearly does not fall within court is unwilling to draw the conclusion that these two
Rule 803(3) and plaintiffs have not offered any other unnamed class members's motives for not joining this
basis for its admissibility. Therefore, the court grants lawsuit are representative of the other class members.
defendant Winnebago's motion to strike with respect to Moreover, the court is unwilling to infer from the
this Statement. The court turns next to consideration of enigmatic reason given for their decision not to join this
plaintiffs' Motion For Amendment Of Order Denying lawsuit that they are fearful of workplace reprisals.
Class Certification. Plaintiffs have produced no direct evidence that class
members are fearful of workplace reprisals. Fear of
B. Motion For Amendment Of Order Denying Class reprisal is but one of many reasons why potential class
Page 6
216 F.R.D. 453, *459; 2003 U.S. Dist. LEXIS 13146, **16;
members might chose not to be a party to this lawsuit. provide that the deadline for joinder of additional parties
For instance, the employees [**17] might believe that be extended to the date that is ninety days from the date
given their demanding positions within the company, the the court establishes for the giving of notice to the absent
lawsuit would be a distraction or require too much of class members. Plaintiffs request this relief to protect the
their time. In addition, as defendant Winnebago points rights of the putative class members from the running of
out in its response, of the 27 potential litigants currently the statute of limitations on their claims. Defendant
employed by Winnebago, all 27 are salaried employees Winnebago also resists this portion of plaintiffs' motion.
and 20 of the 27 are either corporate officers or members Defendant Winnebago argues that the court should
of management. As a result, as the court observed in its exercise its discretion and deny plaintiffs' requests
original decision, because the class members themselves because plaintiffs have not made a showing of special
occupy positions of authority within the company, they circumstances that would warrant the giving of notice to
are quite unlike the plaintiffs in those cases where the the putative class members.
courts have considered potential class members' concern
regarding employer retaliation or reprisal in accessing Federal Rule of Civil Procedure 23(d)(2) authorizes
whether the numerosity requirement has been met. See a court, in the conduct of class action litigation, to issue
Arkansas Educ. Ass'n v. Board of Educ. of Portland, orders "requiring, for the protection of the members of
Arkansas School Dist., 446 F.2d 763, 765 (8th Cir. 1971) the class or otherwise for the fair conduct of the action,
(public school teachers); see also Mullen v. Treasure that notice be given in such manner as the court may
Chest Casino, L.L.C., 186 F.3d 620, 625 (5th Cir. 1999) direct to some or all of the members of any step in the
(casino employees); Scott v. Aetna Servs., Inc., 210 action, or of the proposed [**20] extent of the judgment,
F.R.D. 261, 267 (D. Conn. 2002) (engineers); O'Brien v. or of the opportunity of members to signify whether they
Encotech Constr. Servs., 203 F.R.D. 346, 350 (N.D. Ill. consider the representation fair and adequate, to intervene
2001) [**18] (construction company employees); and present claims or defenses, or otherwise to come into
[*460] Ansoumana v. Gristede's Operating Corp., 201 the action. . ." FED. R. CIV. P. 23(d)(2). Courts have
F.R.D. 81, 85 (S.D.N.Y. 2001) ("unskilled workers" required notice pursuant to Rule 23(d)(2) where the facts
assigned by labor agents to supermarkets and drugstore of the case show that lack of notice would unduly
chains); Adames v. Mitsubishi Bank, Ltd., 133 F.R.D. 82, prejudice the ability of absent class members to bring
89 (E.D.N.Y. 1989) (administrative assistants); Slanina v. independent actions on their claims, either by limiting the
William Penn Parking Corp., 106 F.R.D. 419, 423 (W.D. right of absent class members to recover in a subsequent
Pa. 1984) (parking lot cashiers). Thus, the court suit, or by encouraging continued reliance by unnamed
continues to conclude that the fact that some potential class members on the activity of named class members on
class members remain employed at Winnebago only their behalf. See Shelton v. Pargo, Inc., 582 F.2d 1298,
nominally supports a finding that the numerosity 1315 (4th Cir. 1978); Miller v. Central Chinchilla Group,
requirement has been satisfied and is insufficient to Inc., 66 F.R.D. 411, 417 (S.D. Iowa 1975). Here, as a
require the court to reverse its previous decision that practical matter, the circumstances of this case pose a
plaintiffs have failed to demonstrate that the proposed significant risk of prejudice to putative class members
class meets the numerosity requirement of Federal Rule who do not receive notice of this order. This suit has been
of Evidence 23(a)(1). Therefore, the court denies that pending for almost two years. If the putative class
portion of plaintiffs' motion. members do not receive notice of this order they may
permit the statute of limitation to run on their claims. The
2. Alternative requests court is therefore [**21] of the opinion that notice of this
order should be given to putative class members.
Plaintiffs alternatively request that the court: (1)
require defendant Winnebago to provide plaintiff's Pursuant to Rule 23(d)(2), the court directs that
counsel with a current list of names and addresses of within fifteen (15) days of the date of this order
putative class members; (2) direct plaintiffs to give notice defendant Winnebago is to provide to plaintiffs' counsel a
as of a date certain to the absent [**19] class members; current list of names and addresses of putative class
(3) provide that the denial order shall not be effective members. Plaintiffs' counsel shall cause the notice
until ninety days from the date the court establishes for attached to this order to be mailed by first class mail to all
giving notice to the putative class members, and (4) the putative class members on or before September 15,
Page 7
216 F.R.D. 453, *460; 2003 U.S. Dist. LEXIS 13146, **21;
2003. The costs of mailing this notice shall be borne [**23] Thomas Sanft and Edward Luppen v.
initially by the plaintiffs but shall be taxed as costs of this Winnebago Industries, Inc. et al. United States District
action. The court further orders that the deadline for Court For The Northern District Of Iowa
joinder of additional parties shall be extended to October
15, 2003. The order denying class action status in this Case No. C01-3067MWB
case shall become effective on October 15, 2003.
TO:
III. CONCLUSION
DATE:
Initially, for the reasons outlined above, the court
The above-captioned lawsuit is pending in the United
grants in part and denies in part [*461] defendant
States District Court for the Northern District of Iowa,
Winnebago's Motion To Strike Affidavit Of Donald
Case No. C01-3067MWB. The case involves claims by
Thompson. The court further concludes that plaintiffs
former Winnebago employees, Thomas Sanft and
have failed to demonstrate that the proposed class meets
Edward Luppen ("the Plaintiffs"), against Winnebago
the numerosity requirement of Rule 23(a)(1). Thus, the
Industries, Inc., the Winnebago Deferred Compensation
court denies plaintiffs' [**22] request that the court
Plan, the Winnebago Deferred Incentive Formula Bonus
reverse its decision regarding the certification of a class
Plan and the Winnebago Deferred Compensation and
in this case. The court, however, directs that within
Deferred Bonus Plan Trust ("the Winnebago
fifteen (15) days of the date of this order defendant
Defendants").
Winnebago is to provide to plaintiffs' counsel a current
list of names and addresses of putative class members. Plaintiffs allege that certain amendments to the
Plaintiffs' counsel shall cause the notice attached to this Winnebago Deferred Compensation Plan and/or the
order to be mailed by first class mail to all the putative Winnebago Deferred Incentive Formula Bonus Plan ("the
class members on or before September 15, 2003. The Plans") were illegal and that these illegal amendments
costs of mailing this notice shall be borne initially by the had the effect of reducing the amount of benefits to be
plaintiffs but shall be taxed as costs of this action. The paid to some of the participants in the Plans. You are
court further orders that the deadline for joinder of receiving this Notice because it is believed you are a
additional parties shall be extended to October 15, 2003. participant in one or both of the Plans, or were formerly a
The order denying class action status in this case shall participant in one or both of the Plans, and your benefits
become effective on October 15, 2003. Therefore, were affected by the amendments [**24] to the Plans.
plaintiffs' Motion for Amendment of Order Denying You may have claims against the Winnebago Defendants
Class Certification is granted in part and denied in similar to the claims made by Mr. Sanft and Mr. Luppen.
part.
On July 28, 2003, the presiding judge in the case, the
IT IS SO ORDERED. Honorable Mark W. Bennett, issued a ruling denying the
DATED this 28th day of July, 2003. Plaintiffs' motion to certify this case as a class action. As
a result, your right to assert claims may be lost if you
MARK W. BENNETT do not take action to join this lawsuit before October
15, 2003.
CHIEF JUDGE, U.S. DISTRICT COURT
Thomas Sanft and Edward Luppen are represented
NORTHERN DISTRICT OF IOWA by lawyers from the Cedar Rapids law firm of Bradley &
Riley P.C. If you have questions about this Notice you
Attachment may contact them directly:
NOTICE Donald G. Thompson

YOU ARE ADVISED TO SEEK LEGAL William T. McCartan
ADVICE IMMEDIATELY CONCERNING THIS
NOTICE Paul D. Burns
Page 8
216 F.R.D. 453, *461; 2003 U.S. Dist. LEXIS 13146, **24;
Kevin C. Papp (319) 363-9824
Bradley & Riley P.C. www. bradleyriley.com
2007 First Ave. SE

YOU ARE ADVISED TO SEEK LEGAL
Cedar Rapids, IA 52246 ADVICE IMMEDIATELY CONCERNING THIS
NOTICE
(319) 363-0101
Page 1
APRIL MARIE SCHULTZEN, Individually and on Behalf of Others Similarly Situ-

ated, Plaintiffs, vs. WOODBURY CENTRAL COMMUNITY SCHOOL DISTRICT,
Defendant.
No. C01-4089-MWB

IOWA, WESTERN DIVISION
217 F.R.D. 469; 2003 U.S. Dist. LEXIS 16223
PRIOR HISTORY: Schultzen v. Woodbury Cent. class of similarly situated plaintiffs, but she never sought
Cmty. Sch. Dist., 250 F. Supp. 2d 1047, 2003 U.S. Dist. to certify the class. On March 28, 2003, Schultzen ac-
LEXIS 2437 (N.D. Iowa, 2003) cepted Woodbury Central's offer of judgment (# 47), and
judgment was entered on March 28, 2003 (# 48). The
DISPOSITION: [**1] Parties' joint motion to dis- parties seek the court's approval of their settlement and
miss granted and case dismissed without prejudice. request that the court dismiss this case pursuant to Fed-
eral Rule of Civil Procedure 23(e). 1
COUNSEL: For April Marie Schultzen, Plaintiff: Jay 1 By implication the parties are requesting dis-
Elliott Denne, Stanley E Munger, LEAD ATTORNEYS, missal of Schultzen's class action allegation as
Munger, Reinschmidt & Denne, Sioux City, IA. well as Schultzen's individual claims.
[**2] Federal Rule of Civil Procedure 23(e) pro-
For Woodbury Central Community School District, De-
vides that:
fendant: Michael J Frey, LEAD ATTORNEY, Hellige,
Lundberg, Meis, Erickson & Frey, Sioux City, IA.
A class action shall not be dismissed or
compromised without the approval of the
JUDGES: MARK W. BENNETT, CHIEF JUDGE, U.
court, and notice of the proposed dis-
S. DISTRICT COURT, NORTHERN DISTRICT OF
missal or compromise shall be given to all
IOWA.
members of the class in such manner as
the court directs.
OPINION BY: MARK W. BENNETT
OPINION
FED. R. CIV. P. 23(e). The court's paramount role on a
Rule 23(e) motion is to protect the interests of absent
[*470] ORDER REGARDING JOINT MOTION
plaintiffs before permitting dismissal. See Grunin v. In-
FOR DISMISSAL
ternational House of Pancakes, 513 F.2d 114, 123 (8th
Cir. 1975) ("Under Rule 23(e) the district court acts as a
I. INTRODUCTION AND BACKGROUND
fiduciary who must serve as a guardian of the rights of
This matter is before the court on the parties' joint absent class members"). In the case before this court, the
motion for dismissal (# 49). Plaintiff April Marie class has not been certified, but "this requirement [to act
Schultzen ("Schultzen") originally filed this action as the guardian of the rights of class members] applies
against defendant Woodbury Central Community School even if a class has not yet been certified." Crawford v. F.
District ("Woodbury Central") on behalf of herself and a Hoffman-La Roche Ltd., 267 F.3d 760, 764 (8th Cir.
Page 2
217 F.R.D. 469, *; 2003 U.S. Dist. LEXIS 16223, **
2001) (citing Diaz v. Trust Territory of Pacific Islands, never certified, ensures that the rule's basic aims are fur-
876 F.2d 1401, 1407 (9th Cir. 1989); Glidden v. thered: (1) protection of the interests of the [**5] puta-
Chromalloy Am. Corp., 808 F.2d 621, 625-28 (7th Cir. tive class members by the court; and (2) prevention of
1986); cf. Shelton v. Pargo, 582 F.2d 1298, 1310 (4th abuse characterized by collusion between the active par-
Cir. 1978) [**3] (although court approval under Rule ties, including their counsel. Id. at 764 ("Rule 23(e), in
23(e) is not required when a class has not been certified, turn, prevents the dismissal or compromise of a class
the court must use its Rule 23(d) supervisory powers to action without approval of the district court, and directs
protect the interests of the potential class members)). "A the court to protect the interests of absent plaintiffs be-
representative plaintiff in a class action cannot simply fore permitting dismissal."); Shelton v. Pargo, Inc., 582
agree to a settlement that might be advantageous for him F.2d 1298 (4th Cir. 1978) (primary purpose of Rule 23(e)
personally but not for the other plaintiffs. The court has is to "insure that an absentee class member, against
the responsibility of ensuring that all of the plaintiffs in whom an order of dismissal with prejudice would be res
the class are treated fairly." [*471] Bryant v. Bonded judicata, should be afforded an opportunity to be heard
Accounts Servs., 2000 U.S. Dist. LEXIS 22309, 2000 before any such order was entered"). Thus, a district
WL 33955881, at *2 (D. Minn. Aug. 2, 2000). Therefore, court "must inquire into the terms and circumstances of
the parties' joint motion for dismissal of this action, any dismissal or compromise to ensure that it is not col-
which was brought as a class action, requires court ap- lusive or prejudicial." Diaz, 876 F.2d at 1408.
proval even though a class was not certified prior to the
The parties' joint motion for dismissal, in this case,
parties' request for dismissal. See Wallican v. Waterloo
did not address the factors that would enable the court to
Cmty. Sch. Dist., 80 F.R.D. 492 (N.D. Iowa 1978) (stat-
make a determination under Rule 23. On May 2, 2003,
ing that the supervisory responsibilities and powers
the court ordered the parties to submit to the court on or
stated in Federal Rule of Civil Procedure 23 are applica-
before May 23, 2003, legal briefs addressing the follow-
ble to the stipulation of dismissal filed by the parties at
ing issues: (1) the circumstances [**6] leading to the
the pre-certification stage of litigation).
decision to voluntarily dismiss the class action; (2) any
The Court of Appeals for the Eighth Circuit has ex- settlement or concession of class interests made by the
plained: class representative(s) or counsel; (3) class members'
possible reliance on the filing of the action if they are
Although Rule 23(e) provides generally likely to know of it either because of publicity or other
[**4] for notice to members of a class, circumstances; (4) amount of time for class members to
notice is not necessarily required if a class file other actions in view of applicable statute(s) of limi-
has not been certified. See Diaz, 876 F.2d tations; and (5) any other factors bearing on possible
at 1409; Wallican v. Waterloo Community prejudice or loss of benefit to the absent class members
School Dist., 80 F.R.D. 492, 493 (N.D. created by the dismissal. Gassie v. SMH, Ltd., 1997 U.S.
Iowa 1978). Nevertheless, in deciding Dist. LEXIS 12005, 1997 WL 466905, at *2 (E.D. La
whether to allow dismissal or issue notice, Aug. 1, 1997). The parties in this action have submitted
the district court must consider, among their legal briefs. The court, therefore, will now take up
other things, the possibility that potential the parties' joint motion to dismiss and consider each of
members of the class would be preju- the above factors.
diced. Id. at 1409-10. Dismissal might
prejudice potential members whose II. LEGAL ANALYSIS
claims have expired under a statute of
limitations. See Diaz, 876 F.2d at 1410- A. Circumstances Leading To Decision
11; Wallican, 80 F.R.D. at 494. Dismissal
The parties have indicated to the court that
without notice might also prejudice poten-
Schultzen has accepted an offer to confess judgment
tial members who have been relying on
filed by Woodbury Central in this case. While preparing
the named plaintiff to protect their inter-
for trial it came to the attention of Schultzen that the ac-
ests, by leaving them to fend for them-
tions taken against her were isolated and not representa-
selves without knowledge that they should
tive of Woodbury Central's general treatment of females.
do so. See Glidden, 808 F.2d at 627-28.
[**7] Therefore, a class action pursuant to Rule 23 is not
warranted here. In addition, after the lawsuit [*472] was
filed, no third parties contacted Schultzen's counsel to
Crawford, 267 F.3d at 764-65.
complain of discrimination in the athletic programs of
Further, this court agrees that requiring Rule 23(e) the Woodbury Central School District, and no additional
approval, to an action brought as a class action, though complaints of individual sex discrimination were re-
Page 3
217 F.R.D. 469, *; 2003 U.S. Dist. LEXIS 16223, **
ceived by Schultzen's counsel. Woodbury Central pro- Federal courts have held that the pendency of a class
vided the affidavit of Tom Cooper, Superintendent of the action tolls the applicable statute of limitations until the
Woodbury Central community School District, in which district court makes a class certification. 2 Crown, Cork
he stated that he had no knowledge of any other student, & Seal Co., Inc. v. Parker, 462 U.S. 345, 354-55, 76 L.
male or female, who claims to have been discriminated Ed. 2d 628, 103 S. Ct. 2392 (1983) (holding that the
against by the school district as a result of his or her gen- commencement of a class action suspends the applicable
der. Consequently, Schultzen did not make an attempt to statute of limitations for all asserted members of the pu-
certify this case as a class action lawsuit within the tative class "until class certification is denied."); Am.
meaning of Rule 23. The parties agree that they do not Pipe & Constr. Co. v. Utah, 414 U.S. 538, 554, 38 L. Ed.
believe that there exists any current practice by Wood- 2d 713, 94 S. Ct. 756 (1974) (unanimously [**10] hold-
bury Central to discriminate against female students. The ing that "the commencement of a class action suspends
parties have jointly requested that this court enter an or- the applicable statute of limitations as to all asserted
der granting the dismissal of this case. members of the class who would have been [*473] par-
ties had the suit been permitted to continue as a class
The court concludes that the circumstances of this
action."); see Concordia Coll. Corp. v. W.R. Grace &
case support the dismissal of this action, originally filed
Co., 999 F.2d 326, 331 (8th Cir. 1993) (recognizing
as a class action, in its entirety, where there appears
holding of Crown Cork), cert. denied, 510 U.S. 1093,
[**8] to be no other class members.
127 L. Ed. 2d 218, 114 S. Ct. 926 (1994); see also El-
more v. Henderson, 227 F.3d 1009,1012 (7th Cir. 2000)
B. Settlement Or Concessions Of Class Interests
(noting that the statute of limitations is tolled for class
The court must also consider whether any settlement members until it is determined that the case cannot pro-
or concession of class interests has been made by the ceed as a class action); Armstrong v. Martin-Marietta
class representative or counsel. Woodbury Central of- Corp., 138 F.3d 1374, 1394 (11th Cir.) ("We therefore
fered to confess judgment to Schultzen in her individual conclude that the pendency of a class action tolls the
capacity and no offer was made to settle this action with applicable statute of limitations only until the district
Schultzen in a representative capacity. This settlement court makes a class certification decision. If class certifi-
was not reached by excluding any proposed class mem- cation is denied in whole or in part, the statute of limita-
ber from negotiations. Further, no settlement or conces- tions begins to run again as to those putative class mem-
sion was made by Schultzen or her counsel on behalf of bers who were excluded from the class."), cert. denied,
the potential class portion of this suit. Therefore, this 525 U.S. 1019, 142 L. Ed. 2d 453, 119 S. Ct. 545 (1998).
factor weighs in favor of dismissal of this action. In this case, [**11] the state's two (2) year statute of
limitations on Title IX suits applies. See Gaona v. Town
C. Class Members' Reliance On The Filing & Country, 324 F.3d 1050 (8th Cir. 2002) citing Eger-
dahl v. Hibbing Cmty. College, 72 F.3d 615, 617-18 (8th
The next factor the court must consider is class Cir. 1995). When the tolling period ends, if there is any
members' possible reliance on the filing of the action if
time remaining in the two year period of limitations, the
they are likely to know of it either because of publicity or putative members would have that remaining time to file
other circumstances. Woodbury Central believes that this a separate action. Therefore, this factor further supports
lawsuit was well known in the Moville area. In contrast,
the dismissal of this action.
Schultzen states there was not significant publicity that
would have alerted potential class members. The court is 2 Woodbury Central claims that there is a
inclined to agree with Woodbury Central in that, in a
"rather interesting question for this court to dis-
community [**9] the size of Moville, the lawsuit was cern" and that question is "whether the applicable
probably well known in the area. In addition, Woodbury statute of limitations that are tolled during the
Central states that apparently the settlement of this case
pendency of this action are renewed or resumed."
was reported in the local Moville paper. Schultzen states The court directs Woodbury Central to the defini-
that neither she nor her counsel received any communi- tion of tolled: "To suspend or stop temporarily."
cation from any potential class members in reliance on
Blacks Law Dictionary, 1035 (6th Edition 1991).
the filing of this action. The court concludes that it is In other words, to toll means the period of time is
unlikely that there are putative members of the class who temporarily stopped, or suspended, and then con-
are relying on this lawsuit for relief. Therefore, this fac-
tinues after the tolling period ends. The court ac-
tor also weighs in favor of dismissal of this action. knowledges that the term "renewed" seems to
imply that a completely new period of time
D. Amount Of Time For Class Members To File Other would be given but that is not the case. This court
Actions interprets the use of "renewed" and "resumed" as
Page 4
217 F.R.D. 469, *; 2003 U.S. Dist. LEXIS 16223, **
referring to a continuation of the time period that evidence of any prejudice to absent class members, then
was temporarily suspended during the tolling pe- notice to the class members is not required.").
riod and not a granting of a completely new pe-
In Diaz, the Ninth Circuit Court of Appeals ex-
riod of time.
plained that the purpose of Rule 23(e)'s notice provision
is three-fold: (1) to protect defendants by preventing
[**12] E. Other Factors
plaintiffs from appending class allegations to the com-
Schultzen states that she does not know of any other plaint to extract a more favorable settlement, (2) to pro-
class members and that she does not believe there is any tect the class from objectionable structural relief, trade-
prejudice or loss of benefit to absent class members cre- offs between compensatory and structural relief, or de-
ated by the dismissal of this action. Woodbury Central pletion of limited funds to pay class claims, and (3) to
does not believe any purported absent class members [*474] protect the class from prejudice it would other-
would suffer any prejudice or loss of benefits created by wise suffer if class members have refrained from filing
accepting the dismissal in this case if these members are suit because of knowledge of the pending action. Diaz,
given an opportunity to file a separate cause of action or 876 F.2d at 1409. Here, none of the purposes behind the
intervene in this case. The court finds there are no other notice provision are implicated by allowing dismissal of
factors which would bear on the possible prejudice or the present action without notice.
loss of benefit to the absent class members created by the
dismissal of this action. Therefore, this factor also III. CONCLUSION
weighs in favor of the dismissal of this case.
Although, this case does involve a situation where
the named representative has settled her individual case
F. Notice
and now the parties [**15] seek dismissal of the action,
When confronted with the dismissal of a certified the court has considered the five factors bearing on pos-
class action, Rule 23(e) requires not just court approval, sible prejudice or loss of benefit to the absent class
but such notice of the settlement to members of the class members created by the dismissal. The court finds that
as the court directs. FED. R. CIV. P. 23(e). However, in the absent class members will not be prejudiced if the
the context of a pre-certification, putative class action, court dismisses this action and there is no danger of the
courts have concluded that notice to putative class mem- dismissal having any preclusive effect on absent class
bers of a pre-certification dismissal is not mandated by members since the dismissal of the class allegations will
Rule 23(e). Diaz, 876 F.2d at 1407; [**13] In re Nazi have occurred prior to any court certification inquiry.
Era Cases Against German Defendants Litig., 198 Moreover, the court notes that the class members will not
F.R.D. 429, 441 (S.D.N.Y. 2000); Gunn v. World Omni be prejudiced because the class claims are to be dis-
Fin. Corp., 184 F.R.D. 417, 419 (M.D. Ala. 1999); An- missed without prejudice. Finally, as discussed above,
derberg v. Masonite Corp., 176 F.R.D. 682, 690 (N.D. the parties agree that there is no evidence that any puta-
Ga. 1997); Gupta v. Penn Jersey Corp., 582 F. Supp. tive class members are relying on this case to protect
1058, 1060 (E.D. Pa. 1984); Maddox & Starbuck, Ltd. v. their rights. Thus, the court concludes that there is no
British Airways, 97 F.R.D. 395, 397 (S.D.N.Y. 1983); evidence of collusion or danger of prejudice to absent
Larkin Gen. Hosp., Ltd. v. Am. Tel. & Tel. Co., 93 F.R.D. class members in granting the parties' joint motion to
497, 502-03 (E.D. Pa. 1982); Robinson v. First Nat. City dismiss without notice to the class.
Bank, 482 F. Supp. 92, 100-01 (S.D.N.Y. 1979); Magana
Because the court concludes that all five factors dis-
v. Platzer Shipyard, Inc., 74 F.R.D. 61, 64-71 (S.D. Tex.
cussed above weigh in favor of dismissal of the action,
1977). Under this line of authorities, courts have applied
the parties' joint motion to dismiss is granted.
a functional approach in deciding whether notice is re-
quired and concluded that "if there is no evidence of any
IT IS SO ORDERED.
collusion between the named plaintiffs and the defen-
dants in seeking the dismissal and no evidence of any DATED this 16th day of September, 2003.
prejudice to absent class members, then courts have con-
sistently found that notice to the absent class members is MARK W. BENNETT
not required." Anderberg, 176 F.R.D. at 689; accord [**16] CHIEF JUDGE, U.S. DISTRICT COURT
[**14] Gunn, 184 F.R.D. at 419 (noting that "if there is
no evidence of any collusion between the named plain- NORTHERN DISTRICT OF IOWA
tiffs and the defendants in seeking the dismissal, and no
Page 1
ANN E. BUBLITZ and DOROTHY A. PIERCE, Individually and on Behalf of

Themselves and All Persons Similarly Situated, Plaintiff, v. E.I. duPONT de
NEMOURS and COMPANY, and PIONEER HI-BRED INTERNATIONAL, INC.,
Defendant.
4-00-CV-90247

IOWA, CENTRAL DIVISION
196 F.R.D. 545; 2000 U.S. Dist. LEXIS 14551; 47 Fed. R. Serv. 3d (Callaghan) 1097
DISPOSITION: [**1] Order modified. reasons stated below, the Court will modify the Order.
I. Background
COUNSEL: For Plaintiffs: Frank B. Harty, Esq., Des
Moines, Iowa. Ann Bublitz and Dorothy Pierce filed this class
action on behalf of themselves and approximately 250
For Defendants: John B. Gordon, Esq., Minneapolis, MN. management-level employees of Defendants, E.I. duPont
de Nemours ("DuPont") and Pioneer Hi-Bred
JUDGES: ROBERT W. PRATT, U.S. DISTRICT International, Inc. ("Pioneer"). Plaintiffs seek declaratory
JUDGE. and other relief against Defendants [**2] under a Change
in Control Severance Compensation Plan for
OPINION BY: ROBERT W. PRATT Management Employees ("CIC Plan"). The CIC Plan
essentially provides three years' salary as a severance to
OPINION eligible employees who leave the company either (a)
when asked by the company or (b) when they voluntarily
[*546] MEMORANDUM OPINION AND ORDER quit or retire and are determined to have left the company
for "Stated Good Reasons," as described in the Plan.
Before the Court is Plaintiffs' motion to modify or Plaintiffs allege that their rights under the CIC Plan,
set aside U.S. Magistrate Judge Shields' Order granting which was created by Pioneer, have either been
Plaintiffs permission to communicate with putative class "triggered" or are "triggerable" at their discretion since
members and denying Defendants motion to restrict the DuPont has taken over Pioneer. Plaintiffs filed this
same. Plaintiffs filed their Objections to Magistrate lawsuit on April 21, 2000 and moved to certify the class
Judge's Order and Request for Stay on the same day that on August 8, 2000. To date, the class has not been
Magistrate Judge Shields filed his Order, September 22, certified; but the fact that the class has yet to be certified
2000. Plaintiffs and Defendants also appeared before the is at least in part due to the Court's granting of
Court on September 22, 2000. The Court stayed the Defendant's request to extend the time for them to resist
Magistrate Judge Shields' Order until September 27, 2000 the certification.
or until this Court could rule on the matter. For the
Page 2
196 F.R.D. 545, *546; 2000 U.S. Dist. LEXIS 14551, **2;
47 Fed. R. Serv. 3d (Callaghan) 1097
Since the class has not been certified, Defendants Thus, this Court may not set aside or modify Magistrate
wish to present a Retention Proposal directly to the Judge Shields' Order unless it is clearly erroneous or
members of the putative class as well as have other contrary to law.
related communications directly with the members. The
Retention Proposal consists of incentives and benefits, in III. Discussion
exchange for which the employees [**3] must waive
The Court, for the most part, agrees with Magistrate
their rights under the CIC Plan. Defendants filed a motion
Judge Shields. Magistrate Judge Shields held that there
to allow the communications 1 (though maintaining that
was insufficient evidence to justify the limitations on
such a motion was not necessary), and Plaintiffs filed a
Defendants' communications requested by Plaintiffs.
cross motion to restrict any such communication.
However, the Court disagrees with Magistrate Judge
Magistrate Judge Shields granted Defendants' motion and
Shields as to the significance of the employer-employee
denied Plaintiffs motion outright. Plaintiffs now ask this
relationship between the [**5] Defendants and putative
Court to modify or set aside Magistrate Judge Shields'
class members. With respect to that relationship,
Order.
Magistrate Judge Shields' Order states as follows:
1 While it is true that Defendants filed their
Motion to Allow Communications with Complicating the issue, however, is the
Employees and Request for Expedited Ruling on existence of the employer-employee
August 3, 2000, five days prior to Plaintiffs' relationship between the defendants and
motion to certify the class, the significance of the the putative class members. Plaintiffs
dates of those filings is tenuous at best. Plaintiffs contend the employee-employer
claim that the settlement negotiations were relationship creates an increased potential
prompted by the filing of the class action. for undue influence and coercion by
Defendants claim that the negotiations began prior defendants over the employees, resulting
to the filing of Plaintiffs' action. What the Court in improperly obtained waivers. Although
does find significant is the fact that the filings the Court is cognizant of this potential for
were so close in time and the parties now seem to abuse, there is no factual record of
be in a race to communicate with the potential coercion at this point. Defendants' stated
class members. intention to seek waiver of an employee's
rights under the CIC Plan does not, in and
[**4] II. Standard of Review of itself, suggest coercion. The employees
are free to consult legal counsel of their
Federal Rule of Civil Procedure 72(a) provides the choosing to discuss the Retention Proposal
standard for a district court's review of a magistrate and the ramifications of any waiver.
judge's order on a nondisposive matter. Rule 72(a) states, Further, the Court believes that settlement
in relevant part, as follows: between an employer and employees
should be encouraged, not unduly
Within 10 days after being served with a restricted by premature judicial
copy of the magistrate judge's order, a intervention. At the very least, the Court
party may serve and file objections to the should not deny the employees the
order; a party may not thereafter assign as opportunity, and their right, to consider an
error a defect in the magistrate judge's offer from their employer.
order to which objection was not timely
made. The district judge to whom the case The Court is of the opinion that the at-will [**6]
is assigned shall consider such objections employer-employee relationship between Defendants and
and shall modify or set aside any portion the putative class members produces a strong potential
of the magistrate judge's order [*547] for coercion and thus justifies minimal protections. The
found to be clearly erroneous or contrary Court therefore holds that Magistrate Judge Shields'
to law. failure to provide such minimal protections was an error
of law.
Page 3
196 F.R.D. 545, *547; 2000 U.S. Dist. LEXIS 14551, **6;
The authority provided to this Court by Rule 23(d) to justified.' MCL 2d § 30.24 at 232 (citing
exercise control over a class action must be exercised Kleiner v. First Nat'l Bank of Atlanta, 751
within the boundaries of two guideposts: Gulf Oil Co. v. F.2d 1193 (11th Cir. 1985)).
Bernard, 452 U.S. 89, 68 L. Ed. 2d 693, 101 S. Ct. 2193
(1981) and Great Rivers Cooperative v. Farmland Id. at 766. Thus, the Court must weigh the need for a
Industries, Inc., 59 F.3d 764 (8th Cir. 1995). See Fed. R. limitation on Defendants' communication and the
Civ. P. 23(d). In Gulf Oil, while the Supreme Court dealt potential interference with the rights of the parties and
with limitations on communications between named come up with a carefully drawn order that addresses
plaintiffs and their counsel with prospective class those concerns.
members, it nonetheless set forth a broad principle that
limitations on communications with potential class Magistrate Judge Shields was correct in that the
members must derive from evidence in the record and record does not provide sufficient evidence of coercion to
involve a weighing of competing factors. Gulf Oil, 452 justify the limitations requested by the Plaintiffs. A
U.S. at 102-104, 68 L. Ed. 2d 693, 101 S. Ct. 2193 defendant-employer has the right to communicate
(noting that the district court abused its discretion where settlement offers directly to putative class member
there was no findings supporting a sweeping restraint employees. See Great Rivers, 59 F.3d at 766 (holding
[**7] order). In Great Rivers, the 8th Circuit struck that there was insufficient evidence to restrict the
down a district court's restriction on the defendant-employer from inviting the putative class
defendant-employer from communicating anything to the member employees to opt out of the class). However, a
putative class member employees that could reasonably defendant-employer may not abuse that right. See Manual
be taken as an invitation to opt out. Great Rivers, 59 F.3d for Complex Litigation, Third § 30.24 at 233 (1995)
at 765-766. The district court's restriction was based on ("Defendants ordinarily are not precluded from
an article by the defendant-employer denouncing the communications with putative class members, including
class action suit as "'a direct attack on your [the putative discussions of [**9] settlement offers with individual
class members] Association and on the cooperative class members before certification, but may not give false
system as a whole.'" Id. at 765 (quoting Manual for or misleading information or attempt to influence class
Complex Litigation, Second § 30.24 at 232 (1985)). The members in making their decision whether to remain in
8th Circuit held that such evidence was not sufficient to the class.") (citations omitted). The only evidence in the
support such an order. Id. at 766. Citing Gulf Oil, the 8th record concerning Defendants' communications with
Circuit stated the following: putative class members is that Defendants are the
employers of the putative class members, and wish to
offer them what essentially amounts to a settlement offer
and have other related communications with them. 2 The
Before entry of such an order, there must Court finds that this evidence does not equate to the
be a clear record and specific findings that evidence involved in Great Rivers, 59 F.3d at 765. The
reflect a weighing of the need for a evidence therefore does not support a requirement that all
limitation and the potential interference such communications must first be approved by either the
with the rights of the parties. Gulf Oil v. Court or Plaintiffs, as requested by the Plaintiffs. 3 On
Bernard, 452 U.S. 89, 101, 101 S. Ct. this broad issue, the Court agrees with Magistrate Judge
2193, 2200, 68 L. Ed. 2d 693 (1981). 'In Shields.
addition, such a weighing--identifying the
2 Def.s' Mot. to Allow Communications with
potential abuses being addressed--should
Employees and Request for Expedited Ruling P 7.
result in [**8] a carefully drawn order
3 Pl.s' Brief in Supp. of Mot. for an Order
that limits speech as little as possible,
Restricting Def.'s Contact and Communications
consistent with the rights of the parties
with Members of the Putative Class and in Supp.
under the circumstances.' Id. at 102, 101 S.
of Pl.s' Resist. to Def.s' Mot. to Allow
Ct. at 2200. 'Nevertheless, a limited
Communications with Employees at 6.
restriction--such as precluding a defendant
from soliciting class members to opt out of [**10] The Court, however, parts company with
the litigation--will sometimes be [*548]
Page 4
196 F.R.D. 545, *548; 2000 U.S. Dist. LEXIS 14551, **10;
Magistrate Judge Shields on the significance of the end of this opinion must be in writing. Second,
at-will employer-employee relationship between Defendants must file a copy of that communication,
Defendants and the putative class members. Where the along with the names of the persons it was sent to, with
defendant is the current employer of putative class the Court and provide a copy to Plaintiffs' counsel. Third,
members who are at-will employees, the risk of coercion any offer by Defendants that entails a waiver of rights
is particularly high; indeed, there may in fact be some under [**12] the CIC Plan must give the putative class
inherent coercion in such a situation. This Court is not the member at least ten days to respond. The Court's Order is
first to recognize this. In Kleiner v. First National Bank laid out in full below.
of Atlanta, the 11th Circuit recognized the following:
The Court believes this modification addresses
A unilateral communications scheme, Plaintiffs' concerns without infringing on Defendants'
moreover, is rife with potential for rights. Plaintiffs' counsel are concerned about not being
coercion. 'If the class and the class able to participate in the presentation of the settlement
opponent are involved in an ongoing proposal and related communications, and not being able
business relationship, communications to analyze the settlement proposal before it was presented
from the class opponent to the class may to the putative class members. As stated above, Plaintiffs
be coercive.' have no right to participate in the presentation of the
settlement proposal and related communications, nor do
. . . In view of the tension between the they have the right to analyze it before hand. However,
preference for class adjudication and the by forcing Defendants to communicate with the putative
individual autonomy afforded by class members in writing and provide a copy of that
exclusion, it is critical that the class communication to Plaintiffs, Plaintiffs' counsel will be in
receive accurate and impartial information a position to analyze whatever communication is made by
regarding the status, purposes and effects Defendants. By requiring Defendants to give the
of the class action. Plaintiffs names of the putative class members they
contacted and giving the putative class members ten days
. . . Unsupervised, unilateral to respond to any request for a waiver of their rights,
communications with the plaintiff class Plaintiffs' counsel may notify those persons that they
sabotage the goal of informed consent by have filed a class action regarding the rights under the
urging exclusion on the basis of a CIC Plan that may include them. 4 The putative class
one-sided [**11] presentation of the facts, members will then be in the following position: They will
without opportunity for rebuttal. have a written settlement offer, they will have notice that
a class action has been filed regarding their rights, and,
751 F.2d 1193, 1202-1203 (11th Cir. 1985). In Abdallah they will have time to think about it and contact
v. Coca-Cola Co., 186 F.R.D. 672, 678 (N.D.Ga. 1999), Plaintiffs' counsel if they so choose. Plaintiffs' counsel, in
as in this case, the putative class members were current turn, will be ready to provide an educated analysis. 5
employees of the defendant. Id. The court held that while
4 See Herbert Newberg & Alba Conte, 3
the defendant did not give the court any reason to suspect
Newburg on Class Actions § 15.12 (3d. ed. 1992)
the defendants would attempt to mislead or coerce the
(stating that class counsel may wish to notify
putative class members, simple reality suggested that the
absent class members of the commencement of
danger of coercion was real and justified prohibiting the
the action before the trial court makes a
defendant from speaking to the putative class members
determination regarding class certification for
about the lawsuit. Id. The employer-employee
several reasons).
relationship justifies certain minimal protections in this
5 Id. (stating that no solicitation problems arise
case.
when the class action attorney responds to
[*549] The Court will therefore modify Magistrate inquiries by the absent class members, and that
Judge Shields' Order as follows. First, any "[c]lass members may inquire about their legal
communication by the Defendant to the putative class rights, the nature of the class action, or the
members relating to one of the subjects described at the prospect that the attorney for the class will
Page 5
196 F.R.D. 545, *549; 2000 U.S. Dist. LEXIS 14551, **12;
represent them personally in the litigation"). permission by the Court or Plaintiffs is necessary before
Defendants send their communications to the putative
In-person solicitations pose a particular threat of class members. Furthermore, requiring Defendants to
coercion. This Court recognizes, as did the 11th Circuit in inform Plaintiffs of the content of those communications
Kleiner, 751 F.2d at 1206, that the Supreme Court has does not seem far from Defendants intentions in the first
found that unsupervised oral solicitations produce place. In a letter to Plaintiffs' counsel dated May 31,
distorted statements and the coercion of susceptible 2000, Defendants stated the following:
individuals:
[*550]
[I]n-person solicitation may exert
pressure and often demands an immediate Nevertheless, I am authorized to tell
response, without providing an you that neither Pioneer nor Dupont
opportunity for comparison or reflection. intends to communicate generally with the
The aim and effect of in-person membership in the putative class about
solicitation may be to provide a one-sided making changes in the CIC Plan or taking
presentation and to encourage speedy and any action that would have the effect of
perhaps uninformed decisionmaking; there settling the lawsuit or extinguishing class
is no opportunity for intervention or members' claims under the plan, without
counter-education. . . . giving you prior notice of what those
communications will be. In fact, we intend
Ohralik v. Ohio State Bar Assoc., 436 U.S. 447, 457, 98 to seek court approval of such
S. Ct. 1912, 56 L. Ed. 2d 444 (1978). By prohibiting the communications before they occur
Defendants from orally soliciting waivers from putative pursuant to an appropriately noticed
class members, the Court seeks to prevent such harm in motion.
this case.
The Court therefore does not think that the modification
Moreover, the Court is not completely without power unjustly burdens Defendants.
to invalidate employees' waivers of their rights under the
CIC Plan. In Woods v. Rhodes, 994 F.2d 494, 502 (8th 6 Def.s' Joint Mem. in Resist. to Pl.s' Mot. to
Cir. 1993), the 8th Circuit acknowledged the power to Restrict Contact Between Pioneer and its
invalidate a release of civil claims where the release was employees at 5-6.
not knowing and voluntary. Therefore, the Court is
confident that it is not powerless to cure an unknowing or The Court is convinced that its modification of
involuntary waiver of rights under the CIC Plan by a Magistrate Judge Shields' Order is the best it can do to
putative class member. keep everything above board and is consistent with: It
seeks to protect the putative class members' right to a fair
The modification does not overly infringe on trial, the interests of the class action and the principles of
Defendants' rights. As Defendants pointed out in their Rule 23, and the First Amendment rights of the
brief, 6 a court order constitutes a prior restraint if in Defendants. See Fed. R. Civ. P. 23. This task is especially
order to engage in protected speech, (1) advance approval onerous when the parties, like the ones in this case, are so
of the government is required, (2) the approval depends close to a [**13] determination on class certification.
on affirmative action by a government official and such
action requires the exercise of judgment, and (3) the IV. Order
government official may render that judgment based on
The Order of the Court is as follows:
the content of the speech. Southeastern Promotions, Ltd.
v. Conrad, 420 U.S. 546, 554, 95 S. Ct. 1239, 43 L. Ed.
(1) The stay on Magistrate Judge
2d 448 (1975). The requirements set forth in the Court's
Shields' Order is lifted;
Order do not amount to a prior restraint. The Court does
not seek to regulate the content of Defendants' (2) Any communications by
communications with the putative class members. No Defendants to putative class members on
Page 6
196 F.R.D. 545, *550; 2000 U.S. Dist. LEXIS 14551, **13;
the following subjects must be in writing, Plaintiffs a list of the names of the
filed with the Court, and copied to the employees to whom those
Plaintiffs within 24 hours from when they communications were sent;
are made:
(4) Any offer by Defendants entailing
(a) the merits, status or a request to waive rights under the CIC
effect of this action; Plan must give putative class members at
least ten days to respond;
(1) a class member's
participation in this action; (5) Excluded from the requirements
set [**14] out in this Order are
(2) settlement or other communications to employees whose job
resolution of the claims and responsibilities include administering or
issues presented in this performing the CIC Plan and
action; communications that are necessary to
gather factual information for the defense
(3) settlement or other or settlement of this action;
resolution of the class
members' rights and [*551]
benefits under the CIC
Plan; and (6) This Order will be in effect until
the Court rules on the certification of the
(4) matters that would class.
result in a class member
waiving, releasing or
compromising his or her IT IS SO ORDERED.
rights under the CIC Plan;
Dated this day of September, 2000.
ROBERT W. PRATT,
(3) Along with copies of the
communications described in part (2), U.S. DISTRICT JUDGE
Defendants must provide to the Court and
Page 1
MARIAN BANK, Plaintiff, v. ELECTRONIC PAYMENT SERVICES, INC.,

CORESTATES FINANCIAL CORP., PNC FINANCIAL CORP., BANC ONE
CORP., Defendants.
C.A. No. 95-614-SLR
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
March 12, 1999, Decided
NOTICE: [*1] FOR ELECTRONIC

PUBLICATION ONLY
MEMORANDUM OPINION
DISPOSITION: Plaintiff's motion denied.
Dated: March 12, 1999
Wilmington, Delaware
COUNSEL: For Plaintiff: Joseph A. Rosenthal, Esquire,
Kevin Gross, Esquire, Rosenthal, Monhait, Gross & ROBINSON, District Judge
Goddess, P.A., Wilmington, Delaware.
I. INTRODUCTION
For Plaintiff: Merrill G. Davidoff, Esquire, Martin I.
Twersky, Esquire, Bart D. Cohen, Esquire, Of Counsel, Currently before the court is plaintiff Marian Bank's
Berger & Montague, P.C., Philadelphia, Pennsylvania. motion to provide putative class members with "notice of
opportunity to intervene." (D.I. 127) This motion arises
For Plaintiff: Paul R. Rosen, Esquire, Jeffrey M. out of plaintiff's antitrust suit against several operators of
Goldstein, Esquire, Spector, Gadon & Rosen, P.C., Automated Teller [*2] Machine ("ATM") networks. 1
Philadelphia, Pennsylvania. Plaintiff filed its original complaint in this action on
October 13, 1995, alleging various antitrust violations
For Defendants: Donald E. Reid, Esquire, Morris,
against Electronic Payment Services, Inc. ("EPS"),
Nichols, Arsht & Tunnell, Wilmington, Delaware.
Corestates Financial Corp. ("Corestates"), PNC Financial
For Defendants: Peter Buscemi, Esquire, Stephen Paul Corp. ("PNC"), and Banc One Corp. ("Banc One")
Mahinka, Esquire, Brad Fagg, Esquire, Of counsel, (collectively "defendants") for defendants' allegedly
Morgan, Lewis & Bockius LLP, Washington, D.C. unlawful tying of ATM network processing services with
ATM network access. 2 In July 1996, plaintiff sought
JUDGES: Sue L. Robinson, District Judge. certification of a class of all depository institutions in
Delaware, Pennsylvania, New Jersey, West Virginia, and
OPINION BY: Sue L. Robinson Ohio that participated in the "MAC" Automated Teller
Machine ("ATM") network and that utilized defendants'
OPINION ATM processing services for the period April 17, 1990
through December 3, 1992. (D.I. 45) Defendants opposed
Page 2
1999 U.S. Dist. LEXIS 3097, *2
class certification and filed a motion to dismiss. (D.I. 49) of asserting their own claims against defendants before
In a February 5, 1997 memorandum opinion, the court the running of the statute of limitations. (D.I. 126 at 2)
denied plaintiff's motion for class certification, dismissed For the following reasons, plaintiff's motion is denied.
plaintiff's claims against EPS, and dismissed two of
plaintiff's counts against PNC and Banc One. (D.I. 71) II. DISCUSSION
1 The Commonwealth of Pennsylvania's In support of its motion, plaintiff contends that

Secretary of Banking placed plaintiff in Fed.R.Civ.P. 23(d)(2) grants the court the authority to
receivership on April 17, 1992. (D.I. 120 at 4) issue plaintiff's proposed notice to intervene. This
The case at bar was filed by plaintiff's Asset contention, however, runs counter to the plain meaning of
Management Committee (the "Committee"), Rule 23(d). The Rule permits a court to issue, "in the
created as part of a settlement agreement between conduct of actions to which this rule applies" (i.e., class
the Secretary of Banking and various depositors actions), orders
and creditors. (D.I. 120 at 7-8)
[*3] requiring, for the protection of the
2 EPS is a Delaware corporation and a joint members of the class [*5] or otherwise
venture between defendant banks. EPS operates for the fair conduct of the action, that
an ATM network known as "MAC". Prior to the notice be given in such manner as the
formation of EPS, defendants each operated court may direct to some or all of the
independent ATM networks. With the formation members of any step in the action, or of
of EPS on December 4, 1992, defendants created the proposed extent of the judgment, or of
a single ATM network operated under Corestates' the opportunity of members to signify
"MAC" trademark. (D.I. 120 at 2-3) whether they consider the representation
fair and adequate, to intervene and present
Plaintiff then filed a motion to amend the complaint claims or defenses, or otherwise to come
and a renewed motion for class certification. (D.I. 77, 79) into the action . . . .
Defendants moved for partial summary judgment and
opposed class certification. In its December 30, 1997 Fed.R.Civ.P. 23(d)(2) (emphasis added). Thus, the
memorandum opinion, the court denied class language of Rule 23(d)(2) explicitly contemplates the
certification, holding that plaintiff's claims and defenses issuance of notices to intervene only after a court has
were not typical of those of the putative class and that certified a class action. In the case at bar, no class action
plaintiff would not be an adequate representative of the exists.
putative class. (D.I. 120 at)
Limiting the operation of Rule 23(d)(2) to class
Plaintiff now moves the court to provide these actions prevents courts from inciting litigation where
putative class members with notice "of the need and none yet exists. The Advisory Committee notes to Rule
opportunity for an intervenor to represent the class and 23 specifically warn against using Rule 23(d)(2) for the
thereby preserve the rights of absent class members." "undesirable solicitation of claims." Fed.R.Civ.P.
(D.I. 126 at 2) Plaintiff's proposed notice details the 23(d)(2) advisory committee's note. Numerous courts
procedural history of the [*4] case at bar, and it includes have recognized the danger of providing putative class
a detailed description of a Justice Department complaint members with court-ordered notice of the opportunity to
filed against EPS alleging unlawful tying and willful sue. Courts have agreed that providing such notice "is in
maintenance of monopoly power in the market for a sense merely soliciting a client for plaintiff's counsel
regional ATM network access. (D.I. 125, Ex. A) The under the aegis [*6] of the court." Elias v. National Car
proposed notice also informs putative class members of Rental Sys. Inc., 59 F.R.D. 276, 277 (D. Minn. 1973).
the terms of a consent decree entered into between the Other courts have drawn analogies between such
Justice Department and EPS. (D.I. 125, Ex.A) Plaintiff notification and the unlawful practice of barratry. See
believes that without this court-ordered notice, putative Maddox & Starbuck, Ltd. v. British Airways, 97 F.R.D.
class members will be unaware of the court's denial of 395, 397 (S.D.N.Y. 1983) (denying motion to notify
plaintiff's class certification motion and of the necessity putative class members of denial of certification on
Page 3
1999 U.S. Dist. LEXIS 3097, *6
grounds that it would promote barratry). Courts also have Plaintiff also contends that court-ordered [*8]
rejected purportedly altruistic justifications for notification is warranted because putative class members
court-ordered notification of putative class plaintiffs. See may be relying upon plaintiff to represent their claims
Weisman v. Darneille, 78 F.R.D. 671, 674 (S.D.N.Y. and, unless notified of plaintiff's inability to serve as class
1978) (refusing to provide a list of putative class representative, the running of the statute of limitations
members so that plaintiff could, in its own words, "alert will bar their claims. Plaintiff, however, has offered no
the class to its rights and to the fact that these rights are in evidence of such reliance by other regional depository
serious jeopardy"). A panel of the Ninth Circuit Court of institutions. If these potential plaintiffs have relied upon
Appeals suggested that a court-ordered notification of plaintiff to represent their claims, it is their duty, not the
putative class plaintiffs offends Article III's case or court's, to keep apprised of the legal developments in
controversy requirement by "permitting a court to act plaintiff's case. The court has no obligation to awaken
upon a claim before it becomes the subject of a lawsuit potential litigants from their lethargy. 3 See Polakoff, 264
[and by permitting] a court to acquire jurisdiction by F. Supp. at 917.
encouraging lawsuits." Pan Am. World Airways v. United
States District Court, 523 F.2d 1073, 1077 n.3 [*7] (9th 3 Plaintiff cites American Pipe & Constr. Co. v.
Cir. 1975) (vacating, on mandamus, a district court order Utah, 414 U.S. 538, 38 L. Ed. 2d 713, 94 S. Ct.
notifying putative class members of the opportunity to 756 (1974) for the proposition that court-ordered
sue). notification of putative class plaintiffs is
necessary. American Pipe merely stands for the
In the case at bar, no other depository institution has proposition that commencement of the original
indicated a desire to sue defendants for their alleged class suit tolls the statute of limitations period for
anticompetitive conduct. This reticence is not due, as all putative class members who move to intervene
plaintiff claims, to a lack of notice. In November of 1994, following denial of class certification. The
members of defendants' ATM networks received copies Supreme Court reasoned that putative class
of the Justice Department consent decree. This decree members are "passive beneficiaries of the action
outlined in minute detail the alleged anticompetitive brought on their behalf" until they have received
conduct of defendants. (D.I. 128, Ex.1) Plaintiff's notice of membership in the class. Id. at 552.
proposed notice merely repeats much of the information This rationale, however, does not compel
contained in the consent decree. (Compare D.I. 125, Ex. notification of putative class members upon the
A with D.I. 128, Ex. 1) Thus, court-ordered notice will denial of class certification.
only underscore information already in the possession of
putative class members and may cause some parties to [*9] III. CONCLUSION
"incorrectly infer that [the court] regard[s] the plaintiff['s]
For the aforementioned reasons, plaintiff's motion is
complaint as prima facie well-founded." Polakoff v.
denied. An order shall issue consistent with this
Delaware Steeplechase & Race Ass'n, 264 F. Supp. 915,
memorandum opinion.
917 (D. Del. 1966) (internal quotation omitted); see also
Cherner v. Transitron Elec. Corp., 201 F. Supp. 934, 936
(D. Mass. 1962).
Page 1
LEXSEE 231 FRD 221
IN RE: SERZONE PRODUCTS LIABILITY LITIGATION. THIS DOCUMENT

RELATES TO CLASS ACTION SETTLEMENT.
MDL NO. 1477

WEST VIRGINIA, CHARLESTON DIVISION
231 F.R.D. 221; 2005 U.S. Dist. LEXIS 30468

SUBSEQUENT HISTORY: Later proceeding at In re Group Health Inc., Group Health, Inc. [**2] , HMO,
Serzone Prods. Liab. Litig., 2006 U.S. Dist. LEXIS 38051 Health Insurance Plan of Greater New York, Health Net,
(S.D. W. Va., June 7, 2006) Inc., HealthNow New York Inc., doing business as
BCBS of Western NY, HealthPartners, Inc., Highmark,
PRIOR HISTORY: [**1] Case 2:02-md-01477. Inc., Humana, Inc., John Alden Life Insurance Co., KPS
In re Serzone Prods. Liab. Litig., 2004 U.S. Dist. LEXIS Health Plan, Medical Mutual of Ohio, Mid-Atlantic
28296 (S.D. W. Va., Nov. 18, 2004) Medical Services, Inc., Mountain State BlueCross Blue-
Shield, Mutual of Omaha, MVP Health Plan, Noridian
Mutual Insurance Co., doing business as BCBS of North
COUNSEL: For Blue Cross and Blue Shield of Ala- Dakota, Oxford Health Plans, PacifiCare Health Sys-
bama, Blue Cross and Blue Shield of California, Blue tems, Priority Health, Inc., The Guardian Life Insurance
Cross and Blue Shield of Kansas City, Blue Cross and Co. of America, Tufts Health Plan, United Health Group,
Blue Shield of Louisiana, Blue Cross and Blue Shield of Vista Healthplan, Inc., Wellpoint, Inc., and all of its af-
Michigan, Blue Cross and Blue Shield of Minnesota, filiates and subsidiaries, Wisconsin Physicians Service
Blue Cross and Blue Shield of North Carolina, Premera Ins. Corp., Movants: Mark D. Fischer, Mark M. Sand-
Blue Cross, WellChoice, Inc., Movants: Kimberly R. mann, RAWLINGS & ASSOCIATES, Louisville, KY.;
West, WALLACE JORDAN RATLIFF & BRANDT, Richard W. Cohen, LOWEY DANNENBERG BEM-
Birmingham, AL. PORAD & SELINGER, White Plains, NY.
For Moore Law Firm, Movant: R. Lanahan Goodman, For Lucy Carle, Rebecca Hite, William Huseman, John
Terence L. Moore, MOORE LAW FIRM, Etna, WY. Parrish, Marty Register, William Sloan, Movants: Bar-
bara G. Arnold, MACCORKLE LAVENDER CASEY &
For Aetna, Inc., Arkansas BlueCross BlueShield, Blue- SWEENEY, Charleston, WV.
Cross BlueShield Association, BlueCross BlueShield of
Florida, BlueCross BlueShield of Kansas, BlueCross For Bracewell and Giuliani, L.L.P., Grady, Schneider
BlueShield of Massachusetts, BlueCross BlueShield of and Newman, L.L.P., Hagans, Bobb, Burdine, P.C.,
Mississippi, BlueCross BlueShield of Oklahoma, Blue- Movants: Heath Novosad, Phillip Sampson, Ralph [**3]
Cross BlueShield of Tennessee, BlueCross BlueShield of D. McBride, BRACEWELL & GIULIANI, Houston,
Vermont, BlueCross of Idaho Health Service, Inc., Capi- TX.; Keith Grady, Peter Schneider, GRADY SCHNEI-
tal Blue Cross, CareFirst BlueCross BlueShield, CIGNA, DER & NEWMAN, Houston, TX.
Fortis Benefits Insurance Co., Fortis Insurance Co.,
Golden Rule Insurance Co., Government Employees Alfred Daech, Interested Party, Pro se, Gretna, LA.
Hospital Association, Great-West Life & Annuity Insur-
ance Co., Group Health Cooperative of Puget Sound,
Page 2
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
For David Sullivan, Cheryl Williams, Interested Parties: [*223] MEMORANDUM OPINION AND ORDER
Allan Berger, ALLAN BERGER & ASSOCIATES, New APPROVING SETTLEMENT AND CERTIFYING
Orleans, LA. THE SETTLEMENT CLASS
Pending before the court is the plaintiffs' motion for
For David Pentz, Interested Party: John J. Pentz, Class
final approval of class action settlement [Docket 209].
Action Fairness Group, Maynard, MA.
This litigation arises from allegations that Serzone, a
drug used to treat depression, caused a range of physical
For Lucy Carle, Interested Party: Barbara G. Arnold,
and economic injuries among users and purchasers. On
MACCORKLE LAVENDER CASEY & SWEENEY,
August 12, 2002, this court acquired jurisdiction over the
Charleston, WV.; Frank H. Tomlinson, PRICHARD
Serzone litigation by transfer order of the Judicial Panel
MCCALL & JONES, Birmingham, AL.
on Multidistrict Litigation. The case developed in dis-
covery [**5] for over a year, and settlement discussions
For Rebecca Hite, Marty Register, William Sloan, Inter-
began in mid-2003. On October 28, 2004, the plaintiffs
ested Parties: Barbara G. Arnold, MACCORKLE LAV-
moved for preliminary approval of a class action settle-
ENDER CASEY & SWEENEY, Charleston, WV.; N.
ment, which the court granted on November 18, 2004.
Albert Bacharach, Jr., Gainesville, FL.
Upon completion of notice of the settlement and submis-
sion of written comments to the court in favor of and
For William Huseman, Interested Party: Barbara G. Ar-
opposed to the settlement, the court held a final fairness
nold, MACCORKLE LAVENDER CASEY &
hearing on June 29, 2005. Having considered the entire
SWEENEY, Charleston, WV.; Paul S. Rothstein,
record of submissions in this matter and the oral presen-
Gainesville, FL.
tations at the final fairness hearing, I FIND that the set-
tlement class satisfies the requirements of Rule 23(a) and
For John Parrish, Interested Party: Barbara G. Arnold,
Rule 23(b)(3). Moreover, I FIND that the settlement is
MACCORKLE LAVENDER CASEY & SWEENEY,
fair, reasonable, and adequate. Accordingly, the plain-
Charleston, WV.; Edward W. Cochran, Shaker Heights,
tiffs' motion for final approval of the class action settle-
OH.
ment is GRANTED.
For Eunice S. Acreman, Micki Berry, Joan Bland, Lillie
[*224] I. Background
Blue, Voncile Bryant, Elizabeth Carwyle, Dwayne Fer-
guson, Allyson Harris-Brewer, Martha [**4] Hodges, Bristol-Myers Squibb Company (BMS) developed
Donna Kennedy, Shirley Lander, Shari Lipsey, Mary Serzone, empirically known as nefazodone hydrochlo-
Montgomery, Mary Rand, Meisha Strickland, Kenneth ride, to treat depression. In pre-market trials conducted
Taylor, Loretta Taylor, Doris Thomas, Rita Thomas, Ann by BMS, sixteen percent of the 3,496 patients who used
Williamson, Nettie Wilson, Interested Parties: Patrick D. Serzone had to discontinue its use because of an adverse
McMurtray, MCMURTRAY ARMISTAD, Jackson, MS. experience, including abnormal liver function test re-
sults. The Food and Drug Administration nevertheless
For Ivy Albe, Laurie Alexander, Vernon Davis, Leon [**6] approved BMS's New Drug Application for Ser-
Henley, Jacqueline Westbrook, Interested Parties: Patrick zone on December 22, 1994 based upon findings that
D. McMurtray, FRAZER DAVIDSON, Jackson, MS. Serzone met standards of safety and efficacy as a treat-
ment for depression. 1 BMS began commercial sales of
Craig M. Albritton, Interested Party, Pro se, E.H.C.C., Serzone on March 15, 1995. Serzone's initial label had
St. Gabriel, LA. standard warnings as to the various potential side effects
that had been reported during pre-market trials. The label
Johnnie D. Davidson, Interested Party, Pro se, Fayette- listed hepatitis as a "rare" adverse event and abnormal
ville, AR. liver function as an "infrequent" event.
JUDGES: JOSEPH R. GOODWIN, UNITED STATES 1 As stated in Serzone's product label, only two
DISTRICT JUDGE. of eight pre-market trials conducted by BMS
demonstrated that Serzone was effective in the
OPINION BY: JOSEPH R. GOODWIN treatment of depression.
In 1998, following reports of additional problems,
OPINION
BMS submitted an application to the FDA to revise Ser-
zone's label to state that BMS had received "rare reports
of liver necrosis and liver failure, in cases leading to liver
transplantation and/or death." BMS investigated the
Page 3
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
causal association between Serzone and liver failure by Nefazodone hydrochloride manufactured by entities
conducting two studies -- one in 1999 and 2000 and other than BMS remains on the market as the FDA con-
[**7] another in 2000 and 2001. The 1999-2000 study tinues to believe that its risk-benefit profile supports its
found no incidence of liver failure in approximately continued use in certain patients.
30,000 patient years of Serzone use. The 2000-2001
According to David Dunner, M.D., one of BMS's
study did not find Serzone associated with an increased
medical experts, the causes of depression are not fully
rate of liver failure as compared to that of other antide-
understood. (Dunner [**9] Aff. P 9, June 9, 2005). 2
pressants. Despite these particular findings, in July 2001,
Research indicates that it has biological, genetic, envi-
the FDA directed BMS to issue a "Dear Doctor" letter to
ronmental, and psychological bases. Id. at P 9. The bio-
communicate to health professionals that cases of life-
logical [*225] basis has been linked to imbalances of
threatening hepatic failure had been reported in patients
certain neurotransmitters in the brain, particularly sero-
treated with Serzone. The FDA further required BMS to
tonin and norepinephrin. Id. at P 11. Drugs like Tofranil,
change Serzone's labeling to include a black box warn-
Prozac, and Serzone have been developed to correct
ing, the most serious warning used in prescription label-
these imbalances. Id. at PP 12 & 13. Each of these drugs,
ing. The revised label cautioned:
however, uses a different mechanism of action to achieve
desired results. Id. For example, Selective Serotonin Re-
The reported rate in the United States is
uptake Inhibitors (SSRIs), like Zoloft and Prozac, regu-
about 1 case of liver failure resulting in
late serotonin levels by blocking the ability of nerve end-
death or transplant per 250,000 - 300,000
ings to bind and break down serotonin. Serzone utilizes a
patient years of Serzone treatment. This
different mechanism of action that affects two specific
represents a rate of about 3 - 4 times the
receptors to regulate serotonin levels. Serzone also has
estimated background rate of liver failure.
effects on the norepinephrine receptors. Id. at P 3.
This rate is an underestimate because of
under reporting, and the true risk could be
2 Affidavit of David L. Dunner, M.D., a profes-
considerably greater than this. A large co-
sor of Psychiatry and Behavioral Sciences and
hort study of antidepressant users found
Director of the Center for Anxiety and Depres-
no cases of liver failure leading to death
sion at the University of Washington. Dr. Dun-
or transplant among Serzone users in
ner's affidavit was uncontested in either the writ-
[**8] about 30,000 patient years of expo-
ten objections or oral objections at the fairness
sure. The spontaneous report data and the
hearing.
cohort study results provide estimates of
the upper and lower limits of the risk of [**10] Accordingly, not all antidepressants work
liver failure in nefazodone treatment pa- equally well in all patients. Id. at P 14. Antidepressants
tients, but are not capable of providing a not only operate by different mechanisms of action, but
precise risk estimate. they also carry different side effects, and presentation of
these effects varies among individual patients. Id. Treat-
ment of depression with drug therapy thus boils down to
a process of patient monitoring and trial and error to de-
Given entry of generic forms of nefazodone into the
termine which available antidepressant functions best to
market and the declining volume of branded sales, BMS
restore a patient to well-being. 3 Because the availability
discontinued the manufacture and sale of Serzone on
of a variety of medications increases the odds of finding
June 14, 2004. That same day, the FDA declined to re-
the right treatment for depression in a particular individ-
move Serzone from the United States market and issued
ual, nefazaodone remains on the market despite its con-
the following statement:
siderable risks, and its required use of the FDA's black
box warning. 4
The Agency believes: (1) nefazodone
may provide an important alternative to
3 It is appropriate to note that in clinical trials,
other antidepressants; (2) although there is
Serzone's profile of side effects was typically
a risk of liver injury associated with nefa-
more favorable, especially with respect to weight
zodone, the incidence of liver failure ap-
gain, sexual dysfunction and sleep disturbance,
pears to be low; . . . (4) the black box
than those of other antidepressants. (Dunner Aff.
warning adequately addresses liver toxic-
P 27, June 9, 2005). Serzone's favorable weight
ity overall . . . .
gain side effect makes it useful in treating depres-
sion in women, who are more sensitive to the
negative self image associated with weight gain.
Page 4
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
Id. at P 32. Notably, twice as many women as Moreover, as a general matter, idiosyncratic drug-
men are diagnosed with depression each year. Id. induced liver disease manifests itself while a patient is
[**11] taking the drug. Id. at P 21. With very few exceptions,
4 As declared in Dr. Dunner's affidavit, "The fa- such liver disease does not present itself after the patient
vorable side effect profile of Serzone, coupled has stopped using the medication and the medication has
with its overall efficacy in treating depression, left the patient's system. Id. at P 21. Even among those
have made it an important addition to the medica- patients suffering liver injury, the injury process should
tions available to psychiatrists to treat depres- cease after therapy is discontinued and the drug is elimi-
sion." (Dunner Aff. P 33, June 9, 2005) nated from the body. Id. at P 19. As summarized by Dr.
Watkins, "If the patient does not die or require a liver
Similar to the unknowns surrounding the origins and
transplant, the liver begins to regenerate [**14] as soon
treatment of depression, liver disease can be idiosyn-
as the injury subsides." Id. at P 19. Accordingly, "in most
cratic and difficult to diagnosis. (Watkins Aff. P 19, June
instances, patients who have recovered from drug-
3, 2005). 5 This is due in large part to the important role
induced liver injury without need for a liver transplant do
that the liver plays in many of the body's essential func-
not face any residual injury or risk of future injury, as-
tions. Id. at PP 6,7, &8. The liver stores nutrients, helps
suming they avoid the drug." Id. at P 21.
control certain hormone levels in the blood, and produces
important substances like those that allow blood to clot
II. Litigation History
and those that aid in the digestion of fats. Id. at P 6. Most
importantly, the liver filters all the blood from the diges- In mid-2002, six product liability actions were filed
tive tract before it goes to the rest of the body. Id. at P 7. against BMS in four federal courts: three in the Western
Accordingly, the liver must deal with both beneficial and District of Louisiana and one each in the Eastern District
harmful components carried in the blood. Id. The liver of Louisiana, the Middle District of Louisiana, and the
breaks down nutrients into molecules necessary for Northern District of Mississippi. Finding these cases to
[**12] the production of energy and other critical func- share common issues of fact relating to the safety of Ser-
tions, and it metabolizes potentially harmful substances, zone, the Judicial Panel on Multidistrict Litigation issued
like alcohol, industrial chemicals, artificial food addi- a Transfer Order on August 12, 2002, consolidating and
tives, and street drugs to protect the rest of the body from transferring the actions to this district for pretrial pro-
their effects. Id. Most medications are also metabolized ceedings. Since then, more than 160 cases involving
through the liver. Id. at P 8. This function helps rid the thousands of individual plaintiffs have been transferred
body of medications that would otherwise remain for to the In re Serzone Products Liability Litigation, MDL
undesirable amounts of time. Id. In addition, the true No. 1477. In these cases, the plaintiffs allege injuries
acting agent of a drug may be a metabolic by-product; caused by Serzone ranging from liver failure resulting in
thus, performance of a drug may even depend on the transplant or death to drug-induced hepatitis, nausea,
liver to first metabolize the drug. Id. dizziness and diarrhea. Some [**15] plaintiffs claim that
Serzone lacked efficacy as an antidepressant, and some
5 Affidavit of Paul B. Watkins, M.D., a physi- allege that its price was too high. A core allegation in
cian licensed in North Carolina and board certi- these actions is that BMS misrepresented or omitted ma-
fied in Internal Medicine (since 1982) and Gas- terial facts about Serzone, including the adverse health
troenterology (since 1984). Dr. Watkins' affidavit effects caused by Serzone and the frequency, severity
was uncontested in either the written objections and rapid development of those adverse effects.
or oral objections at the fairness hearing.
On August 16, 2002, I issued Pretrial Order No. 1,
According to Paul Watkins, M.D., there are many which scheduled an initial status conference for Septem-
ways the health of the liver can be adversely affected by ber 23, 2002 to address case management issues and to
toxins, drugs, or diseases. [**13] Id. at P 11. Certain identify critical facts and legal issues [Docket 2]. The
viruses such as hepatitis A, B, and C and certain auto- order also informed the parties of the court's website,
immune diseases such as primary biliary cirrhosis and http://www.wvsd.uscourts.gov/serzone/, where signifi-
primary sclerosing cholangitis can injure the liver. Id. at cant orders and opinions would be published. Id. On Sep-
P 9. Toxins such as industrial chemicals, certain cleaning tember 25, 2002, I referred this matter to Magistrate
fluids and alcohol will predictably injure the liver, de- Judge Mary E. Stanley for management of discovery and
pending upon the dose and duration of the exposure to resolution of discovery disputes [Docket 6]. In Pretrial
these substances. Id. With drug-induced liver injury, Order No. 2, issued on October 7, 2002, I appointed Carl
however, a medication capable of causing severe liver N. Frankovitch of Anetakis, Colantonio & Simon and
damage in some people may cause no liver harm at all in Marvin W. Masters of the Masters Law Firm, as
the vast majority of patients taking the [*226] drug. Id. Plaintffs' Co-Lead and Co-Liaison Counsel [Docket 8].
Page 5
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
In turn, I appointed Michael A. Tanenbaum of Sedgwick, Class Members and interested parties to submit written
Detert, Moran & Arnold LLP as Defendant's [**16] comments in favor of, or in opposition to, the settlement
Lead Counsel and Michael Victorson of Jackson Kelly and to file a written notice of appearance to speak at the
PLLC as Defendant's Liaison Counsel. Id. Lastly, I set final fairness hearing. After considering the required
forth a discovery schedule and appointed members to a factors in Fed. R. Civ. P. 23(g), I appointed Carl N.
Plaintiffs' Executive Committee to conduct and coordi- Frankovitch, Marvin W. Masters, Dianne M. Nast and
nate the discovery stage of this litigation with defendant's Stanley M. Chesley as Class Counsel.
representatives. Id.
In addition, on November 18, 2004, I issued an opin-
To further manage discovery, Judge Stanley desig- ion regarding attorneys' fees. The order directed that any
nated a Discovery Committee consisting of counsel for contingency fee agreement between an individual class
plaintiffs and BMS. 6 Judge Stanley conducted numerous member and an attorney that has or will be entered into
conferences regarding discovery matters, and on Decem- after October 15, 2004, and is intended to allow the at-
ber 6, 2002, the plaintiffs served BMS with their com- torney to recover contingency fees, will not be enforced.
prehensive request for production of documents. The Such counsel may instead seek reimbursement [**19]
request was organized into nine categories: (1) corporate only at an hourly rate that does not exceed $ 200.00 per
data; (2) government regulatory documents; (3) product hour for a total amount of compensation that does not
testing; (4) withdrawal from the market; (5) labeling; (6) exceed $ 10,000 [Docket 171]. In December, 2004, I
marketing; (7) physicians and scientists; (8) healthcare issued another opinion regarding individual notice and
insurers and pharmacies; and (9) other documents con- privacy interests. The order directed BMS to provide
cerning the litigation [Docket 11, 14, 15, & 21]. BMS individual notice to all reasonably identifiable Class
made an initial voluntary disclosure of documents in Members, namely the plaintiffs and individuals who had
electronic form in November, 2002, and on January 27, been the subject of a Serzone-related Adverse Event Re-
2003, BMS served its responses to the plaintiffs' report (AER). I also directed BMS to provide notice to
quests. BMS continued to produce documents on a roll- physicians who had submitted Serzone-related AERs. To
ing basis through March, [*227] 2004. [**17] Nego- reconcile the countervailing interest in protecting indi-
tiations regarding individual plaintiff discovery culmi- vidual privacy with the interest in providing potential
nated in court approval of a Plaintiff's Fact Sheet and Class Members with the best notice practicable, I di-
related medical and other record authorizations on Janu- rected BMS to distribute the mailings itself to avoid un-
ary 7, 2003 [Docket 41]. In total, between November, necessary administrative involvement of any party previ-
2002 and March, 2004, BMS produced over one and one ously unaware of the AER reports [Docket 176]. I later
half million pages of documents, which were analyzed amended that: order to direct that notice be sent to
by the Discovery Committee. Concurrently, the Plain- known counsel as well [Docket 183].
tiffs' Executive Committee undertook a detailed analysis
On June 29, 2005, I held a final fairness hearing.
of all Serzone adverse event reports.
Prior to the fairness hearing, seventeen objections and
eight notice of appearance were filed. 7 Two groups of
6 The Discovery Committee is distinct from the
insurers and a group of six Class Members also filed
Plaintiff's Executive Committee, but the two
motions to intervene. [**20] 8 Class Counsel and coun-
groups were directed to work in conjunction with
sel for BMS filed briefs, affidavits, and [*228] other
one another.
documents in support of the class action settlement. They
In mid-2003, settlement negotiations began. On Au- also filed responses to the various objections filed with
gust 7, 2003, the plaintiffs met with BMS representatives the court during the course of the notice. At the hearing,
in New York where they proposed that the parties inves- counsel for each party was given an hour to speak. Ar-
tigate the potential for a global resolution based on the thur Miller appeared as additional counsel for the class
severity of the claimants' injuries and a simplified for- and argued in favor of the settlement. All persons who
mula of causation. After a year of negotiations, the par- filed a written notice of appearance were recognized and
ties reached an agreement in principle to a class action allowed to speak about their concerns. 9 Moreover, I gave
settlement [**18] in the aggregate amount of $ 70 mil- each objector the opportunity to file a supplemental brief
lion, subject to certain increases. On October 28, 2004, within ten days of the hearing and counsel to file any
the plaintiffs moved for preliminary approval of the class responses within five days after. Two objectors filed
action settlement, which the court granted on November supplemental briefs, and BMS and Class Counsel re-
18, 2004. Counsel for the parties were ordered to imple- sponded to each brief. I have carefully considered the
ment the Settlement Notice Plan and to establish an in- issues and concerns raised both at the fairness hearing
teractive website on which notice materials could be ac- and in writing before and after the hearing. I will discuss
cessed by prospective Class Members. I also invited these issues at length below.
Page 6
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
ment; and (8) fraud. BMS's answer denied the principal

7 The following groups and individuals filed ob- allegations of the complaint and asserted fifty-seven af-
jections: Blue Cross Blue Shield Plans; David firmative defenses.
Pentz; Marty Register, Rebecca Hite, William
Sloan, John Parrish, William Huseman, and Lucy 10 The instant case has been assigned case
Carle; Third Party Payers; Bruce Davidson, number 2:04-cv-1188. Two of the named plain-
M.D.; William Edwin Collard, Jr.; James Martin; tiffs had previously filed suit against BMS: (1)
Hugh Rice Kelly; Kenneth Gauntlett; Lummus Dexter Heir filed suit on May 21, 2004 in the
Hannes; Mary Mullen; Johnnie Davidson; Re- District of Minnesota; and (2) Susan Kyle filed
becca Long; Craig Albritton; Pam Barnett; An- suit on June 24, 2003 in the Northern District of
thony Caputo II; and David Storm, St. Those fil- West Virginia.
ing notices of appearance include: Blue Cross
The Settlement Agreement, which has been pre-
Blue Shield Plans; David Pentz; Marty Register,
sented for the court's approval, is between BMS and the
Rebecca Hite, William Sloan, John Parrish, Wil-
following class:
liam Huseman, and Lucy Carle; Johnnie David-
son; Rebecca Long; Ron Penton; Daniel Becnel;
All natural persons in the United States
and Dexter Heir. William Edwin Collard, Jr. has
and its territories who purchased [**23]
withdrawn his objections. There is no evidence in
or used Serzone in the United States and
the record to indicate that the withdrawal is con-
its territories between March 15, 1995 and
nected to any benefit conveyed or promised by
October 1, 2004, and their estates, admin-
Plaintiffs' Counsel or BMS to Mr. Collard.
istrators or other legal representatives,
[**21]
heirs or beneficiaries. It includes all other
8 The motion to intervene filed by Marty Regis-
persons or entities asserting the right to
ter, Rebecca Hite, William Sloan, John Parrish,
sue BMS or any of the Released Parties
William Huseman, and Lucy Carle was filed for
by reason of their relationship with a per-
purposes of objecting. Finding this procedural
son who purchased or used Serzone.
step unnecessary, I denied this motion at the fair-
ness hearing but allowed them to present their ob- The Settlement Class does not in-
jections. The insurers have since withdrawn their clude any individuals whose claims
motions and objections. against BMS or any other of the Released
9 The following individuals spoke at the fairness Parties arising from Serzone have been
hearing: Edward Cochran representing John Par- resolved by release outside of this Settle-
rish; Frank Tomlinson representing Rebecca Hite; ment or by judgment on the merits.
Albert Bacharach representing Rebecca Hite;
John Pentz representing David Pentz; Rebecca
Long (pro se); Daniel Becnel (commenting in fa- Third Amended Settlement Agreement at PP 6-7. 11 The
vor of proposed settlement). Settlement waives any statute of limitation defense and
simplifies issues of causation by conditioning recovery
III. The Proposed Settlement on objective criteria. Specifically, the settlement condi-
tions payment only on (1) submission of proof of use or
A. Class Members & Basic Terms purchase of Serzone; and (2) for those claiming a spe-
cific physical injury, proof of a temporal relationship
On November 4, 2004, Class Counsel filed a com-
between the use of Serzone and a qualifying medical
plaint in the Southern District of West Virginia to
condition. Counsel for both BMS and the plaintiffs agree
streamline the claims of Class Members asserted in
that drug-induced liver failure causes immediate rather
pending federal and state Serzone litigation throughout
than delayed harm. As such, this litigation [**24] pre-
the country and to facilitate class action treatment of
sents no risk of latent effects or future claims. The Set-
those claims for settlement purposes. The named plain-
tlement [*229] Agreement establishes October 1, 2004
tiffs consisted of Dexter Heir, Andrea [**22] Harper,
as the cut-off date for persons who have purchased or
Martha Sue Perdue, Cecil Gladwell, and Susan K. Kyle.
10 used Serzone to be included in the Class. BMS discon-
The complaint invoked diversity jurisdiction and as-
tinued the manufacture and sale of Serzone on June 14,
serted various state-law claims for relief, including: (1)
2004, and both sides assert that no new injuries will oc-
strict products liability (failure to warn); (2) strict prod-
cur due to Serzone ingestion because of the way Serzone
ucts liability (design defect); (3) negligent failure to
affects the body. Moreover, those injuries already alleged
warn; (4) negligence per se; (5) breach of implied war-
should not progress among Class Members.
ranty; (6) breach of express warranty; (7) unjust enrich-
Page 7
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
ing transplant, and liver failure requiring placement on

11 The Settlement Agreement dated October 15, the UNOS transplant list but no transplant occurred. One
2004 was subsequently amended three times in schedule provides payment to claimants who had no pre-
order to: (1) conform to the court's preliminary existing liver problem, and the other provides compensa-
approval order dated November 24, 2004; (2) ex- tion to claimants who had chronic liver disease before or
tend the time frame for BMS to make initial de- during use of Serzone or who had other medical condi-
posits to the claim funds in accordance with the tions that complicate matters of medical causation. Pay-
court's order dated December 30, 2004; (3) en- ments range from a high of $ 3.5 million for the repre-
sure the security of the Settlement Funds, con- sentatives [**27] of 30 to 40 year old patients who died
form to the rules of prudent investment for funds from acute liver failure to $ 100,000 for claimants with
of this nature, and clarify procedures related to pre-existing liver problems who developed acute liver
the administration of claims and payments to the failure and were placed on the UNOS transplant list, but
Claims Administrator pursuant to the court's or- who did not undergo transplant surgery.
der dated February 15, 2005.
Fund B, initially funded with $ 30 million, also pro-
vides two separate schedules of compensation for claim-
[**25] B. Settlement Funds
ants with "general hepatic injuries." The Schedule de-
The Settlement Agreement allocates $ 70 million to fines "general hepatic injury" to include hepatic injuries
pay qualifying claims and guarantees an additional pool reflected by laboratory abnormalities, overt symptoms
of $ 8 million to draw upon if there is an unexpectedly such as jaundice, and significant medical treatment con-
high volume of the most serious injury claims. In that sisting of either hospitalization or repeated outpatient
situation, the Agreement provides for additional and dis- visits. One schedule provides payment to claimants
cretionary Back End Adjustments to ensure that the without any pre-existing liver disease, and the other pro-
funds can cover the qualifying claims. Class Members vides compensation to claimants with pre-existing liver
who participate and qualify for Fund A or Fund B pay- disease or who had other liver conditions. The schedule
ments will also have a "Back End Opt-Out right" in the provides for a maximum of $ 200,000 for young claim-
unexpected event that funds run short. ants with significant laboratory abnormalities who re-
quired hospitalization to a minimum of $ 5,000 for
As the parties have structured the settlement to util-
claimants with other confounding medical conditions
ize a Qualified Settlement Fund as defined in section
who showed elevated liver enzymes by two consecutive
1.468B-1(c) of the Treasury Regulations, any funds re-
blood tests no closer than two days and no further than
maining after the actual payment of all Fund A and B
ninety days apart.
claims will not be returned to BMS but rather transferred
to a sub-account. This sub-account, under the terms of Fund C, funded [**28] with $ 5 million, provides
the Qualified Settlement Fund, is dedicated to the pay- compensation for "non serious hepatic injuries." The
ment of a spectrum of claims, including any award of Schedule defines "non serious" injuries by reference to
fees to Class Counsel. This financial arrangement pro- laboratory tests reflecting elevated liver enzymes or
vides for protection of the funds and confers certain tax bilirubin. Fund C provides for two levels of payments: $
benefits for Class Members and BMS. In no event, how- 7,500 for more significantly elevated readings and
ever, will any of the money [**26] deposited into the [*230] $ 2,000 for less significantly elevated readings.
Fund be returned to BMS. Fund C does not require any overt physical symptoms of
clinical illness. Fund D, the "non specific injury and gen-
The Schedule of Payments details the financial
eral benefit fund," is also funded at $ 5 million. It pro-
terms of payments to Class Members. The Schedule rec-
vides a payment of $ 100 to any claimant who wants to
ognizes four categories of injuries as well as gradations
make a claim for any reason, and who can prove that he
of injury within each category. Based on objective medi-
or she bought or used Serzone during the class period. It
cal criteria, it makes payments from four corresponding
requires no showing of overt physical or economic in-
funds: Fund A, Fund B, Fund C, and Fund D. Funds un-
jury.
used by B, C, and D claimants will go to pay Fund A
claimants, if necessary. Likewise, funds unused by A, C, The Schedule of Payments also provides for addi-
and D claimants will go to pay Fund B claimants, if nec- tional payments based on claimant-specific factors. In
essary. Fund A, it allows increases of twenty-five percent for
multiple liver transplant surgeries. The Schedule further
Fund A, initially funded with $ 30 million, provides
provides for a $ 100,000 payment for spousal loss of
two separate schedules of compensation for claimants
consortium, and allows $ 100,000 awards for loss of
with "serious hepatic injuries." Claims qualifying as "se-
support to each child under the age of eighteen who has
rious hepatic injuries" include death, liver failure requir-
lost a parent to liver disease. The Schedule also provides
Page 8
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
for payments of up to [**29] $ 50,000 annually for loss The settlement agreement provides for a two-stage
of income for up to a maximum of fifteen years. In Fund claims process. The first stage required claimant Class
B, the Schedule allows for payments of up to $ 50,000 Members to submit a preliminary form providing mini-
annually for loss of income for up to a maximum of two mal information about their claims so that the parties
years. could predict where a particular claimant may fall in the
settlement matrix. The deadline for filing this inventory
If Fund A or Fund B claims and expenses exceed the
form was May 13, 2005, approximately six weeks before
available amounts in these respective funds, the Settle-
the date of the Final Fairness hearing. The second phase
ment Agreement further provides for Back End Opt-Out
of the claims process requires the submission of full
and Adjustments. For Fund A, BMS will pay up to an
claims information, and will conclude 90 days after final
additional $ 5 million to pay all approved Fund A claims
judicial approval of the settlement. The claims adminis-
at the full value assigned to them by the Claims Admin-
trator's factual determinations regarding the claims in-
istrator. If $ 35 million is still insufficient to pay Fund A
formation may be appealed to the Magistrate Judge.
claims at one hundred percent of the value assigned to
them by the Claims Administrator, BMS can increase the
[*231] D. Other Payments
funding again. BMS may also decline to increase the
dollar amount in Fund A beyond the additional $ 5 mil- The Settlement Agreement also provides that BMS
lion. If that is the case, BMS and Class Counsel have will pay reasonable actual expenses, not to exceed $
agreed to negotiate in an attempt to agree on a reduced 950,000, to provide notice of the Settlement to Class
payment that will be accepted by approved Fund A Members. Additionally, attorney fees and expenses as
claimants. Under the terms of the Settlement Agreement, awarded by me [**32] will be paid by BMS separate
the parties must report the results of their good faith ne- and apart from any Fund payment. In the event that any
gotiations to the court. money is transferred to the BMS Product Liability Sub-
Account, that money will also be available to pay attor-
If I approve the new negotiated payments, the
neys' fees. Although the Settlement Agreement does not
Claims Administrator must notify each Fund A claimant
provide further detail as to limitations on attorneys' fees
of [**30] his or her revised award. If the revised award
that may be requested by Class Counsel, the order en-
varies by more than five percent from the amount to
tered by this court on November 18, 2004 conditionally
which the claimant would have otherwise been entitled,
certifying the settlement class and preliminarily approv-
the claimant will have thirty days from receipt of the
ing the settlement indicates that Class Counsel's fees
revised award to exercise a Back End Opt-Out and re-
shall not exceed $ 20 million. Class Counsel have peti-
store his or her claim to active litigation status. If the
tioned the court for an award of attorneys' fees, and the
claimant does not opt out, he or she will receive the ne-
matter is currently under advisement. Under the terms of
gotiated award in full satisfaction of his or her claim. The
the agreement, distribution of attorneys' fees and costs
terms of the Back End Opt-Out and Adjustment rights
allowed to Class Counsel will not occur until approval of
for Fund B are exactly the same as for Fund A, except
the Settlement is final and non-appealable and all of the
that BMS is only obligated to pay an additional $ 3 mil-
dates upon which BMS has any option to terminate the
lion, as opposed to $ 5 million for Fund A, to meet ap-
settlement agreement or any portion thereof has passed.
proved claims.
In the event that I determine that BMS and Class IV. Personal Jurisdiction and Notice
Counsel are unable to reach an agreement as a result of
Reasonable notice combined with an opportunity to
their reduced payment negotiations for Fund A or Fund
be heard and withdraw from the class satisfies the due
B, or if the parties reach an agreement that I do not ap-
process requirements of the Fifth Amendment. Brown v.
prove, the Settlement Agreement will terminate only
Am. Home Prods. Corp. (In re Diet Drugs (Phentermine,
with respect to the involved fund. All money remaining
Fenfluramine, Dexfenfluramine) Prods. Liab. Litig.),
in the involved fund will be transferred to the BMS
2000 U.S. Dist. LEXIS 12275, Nos. 1203, 99-20593,
Product Liability Sub-Account. Under the terms of the
2000 WL 1222042, [**33] at **34 (citations omitted).
Settlement Agreement, if Fund C or Fund D claims and
Thus, "silence on the part of those receiving notice is
expense totals exceed the available amounts in these
construed as tacit consent to the court's jurisdiction." Id.
[**31] respective funds, benefits to Class Members will
(quoting Krell v. Prudential Ins. Co. of Am. (In re Pru-
be proportionately reduced. BMS will not make any
dential Ins. Co. Am. Sales Practice Litig. Agent Actions),
Back End Adjustments to these two funds, nor do claim-
148 F.3d 283, 306 (3d Cir. 1998)). In addition, in a set-
ants under these funds have any Back End Opt-Out
tlement class maintained under Rule 23(b)(3), class no-
Rights.
tice must meet the requirements of both Federal Rules of
Civil Procedure 23(c)(2) and 23(e). Rule 23(e) specifies
C. Claims Administration
Page 9
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
that "no class action may be 'dismissed or compromised West Virginia courts, and elsewhere; (g)
without [court] approval,' preceded by notice to class use high quality notification vehicles and
members." Fed. R. Civ. P. 23(e). Rule 23(c)(2) requires methods in order to convey the impor-
that notice to the class must be "the best practicable un- tance of the information affecting Class
der the circumstances, including individual notice to all Members' rights; (h) write and design No-
member who can be identified through reasonable ef- tices in plain language that will be "no-
fort." Fed. R. Civ. P. 23(c). The Rule also requires that ticed," as well as simple, clear, easy to
the notice inform potential class members (1) that they understand and act upon; (i) ensure that
have an opportunity to opt out; (2) that the judgment will Class Members who choose to participate
bind all class members who do not opt out; (3) and that can conveniently act on their right to
any member who does not opt out may appear through claim a payment from the settlement
counsel. Id. Thus, I must consider the [**34] mode of through repetition, a variety of distribu-
dissemination and the content of the notice to assess tion methods, and notice design features;
whether such notice was sufficient. MANUEL FOR and (j) ensure an overall [**36] effective
COMPLEX LITIGATION (FOURTH) § 21.312 (2004). effort based on all relevant communica-
tion standards.
When I granted preliminary approval of the pro-
posed settlement on November 18, 2004, I approved the
form and method of notice described in the Notice Plan,
(Hilsee Aff. P 25, April 14, 2005). To enhance consumer
which included nationwide publication notice, estab-
exposure, Hilsoft studied the demographics and reader-
lishment of a notice and claims information website
ship of publications among adults who used a prescrip-
(www.serzoneclaims.com), a toll free number to take
tion drug for depression in the last twelve months. Con-
questions, and individual mailings to reasonably identifi-
sequently, Hilsoft chose to utilize media particularly tar-
able Class Members. The Notice Plan was drafted by
geting women due to their greater incidence of depres-
Hilsoft Notifications, a Pennsylvania firm specializing in
sion and heavy usage of the medication. Id. at P 27. Be-
designing, developing, analyzing and implementing
tween December 17, 2004 and February 22, 2005, no-
large-scale, unbiased legal notification plans. Hilsoft has
tices appeared in a series of national magazines and more
disseminated class action notices in more than 150 cases,
than 947 United States newspapers, having an estimated
and it designed the model notices currently displayed on
combined audience of 292,337,000 people and yielding
the Federal Judicial Center's website as a template for
an estimated 370,325,000 gross impressions. 12
others to follow.
Here, the Notice Program was designed to: 12 The Summary Notice appeared in People,
Readers Digest, Family Circle, Better Homes and
(a) effectively reach approximately 80% Gardens, Cosmopolitan, and the National En-
of Class Members; (b) provide those quirer.
Class Members reached multiple opportu-
nities to be exposed to the notice; (c) use V. Objections
targeted notice vehicles and state-of-art
Seventeen written objections were filed prior to the
notice planning [**35] (I.E., media
Fairness hearing; seven were untimely. 13 Nevertheless, I
known to be used by Class Members),
considered each [**37] of the objections, and I allowed
with audiences that can be mathematically
objectors who spoke at the final fairness hearing to pre-
calculated; (d) provide thorough and fair
sent arguments outside their written objections. I also
geographic coverage of the United States
afforded each objector who spoke at the hearing the addi-
and its territories and possessions; (e) de-
tional opportunity to file supplemental briefs within ten
sign a program broadly targeting Class
days of the hearing and in turn, I gave BMS and Class
Members, without disadvantaging any po-
Counsel five days to respond. Two sets of supplemental
tential Class member on the basis of geog-
briefs were filed; one was untimely. BMS and Class
raphy (where they choose to live) or
Counsel filed written responses to both.
demographics (e.g., their age or socio-
economic status); (f) develop a program
13 In an order dated June 23, 2005, I directed
consistent with other notice programs
that the date stamped as "RECEIVED" on the
[Hilsoft has] designed that have [*232]
documents by the Claims Administrator be
been court-approved and that [Hilsoft has]
deemed as the date filed with the Clerk of Court
implemented for large classes certified for
in accordance with this court's Order Condition-
purposes of settlement in federal courts,
ally Certifying Temporary Class Settlement and
Page 10
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
Preliminarily Approving Settlement [Docket The medical objections before the court, filed by
257]. Rebecca Long, Johnny Davidson, Ken Gauntlett, Craig
Albritton, James Martin, Pam Barnett, and the withdrawn
Indeed, some objections are best characterized as
objection of William Collard, all suggest that the Settle-
merely expressing discontent with the settlement without
ment should give greater compensation to persons with
substantive argument or presentation of evidence. Other
medical problems besides acute liver failure. The medi-
objections were premature objections to an award of at-
cal conditions complained of- namely headaches, loss of
torneys' fees to [**38] class counsel. Of those remain-
hearing, loss of eyesight, serotonin syndrome, primary
ing, the objections may be split into three principal
[**40] sclerosing cholangitis -- have multiple causes
groups: (1) objections regarding third party payments;
and have not generated litigation even from these objec-
(2) medically-based objections; and (3) procedurally-
tors. Class Counsel consulted with medical experts to
based objections.
address each medical objection. The consulting experts
have opined that none of the objections would render the
A. Third Party Payments
Settlement unfair or unreasonable from a medical stand-
Certain insurers, known as the Blue Cross Plans and point. (Regan Aff. P 15, June 8, 2005); (Heckman Aff. P
Third Party Payers, filed motions to intervene as well as 14, June 8, 2005). For instance, with regard to whether
objections. Neither group spoke at the fairness hearing. drug-induced acute liver injury is either latent or whether
These insurers have since provided the court with notice it progresses in most former patients, the objectors pre-
of withdrawal of their motions and objections as they sented no evidence from studies or experts. Moreover,
have reached an agreement with BMS and Class Counsel none of the objectors attempted to cross-examine the
separate and apart from the Settlement Agreement. A parties' scientific experts, challenge their credentials, or
summary of the agreement was included in the notice of question their opinions beyond mere assertions in their
withdrawal for informational purposes. In pertinent part, briefs or oral arguments.
it provides:
When objectors seek individual terms more favor-
able than those applicable to other class members, they
Class Counsel and counsel for certain
should be approved only on a showing of a reasonable
Insurers have agreed to a minimum 33 1/3
relationship to facts or law that distinguish the objector's
% discount for relevant medical liens.
position from other class members. MANUEL FOR
Class Members will be informed of the
COMPLEX LITIGATION (FOURTH) § 21.643 (2004).
discount through a Court approved letter,
None of the objectors have made such a showing. Nor
to be sent by the Claims Administrator.
have any of the objectors identified a [**41] distinction
This information will be confidential and
that requires a subclass or otherwise uncovers an imper-
HIPAA compliant. As an additional bene-
fection in the class definition or the settlement terms. As
fit to Class Members, participating insur-
such, perhaps the most appropriate remedy for these ob-
ers have agreed to waive their lien rights
jectors would have been to opt out and seek recovery in
as to Fund D claimants.
the tort system.
C. Procedural Objections
A copy [**39] of the letter to be sent to Class Members
was filed as an attachment to the notice of withdrawal.
1. Claims Process
The letter merely informs Class Members that they are
eligible to receive a discount for what may otherwise Objectors argue that the lien hold-back provisions of
constitute subrogation claims or liens for medical bene- the settlement agreement are unreasonable. The lien
fits paid if they elect to provide [*233] information to hold-back provisions of the Settlement Agreement reflect
the insurers who have entered into the agreement with the acknowledgement that certain third parties may have
BMS. I FIND the agreement does not unduly burden or valid liens against some claimants. These provisions are
prejudice Class Members. Rather, it gives Class Mem- arguably designed to protect Class Members by provid-
bers the option of receiving a discount for certain medi- ing an incentive for them to conduct at least some inves-
cal liens that may attach to recoveries in any event by tigation as to whether their claim awards are subject to
operation of law. Accordingly, I APPROVE the with- liens. Should Class Members accept and spend their re-
drawal of the Blue Cross Plans and Third Party Payer's coveries in this action without making this basic inquiry,
motions to intervene and objections. certain Class Members might find themselves later being
notified of liens of which they were unaware and might
B. Medically-Based Objections not be in the financial position to pay. To the extent that
such a lien exists, it is often easier for claimants to nego-
Page 11
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
tiate a reduction with the lienholder up front, rather than Mary J. Davis, Toward the Proper Role for Mass Tort
to become embroiled in litigation pursued by [**42] the Class Actions, 77 OR. L. REV. 157, 187 (1998).
lienholder at a later time. Moreover, absent repayment of
The parties here sought to protect against this unde-
liens, BMS could, under certain circumstances, retain a
sirable scenario by requiring the filing of an inventory
liability for lien payment after the claimants have spent
form as part of the claims process. Similar procedures
their settlement check elsewhere.
have been approved by at least one other MDL court. In
Some objectors assert that the vagueness of the pro- the Chattem Dexatrim Settlement, class members were
visions render the claims administrator nothing short of a required to submit completed claims forms by July 7,
collection agency because it calls upon the claims admin- 2004. In re Phenylpropanolamine (PPA) Prods. Liab.
istrator to act even upon unrelated liens. Read in context, Litig., 227 F.R.D. 553, (W.D. Wash. 2004) (attached
however, with the exception of child support, the lien class action settlement agreement Exh. A Annex III).
provisions included in the Settlement Agreement pertain Notice occurred between May 24th and June 22, 2004,
to liens associated with Class Members' purchase or use and the fairness hearing occurred on August 26, 2004. Id.
of Serzone. The examples that are provided in the Set- at 557. In that case, the class members had a signifi-
tlement Agreement include liens associated with Class cantly shorter period of time to file their claims, [**45]
Members' treatment for injuries and Medicare liens under which required more onerous submissions than the filing
the Medicare Secondary Payment Act. As counsel for of the inventory form in the instant action. Id.
BMS made clear during the final fairness hearing, unre-
Based on the responses received from the filing of
lated liens are not contemplated by the Settlement. In
inventory forms, BMS believes that it has adequately
some states, unpaid child support attaches as a lien
funded the settlement and that the claims process can
[*234] to certain settlements. Moreover, there are nu-
proceed with a greatly reduced risk of disruption or com-
merous federal and state lien requirements for medical
plete breakdown, as experienced in the silicone gel breast
treatment for which plaintiffs may be responsible. The
implant case. In re Silicone Gel Breast Implant Prods.
parties assert that the Claims Administrator understands
Liab. Litig., No. CV94-P-11558-S, MDL 926 (N.D. Ala.
the purpose [**43] of the hold-back provision, and does
Sept. 1, 1994). Class Members have timely filed 6,524
not aspire to act as a collection agency for debts unre-
inventory forms. Only 61 forms were filed untimely, a
lated to this action. Ultimately, I FIND that the lien hold-
relatively low number that supports the notion that the
back provisions provide at least some protection to Class
filing procedure and deadline were not overly burden-
Members without imposing an unreasonable burden on
some. Even so, any claimant who filed an inventory form
their recovery. Also, I FIND it unnecessary to adopt the
late, but can show that allowance of his or her late-filed
language changes proposed by the objectors. These ob-
claim will not cause harm or prejudice to existing parties
jections are OVERRULED.
will be allowed to join the class.
Some objectors also argue that the inventory re-
Some objectors also compare the claims administra-
quirement is essentially an unreasonable claims deadline.
tion process to an administrative proceeding, arguing that
BMS responds that this requirement provides important
review of the Magistrate Judge's findings by an Article
protection to both BMS and Class Members. For the fol-
III judge is constitutionally required. Yet, the objectors
lowing reasons, I find that the inventory claim form was
cite no case law to support this comparison, and the court
a necessary and reasonable requirement. The settlement
[**46] has not located relevant authority. Thus, as a
commits Class Members and BMS to a claims process
practical matter, the parties have only agreed to a limited
that will last for several months and cost a substantial
right of appeal. Accordingly, this court will retain juris-
amount of time and money. All parties have an interest in
diction to ensure that the Claims Administrator interprets
completing this process in a timely and predictable man-
the settlement correctly and fulfills its obligations, but it
ner. Consider, for instance, the scenario in the silicone
will not review individual matrix awards. Objectors also
gel breast implant settlement class action in which thou-
argue that fees should be awarded to Class Members who
sands more claims were made than anticipated. In
successfully challenge a decision by the Claims Admin-
Lindsey v. Dow Corning Corp. (In re Silicone Gel Breast
istrator, but again, they do not cite legal authority. In
Implant Prods. Liab. Litig.), 1994 U.S. Dist. LEXIS
turn, neither the court nor BMS or Class [*235] Coun-
12521, No. CV94-P-11558-S, MDL [**44] 926 (N.D.
sel have been able to locate any precedent for such ac-
Ala. Sept. 1, 1994), the settlement fund was inadequate to
tion. I recognize that this is a carefully negotiated com-
compensate all of the claimants, and a large number of
promise of claims between private litigants, and BMS
claimants exercised their back end opt-out right in order
has simply not agreed to pay attorney's fees for claimants
to pursue their claims through traditional tort litigation.
who successfully exercise their limited right of appeal.
The principal defendant filed for Chapter 11 bankruptcy
Accordingly, these objections are OVERRULED.
reorganization, and the class settlement simply fell apart.
Page 12
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
Lastly, in regard to claims administration proce- FIND that there was sufficient notice leading up to the
dures, objectors point out that the third Amended Settle- opt-out deadline.
ment Agreement reads that a showing "beyond a reason-
Objectors also assert that because the settlement
able doubt" is required for the Magistrate Judge to over-
class could have potentially included millions of Class
turn the Claims Administrator's determination. During
Members, and only 6,524 have "shown their hands" to be
the fairness hearing, however, I stated that "beyond
included in the class by filing an inventory form, the
[**47] a reasonable doubt" was not an appropriate stan-
notice is inadequate. However, many factors contribute
dard in the civil law and explained that "clear error" was
to the claims response rate. See, e.g., Zimmer Paper
a similar standard that could be substituted. Neither BMS
Prod., Inc. v. Berger & Montague, P.C., 758 F.2d 86,
nor Class Counsel object to substituting "clear error" in
92-93 (3d Cir. 1985) (holding that where defendant en-
place of "beyond a reasonable doubt." As I find "clear
gaged in customary and court approved notice procedure,
error" to be the appropriate standard, I SUSTAIN this
the response rate was not determinative of the adequacy
objection and ORDER the parties to substitute "clear
of the class notice.); 3 Alba Conte & Herbert Newberg,
error" where the language reads "beyond a reasonable
NEWBERG ON CLASS ACTIONS § 8.45 (4th ed.
doubt" in the Third Amended Settlement Agreement.
2002)("Claims response levels will tend to vary with the
circumstances, types of class notices employed, and size
3. Notice
of individual claims involved in each case."). BMS ex-
Objections to the notice provided in this matter may plains that claimants, especially Fund D claimants, may
be split into two groups: (1) notice regarding the right to have chosen not to participate for numerous reasons. For
opt-out; and (2) the relationship between the claims fil- instance, claimants who do not feel aggrieved may not
ings and the adequacy of the notice. Regarding the right want to risk exposure of privacy interests. Other [**50]
to opt-out, one objector argues that the information re- claimants who were helped by Serzone might find it in-
quested to allow a class member to opt-out -- namely the apposite to recover from the settlement. [*236] As Mr.
nature of alleged Serzone-related injuries and the name Hilsee explained in his supplemental affidavit, the ade-
and address of counsel -- impermissibly burdened this quacy of notice is measured by whether notice reached
constitutional right. As stated by the United States Su- Class Members and gave them an opportunity to partici-
preme Court, "the interests of absent plaintiffs are suffi- pate, not by actual participation. (Hilsee Supp. Aff. P
ciently protected ... when those plaintiffs are provided 6(c)(v), June 8, 2005).
with a request for exclusion that can be returned within a
Hilsee estimates that publication notice reached ap-
reasonable [**48] time to the court." Philips Petroleum
proximately eighty percent of the U.S. population that
Co. v. Shutts, 472 U.S. 797, 814, 105 S. Ct. 2965, 86 L.
used Serzone and that Class Members were exposed to
Ed. 2d 628 (1985). Under this standard, I FIND the ar-
the Notice an average of 2.6 times throughout the Notice
gument regarding the burden of providing the informa-
program. (Hilsee Aff. PP 28 & 50, April 14, 2005). With
tion requested in the opt-out to be unpersuasive. Provid-
regard to the timing of the notice, Hilsee maintains that
ing information regarding the Serzone-related injury and
"all of the notices appeared in the publications before the
the name and address of counsel, if any, does not imper-
end of February 2005, which allowed plenty of time for
missibly burden a claimant's ability to return the request
Class Members to see the Notice several times, receive
for exclusion within a reasonable time. Moreover, as a
and review other information, and respond accordingly
practical matter, BMS has asserted that it does not dis-
before the April 8, 2005 exclusion deadline and the April
pute the validity of any opt-out based on a claimant's
29, 2005 objection deadline. The May 13, 2005 deadline
failure to provide such information in its entirety.
to file an Inventory form [was] another month away." Id.
One objector argues that the notice did not con- at P 51. The Claims Administrator, Smith Cochran &
spicuously disclose the date for Class Members to ex- Hicks, PLLC, reported that 6,524 inventory forms had
clude themselves, and others object to April 8, 2005 as been received by the May 13, 2005 inventory [**51]
the deadline for opting out. The notice contained a sec- form deadline, while only 61 forms were received after
tion on "Excluding Yourself from the Settlement," and that deadline. The relatively low number of late-filings
all of the different deadlines appeared in bold face type supports a finding that Class Members understood the
within the notice. (Hilsee Supp. Aff. P 6(b), June 8, inventory requirement and the date of its deadline.
2005). Moreover, the notice campaign began in early
Hilsoft Communications also created a website,
December, and the deadline to file opt-outs was April 8,
www.serzoneclaims.com, to which I have provided a
2005. This timeline, spanning a period of four months, is
link on the court's official website. Among other docu-
consistent with court-approved [**49] best practices for
ments related to the settlement, including the Third
class notice campaigns. Id. at P 6(c)vi. Accordingly, I
Amended Settlement Agreement, the website provides
the notice materials in English and Spanish, which could
Page 13
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
be accessed and downloaded by prospective Class Mem- tion under Federal Rule of Civil Procedure 23. Amchem
bers. Hilsee reports that Hilsoft submitted the website to Prods. v. Windsor, 521 U.S. 591, 620, 117 S. Ct. 2231,
over 380 submission services, and as of April 13, 2005, 138 L. Ed. 2d 689 (1997). Thus, the named plaintiffs
the website had received 31,937 hits. (Hilsee Aff. PP 37 must meet the prerequisites of Rule 23(a) and at least one
& 38, April 14, 2005). of [**54] the subsections of Rule 23(b). Gunnells v.
Healthplan Servs., Inc., 348 F.3d 417, 423 (4th Cir.
In addition, pursuant to the court's December 21,
2003). The practice in this circuit is "to give Rule 23 a
2004 order concerning privacy interests and individual
liberal rather than a restrictive construction, adopting a
notice, BMS sent written notice in January and early
standard of flexibility in application [that] will in the
February, 2005 to 4,016 persons known to BMS to have
particular case best serve the ends of justice for affected
used Serzone and whose names appeared in BMS's Ad-
parties and promote judicial efficiencies." Id. at 424
verse Event Report database. Furthermore, in early Feb-
(quoting In re A.H. Robins, Co., Inc., 880 F.2d 709, 740
ruary 2005, BMS sent letters to 2,775 physicians in the
(4th Cir. 1989) (holding that it was proper in determining
U.S. who had called the Adverse Event Reporting Sys-
certification to consider whether certification would "fos-
tem [**52] regarding patients using Serzone. This letter
ter the settlement of the case with advantage to the par-
advised them of the settlement and encouraged them to
ties and with great savings in judicial time and ser-
tell patients about the settlement. In seeking to mitigate
vices")).
privacy concerns by eliminating the involvement of un-
necessary third parties, I ordered BMS to administer this In the instant case, plaintiffs seek certification under
portion of the notice in lieu of Hilsoft or the claims ad- Rule 23(b)(3), which requires that common issues pre-
ministrator. (Keller Aff. at P 5, April 15, 2005). dominate over individual ones and that a class action be
superior to other available methods of adjudication. In
Not one of the objectors support challenges to the
evaluating whether the settlement meets the criteria of
adequacy of notice with any kind of evidence; rather,
Rule 23(a) and (b), the fact of settlement is a relevant
these objections consist of mere arguments and specula-
consideration, as settlement moots concern that trial
tion. I have, nevertheless, addressed the main arguments
would present intractable problems of management. Id.
herein, and I have considered all arguments when evalu-
The Fourth Circuit has [**55] noted,
ating the notice in this matter. Accordingly, after consid-
ering the full record of evidence and filings before the
The Supreme Court explained in Am-
court, I FIND that notice in this matter comports with the
chem that when dealing with a settlement
requirements of Due Process under the Fifth Amendment
only class pursuant to Rule 23(e), 'a dis-
and Federal Rules of Civil Procedure 23(c)(2) and 23(e).
trict court need not inquire whether the
Lastly, at least one objector asserted that the settle- case, if tried, would present intractable
ment is under-funded. In response, the plaintiffs submit- management problems,' which would or-
ted the opinion of Harvey S. Rosen, Ph.D., an expert dinarily be necessary to satisfy Rule
participant in thousands [**53] of personal injury and 23(b)(3)'s predominance requirement. . .
wrongful death cases over a period of thirty years. Dr. The dissent thus ignores the lesson of Am-
Rosen states that the monetary amounts set forth in the chem . . . i.e., the Supreme Court's recog-
Schedule of Payments compensate most injured parties at nition that the subsections of Rule 23 are
levels that are well within the range of damage awards interactive, and not to be followed . . . in a
expected in the tort system. Taking special note of set- strictly sequential fashion.
tlement provisions for direct wage and economic loss
compensation, Dr. Rosen is of the opinion that the dollar
amounts on the compensation grids are fair and adequate. Gunnells, 348 F.3d at 440 (4th Cir. 2003). I am never-
(Rosen Aff. at P 6, June 21, 2005). Moreover, BMS has theless mindful of the impropriety of simply finding that
stated that the response data garnered through the filing "if a settlement is 'fair,' then certification is proper." Am-
of inventory forms indicates that each fund is adequately chem, 521 U.S. at 594 (1997). Accordingly, I will care-
funded. As the record contains no contrary evidence and fully consider each of the requirements for class certifi-
none of the objectors challenged any aspect of Dr. cation in this matter.
Rosen's affidavit, I FIND that the settlement is ade-
A. Rule 23(a)
quately funded.
1. Numerosity
VI. Class Certification
Rule 23(a)(1) requires that the class be of sufficient
Regarding requirements [*237] for certification, a
size that joinder of all members is "impracticable." In
settlement class must meet the requirements for certifica-
determining whether joinder is impracticable, a court
Page 14
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
should analyze the factual circumstances of the case at *43 (E.D. Pa. Aug. 28, 2000). The class representa-
rather than relying on numbers alone. Cypress v. New- tives and class members need not have suffered identical
port News Gen. & Nonsectarian Hosp. Ass'n, 375 F.2d injuries or damages. United Broth. of Carpenters, 152
648 (4th Cir. 1967). [**56] Factors to be considered are F.R.D. 518, 522 (S.D. W.Va. 1994); see also Mick v. Ra-
"the estimated size of the class, the geographic diversity venswood Aluminum Corp., 178 F.R.D. 90, 92 (S.D. W.
of class members, the difficulty of identifying class Va. 1998).
members, and the negative impact of judicial economy if
In the instant case, the claims of the named plaintiffs
individual suits were required." Christman v. American
and the Class Members arise from a single product and
Cyanamid Co., 92 F.R.D. 441, 451 (N.D. W. Va. 1981);
identical conduct -- BMS's course of conduct in the de-
McGlothlin v. Connors, 142 F.R.D. 626, 632 (W.D. Va.
velopment and marketing of Serzone. The class represen-
1992).
tatives claim that they, like every other Class Member,
At the fairness hearing, Class Counsel indicated that either used or purchased Serzone, an allegedly defective
the proposed settlement Class consists of approximately drug. Also, like any member of the class, the representa-
eight million people located throughout the United States tives seek the maximum amount of damages immedi-
and its territories. One hundred and seventy-six federal ately. Damage levels vary among the class representa-
lawsuits have been filed and transferred to the MDL. A tives as they do among members of the class, but all are
few of these suits are styled as class actions. Moreover, similarly aggrieved by BMS's conduct, and all assert
lawsuits are also pending in state courts. I FIND that the similar claims of liability. Accordingly, I FIND that the
proposed class is so numerous that joinder of all mem- claims of the class representatives are typical of those of
bers is impracticable. Accordingly, the numerosity re- [**59] members of the class.
quirement is satisfied.
4. Adequacy
2. Commonality
The final requirement of Rule 23(a) is set forth in
Rule 23(a)(2) requires a showing of the existence of subsection (4), which requires that "the representative
"questions of law or fact common to the class." Fed. R. parties will fairly and adequately protect the interests of
Civ. P. 23(a)(2). Rule 23(b)(3) requires that questions of the class." Fed. R. Civ. P. 23(a)(4). This determination
law or fact common to the class predominate over any requires a two-pronged inquiry: (1) the named plaintiffs
questions affecting [**57] only individual members. must not have interests antagonistic to those of the class;
Fed. R. Civ. P. 23(b)(3). The Fourth Circuit has held that and (2) the plaintiffs' attorneys must be qualified, experi-
"in a class action brought under Rule 23(b)(3), the 'com- enced and generally able to conduct the litigation. Hew-
monality' requirement [of Rule 23(a)(2)] is subsumed lett v. Premier Salons Int'l, Inc., 185 F.R.D. 211, 218 (D.
under, or superseded by, the more stringent Rule 23(b)(3) Md. 1997).
requirement that questions common to the class 'pre-
The adequate representation inquiry "serves to un-
dominate over' other questions." Lienhart v. Dryvit Syst.
cover conflicts of interest between named parties and the
Inc. 255 F.3d 138, 147 n.4 (4th Cir. [*238] 2001) (cit-
class they seek to represent." Amchem, 521 U.S. at 625.
ing Amchem, 521 U.S. at 609). Because this is a class
The named plaintiffs seek to represent persons who have
action brought under Rule 23(b)(3), I will analyze the
purchased or used Serzone, each of whom was impacted
two factors together in the predominance section of this
by BMS's alleged wrongdoing and each of whom has the
opinion. See In re Life USA Holding, Inc., 242 F.3d at
same interest as the named plaintiffs in establishing
144 (analyzing the two factors together).
BMS's liability and obtaining damages. No conflict of
interest exists as all members of the settlement class de-
3. Typicality
sire to recover damages immediately for injuries alleg-
To satisfy the typicality requirement under Rule edly caused by the purchase or ingestion of Serzone.
23(a)(3), the "claims or defenses of the representative
[**60] In Amchem, the class consisted of both in-
parties [must be] typical of the claims or defenses of the
jured and exposure-only plaintiffs. As such, the interests
class." Fed. R. Civ. P. 23(a)(3). "A sufficient nexus is
of those in the class were conflicted, and the named par-
established [to show typicality] if the claims or defenses
ties could not adequately represent the class. For in-
of the class and class representatives arise from the same
stance, the goal for currently injured plaintiffs was to
event or pattern or practice and are based on the same
obtain generous, immediate payments. The goal for ex-
legal theory." In re Trazosin Hydrochloride Antitrust
posure-only patients, however, was to ensure an ample,
Litig., 220 F.R.D. 672, 686 (S.D. Fla. 2004) [**58]
inflation-protected fund for the future. Given such con-
(quoting Kornberg v. Carnival Cruise Lines, Inc., 741
flicting interests, there could be no assurance of adequate
F.2d 1332, 1337 (11th Cir. 1984); see also In re Diet
representation. In contrast, here, there is no scientific
Drugs, 2000 U.S. Dist. LEXIS 12275, 2000 WL 1222042
Page 15
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
evidence of latent or progressive liver injuries arising would present intractable management problems . . . for
from the ingestion of Serzone nor does the class have to the proposal is that there be no trial. [**63] "); see also
accommodate future claimants, as in Amchem. Indeed, Gunnells v. Healthplan Servs., 348 F.3d 417, 440 (4th
there are no members of the class in whose interest it Cir. 2003) (noting the settlement is relevant to a finding
would be to preserve BMS's resources for the future. See, of predominance, and recognizing that Rule 23 creates an
e.g., In re Phenylpropanolamine (PPA) Prods. Liab. "interactive" series of considerations to be used in certi-
Litig., 227 F.R.D. 553, 562 (W. D. Wash. 2004). The fying classes).
injuries among Class Members are presently known, and
all Class Members are interested in immediate payment. 5. Predominance
[*239] No objections indicate, and there is nothing As previously discussed herein, Rule 23(a)(2) re-
in the record to suggest, that the representative Plaintiffs quires a showing of the existence of "questions of law or
have interests antagonistic to [**61] those of the absent fact common to the class." Fed. R. Civ. P. 23(a)(2). Rule
Class Members in the pursuit of the Class claims against 23(b)(3) requires the Court to determine whether these
BMS. I FIND that Rule 23(a)(4)'s first requirement is common questions of law or fact predominate over any
satisfied. Different levels of compensation under the set- questions affecting only individual class members. This
tlement's Schedule of Payments do no defeat this finding. rule tests "whether proposed classes are cohesive enough
By nature of the settlement, the parties have negotiated to warrant adjudication by representation." Gariety v.
values to assign to claims based on the severity of physi- Grant Thornton, 368 F.3d 356, 362 (4th Cir. 2004). The
cal injury. I do not consider the assignment of a lower Supreme Court has instructed that the predominance
value to claims where injuries are less serious to be evi- inquiry "trains on the legal or factual questions that qual-
dence of conflict. ify each class member's case as a genuine controversy,
questions that preexist any settlement." Amchem, 521
The inquiry into the adequacy of legal counsel fo-
U.S. at 623.
cuses on whether counsel is competent, dedicated, quali-
fied, and experienced enough to conduct the litigation Overall, the instant action presents more than a mere
and whether there is an assurance of vigorous prosecu- common interest in a fair compromise. The entire history
tion. McGlothlin v. Connors, 142 F.R.D. 626, 633-34 of Serzone is common; the [**64] drug was formulated,
(W.D. Va. 1992.). Class Counsel have many years of manufactured, and distributed in exactly the same fash-
experience in prosecuting complex products liability ion. The common issues -- arising from the common
litigation and managing class action lawsuits. In fact, I course of conduct by the defendant in manufacturing and
hand selected these attorneys among several qualified distributing Serzone, and the common character of the
attorneys to assume leadership roles in the multi-district underlying science and the alleged injuries to the Class
litigation at the outset of this matter. Informed by volu- Members -- would be the subject of most of the efforts of
minous discovery and research, Class Counsel were able the parties and the court in resolving this case. Indeed,
to negotiate the proposed settlement [**62] from a posi- the relationship between BMS and the injured claimants
tion of knowledge, as advocates for the entire Class. is a "distant and impersonal one, involving only the inju-
They negotiated the settlement within the context of an rious use of an allegedly defective product." Mary J.
MDL comprising thousands of individual claims and Davis, Toward the Proper Role for Mass Tort Class Ac-
other pending class actions. Noting that it is uncontested tions, 77 OR. L. REV. 157, 164 (1998) (arguing [*240]
in the record that the named plaintiffs are represented by that "consequently, no meaningful difference based on
competent attorneys with extensive experience in mass the nature of the parties' relationship exists on which to
tort litigation, I FIND that Rule 23(a)(4)'s second re- base liability as might be in other contexts, like medical
quirement is satisfied. malpractice or automobile cases"). For all claimants,
culpability is the central issue, and that determination
The proposed class action must also meet the re-
focuses upon the actions of BMS.
quirements of at least one of the subsections of Rule
23(b). Under Rule 23(b)(3), a class may be certified only This case involves one defendant, one product, and
where "questions of law or fact common to the members one course of conduct confined to a defined time period
of the class predominate over any questions affecting in which the defendant engaged in behavior that pre-
only individual members, and . . . a class action is supe- sented virtually identical risk to [**65] all the claimants.
rior to other available methods for the fair and efficient Questions that are central to the case and common to the
adjudication of the controversy." Fed. R. Civ. P. class include: (1) Does Serzone cause physical injury and
23(b)(3). In the context of granting approval to a pro- illness? (2) Did BMS conduct appropriate testing of Ser-
posed class settlement, settlement is relevant to the pre- zone? (3) Did BMS adequately warn of the adverse ef-
dominance inquiry. See Amchem, 521 U.S., at 620 ("[A] fects of Serzone? and (4) Did BMS misrepresent the risk
district court need not inquire whether the case, if tried, of adverse effects of Serzone? Although Settlement Class
Page 16
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
Members may have suffered variant degrees of harm, the this settlement class were denied, litigating the similar
proof regarding the dangerous propensities alleged of issues in individual lawsuits would consume many more
Serzone is the same for any person seeking to establish judicial resources than addressing them together in this
liability against BMS. These core liability issues are in- class action. In re A.H. Robins, 880 F.2d at 742. Requir-
volved in the claims of all Plaintiffs, and all claims in- ing individual Class Members to file their own suits
volve common proof. would cause unnecessary, duplicative litigation and ex-
pense, with parties, witnesses and courts required to liti-
Still yet, litigation of this matter presents individual
gate time and again the same issues, possibly in different
issues such as causation and differing state laws. In the
forums. Id. Moreover, class treatment [**68] limits the
context of the settlement, however, such issues are ren-
possibility of inconsistent rulings regarding liability or
dered irrelevant, allowing common issues to predomi-
the appropriate measurement for damages. Id. Finally,
nate. Differences in state law, such as those regarding
Class Members will receive prompt and guaranteed
contributory negligence and comparative fault, the
compensation for their injuries.
learned intermediary doctrine, punitive damages, and the
statute of limitations do not destroy class cohesion be- Absent the class procedures, many Class Members
cause the settlement agreement provides for the distribu- may be effectively foreclosed from pursuing their claims.
tion of benefits based on the objective criteria described Class actions are often [*241] the only means for assur-
[**66] in the Schedule of Payments. As this matter in- ing that defendants who have harmed consumers will not
volves attorneys representing individual clients from all benefit from their unlawful conduct simply because of
over the nation, it is noteworthy that not a single attorney the magnitude of the misconduct and aggregated harm
raised an objection indicating variances in state law as a compared to the small magnitude of individual harm.
basis for disapproving certification of this settlement Gunnells v. Healthplan Serv., Inc., 348 F.3d 417, 426
class. (4th Cir. 2003). The individual harm is often too minimal
to bear the high costs of individual litigation. Id. Thus,
Moreover, individual issues of causation, such as
without the class device, thousands of plaintiffs could be
those regarding physiology, underlying illnesses, and
denied their day in court. Id. The Supreme Court de-
medical history, as well as injuries and damages also
clared in Deposit Guaranty Nat'l Bank v. Roper, 445 U.S.
abate because the settlement's objective criteria provide
326, 339, 100 S. Ct. 1166, 63 L. Ed. 2d 427 (1980) that
for an objective scheme of compensation. Again, not a
"where it is not economically feasible to obtain relief
single objection was raised regarding the settlement
within the traditional framework of a multiplicity of
agreement's treatment of individual issues of causation.
small individual suits for damages, aggrieved persons
Accordingly, I FIND that there are questions of law or
may be without any effective redress unless they may
fact -- involving a common product, defendant, course of
employ [**69] the class action device."
conduct, and risk -- that are common to the members of
the class and that these questions predominate over any As for the Fund D claims, which number in the
questions affecting only individual members. thousands but are of little monetary value, the necessity
of class treatment is apparent. Nevertheless, I recognize
6. Superiority that the class consists not only of members with claims
of little monetary value but also those with monetary
In Amchem, the Supreme Court stated that Rule
values reaching millions of dollars. Members of the class
23(b)(3)'s superiority requirement, like predominance,
with specific physical injuries whose claims are monetar-
ensures that resolution by class action will "achieve
ily significant, particularly the Fund A claimants, have a
economies of time, effort, and expense, and promote . . .
greater interest than members with no physical injury in
uniformity of decision [**67] as to persons similarly
retaining control over their own cases, particularly re-
situated, without sacrificing procedural fairness or bring-
garding damages issues. Concerns over individual con-
ing about other undesirable results." Amchem, 521 U.S.
trol are significantly alleviated, however, in the context
at 615.
of this particular settlement. The Schedule of Payments
Settling this case as a class action will achieve incorporates individual issues for the most seriously in-
economies for both the litigants and the court. A class jured claimants. On an individual basis, Fund A claim-
action significantly reduces the overall cost of complex ants are eligible to receive damages for lost wages and
litigation, allowing plaintiffs' attorneys to pool their re- loss of consortium in addition to baseline damage awards
sources and requiring defendants to litigate all potential reaching millions of dollars. Fund B claimants are also
claims at once, thereby leveling the playing field be- eligible to receive damages for lost wages. Even though
tween the two sides. In re "Agent Orange" Prod. Liab. both claimants with physical and non-physical injuries
Litig., 597 F. Supp. 740, 842 (E.D.N.Y. 1984), aff'd, 818 are part of the same class, the parties have fashioned a
F.2d 145 (2d Cir. 1987). In contrast, if certification of distribution [**70] plan that is both fair to the strong
Page 17
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
plaintiffs and efficient in adjudicating the large number the defendant's product and, if claiming injuries, proof of
of claimants. Accordingly, I FIND class action treatment injury. Finally, in In re Factor VII or IX Concentrate
to be superior in this matter. Blood Prods. Litig., Final Order and Judgment relating to
Settlement (N.D. Ill. May 8, 1997), the court granted
VII. Fairness Determination final approval to a settlement that eliminated the need to
prove causation, observing that establishing causation
Rule 23(e)(1)(C) provides that a court may only ap-
would present a significant obstacle to many class mem-
prove the settlement of a certified class action after de-
bers if the case were to go to trial, a fact which supported
termining that it is fair, reasonable, and adequate. While
final approval. Id. at P 10(A).
compromise and settlement are favored by the law, "the
primary concern addressed by Rule 23(e) is the protec- Despite the supporting authority of these other prod-
tion of class members whose rights may not have been uct liability class action settlements which eliminated the
given adequate consideration during the settlement nego- need to prove causation, I nevertheless harbor reserva-
tiations." In re Jiffy Lube Securities Litigation, 927 F.2d tions about giving private attorneys the authority to con-
155, 158 (4th Cir. 1991). In In re MicroStrategy, Inc. struct such a mechanism for resolving claims. The [**73]
Sec. Litigation, 148 F. Supp. 2d 654 (E.D. Va. 2001), the notion simply hints at opportunity for collusion and nui-
court noted that approval of a class action settlement is sance-value awards. In this case, however, my concerns
committed to the "sound discretion of the district courts are allayed by: (1) the character and sophistication of the
to appraise the reasonableness of particular class-action attorneys involved in this matter, notably the Class
settlements on a case-by-case basis, in light of the rele- Counsel and (2) the particularities of the science behind
vant circumstances." Id. at 663 (quoting Evans v. Jeff D., this drug and associated liver injuries. Thus, in this case,
475 U.S. 717, 742, 106 S. Ct. 1531, 89 L. Ed. 2d 747 allowing attorneys to construct an appropriate claims
(1986)). resolution mechanism may be justified by very careful
judicial review.
As a preliminary matter in this [**71] fairness de-
termination, I am somewhat concerned by the treatment Unlike some other settlements in which leadership
of causation under the terms of the settlement agreement. among class counsel has come into being largely outside
The settlement agreement here streamlines claims by the control of the court, I carefully selected the attorneys
operation of the Schedule of Payments, which eliminates who would later become Class Counsel from a highly
the need for Class Members to prove causation. In return, qualified pool of attorney applicants shortly after this
BMS achieves greater certainty as to its potential tort matter was transferred to this court as an MDL. I selected
liabilities. Several courts have approved similar product Carl N. Frankovitch, Marvin W. Masters, Dianne M.
liability class action settlements utilizing this approach to Nast and Stanley M. Chesley to represent the class not
causation. For instance, in In re Phenylpropanolamine only because they possess sophisticated legal expertise
(PPA) Prods. Liab. Litig., 227 F.R.D. 553, 563 (W.D. but also because they exhibit the traits of careful and
Wash. 2004), the court granted final approval to the class thoughtful fiduciaries. I also appointed the members of
action settlement that "effectively nullified" causation. In the Plaintiffs' Executive Committee, charged with con-
In re Inter-Op Hip Prosthesis Liab. Litig., 2002 U.S. ducting and coordinating discovery, and approved BMS'
Dist. LEXIS 21696, No. 1:01-CV-9000, MDL 1401, 2002 proposed Lead and [**74] Liaison Counsel. I am confi-
WL 1359693 (N.D. Oh. May 8, 2002), the court granted dent in my selection and my approval of these attorneys,
final approval of a settlement, in which "individual is- and I am able to give significant weight to their asser-
sues relating to causation . . . disappear because the set- tions that this settlement is the product of hard-fought,
tlement's objective criteria provide for an objective com- arms-length negotiations and that the interests of their
pensation scheme." See In re Inter-Op Hip Prosthesis clients and the class as a whole have been protected.
Liab. Litig., 204 F.R.D. 330, 347 (N.D. Ohio 2001)
Nevertheless, beyond the character and professional
(granting preliminary approval to settlement). In In re
record of these attorneys, the class was further protected
Diet Drugs Prods. Liab. Litig., 2000 U.S. Dist. LEXIS
through a system of checks and balances provided by the
12275, Nos. 1203, 99-20593, 2000 WL 1222042, [**72]
other plaintiffs' attorneys representing individual clients
at *22 (E.D. Pa. Aug. 28, 2000), [*242] the court
across the nation in this matter. There is no incentive fee
granted final approval to a settlement in which "class
arrangement in the Settlement Agreement for attorneys
members do not have to demonstrate that their injuries
representing individual clients. As such, these attorneys
were caused by ingestion of Pondimin and Redux in or-
are receiving no greater fee benefit under the settlement
der to recover." In In re Baxter Healthcare Corp. Gam-
than they would normally receive. Attorneys represent-
magard Prods. Liab. Litig., Final Order and Judgment
ing individual clients, particularly those with contin-
(C.D. Cal. Oct. 5, 2000), the court granted final approval
gency fee agreements entered into before the date of the
to a settlement that required only proof of infusion with
Settlement Agreement, have every incentive to object if
Page 18
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
the recovery amounts under the settlement are unfair. Because the design of the Schedule of Payments so
Significantly, no objections to recovery amounts for neatly parallels the unique, underlying science in this
Class Members were made. Lastly, I note that while matter, my concerns regarding causation are assuaged.
BMS has agreed to pay attorneys' fees, I have and will While the settlement is not a perfect substitute for estab-
exercise [**75] complete control over the amount that is lishing specific causation, the structure of the Schedule
awarded. of Payments takes us a long way toward it. Accordingly,
I FIND that the objective criteria in the Schedule of
With regard to the unique interplay of science and
Payments represent a fair and reasonable compromise of
specific causation in this matter, there are some key sci-
causation issues. Such criteria save claimants the burden
entific conclusions about Serzone and associated liver
of establishing causation as a matter of certainty while
injuries, which are undisputed in the record, that allow
preventing undesirable recoveries for groundless claims.
uncertainties regarding causation to be reasonably and
This compromise supports a finding of hard-fought,
adequately dealt with in the compensation calculus of the
arms-length negotiations in this matter that incorporate a
Schedule of Payments. To begin, the heightened risk of
critical understanding of the scientific nature of Serzone
liver injury associated with Serzone was three or four
and associated liver injuries into the Settlement Agree-
times the estimated background rate of liver failure and
ment.
that is likely an underestimate due to underreporting.
While epidemiological studies show a low incidence of Proceeding from this general fairness consideration
Serzone-related liver failure and injury, these results do to the factors specified [**78] by the Fourth Circuit, I
strongly suggest more than a mere correlation between note the Court's adoption of a bifurcated analysis, sepa-
the drug and liver damage. Most importantly, with very rating the inquiry into a settlement's "fairness" from the
few exceptions, liver injuries associated [*243] with inquiry into a settlement's "adequacy." MicroStrategy,
Serzone will manifest no later than two weeks after the 148 F. Supp. 2d. at 663 (citing In re Jiffy Lube Sec.
drug has left the body, and patients who have recovered Litig., 927 F.2d 155, 158-59 (4th Cir. 1991)); see also
from drug induced liver injury without the need for a Strang v. JHM Mortgage Sec. Ltd. P'ship, 890 F.Supp.
liver transplant do not face any residual risk of progres- 499, 501 (E.D. Va. 1995). In assessing the fairness of a
sive or future injury if the drug is avoided. (Watkins Aff. proposed settlement, the court must consider the follow-
P 21, June 3, 2005); see also Fairness [**76] Hr'g Tr. at ing four factors: (a) the posture of the case at the time the
13, June 29, 2005 (argument of Carl Frankovitch). Thus, settlement was proposed; (b) the extent of discovery that
there is a distinct time frame within which Serzone may had been conducted; (c) the circumstances surrounding
have caused a claimant's liver injury. the negotiations; and (d) the experience of counsel in the
area of class action litigation. Id. at 663-64; see also
Given this distinct time frame, a claims resolution
Strang, 890 F. Supp. at 501. In determining the "ade-
mechanism based upon a temporal association between
quacy" of the settlement, the court should look to the
the ingestion of Serzone and the alleged associated injury
following: (a) the relative strength of the plaintiffs' case
reflects a reasonable compromise of causation issues.
on the merits; (b) the existence of any difficulties of
Clearly, Class Counsel, members of the Plaintiffs' Execu-
proof or strong defenses the plaintiffs are likely to en-
tive Committee, and counsel for BMS had a keen appre-
counter if the case goes to trial; (c) the anticipated dura-
ciation for causation issues in this case as the record in-
tion and expense of additional [**79] litigation; (d) the
dicates that they carefully scrutinized individual plaintiff
solvency of the defendants and the likelihood of recovery
fact sheets and medical records as well as all Serzone
on a litigated judgment; and (e) the degree of opposition
adverse event reports with the assistance of highly quali-
to the settlement. Id. at 665; see also Strang, 890 F.
fied medical experts. The parties indeed took advantage
Supp. at 501.
of the distinct time frame they discovered for claims in
this case when structuring the Schedule of Payments by
A. Criteria for Fairness:
incorporating objective requirements of temporal asso-
ciation. With regard to pre-existing liver conditions,
1. Posture of the case at the time the settlement was
which further complicate issues of causation, the parties
proposed / 2. Extent of discovery
simply created a lower gradation of payment within a
given fund. Coordinately, claimants with no pre-existing When reviewing a Settlement, courts should con-
liver conditions, who consequently have [**77] fewer sider the stage of the current litigation and the amount of
obstacles in proving causation, fall into the higher grada- discovery that the parties have completed. Jiffy Lube,
tion of payment within a given fund. I conclude that the 927 [*244] F.2d, at 159; see also Krell v. Prudential
parties acted diligently and with great care in designing a Ins. Co. of Am. (In re Prudential Ins. Co. Am. Sales
schedule of payments that incorporates important con- Practice Litig. Agent Actions), 148 F.3d 283, 319 (3d
siderations of these causation issues. Cir. 1998). As other courts considering mass tort settle-
Page 19
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
ments have observed, this factor is useful in evaluating

whether the plaintiffs and their counsel have sufficiently 4. Experiences of counsel in the area of class action
developed the case to appreciate the merits of their litigation
claims. In re Diet Drugs Prods. Liab. Litig. 2000 U.S.
As discussed earlier, I am confident in my selection
Dist. LEXIS 12275, Nos. 1203, 99-20593, 2000 WL
[**82] of Class Counsel and my approval of Lead and
1222042, at *60 (E.D. Pa., Aug. 28, 2000). There is,
Liaison Defense Counsel. Carl N. Frankovitch, Marvin
however, no minimum or definitive amount of discovery
W. Masters, Dianne M. Nast and Stanley M. Chesley are
that must be undertaken. Jiffy Lube, 927 F.2d at 159.
nationally recognized members of the complex civil liti-
As outlined earlier in this opinion, this matter was gation bar and have been involved significantly in major
[**80] actively litigated for over two years before the leadership positions in many complex mass tort and per-
settlement was reached. During that time, two commit- sonal injury class actions. Similarly, counsel for BMS
tees, the Plaintiffs' Executive Committee and the Discov- are members of a nationally recognized law firm, and are
ery Committee, were established to deal with discovery also well known in the litigation bar.
matters in this case. The record indicates that Class
Counsel, members of the Plaintiffs' Executive Commit- B. Criteria for Adequacy:
tee, and the Discovery Committee carefully scrutinized
all Serzone adverse event reports, the Serzone New Drug 1. Relative strength of the plaintiffs' case on the mer-
Application (NDA), Amended NDA, Safety Updates, its / 2. Existence of any difficulties of proof or strong
Investigational NDA (IND), Food and Drug Administra- defenses the plaintiffs are likely to encounter if the
tion Advisory Panel Transcripts, and studies and reports case goes to trial
not included in the NDA and/or IND. In total, over one
"The most important factor to be considered in de-
and a half million documents were analyzed. Also, phy-
termining whether there has been such clear abuse of
sicians and scientific experts were consulted extensively.
discretion is whether the trial court gave proper consid-
As the breast implant litigation makes clear, realisti- eration to the strength of the plaintiff's case." Flinn v.
cally estimating the number of claims is critical to insur- FMC Corp., 528 F.2d 1169, 1172 (4th Cir. 1976). "If the
ing the success of any attempt at setting up a claims reso- settlement offer was grossly inadequate, it can be inade-
lution. In re Silicone Gel Breast Implant Prods. Liab. quate only in light [*245] of the strength of the case
Litig., 1994 U.S. Dist. LEXIS 12521, No. CV94-P-11558- presented by plaintiffs." Id. at 1172 (quoting City of De-
S, MDL 926 (N.D. Ala. Sept. 1, 1994). Thus, extensive troit v. Grinnell Corp., 495 F.2d 448, 455 (2d Cir. 1974).
discovery in this matter is also evidenced by a sound [**83] As the court in MicroStrategy noted, "while
estimate of the number of claims, which we have here Class Counsel express confidence in the strength of
according to the response data garnered [**81] by the plaintiffs' case on the merits, 'the complexities and uncer-
returned inventory forms. This also supports the idea that tainties characteristic of class action securities litigation,
the case was at a point where such reasonable estimates and the associated expenses of such litigation, make it
could be made. Accordingly, discovery has been suffi- appropriate for... plaintiffs to compromise their claims
cient to give counsel an informed view of the strengths pursuant to a reasonable settlement.'" In re Microstrat-
and weakness of the plaintiffs' case. egy, Inc. Securities Litigation, 148 F. Supp. 2d 654, 665
(E. D. Va. 2001) (quoting South Carolina Natl. Bank v.
3. Circumstances surrounding the negotiations; Stone, 139 F.R.D. 335, 340 (D. S.C. 1991). A trial neces-
whether settlement is a product of hard-fought, arms- sarily involves the risk that Plaintiffs and the Class
length negotiation would obtain little or no recovery. Weiss v. Mercedes-
Benz, 899 F. Supp. 1297, 1301 (D. N.J. 1995) ("The risks
When settlement negotiations began in mid-2003,
surrounding a trial on the merits are always consider-
each side was able to negotiate from a position of knowl-
able.")
edge about the merits of the case. Over the course of
more than a year, over twenty day-long negotiation ses- Class Counsel assert that plaintiffs' claims are meri-
sions were held in New York City and other locations. torious, but also admit that there are obvious hurdles in
Scores of telephone meetings were held, and a number of establishing proof of liability and damages. At trial,
negotiation sessions occurred in conjunction with court plaintiffs would have to demonstrate, through the presen-
proceedings. There is no evidence in the record to sug- tation of expert testimony, that Serzone causes the type
gest, nor do any of the objectors assert, that this settle- of injuries alleged and that it, in fact, caused the injuries
ment agreement was tainted by collusion of the parties. suffered by Plaintiffs. [**84] This is complicated by
Rather, the settlement agreement in this matter represents issues of individual physiology and pre-existing medical
the product of hard-fought, arms-length negotiations conditions as well as the complexities of depression and
aided by extensive discovery. liver diseases.
Page 20
231 F.R.D. 221, *; 2005 U.S. Dist. LEXIS 30468, **
Even if it is shown that the drug did cause the S, MDL 926 (N.D. Ala. Sept. 1, 1994). If class members
claimed injury, BMS has substantial defenses that create opt-out, the court should examine the circumstances to
uncertainties about liabilities and damages. Indeed, BMS determine whether the opt-outs reflect an organized
raised fifty-seven defenses in its answer to the class ac- campaign or the sentiments of the class at large. MAN-
tion complaint. Most notably, BMS could raise defenses UAL [*246] FOR COMPLEX LITIGATION (Fourth) §
such as the learned intermediary doctrine, statute of limi- 21.631 (2004). Nevertheless, "[a] settlement is not unfair
tations, statute of repose, and failure to mitigate damages simply because a large number of class members oppose
to bar or reduce any damages sought by claimants. Plain- it." Flinn, 528 F.2d, at 1173 (4th Cir. 1976).
tiffs indeed present meritorious claims, and the settle-
In the instant case, 6,524 inventory claims forms
ment eliminates several, significant obstacles to their
have been timely filed and 120 were received after the
recoveries. The record contains evidence supporting the
deadline. Opposite this favorable response, 2,536 opt-
valuation of those recoveries in the Schedule of Pay-
outs have been timely filed, with 22 arriving after the
ments, and no objections indicate otherwise. Accord-
deadline. BMS asserts that the members who have ex-
ingly, I find these considerations weigh in favor of the
cluded themselves are predominantly represented by one
adequacy of the settlement.
consortium of counsel and that they fall into the category
of Fund D claims. Seventeen objections were filed, but
3. Anticipated duration and expense of additional
most were tailored to individual interests or particular
litigation
procedural aspects of the Settlement [**87] Agreement.
This case involves thousands of Class Members. It is For reasons noted earlier in the discussion of objections,
permeated by complicated medical and scientific issues. none of these objections raised any significant bar to my
Trials would necessarily be expensive and time consum- approval of the proposed settlement. Despite the objec-
ing. See In re Prudential Ins. Co. of America Sales Prac- tor's arguments, I FIND that this settlement is fair and
tices Litigation, 148 F.3d 283, 318 (3rd Cir.1998). adequate.
[**85]
VIII. Conclusion
4. Solvency of the defendants and likelihood of recov-
For the foregoing reasons, the court: (1) SUSTAINS
ery on a litigated judgment
the objection regarding the proper civil standard of re-
The solvency of the defendant may be relevant to view in the magistrate's review of the claims process and
determining the adequacy of a settlement if it appears ORDERS substitution of the standard "beyond a reason-
that the defendant would not be able to satisfy a litigated able doubt" with "clear error" in Paragraph 7.9 of the
judgment, thus making settlement the only means for Third Amended Settlement Agreement; (2) OVER-
claimants to recover at all. In this case, however, prob- RULES the remaining objections to the settlement
abilities weigh in favor of BMS being able to satisfy agreement and proposed class; (3) APPROVES the
most judgments that plaintiffs might have obtained withdrawal of William Edwin Collard, Jr.'s objection and
against it. In 2004, BMS reported its net sales to be $ the withdrawal of Certain Third Party Payers' and the
19.38 billion. In both 2003 and 2004, Fortune magazine Blue Cross Plans' Motions to Intervene for Purposes of
listed BMS as number 92 in its Fortune 500, with more Presenting Objections and set forth objections to the
than $ 20 billion in revenues reported. Since the remain- Proposed Settlement Agreement; (4) CERTIFIES the
ing factors weigh in favor of finding the Settlement to be proposed class upon finding that the class satisfies Rule
adequate, this factor may be given little weight. See 23(a) and Rule 23(b)(3); and (5) APPROVES the pro-
Henley v. FMC Corp., 207 F. Supp. 2d 489, 494 (S.D. W. posed settlement upon finding that the settlement is fair,
Va. 2002). reasonable and adequate for purposes [**88] of Rule
23(e).
5. Reaction of Class Members to the proposed settle-
The court DIRECTS the Clerk to send a copy of
ment; degree of opposition to the settlement
this Order to Defendant's Liaison Counsel and Plaintiffs'
"The attitude of the members of the class, as ex- Liaison Counsel, and DIRECTS the Clerk to post this
pressed directly or by failure to object, after notice, to the published memorandum and opinion at
settlement, is a proper consideration for the trial court." http://www.wvsd.uscourts.gov.
Flinn v. FMC Corp., 528 F.2d 1169, 1173 (4th Cir.
ENTER: Sept. 2, 2005
1976). [**86] "While approval of a proposed class set-
tlement is not a matter to a plebiscite, the views of puta- JOSEPH R. GOODWIN
tive class members are certainly relevant and entitled to
great weight." In re Silicone Gel Breast Implant Liability UNITED STATES DISTRICT JUDGE
Litig., 1994 U.S. Dist. LEXIS 12521, No. CV94-P-11558-
Page 1
LEXSEE 2007 US DIST LEXIS 78415
LISA D. WILLIAMS, et al., Plaintiffs, v. TELESPECTRUM, INC., Defendant.
Civil Action No. 3:05cv853
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIR-

GINIA, RICHMOND DIVISION
June 1, 2007, Decided

June 4, 2007, Filed
COUNSEL: [*1] For Lisa D. Williams, Stephen L. Richmond, VA; Jeffrey Brian Balicki, Feldstein, Grin-
Sanders, Eric L. Cox, Plaintiffs: Jason Meyer Krumbein, berg, Stein & McKee, Pittsburgh, PA.
LEAD ATTORNEY, Krumbein Consumer Legal Ser-
vices, Richmond, VA; Christopher Colt North, Newport For Lisa D. Williams, Stephen L. Sanders, Eric L. Cox,
News, VA; Leonard Anthony Bennett, Consumer Litiga- Counter Defendants: Jason Meyer Krumbein, LEAD
tion Assoc PC, Newport News, VA. ATTORNEY, Krumbein Consumer Legal Services,
Richmond, VA; Christopher Colt North, Newport News,
For Velva Battle, Kinesha Allen, Kimetra Barnes, Sandra VA; Leonard Anthony Bennett, Consumer Litigation
Bennett, Tarsha Blount, Shannon Davis, D. Carmen Mat- Assoc PC, Newport News, VA.
thews, Ijanaya Muhammad, Lakeisha Carter, Aquan Bat-
tle, Wanda Cheatham, Ivy Espree, Audrey Hargraves, For Lakeisha Carter, Ivy Espree, Audrey Hargraves,
Raphael Mathis, Earl Matthews, Roderick Oaks, Cassan- Raphael Mathis, Earl Matthews, Cassandra Sargent, Ter-
dra Sargent, Terrence Walker, Keonna Sedgwick, Con- rence Walker, Counter Defendants: Christopher Colt
solidated Plaintiffs: Christopher Colt North, LEAD AT- North, Newport News, VA; Leonard Anthony Bennett,
TORNEY, Newport News, VA; Leonard Anthony Ben- Consumer Litigation Assoc PC, Newport News, VA.
nett, Consumer Litigation Assoc PC, Newport News,
VA. JUDGES: Robert E. Payne, Senior United States District
Judge.
For Telespectrum, Inc., Defendant: Jennifer Magoulas
Campbell, LEAD ATTORNEY, Jonathan Paul Harmon, OPINION BY: Robert E. Payne
Robyn Suzanne Gray, McGuire Woods LLP, Richmond,
VA; Jeffrey Brian Balicki, Feldstein, Grinberg, Stein & OPINION
McKee, Pittsburgh, PA.
MEMORANDUM OPINION
For Velva Battle, Kinesha Allen, Kimetra Barnes, Sandra
This matter is before the Court on Plaintiffs' Motion
Bennett, Tarsha Blount, Shannon Davis, D. Carmen Mat-
for Class Certification (Docket No. 25). For the reasons
thews, Ijanaya Muhammad, Keonna Sedgwick, Consol
set forth below, the Motion will be denied.
Counter Defendants: Christopher Colt North, LEAD
ATTORNEY, Newport News, VA; Leonard Anthony
BACKGROUND
[*2] Bennett , Consumer Litigation Assoc PC, Newport
News, VA. Defendant Telespectrum, Inc. ("TI") operates call
centers. The proposed class consists of 38 people who
For Telespectrum, Inc., Counter Claimant: Jennifer Ma- worked for TI, 1 and were fired [*3] when TI ran a check
goulas Campbell, LEAD ATTORNEY, Jonathan Paul of their criminal backgrounds and found what it believed
Harmon, Robyn Suzanne Gray, McGuire Woods LLP, were felony records.
Page 2
2007 U.S. Dist. LEXIS 78415, *
Class Certification. Docket No. 47 at Ex. [unnumbered].

1 There appears to be confusion about whether The spreadsheet reveals that consumer reports for more
some of the proposed class members were denied than a dozen of the proposed members listed felony con-
employment, "provisionally hired" and then fired, victions, whereas in fact the proposed members had only
or simply fired. See Plaintiffs' Renewed Memo- misdemeanor convictions. The spreadsheet also shows
randum in Support of Class Certification (Docket that at least one proposed class member (Keonna Smith
No. 47) at [unnumbered] 10, 13. For the purposes Sedgwick) was re-hired after her report was corrected to
of certification, the distinction is immaterial. show that she had a misdemeanor record rather than a
Both parties agree that there are 38 potential class felony record. Id. The spreadsheet also lists approximate
members. lost wages of many of the class members, which range
from $ 2,500 to $ 40,000 "plus." Id.
As part of its business, TI entered into a contract
with Verizon in which TI employees at its Norfolk of- On their renewed motion, Plaintiffs seek certifica-
fices would provide call center services for Verizon. The tion on the following alleged violations of the FCRA:
contract between TI and Verizon provided that TI's em-
ployees involved in servicing the contract "cannot have a 1. TI violated 15 U.S.C. §
criminal record . . . that would indicate that they present 1681b(b)(3)(A) when it failed to provide
an unreasonable risk to co-workers or property." See TI's class members with a copy of their reports
Memorandum in Opposition to Plaintiff's Amended Mo- before firing them;
tion for Class Certification (Docket No. 50), Ex. B at 2
2. TI violated 15 U.S.C. §
("General Management Process").
1681m(a)(2)(B) when it failed to inform
To comply with this contractual provision, TI pro- class members that the CRA that had [*6]
cured the consumer reports ("reports") from a consumer provided the reports did not make the de-
reporting agency ("CRA") of the employees who were to cision to fire them, and that the CRA
service the Verizon contract. [*4] For each proposed would be unable to tell them why they
class member, the reports indicated that the member had were fired.
been convicted of at least one felony. TI fired all the
proposed class members. Plaintiffs allege that it was TI's
standard practice to provide the reports to the fired em-
Plaintiffs claim that TI violated these two FCRA
ployee at the time that the employee was fired. Plaintiffs
subsections both negligently (15 U.S.C. § 1681o) and
also allege that TI, as a standard "practice" vel non, failed
willfully (§ 1681n). Section 1681n provides that in the
to inform the fired employees that the CRA had nothing
event of a willful violation, the plaintiff may recover for
to do with their firing, and that the CRA could not tell
punitive damages, actual damages, and statutory dam-
the employees why they were fired.
ages of up to $ 1,000 per violation. Section 1681o pro-
Plaintiffs brought numerous claims against TI under vides that a plaintiff may recover actual damages in the
the Fair Credit Reporting Act ("FCRA"). 2 The action event of a negligent violation.
was referred to the Magistrate Judge, and TI moved for
Plaintiffs request that the Court certify a class pursu-
summary judgment. Pursuant to the Magistrate Judge's
ant to Fed. R. Civ. P. 23(b)(3), for three issues: (1)
Report and Recommendations (Docket No. 35), the
whether TI willfully violated section 1681b or section
Court granted TI's motion in part and denied it in part.
1681m, and if so, what (2) statutory and (3) punitive
(Docket No. 40).
damages to impose pursuant to § 1681n. Plaintiffs would
have the Court allow claims for actual damages flowing
2 Plaintiffs also brought a claim of race dis-
from any violations to proceed in individual actions, an-
crimination, which they have since withdrawn.
cillary to the proposed class action.
The Court held an initial class certification hearing
on the remaining claims, but due to the parties' confusion DISCUSSION
about the number of potential class members, it ordered
Plaintiffs have moved for class certification pursuant
the parties to reopen discovery and re-submit memoranda
to Fed. R. Civ. P. 23(b)(3). To be appropriate for certifi-
regarding class certification (Docket No. [*5] 43). Now
cation, the class must satisfy the four certification pre-
on re-briefing, Plaintiffs move to certify a class of 38
requisites of Rule 23(a) and the certification criteria of
employees who were fired from TI. Plaintiffs' counsel
Rule 23(b)(3).
summarized its investigation of the proposed class mem-
bers and their claims in a spreadsheet attached to Plain-
I. [*7] Fed. R. Civ. P. 23(a)--Prerequisites
tiffs' Memorandum in Support of Renewed Motion for
Page 3
2007 U.S. Dist. LEXIS 78415, *
a. Numerosity First, Plaintiffs seek to certify a class only as to

statutory and punitive damages under § 1681n. Requiring
The numerosity prerequisite permits class certifica-
a plaintiff to show actual damages as a precondition to
tion only if the proposed class is so numerous that join-
permitting him to assert a claim under a statute that pro-
der of all members is impracticable. In this case, there
vides for recovery of statutory and punitive damages
are two numerosity issues. First, the raw number of pro-
independent of any actual damages would effectively
posed class members--38--makes this a borderline case.
defeat the remedies that Congress afforded to plaintiffs
Second, TI argues that many of the proposed class mem-
who can show that a defendant willfully violated the
bers are not in fact members, because they would have
statute. See Owner-Operator Indep. Driver Ass'n. Inc. v.
been fired in any event, and therefore did not suffer ac-
USIS Commercial Servs., Inc., 2006 U.S. Dist. LEXIS
tual damages.
52331, 2006 WL 2164661, *2 (D. Colo. July 31, 2006)
i. The 38 Proposed Class Members ("[A] plaintiff who has proven that the defendant will-
fully failed to comply with the FCRA may recover statu-
The class contemplated here would have 38 mem- tory and punitive damages without proof of actual dam-
bers. This number stands at the threshold of the numeros- ages."). 3
ity requirement. While classes with similar numbers of
members have been certified, see, e.g., Rodger v. Elec. 3 This is not to imply that certification of a simi-
Data Sys. Corp., 160 F.R.D. 532, 535 (E.D.N.C. 1995) lar class would be inappropriate under § 1681o,
(certifying class of 25-30), joinder in much larger classes
which provides a remedy for actual damages
has not been found to be impracticable. See, e.g., Moore only. Courts often separate questions of liability
v. Trippe, 743 F. Supp. 201, 211 (S.D.N.Y. 1990) (deny- and damages, see 5 James Wm. Moore, Moore's
ing certification in proposed class of 57).
Federal Practice § 23.45(b), and in any event
Most of the putative class members apparently live certification under [*10] § 1681o is not before
in the vicinity of Norfolk. However, the record suggests the Court.
that the putative class members are not sophisticated
Second, § 1681b(3) (A), which requires TI to pro-
civil litigants, compare Liberty Lincoln Mercury, Inc. v. vide copies of the consumer report before firing the class
Ford Mktg. Corp., 149 F.R.D. 65, 73 (D.N.J. 1993) [*8] members, does not contemplate an accuracy threshold.
(joinder not impracticable because the 123 proposed
Unlike 15 U.S.C. § 1681k, which is designed, according
class members are sophisticated auto dealerships capable to the language in the statute itself, to ensure that infor-
of litigating for themselves), and at least some of the mation in consumer reports is "complete and up to date,"
putative class members are apparently difficult to locate.
§ 1681k(a)(2), 4 § 1681b contains no such language. In-
See Spreadsheet, Docket No. 47 at Ex. [unnumbered] stead, § 1681b's advanced notice requirement appears
(revealing that Plaintiffs' counsel failed to make contact designed, according to an interpretation by the Federal
with 14 proposed members). Compare Garcia v. Gloor, Trade Commission ("FTC"), to "allow consumers to dis-
618 F.2d 264, 267 (5th Cir. 1980) (joinder practicable cuss reports with employers or otherwise respond before
inter alia because all 31 proposed members were easy to
adverse action is taken." 5 Certainly this requirement is
locate). Overall, the putative class, as it is proposed by designed in part to allow the consumer to correct inaccu-
plaintiffs, meets the numerosity requirement. racies in the report, but, as the interpretation of the FTC
ii. Defendant's Class-Membership Argument opinion letter suggests, the statute contemplates a wide
range of responses beyond correcting inaccuracy--to
TI seems to argue that the class is really much "discuss" the report, or to "otherwise respond." Such
smaller than Plaintiffs propose because most of the puta- response might include explaining the meaning of an
tive class members' corrected reports were accurate, cor- item on the report, 6 or, say, paying an outstanding fine
rectly reported at least one felony, or correctly reported that the report accurately reflected. In sum, § 1681b's
the existence of a criminal record (i.e., reporting felonies text, and its interpretation by the FTC, indicate that it is
where the members really had misdemeanors). These not [*11] exclusively concerned with accuracy.
proposed members, TI argues, would have been fired
even if they had had a chance to correct their records. 4 Some courts have held, without extensive
Therefore, they suffered no actual harm from TI's viola- comment, that accuracy is a threshold require-
tion, and therefore, they are not properly members of the ment for § 1681k claims. See, e.g., Obabueki v.
class. As [*9] a result the proposed class is much IBM Corp., 145 F. Supp. 2d 371, 396 (S.D.N.Y.
smaller than 38 members, and is insufficiently numerous 2001).
for certification. This argument is incorrect, for several 5 Letter of William Haynes to Harold R.
reasons. Hawkey (Dec. 18, 1997), FTC Informal Staff
Letter, at 2 (available at
Page 4
2007 U.S. Dist. LEXIS 78415, *
http://www.ftc.gov/os/fcra/hawkeycb.htm). The fact common to the class. TI argues that there are no
FTC provides informal staff opinion letters guid- common claims here, for two reasons.
ing interpretation of the FCRA. Congress has
First, TI, repeating its arguments in the numerosity
granted the FTC the authority to prescribe trade
section, argues that those class members who would have
regulations and other rules in regulation of the
been fired anyway are not entitled to damages, and there-
FCRA. Pub. L. No. 106-102 (codified in relevant
fore do not have claims, and therefore would not have
part at 15 U.S.C. §§ 6801-6809 and §§ 6821-
"common" claims. The Court rejects this argument for
6827).
the reasons set forth in the numerosity analysis above.
6 The action at bar is something of a case-in-
point for such a possibility. The TI-Verizon con- Second, TI argues that a fact-finder will have to sift
tract provided that employees could not "have a through each putative class member's individual actual
criminal record . . . indicat[ing] that they present damages before it makes a finding of damages. This ar-
an unreasonable risk to co-workers or property." gument seems to be that, because some part of each class
(emphasis added). The contract did not impose a member's claims is unique, the proposed class fails the
flat bar to employees with criminal records, but commonality prerequisite. This argument misapprehends
rather excluded only those employees with re- the nature of the commonality prerequisite. To satisfy the
cords that indicated an unreasonable risk. Section commonality prerequisite, there need be only a single
1681b at least would have given the employees issue [*14] common to the class, and that issue need not
here the opportunity to argue that no such risk predominate in the litigation. See Cent. Wesleyan Coll. v.
was presented [*12] by the past conviction. In- W.R. Grace & Co., 143 F.R.D. 628, 636 (D.S.C. 1992),
deed, at least one class member whose corrected aff'd 6 F.3d 177 (4th Cir. 1993)("[The commonality pre-
record showed a misdemeanor background ap- requisite] does not require that all, or even most, issues
pears to have been re-hired. be common, nor that common issues predominate, but
only that common issues exist."). In certifying class ac-
This interpretation of § 1681b's purpose is
tions, courts often separate issues of damages and liabil-
more expansive than Judge Lauck's interpretation
ity. See generally 5 Moore's Federal Practice §
in the Report and Recommendations, which con-
23.45(2)(a). As a result, "differences in damages among
cluded that "[p]rior disclosure of the report pro-
the potential class members do not generally defeat
vides the consumer with the opportunity to cor-
[commonality] if liability is common to the class." Mor-
rect any inaccuracies in the report." Report and
ris v. Wachovia Sec., Inc., 223 F.R.D. 284, 299 (E.D. Va.
Recommendations at 10. The language in the
2004).
FTC opinion letter justifies a broad interpretation.
Also, Judge Lauck was not dealing with the ques- In this case, Plaintiffs seek certification of a class:
tion of whether correcting inaccuracies was the (1) to determine whether TI willfully failed to comply
only reason that the report should be provided in with the two FCRA regulations on a class-wide basis; (2)
advance of firing. to determine statutory damages; and (3) to determine
punitive damages. Plaintiffs would have actual damages
Third, § 1681m, which required TI to inform the
calculated in subsequent individual litigation. As Plain-
class members that the CRA had not caused them to be
tiffs have conceived the class, liability for the violation,
fired and could not tell them why they were fired, is
statutory damages, and punitive damages all present
quite removed from the accuracy of the underlying data.
questions of fact or law common to the class. [*15]
Section 1681m simply requires an employer to inform
These common questions are unaffected by the differ-
the employee that the employer, not the CRA, made the
ences in the individual plaintiffs' actual damages. Com-
firing decision. There is no suggestion in the text of §
mon questions of law or fact do exist as to this class, and
1681m that Congress intended to impose an actual dam-
the commonality prerequisite therefore does not bar cer-
ages threshold to such claims.
tification.
For the foregoing reasons, TI's numerosity argu-
c. Typicality
ments fail. Accuracy [*13] is not a threshold require-
ment for either of the claims as to which Plaintiffs seek TI does not develop an argument for this prerequi-
class certification, and thus accuracy is not a considera- site, and indeed, the typicality prerequisite does not ap-
tion in assessing the numerosity component of the class pear to bar class certification. The typicality prerequisite
certification issue. focuses on the general similarity of the class representa-
tives' legal and remedial theories to those of the proposed
b. Commonality
class. See Jenkins v. Raymark Indus., Inc., 782 F.2d 468,
The commonality prerequisite permits class certifi- 472 (5th Cir. 1986). As Plaintiffs propose certification,
cation only if there are one or more questions of law or the class representatives all claim the same injuries--
Page 5
2007 U.S. Dist. LEXIS 78415, *
willful violations of §§ 1681b & 1681m--as the class. To satisfy Fed. R. Civ. P. 23(b)(3)'s predominance
They also seek the same remedies--statutory and punitive requirement, common questions of law or fact must pre-
damages. The typicality prerequisite therefore does not dominate over questions affecting only individual class
bar certification of the class claims. members. The common "questions" concern not only
matters of factual and legal liability, but questions of
d. Adequacy of Representation
damages as well. See generally 5 Moore's Federal Prac-
The adequacy of representation prerequisite requires tice § 23.45(2)(b). In certifying class actions, courts often
the Court to be satisfied that "the representative parties separate issues of damages and liability. See id. at §
will fairly and adequately protect the interest of the 23.45(2)(a). [*18] However, when issues of liability and
class." This prerequisite has three components that are individual damages cannot be treated separately and
relevant here. damages require individual calculation, certification is
inappropriate. See Lienhart v. Dryvit Sys., Inc., 255 F.3d
First, the adequacy prerequisite [*16] is similar to 138, 147 (4th Cir. 2001) ("the need for individualized
the typicality prerequisite in that it seeks to ensure that proof of damages may defeat predominance where proof
the named plaintiffs have similar claims to the class, so of damages is essential to liability." (citing Windham v.
that they will protect the class in matters germane to the
Am. Brands, 565 F.2d 59, 66 (4th Cir. 1977))).
claims in the litigation. See Amchem Prods., Inc. v. Win-
dsor, 521 U.S. 591, 625-26, 117 S. Ct. 2231, 138 L. Ed. In this case, Plaintiffs would litigate punitive dam-
2d 689 (1997). This feature of the adequacy prerequisite ages--that being, what amount of punitive damages to
is addressed in the typicality section. impose on TI for willful violations of the FCRA--on a
class-wide basis. However, the amount of punitive dam-
Second, the adequacy prerequisite looks to the per- ages available against TI is constrained by the Constitu-
sonal characteristics of the named plaintiffs themselves
tion's Due Process clause. In BMW of North America,
to see whether they are fit representatives. TI does not Inc. v. Gore, 517 U.S. 559, 116 S. Ct. 1589, 134 L. Ed.
argue that the named plaintiffs here are unfit representa- 2d 809 (1996), the Supreme Court held that "[punitive]
tives, and the record does not suggest otherwise.
damages must bear a reasonable relationship to compen-
Third, the adequacy prerequisite looks to the qualifi- satory damages . . . ." 517 U.S. at 580. While the Court
cations of class counsel, an issue which TI does not con- has declined to set down a specific compensable-to-
test. The adequacy prerequisite therefore does not bar punitive damages ratio, it suggested that "[s]ingle-digit
class certification. multipliers are more likely to comport with due process .
. . ." State Farm Mut. Auto. Ins. Co. v. Campbell, 538
II. Fed. R. Civ. P. 23(b)(3)--Criteria U.S. 408, 425, 123 S. Ct. 1513, 155 L. Ed. 2d 585 (2003).
Therefore, to comport with due process, [*19] the puni-
Plaintiffs seek class certification pursuant to Fed. R. tive damages awarded in this action must bear some rea-
Civ. P. 23(b)(3). To certify a class under Fed. R. Civ. P. sonable relationship to actual damages.
23(b)(3), it is necessary that questions of law or fact
common to the class predominate over any questions In this case, Plaintiffs propose to litigate statutory
affecting only individual members, and that a class ac- and punitive damages together on a class-wide basis. The
tion is superior to other available methods for a fair and statutory damages flowing from each violation are
efficient [*17] adjudication of the controversy. capped at $ 1,000. 15 U.S.C. § 1681n(a)(1)(A). Because
the Plaintiffs allege two violations of the FCRA, in the
a. Predominance class action proper they could achieve a maximum of $
Plaintiffs seek certification of a class that would liti- 2,000 in statutory damages per class member. Mean-
gate (1) whether TI willfully violated the FCRA provi- while, the actual damages that would be at issue in any
sions, along with (2) statutory and (3) punitive damages individual litigation vary widely, and in some cases are
flowing from any willful violations. Plaintiffs would many times greater than the maximum statutory dam-
leave litigation of actual damages suffered by each plain- ages. According to Plaintiffs' class spreadsheet, actual
tiff to individual, ancillary litigation. The predominance damages, in the form of lost wages, range from $ 2,500
requirement bars such a class from being certified. While to $ 40,000 "plus" per class member. 7 Other class mem-
common questions of law and fact do indeed exist, the bers allege lost wages in a variety of amounts, including
issue of TI's liability for punitive damages to each indi- $ 24,872, $ 20,290, $ 12,700, and $ 13,500 per class
vidual class member would over-shadow the common member.
issues that would be litigated. Common questions of law
and fact therefore do not predominate over individual 7 The spreadsheet does not list other potential
questions, and class certification is inappropriate. sources of actual damages, such as emotional dis-
tress resulting caused by the loss of employment.
Page 6
2007 U.S. Dist. LEXIS 78415, *
When one applies the due process admonitions of incorrectly classified as felonies. Many of the claims for
Gore and State Farm to the claims posited for certifica- actual damages, therefore, appear to be viable. 9
tion here, a problem immediately [*20] becomes appar-
ent. At the class action stage, punitive damages would be 9 TI acknowledged as much when it argues that
measured for due process reasonableness against statu- for each class member, the Court would need to
tory damages, which here would be a maximum of $ decide whether "the nature of the crimes . . . indi-
2,000. However, punitive damages could be measured cate[d] [that] the employee pose[d] an unreason-
for reasonableness against each plaintiff's individual ac- able risk . . . ." TI's Memorandum in Opposition
tual damages, which allegedly range from $ 2,500 to $ at 9.
40,000 or more per person. Quite clearly, the size of a
As Plaintiffs would have the Court try this action,
constitutionally permissible punitive damage award cal-
however, once punitive damages were imposed (or de-
culated against individual members' actual damages has
nied) as to the whole class, claim and issue preclusion
the potential significantly to exceed the size of a consti-
would bar individual plaintiffs from re-asserting the
tutionally permissible punitive damage award calculated
same punitive damage claims in their individual cases.
against statutory damages alone. 8
Those individual plaintiffs with real, viable claims to
actual damages would therefore be precluded from seek-
8 At the class certification hearing, Plaintiffs'
ing the full range of punitive remedies to which they
counsel argued that this potential discrepancy
might otherwise be entitled.
does not actually exist because the statutory dam-
ages contemplated here are minimal, and where In sum, many class members appear to have real, vi-
compensatory damages are nominal or minimal, able claims for actual damages suffered as a result of TI's
awards with much higher punitive damages mul- failure to comply with the FCRA. These actual damages
tipliers escape the Gore / State Farm due process are often ten, and up to twenty times greater than the
analysis. The Court finds no support for this ar- statutory damages for which each class member is eligi-
gument. In this case, the maximum statutory ble. If punitive damages are tried individually, where
damages award against which punitive damages [*23] they would be measured for constitutional reason-
would be compared is $ 2,000 per class member. ableness against each individual plaintiff's full range of
The "minimal" damages that skirt under [*21] compensatory damages, these individual class members
State Farm and Gore due process considerations might permissibly be entitled to punitive remedies many
are considerably smaller. See, e.g., Lee v. Ed- times greater than they would be were punitive damages
wards, 101 F.3d 805, 811 (2d Cir. 1996) (distin- measured only against statutory damages, as they would
guishing Gore (where compensatory damages have to be in the proposed class action.
were $ 4,000) from the case before it where com-
pensatory damages were $ 1, and reasoning that This discrepancy affects many class members' po-
"because the compensatory award here was tential recoveries for punitive damages rather dramati-
cally. As a result, it overshadows the issues common to
nominal, any appreciable punitive award would
produce a ratio that would appear excessive by the class. Individual issues, rather than common issues,
[the Gore] measure." (emphasis original)). Ac- therefore predominate this action. Under the predomi-
nance requirement, therefore, certification of this class is
cord IGEN Int'l, Inc. v. Roche Diagnostics
GmbH, 335 F.3d 303, 314 (4th Cir. 2003) (treat- inappropriate.
ing $ 10 as nominal damages for purposes of b. Superiority
Gore and State Farm); Givens v. O'Quinn, 447 F.
Supp. 2d 593, 596 (W.D. Va. 2006) ($ 1). Because individual issues predominate in this action,
class treatment is not superior to other methods of man-
This disparity in potential recoveries is not one that aging the case: many class members have a significant
exists solely in theory. The contract between TI and Ver- interest in controlling their own, separate litigation. This
izon did not call for an absolute ban on employees with is especially so as each class member faces different cal-
criminal records, but rather provided that employees culations of the strength and size of their claims. See,
should be banned if their records suggested an "unrea- e.g., Causey v. Pan Am. World Airways, Inc., 66 F.R.D.
sonable risk" to persons or property, and at least one 392, 399 (E.D. Va. 1975) (denying certification on supe-
class member was hired back after her record was cor- riority grounds in part because [*24] "[s]ome claimants
rected to show that a reported felony conviction was ac- may well evaluate their chances against certain potential
tually a misdemeanor. In this case, many proposed class defendants as better than against others.").
members, claiming tens of thousands [*22] of dollars in
lost wages, had misdemeanor records that the reports
Page 7
2007 U.S. Dist. LEXIS 78415, *
Additionally, the Court has the discretion to aggre- In sum, litigation of these claims via class action is
gate the claims in this action by other means that are not a superior method of adjudicating these claims, and
superior to the class action device. 10 class certification is inappropriate.
10 For instance, the Court might order the issue CONCLUSION

of TI's willfulness be consolidated for trial under
For the foregoing reasons, Plaintiffs' Motion for
Fed. R. Civ. P. 42(a), followed by ancillary trials
Class Certification (Docket No. 25) will be denied.
for each plaintiff on actual, statutory, and puni-
tive damages. See, e.g., Hassett v. Modern Maid The Clerk is directed to send a copy of this Memo-
Packers, Inc., 23 F.R.D. 661, 664 (D. Md. 1959) randum Opinion to all counsel of record.
(deciding, in a case where three plaintiffs sued
two defendants for damages arising out of a sin- It is so ORDERED.
gle accident, to consolidate the case for purposes Robert E. Payne
of liability, and to try damages as to each plaintiff
separately). Senior United States District Judge
Richmond, [*25] Virginia
Date: June 1, 2007
Page 1
DARYAL T. NELSON and TOMMY ARMSTRONG, individually and on behalf of

all persons similarly situated, PLAINTIFFS v. WAL-MART STORES, INC; and
WAL-MART TRANSPORTATION LLC, DEFENDANTS
No: 2:04CV00171 WRW, No: 2:05CV00134 WRW
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF

ARKANSAS, EASTERN DIVISION
245 F.R.D. 358; 2007 U.S. Dist. LEXIS 35760; 69 Fed. R. Serv. 3d (Callaghan) 77; 100
Fair Empl. Prac. Cas. (BNA) 1197
May 16, 2007, Decided

May 16, 2007, Filed
SUBSEQUENT HISTORY: Summary judgment denied ATTORNEY, John W. Walker, P.A., Little Rock, AR;
by Nelson v. Wal-Mart Stores, Inc., 2009 U.S. Dist. Lloyd W. Kitchens, III, LEAD ATTORNEY, Morgan E.
LEXIS 3707 (E.D. Ark., Jan. 13, 2009) Welch, LEAD ATTORNEY, Welch and Kitchens, LLC,
Little Rock, AR.
PRIOR HISTORY: Nelson v. Wal-Mart Stores, Inc.,
2006 U.S. Dist. LEXIS 86101 (E.D. Ark., Nov. 20, 2006) For Wal-Mart Stores Inc, Wal-Mart Transportation, LLC,
Defendants: Alison B. Marshall, LEAD ATTORNEY,
Jones Day - Washington, Washington, DC; Joann C.
COUNSEL: [**1] For Daryal T Nelson, individually Maxey, LEAD ATTORNEY, Philip E. Kaplan, LEAD
and on behalf of all persons similarly situated, Plaintiff: ATTORNEY, [**2] Kaplan, Brewer, Maxey &
David O. Bowden, LEAD ATTORNEY, Attorney at Haralson, P.A., Little Rock, AR; Lawrence C. DiNardo,
Law, Little Rock, AR; John W. Walker, LEAD LEAD ATTORNEY, Michael J. Gray, LEAD
ATTORNEY, Shawn Garrick Childs, LEAD ATTORNEY, Jones Day - Chicago, Chicago, IL; Richard
ATTORNEY, John W. Walker, P.A., Little Rock, AR; H. Deane, LEAD ATTORNEY, Jones Day - Atlanta,
Lloyd W. Kitchens, III, LEAD ATTORNEY, Morgan E. Atlanta, GA.
Welch, LEAD ATTORNEY, Welch and Kitchens, LLC,
Little Rock, AR; Robert Peter Pressman, LEAD JUDGES: Wm. R. Wilson, Jr., UNITED STATES
ATTORNEY, Attorney at Law, Lexington, MA; Joseph DISTRICT JUDGE.
Henry Bates, III, Cauley Bowman Carney & Williams,
LLP, Little Rock, AR. OPINION BY: Wm. R. Wilson, Jr.
For Tommy Armstrong, Individually and on Behalf of OPINION

All Persons Similarly Situated, Consol Plaintiff: Darrin
Lavell Williams, LEAD ATTORNEY, Joseph Henry
Bates, III, LEAD ATTORNEY, Cauley Bowman Carney [*362] ORDER GRANTING IN PART AND
& Williams, LLP, Little Rock, AR; John W. Walker, DENYING IN PART PLAINTIFFS' MOTION FOR
LEAD ATTORNEY, Shawn Garrick Childs, LEAD CLASS CERTIFICATION
Page 2
245 F.R.D. 358, *362; 2007 U.S. Dist. LEXIS 35760, **2;
69 Fed. R. Serv. 3d (Callaghan) 77; 100 Fair Empl. Prac. Cas. (BNA) 1197
Pending is Plaintiffs' Motion for Class Certification, vice presidents report to the senior vice president of the
1 to which Defendants have responded. 2 A Class Transportation Division, who reports directly to the
Certification Hearing was held May 31, 2006. After the executive vice president of the Logistics Division. 9
hearing, both parties submitted proposed findings of fact
and conclusions of law. 3 I submitted additional questions 4 Doc. No. 82 at 3.
to the parties, and held another hearing, on April 24, 5 See Defs.' Ex. 24 P 4. Counsel stated at the
2007, on the motion to certify the class. For the reasons hearings that Wal-Mart now has 47 transportation
below, Plaintiffs' Motion for Class Certification is offices.
GRANTED in part and DENIED in part. 6 Doc. No. 77-9 at 23.
7 Doc. Nos. 63-2 at 11; 77-9 at 17-19.
1 Doc. No. 54. For purposes of this Opinion and 8 Doc. No. 77-9 at 28-30.
Order, "Doc. No." refers to the CM/ECF docket 9 Doc. No. 77-11.
entry number, while "Pls.' Ex." (or "Defs.' Ex.")
refers to the number of the exhibit to the class Each over-the-road truck driver is assigned to a
certification motion (or response to the class transportation office. 10 Every transportation office, with
certification motion) submitted by the respective minor exceptions, has the same management positions
party. and internal reporting hierarchy. [**5] 11 Wal-Mart
[**3] fosters a uniform corporate culture by the frequent
2 Doc. No. 64. transfer of managers from one transportation office to
3 Doc. Nos. 105; 106. another as well as by training managers in transportation
offices other than those to which they will ultimately be
I. BACKGROUND assigned. 12
Plaintiffs Tommy Armstrong and Daryal T. Nelson 10 Pls.' Ex. 3.

are African American truck drivers who applied for 11 Pls.' Exs. 5 at 17-19; 7 at 20-21.
positions as over-the-road truck drivers at transportation 12 See, e.g., Pls.' Exs. 12 at 32-34; 13 at 8-12; 14
offices operated by Defendant Wal-Mart Transportation at 10.
LLC, a wholly owned subsidiary of Defendant Wal-Mart
Stores, Inc. (collectively "Wal-Mart"), but were rejected. Wal-Mart's field transportation operations are
This case challenges Wal-Mart's hiring practices for divided into ten regions. 13 Each region has an identical
over-the-road truck drivers. management organization, including a regional
transportation manager and a regional people manager. 14
Wal-Mart's Logistics Division is divided into two All regional managers are centrally based at Wal-Mart's
subdivisions: (1) the Transportation Division in charge of [*363] headquarters in Bentonville. 15 The regional
Wal-Mart's truck fleet and its support; and (2) the managers travel to the transportation offices in their
Distribution Division in charge of the distribution centers region from Tuesday through Thursday and are back in
that the trucking fleet services. 4 Wal-Mart's Bentonville on Monday and Friday. 16 The managers in
Transportation Division includes approximately 8,000 the transportation offices report directly to the regional
drivers, in 47 field transportation offices nationwide, who managers. 17
deliver goods and products to Wal-Mart stores and Sam's
Clubs across the country. 5 Every transportation office is 13 Pls.' Ex. 3.
located on-site at one of the distribution centers it [**6]
services. 6 The transportation offices have their own 14 Pls.' Ex. 5 at 28-30.
management structure, including [**4] a general 15 Id. at 39.
transportation manager in charge of each office and a 16 Id. at 39-40.
personnel manager who, together with the general 17 Pls.' Ex. 8.
transportation manager, is responsible for hiring
All hiring and personnel policies for the
over-the-road truck drivers. 7 The general transportation
transportation offices are developed at and disseminated
manager and personnel manager report to regional
from Wal-Mart's central headquarters in Bentonville. The
managers, who in turn report to either the east or west
corporate-level Human Resources Department develops
vice president of the Transportation Division. 8 Those
Page 3
245 F.R.D. 358, *363; 2007 U.S. Dist. LEXIS 35760, **6;
the human resource policies that apply throughout 26 See Pls.' Ex. 7 at 49, 58.
Wal-Mart. 18 The corporate-level Diversity Office 27 Id. at 49-50.
develops, coordinates, and monitors all of Wal-Mart's 28 Id. at 180-81; see also Pls.' Exs. 23; 24.
diversity initiatives. 19 Ed Parrish, the director of people
for Wal-Mart's Transportation Division, develops all the All who call the 1-800 number, regardless of which
hiring and personnel policies specific to the transportation office they wish to apply, are initially
Transportation Division. 20 These policies are processed and screened at Wal-Mart's Bentonville
disseminated nationwide to the regions and individual headquarters. 29 An application is then sent to the
transportation offices through an online database. 21 potential applicant. 30 The applicant is instructed to return
Neither regional managers nor managers at individual the completed application to the Bentonville
transportation offices have the authority to develop headquarters. 31 If the application is completed, the
personnel or hiring policies that diverge from the minimum requirements are met, and the applicant's
corporate policies developed in Bentonville. 22 preferred transportation office is currently hiring, the
application is forwarded to the appropriate transportation
18 Pls.' Ex. 7 at 10-12. office. 32 In some cases, an applicant may send the
[**7] application directly to the transportation office, in which
19 Id. at 38. case the clerk at the transportation office conducts the
20 Id. at 9-10, 152. initial screening process. 33
21 Id. at 145-46, 152.
22 Id. at 151-52. 29 Pls.' Exs. 28; 29.
30 Id.
The primary elements of the hiring process for 31 Id.
drivers at every transportation office are identical. First, 32 Id.
new drivers are recruited almost exclusively through the 33 Pls.' Ex. 7 at 72-75.
"word of mouth" of current Wal-Mart drivers. 23
Wal-Mart implements the word-of-mouth recruitment by [**9] After the application is forwarded from the
providing its current drivers with a "1-800 card" to pass Bentonville headquarters, a screening committee,
out to prospective applicants. 24 The card lists the consisting of current drivers at the transportation office,
minimum driver qualifications and a 1-800 number decides which applicants [*364] will be granted an
drivers can call to request an application. 25 Both the interview. 34 The same screening committee of current
minimum qualifications and the application are the same drivers also interviews those applicants who make the
nationwide. 26 All 1-800 cards are designed and printed initial screening cut. 35 Those applicants who are
at the Bentonville headquarters. 27 Wal-Mart does little, recommended by the screening committee are then
if any, job advertising in addition to their drivers interviewed by a management committee, which must
disseminating the 1-800 card. 28 include the general transportation manager and the
personnel manager. 36 The general transportation
23 While Wal-Mart vigorously disputes that fact, manager of the transportation office for which the
it is amply supported by Wal-Mart's own applicant applied makes the final hiring decision. 37 No
admission in an answer to one of Plaintiffs' other position within the Transportation Division utilizes
interrogatories as well as the corporate memos a hiring process involving word-of-mouth recruitment, a
and presentations and deposition testimony of centralized 1-800 number, or employee screening
Wal-Mart's own employees. See Pl. Exs. 9 at 6 committees. 38
(interrogatory response no. 4); 7 at 46-48, 180-81,
184, 194, 197, 204-05; 10 at 745; 11 at 4; 12 at 34 Pls.' Ex. 31.
44-48; 13 at 28-30; 15 at 33-34; 16 at 52; 20 at 35 Id.
10-14; 21 at 12, 44, 47-48; 22 at 269; 83 at 15-16, 36 Id.
58. 37 Pls.' Ex. 7 at 127.
[**8] 38 Id. at 153-54.
24 Pls.' Ex. 9 at 6.
Beyond the minimum qualifications, Wal-Mart has
25 Id.
no written or objective [**10] criteria to guide the driver
Page 4
245 F.R.D. 358, *364; 2007 U.S. Dist. LEXIS 35760, **10;
screening committees when analyzing applicants during 49 See Pls.' Ex. 93 at A-3.
the hiring process. 39 The hiring discretion of the general
transportation managers is similarly unfettered by any In 1999, Kevin Upham, the driver recruitment
objective criteria. 40 Wal-Mart does not track, evaluate, coordinator, undertook a detailed evaluation of
or analyze what subjective criteria its drivers and Wal-Mart's current recruiting practices. 50 Upham
managers are utilizing during the recruitment and hiring concluded that the exclusive reliance on word-of-mouth
process. 41 While Wal-Mart policy requires each driver hiring practices was greatly limiting publicity of job
screening committee to be 50% diverse, 42 a review of all openings for over-the-road truck drivers. 51 He
of Wal-Mart's regional personnel manager audits reveals recommended to management that steps be taken to
that no screening committee has a majority of African publicize job openings to the general trucking
Americans and that a substantial percentage of the community. 52 Wal-Mart did not [*365] adopt Upham's
screening committees do not have any African American proposals, 53 and eliminated the driver recruitment
representation whatsoever. 43 Plaintiffs have presented position. 54
evidence of some of the subjective factors employed by
50 Pls.' Ex. 10.
the screening committees to determine which applicants
51 See id. at 745.
make the interview cut, 44 as well as anecdotal evidence
52 Id.
of overt racism among screening committee members. 45
53 Pls.' Ex. 7 at 183-85.
39 Id. at 80-89. 54 Id. at 195.
40 Id. at 127.
Wal-Mart revived the recruitment position in 2004
41 Id. at 54, 89, 127.
and placed Frank Paris in that position. 55 Paris
42 Pls.' Ex. 45 at 76-77.
investigated Wal-Mart's recruitment practices and, in an
43 Pls.' Ex. 43.
August 2004 memo and Powerpoint presentation, reached
[**11]
almost the same conclusions as [**13] Upham about the
44 See, e.g., Pls.' Exs. 20 at 30; 21 at 34-35; 26
impact of Wal-Mart's reliance on word-of-mouth
Nev. 113, 65 P 7; 30 Wash. 586, 71 P 9; 80 P 7,
recruiting. 56 Wal-Mart made no changes to its hiring
32 Mont. 159.
policies in response to Paris's investigation.
45 Pls.' Exs. 94 at 90; 95 at 94-95, 119, 149-50;
96 at 61-73. 55 Id.
56 Pls.' Ex. 11 at 4; see also Pls.' Exs. 22 at 269;
From January 1, 2000, to September 19, 2005,
7 at 200-201.
Wal-Mart hired 4,135 over-the-road truck drivers. 46
Wal-Mart's workforce of over-the-road truck drivers Wal-Mart has the ability to generate and retain
during that time ranged from approximately 4% to 6% complex demographic data and other statistical
African American and the new hires during that period information. 57 Yet Wal-Mart rejected two proposals to
approximately 7.4% African American. 47 During the track the racial demographics of its applicant pool for
same time period, a study by the American Trucking over-the-road truck drivers. 58 In fact, Wal-Mart has
Association determined that approximately 15% of the never analyzed the causal connection between its reliance
nationwide truck-driver workforce was African on word-of-mouth recruiting and the number of African
American. 48 Utilizing census data and EEOC data, Americans in its workforce of over-the-road truck
Plaintiffs' expert Dr. Martin Shapiro determined that from drivers, despite the acknowledgment by Ed Parrish --
January 1, 2000, to September 19, 2005, the proportion of Wal-Mart's top human resources officer in the
newly hired African American drivers was less than the Transportation Division and chosen corporate
expected proportion of newly hired African American representative in this suit -- that word-of-mouth recruiting
drivers in 34 of the 39 transportation offices. 49 leads to a perpetuation of the current demographics in the
workforce. 59
46 Defs.' Ex. 32-3 at 4.
47 Defs.' Ex. 32-1 at 7. 57 See Pls.' Exs. 45 at 28-29; 58.
[**12] [**14]
48 Pls.' Ex. 102. 58 Pls.' Exs. 45 at 25-26, 49-54; 46; 48.
Page 5
245 F.R.D. 358, *365; 2007 U.S. Dist. LEXIS 35760, **14;
59 Pls.' Ex. 7 at 207-08. 64 Id.

65 Eisen v. Carlisle & Jacquelin, 417 U.S. 156,
II. CERTIFICATION UNDER RULE 23(a) 178, 94 S. Ct. 2140, 40 L. Ed. 2d 732 (1974).
[**16]
Plaintiffs seek to certify a class consisting of: 66 Mehl v. Canadian Pac. Ry. Ltd., 227 F.R.D.
505, 509 (D.N.D. 2005) (citation omitted).
a. African American persons who reside 67 See Gen. Tel. Co. of the Sw. v. Falcon, 457
in the continental United States of U.S. 147, 160, 102 S. Ct. 2364, 72 L. Ed. 2d 740
America who have applied for (1982).
employment as over-the-road truck drivers
at Wal-Mart since September 22, 2001, [*366] A. Implicit Requirement for Class
and who have not been hired; and Certification
b. African American persons who While not explicitly listed in Rule 23(a), some courts
reside in the continental United States of have required that a precisely defined class exist before
America who were deterred or thwarted considering the Rule 23(a) criteria for class certification.
from applying for positions as 68 Wal-Mart argues that including all African Americans
over-the-road truck drivers at Wal-Mart who were deterred or thwarted from applying to the
due to Wal-Mart's challenged policies and proposed class renders the class too imprecise and
practices. 60 speculative to be certified.
To obtain class certification, Plaintiffs must meet all four 68 Dirks v. Clayton Brokerage Co. of St. Louis
requirements of Federal Rule of Civil Procedure 23(a) Inc., 105 F.R.D. 125, 130 (D. Minn. 1985) (citing
and the requirements of at least one of the subdivisions of Roman v. ESB, Inc., 550 F.2d 1343, 1348 (4th
Rule 23(b). A case is "not maintainable as a class action Cir. 1976)).
by virtue of its designation as such in the pleadings." 61
Instead, "[t]here must be an adequate statement of the The Supreme Court has held that, in certain
basic facts to indicate that each requirement of the rule is situations, deterred applicants are entitled to relief under
fulfilled. [**15] " 62 The party seeking class Title VII. 69 According [**17] to the Supreme Court,
certification has the burden of establishing that
certification is appropriate. 63 [t]he effects of and the injuries suffered
from discriminatory employment practices
60 Doc. No. 105 at 9. are not always confined to those who were
61 In re Am. Med. Sys., Inc., 75 F.3d 1069, 1079 expressly denied a requested employment
(6th Cir. 1996). opportunity. A consistently enforced
62 Id. discriminatory policy can surely deter job
63 Coleman v. Watt, 40 F.3d 255, 259 (8th Cir. applications from those who are aware of
1994). it and are unwilling to subject themselves
to the humiliation of explicit and certain
The decision whether to certify a class action is left rejection.
to the sound discretion of the district court. 64 In
determining whether to certify a class action, "the If an employer should announce his
question is not whether the plaintiff or plaintiffs have policy of discrimination by a sign reading
stated a cause of action or will prevail on the merits, but "Whites Only" on the hiring-office door,
rather whether the requirements of Rule 23 are met." 65 his victims would not be limited to the few
"Accordingly, while the Court must conduct a 'rigorous who ignored the sign and subjected
analysis,' class certification is a procedural determination themselves to personal rebuffs. The same
and should not include an inquiry into the merits." 66 The message can be communicated to potential
Court's duty to assure compliance with Rule 23 continues applicants more subtly but just as clearly
even after the certification. 67 by an employer's actual practices -- by his
consistent discriminatory treatment of
Page 6
245 F.R.D. 358, *366; 2007 U.S. Dist. LEXIS 35760, **17;
actual applicants, by the manner in which (N.D. Cal. Mar. 30, 1984) ("female applicants and
he publicizes vacancies, his recruitment deterred female applicants");
techniques, his responses to casual or
tentative inquiries, and even by the racial [**19] Wal-Mart in its surreply vigorously contests
or ethnic composition of that part of his Plaintiffs' characterization of Wal-Mart's driver
work force from which he has recruitment practices as "word of mouth." Instead,
discriminatorily excluded members of Wal-Mart chooses to characterize driver hiring as "a
minority groups. When a person's desire more formal hiring process with many objective
for a job is not translated into a formal components." 72 Wal-Mart points to the existence of
application solely [**18] because of his minimum job qualifications and a formal application
unwillingness to engage in a futile gesture process as proof that its characterization is correct. At this
he is as much a victim of discrimination as stage in the litigation, however, where I am not allowed
is he who goes through the motions of to inquire into the merits of Plaintiffs' claims, 73 Plaintiffs
submitting an application. 70 have presented sufficient [*367] evidence to support
their characterization of the recruitment process as
Where, as here, the employment practice complained of word-of-mouth. Wal-Mart concedes that its primary
involves word-of-mouth recruitment, courts have often means of driver recruitment is through its current drivers
included deterred and thwarted applicants in the class -- who, based on evidence presented by Plaintiffs, are
challenging such a practice. 71 Indeed, inclusion of disproportionately white 74 -- passing out cards with the
deterred and thwarted applicants seems most appropriate 1-800 number for applications. 75 Plaintiffs also have
in the context of word-of-mouth practices, since the presented evidence that Wal-Mart's white drivers mainly
nature of word-of-mouth recruiting is to prevent members refer only other white drivers. 76 Such evidence is
of a protected class from even knowing about consistent with what courts have understood to be the
employment opportunities. tendency of word-of-mouth recruiting. 77 Whether
Wal-Mart actually engaged in impermissible
69 Int'l Bhd. of Teamsters v. United States, 431 word-of-mouth recruiting will [**20] be best resolved in
U.S. 324, 97 S. Ct. 1843, 52 L. Ed. 2d 396 (1977). a motion for summary judgment, or in a trial on the
70 Id. at 365-66. merits. However, Plaintiffs have presented sufficient
71 See, e.g., Catlett v. Mo. Highway & Transp. evidence to raise an inference that Wal-Mart's practices
Comm'n, 828 F.2d 1260, 1262 (8th Cir. 1987) are word-of-mouth recruiting as that term has been
(class of females "who applied or might have recognized by other courts.
applied for maintenance positions" with the
defendant); Domingo v. New England Fish Co., 72 Defs.' Surreply at 7.
727 F.2d 1429, 1433, 1442 (9th Cir. 1984) (class 73 The Supreme Court was unmistakably clear
of all nonwhites who "were employed by Nefco, in Eisen that "nothing in either the language or
applied for employment with Nefco, or were history of Rule 23 . . . gives a court any authority
deterred from applying for employment with to conduct a preliminary inquiry into the merits of
Nefco"); Bibbs v. Jernberg Indus., Inc., No. 93 C a suit in order to determine whether it may be
0637, 1993 U.S. Dist. LEXIS 17869, 1993 WL maintained as a class action." Eisen, 417 U.S. at
535338, at *3 (N.D. Ill. Dec. 17, 1993); Van v. 177.
Plant & Field Serv. Corp., 672 F. Supp. 1306, 74 See Pls.' Exs. 2; 57.
1308 (C.D. Cal. 1987) (class of all women who 75 Pls.' Exs. 7 at 180, 184, 195, 197; 9 at 6.
were past or present applicants for hire or were 76 See Pls.' Exs. 71 P 6; 20 Colo. App. 74, 77 P
deterred from applying); Kraszewski v. State 6; 16 at 55; 68 P 8; 10 Wyo. 439, 70 P. 1, 7; 31
Farm Gen. Ins. Co., No. C 79-1261, 1985 U.S. Mont. 526, 79 P. 1, 9.
Dist. LEXIS 20297, 1985 WL 1616, at *78, *80 77 See, e.g., Parham v. Sw. Bell Tel. Co., 433
(N.D. Cal. Apr. 29, 1985) (class consisting of all F.2d 421, 426-27 (8th Cir. 1970).
"female applicants and deterred applicants");
While some courts have excluded deterred applicants
Pollar v. Judson Steel Corp., No. C-82-6833,
from class participation [**21] out of fear that the class
1984 U.S. Dist. LEXIS 18018, 1984 WL 968, at *3
Page 7
245 F.R.D. 358, *367; 2007 U.S. Dist. LEXIS 35760, **21;
size will become unlimited or unwieldy, 78 such concerns LEXIS 21252, 1993 WL 559031, at *4 (D. Minn.
are not present here. The proposed class of deterred Sept. 30, 1993) (finding that the proposed
applicants is limited to African Americans possessing sub-class of deterred applicants was the
sufficient experience and training to meet Wal-Mart's equivalent of a "substantial percentage of the
minimum qualifications for over-the-road truck drivers nation's female work force").
but who were deterred or thwarted, because of
Wal-Mart's reliance on word-of-mouth recruitment, from B. Numerosity
making timely applications for employment. While that
Since it is undisputed that the class is "so numerous
may be a few hundred, or even a few thousand, class
that joinder of all members is impracticable," I find that
members, it is far cry from the sheer magnitude of
Plaintiffs have met Rule 23(a)(1)'s numerosity
potential class members that has given other courts pause
requirement.
in determining whether to allow deterred applicants to
participate in the class. 79 I find that Plaintiffs have C. Commonality
presented a sufficiently precise class definition to meet
the implied requirement of Rule 23(a). Rule 23(a)(2) requires that there be common
questions of law or fact among the members of the class.
78 For example, the court in Harris v. General 80 Class certification is "particularly appropriate" when
Development Corporation, 127 F.R.D. 655 (N.D. the issues involved are common to the class as a whole
Ill. 1989), addressed the inclusion of deterred and when they turn on questions of law applicable in the
applicants in an employment class action: same manner to each member of the class. 81 While
allegations of across-the-board discrimination will not
satisfy the burden of proof on certification, evidence that
an employer operated under a general policy of
In certain cases . . . class discrimination which manifested itself to all class
identification would be entirely members [**23] "in the same general fashion, such as
feasible. For example, a class through entirely subjective decisionmaking processes,"
comprised of current employees suffices [*368] to show commonality. 82 "[C]ourts have
who were "chilled" from applying made it clear that in cases alleging class-wide disparate
for a promotion is relatively treatment in particular employment actions, plaintiffs
limited, readily identifiable, and must show a company-wide policy or practice, beyond
capable of more accurate individualized claims of discrimination." 83
verification. In contrast to that
situation, plaintiffs' class of 80 Paxton, 688 F.2d at 561.
deterred applicants encompasses 81 Falcon, 457 U.S. at 155.
the entire available black labor 82 Id. at 159 n.15.
force in the City of Chicago and its 83 Abrams v. Kelsey-Seybold Med. Group, Inc.,
contiguous suburbs. In attempting 178 F.R.D. 116, 129 (S.D. Tex. 1997).
to cull the truly deterred applicants
from such an expansive universe, a Plaintiffs argue that commonality is met because all
tremendous amount of valuable class members are over-the-road truck drivers who have
court time and resources would be been affected by the excessive subjectivity of Wal-Mart's
consumed, placing a severe burden uniform hiring policies. I am satisfied that there are
on the court and litigants. common questions of law and fact with respect to the
class and its representatives. Plaintiffs do not seek to
certify a class challenging across-the-board
Id. at 659 (citation omitted). discrimination for a broad range of jobs across [**24]
[**22] several departments, 84 but rather focus specifically on
79 See id. (entire available black labor force in the hiring policies for the single position of over-the-road
the City of Chicago); see also Sondel v. Nw. truck driver in Wal-Mart's Transportation Division.
Airlines, Inc., No. 3-92-381, 1993 U.S. Dist.
Page 8
245 F.R.D. 358, *368; 2007 U.S. Dist. LEXIS 35760, **24;
84 Cf. Falcon, 457 U.S. at 152 (describing through distribution of the 1-800 cards; entrusting current
"across-the-board" challenge to defendant's drivers to conduct both the initial screening to determine
employment practices involved in the case); which applicants will be granted an interview and the
Bradford v. Sears, Roebuck, & Co., 673 F.2d 792, initial interview; and entrusting the final stage of
794-95, 796 (5th Cir. 1982) (challenging hiring, interviews and the ultimate hiring decision to the general
firing, pay, and promotion practices across all of transportation managers. Plaintiffs have produced
defendant's job classifications in the state of evidence that Wal-Mart has not established any objective
Mississippi); Yapp v. Union Pac. R.R. Co., 229 hiring criteria besides the minimum qualifications printed
F.R.D. 608, 610 (E.D. Mo. 2005) (challenging on the 1-800 cards to guide the decisionmakers at any
selection practice for non-union positions across step of the hiring process. Consequently, drivers and
all of the defendant's departments); Dukes v. general transportation managers are free to apply
Wal-Mart Stores, Inc., 222 F.R.D. 137, 141, 146 subjective and idiosyncratic factors in deciding which
(N.D. Cal. 2004) (challenging the pay and applicants are hired. Plaintiffs have produced evidence
promotion practices across several departments that the application of such subjective factors has led to
and numerous job classifications); Clayborne v. statistically significant under-representation of African
Omaha Pub. Power Dist., 211 F.R.D. 573, 578 American over-the-road truck drivers in Wal-Mart's work
(D. Neb. 2002) (challenging promotion, pay, force. Plaintiffs have produced evidence that, although
training, and performance-evaluation practices for Wal-Mart was aware of both the potential for its hiring
positions companywide); Wright v. Circuit City process to produce this disparity and had the means to
Stores, Inc., 201 F.R.D. 526, 528, 531 (N.D. Ala. attempt to correct the disparity, Wal-Mart did nothing to
2001) (challenging promotion assignment, change its hiring policies.
training, and transfer practices across multiple
positions and departments); Bacon v. Honda of This evidence presented [**27] by Plaintiffs
Am. Mfg., Inc., 205 F.R.D. 466, 477 (S.D. Ohio demonstrates the existence of common issues of fact and
2001) (seeking to certify class "consisting of law to be decided at trial (if not on Wal-Mart's motion).
every African American who has ever been Plaintiffs will have to establish that Wal-Mart's hiring
employed at the Ohio Honda facilities"). policies and [*369] practices were indeed uniform
throughout Wal-Mart's transportation offices and that
[**25] "[I]t is uniformly held that plaintiffs seeking they caused African Americans to be hired less often as
class certification may represent a multi-facility class over-the-road truck drivers than similarly situated whites.
only where centralized and uniform employment They will have to demonstrate that Wal-Mart's driver
practices affect all facilities the same way." 85 For hiring policy for the Transportation Division caused a
purposes of this stage of the litigation, Plaintiffs have pattern or practice of discrimination against African
established uniform hiring policies affecting all African American over-the-road truck drivers in violation of Title
American over-the-road truck drivers who met the VII and § 1981. They also must show that Wal-Mart's
minimum requirements and applied, or were deterred driver hiring policy violated Title VII by having a
from applying, to Wal-Mart in a similar manner. disparate impact on African American over-the-road
Plaintiffs presented evidence that, while Wal-Mart does truck drivers -- a disparate impact not justified by a
not have a centralized decisionmaking body that makes business necessity. Resolving these factual and legal
each driver hiring decision, Wal-Mart does have uniform questions will involve the same evidence for all class
policies, procedures, and practices that control the hiring members.
process for over-the-road truck drivers.
Wal-Mart asserts several reasons as to why Plaintiffs'
85 Clayborne, 211 F.R.D. at 595. proposed class cannot meet the commonality
requirement, none of which are persuasive. First,
Plaintiffs have produced evidence of hiring practices Wal-Mart argues that commonality is defeated because of
promulgated by Wal-Mart's central office in Bentonville the variations in qualifications and experience [**28]
that each transportation office must follow. These among the class members. Wal-Mart cites several cases
practices include relying primarily on current drivers to to support its argument. Those cases all stand for the
solicit potential [**26] applicants for driver positions unremarkable proposition that, absent a showing of a
Page 9
245 F.R.D. 358, *369; 2007 U.S. Dist. LEXIS 35760, **28;
pattern or practice of discrimination common to the class, [**30] That last point ties into Wal-Mart's third,
"[d]iscrimination based solely on membership in a and most substantial, argument against a finding of
protected class [w]hich manifests itself in a different set commonality here. Wal-Mart argues that commonality is
of facts for each employee is not enough to satisfy the defeated because, despite similar hiring policies, the
commonality requirement." 86 However, Plaintiffs have hiring decisions are made independently by each general
presented evidence of uniform hiring policies, developed transportation manager. Wal-Mart cites numerous cases
by a centralized authority, which affect all class members where other courts refused to grant certification when an
in a similar way. Thus, the factual differences in employer "had a centralized policy of decentralization."
Plaintiffs' claims that Wal-Mart points out -- such as 90 I am well aware of the split among courts who view a
different levels of experience and locations of interest -- policy of decentralized and subjective decisionmaking as
do not defeat the existence of common questions based sufficient to support a finding of commonality, and those
on the effect of Wal-Mart's uniform hiring policies on who find that it defeats commonality. 91 [*370] Without
African American over-the-road truck drivers. hesitation, I agree with the former courts. It is difficult to
see why a large corporation should not be held to account
86 Ellis v. Elgin Riverboat Resort, 217 F.R.D. for instituting a centralized policy that harms a class of
415, 427 (N.D. Ill. 2003) (internal quotation individuals just because that policy allows managers to
omitted); see also Skipper v. Giant Food Inc., 68 utilize subjective decisionmaking. As the court in
Fed. Appx. 393, 397 (4th Cir. 2003) ("Given the McReynolds stated:
nature of the claims plaintiffs have pressed, the
facts will vary widely from worker to worker in This position [that a policy of
cases of disparate treatment, and they will vary decentralized decisionmaking defeats
widely from warehouse to warehouse in cases of a commonality] would permit companies to
hostile work environment."); Johnson v. U.S. Beef escape Title VII class actions by
Corp., No. 04-0963, 2006 U.S. Dist. LEXIS minimizing the amount of control that
14305, 2006 WL 680918, at *4 (W.D. Mo. Mar. they exercise over individual managers.
14, 2006) (noting that "plaintiffs have failed to Such a [**31] holding would run afoul of
identify what policies or procedures they believe the purpose of Title VII, which is "not to
are discriminatory"). provide redress but to avoid harm," by
encouraging employers "to adopt
[**29] Next, Wal-Mart argues that the evidence of antidiscrimination policies and to educate
significant variations in the hiring processes of the 47 their personnel on Title VII's
individual transportation offices prevents a finding of prohibitions." 92
commonality. For example, Wal-Mart points out that
different general transportation managers and screening The Ninth Circuit has made the same point: "The
committees use different evaluation methods for driver unsurprising fact that some employment decisions are
candidates, some of which involve assessing objective made locally [should] not allow a company to evade
qualifications. 87 However, as Plaintiffs correctly note in responsibility for its policies." 93
their reply, 88 all of the distinctions Wal-Mart lists are
either immaterial or actually support Plaintiffs' contention 90 Defs.' Resp. Br. at 28-29 (citing Reid v.
that Wal-Mart has set up a driver-hiring process rife with Lockheed Martin Aeronautics Co., 205 F.R.D.
subjectivity. Furthermore, the fact that some individual 655, 670 (N.D. Ga. 2001)).
managers may actually use objective criteria does not 91 Melissa Hart, Subjective Decisionmaking and
defeat Plaintiffs' claim of excessive subjectivity. "[W]hat Unconscious Discrimination, 56 ALA. L. REV.
is significant is that the determination of which criteria to 741, 787 (2005) (collecting cases).
use is left entirely to the individual manager." 89 92 208 F.R.D. at 443 (citing Kolstad v. Am.
Dental Ass'n, 527 U.S. 526, 545, 119 S. Ct. 2118,
87 Defs.' Resp. Br. at 23. 144 L. Ed. 2d 494 (1999) (internal quotation
88 Pls.' Reply Br. at 20. omitted)); See generally Daniel S. Klein, Note,
89 McReynolds v. Sodexho Marriott Servs., Inc., Bridging the Falcon Gap: Do Claims of
208 F.R.D. 428, 442 (D.D.C. 2002). Subjective Decisionmaking in Employment
Page 10
245 F.R.D. 358, *370; 2007 U.S. Dist. LEXIS 35760, **31;
Discrimination Class Actions Satisfy the Rule 95 Eisen, 417 U.S. at 177-78.
23(a) Commonality and Typicality 96 Chaffin v. Rheem Mfg. Co., 904 F.2d 1269,
Requirements?, 25 REV. LITIG. 131, 152-165 1276 (8th Cir. 1990).
(2006).
[**32] D. Typicality
93 Staton v. Boeing Co., 327 F.3d 938, 956 (9th
The Eighth Circuit has defined typicality as requiring
Cir. 2003).
"a demonstration that there are other members of the
Nevertheless, even assuming that a centralized policy class who have the same or similar grievances as the
of decentralized, subjective decisionmaking cannot by plaintiff." 97 "A demonstration of typicality 'require[s]
itself meet the commonality requirement for Rule 23, the something more than general conclusory allegations that
unique factual situation of this case makes a finding of unnamed blacks have been discriminated against.'" 98 As
commonality appropriate here. 94 Although Wal-Mart's courts have noted, the typicality and commonality
policy of subjective and decentralized decisionmaking is requirements "tend to merge" because [*371] "[b]oth
an important part of Plaintiffs' claims, Plaintiffs do not serve as guideposts for determining whether . . . the
argue that Wal-Mart should be liable just because they named plaintiff's claim and the class claims are so
allowed its general transportation managers discretion as interrelated that the interests of the class members will be
to who they could hire. Instead, Plaintiffs have presented fairly and adequately protected in their absence." 99 The
evidence that Wal-Mart's policy across all the analysis of commonality presented above applies with
transportation offices is to recruit new drivers primarily equal force to typicality. Plaintiffs have shown uniform
through its current drivers by using the 1-800 card and hiring policies across the transportation [**35] offices
driver screening committees. Plaintiffs also have that affect all class members in a similar manner. The
presented statistical and anecdotal evidence to show that named plaintiffs' claims are typical of the class members'
this policy had a class-wide impact, preventing qualified claims because they seek to challenge those policies.
African American truck drivers from getting positions as
97 Id. at 1275.
over-the-road truck drivers at Wal-Mart. Finally,
98 Id. (quoting Paxton, 688 F.2d at 562).
Plaintiffs have produced evidence [**33] that Wal-Mart
99 Falcon, 457 U.S. at 157 n.13.
was aware of the potential for its hiring process to
perpetuate the racial disparity in its driver workforce but Wal-Mart does make one argument specifically
did nothing. Combined, Plaintiffs' evidence raises an addressed to the typicality requirement. Wal-Mart argues
inference that Wal-Mart excluded a cohesive group from that Plaintiffs cannot meet the typicality requirement
the same opportunity by the intentional application of the because of the differing qualifications and factual
same policy. circumstances of the named plaintiffs and the members of
the proposed class. 100 Because of these factual
94 See, e.g., Prado-Steiman ex rel. Prado v.
variations, Wal-Mart argues that it has unique defenses to
Bush, 221 F.3d 1266, 1275-76 (11th Cir. 2000)
many of the individual class members that makes class
(noting that most certification decisions turn on
treatment inappropriate. However, when a plaintiff
"case-specific matters of fact").
challenges a corporate-wide policy of discrimination with
Again, although Wal-Mart vigorously disputes the regard to a specific employment practice, typicality is not
inferences to be drawn from Plaintiffs' evidence and defeated just because the named plaintiffs and individual
introduces its own evidence to counter Plaintiffs' claims, I class members have differing qualifications. [**36] 101
note again that my task, at this stage of the litigation, is As was explained above, Plaintiffs' claims are based on
not to determine the merits. 95 It is sufficient that the same hiring policies and legal theories relevant to the
Plaintiffs' evidence "at least suggest[s]" that Wal-Mart's class as a whole. 102 While Wal-Mart's unique defenses
hiring policies affected African American over-the-road may ultimately preclude some potential class members
truck drivers in a similar way by routinely excluding from recovering, they do not prevent the use of a class
them from hiring opportunities with Wal-Mart. 96 action to determine the central issue in this case: whether
Plaintiffs have met that [**34] burden and satisfy the Wal-Mart's hiring policies for over-the-road truck drivers
commonality requirement of Rule 23. resulted in unlawful discrimination.
Page 11
245 F.R.D. 358, *371; 2007 U.S. Dist. LEXIS 35760, **36;
100 Defs.' Resp. Br. at 26. at Wal-Mart. 106 Whether Armstrong needed to verify
101 Paxton, 688 F.2d at 562; see also that he met the qualifications, however, is hotly disputed.
Donaldson v. Pillsbury Co., 554 F.2d 825, 831 107 Because [*372] "the named plaintiff need not
(8th Cir. 1977) ("When the claim arises out of the demonstrate a probability of success on the merits . . . to
same legal or remedial theory, the presence of serve as the class representative," 108 I need not decide
factual variations is normally not sufficient to that factual dispute now.
preclude class action treatment.").
102 Alpern v. UtiliCorp United, Inc., 84 F.3d 106 Defs.' Resp. Br. at 35.
1525, 1540 (8th Cir. 1996) ("Factual variations in 107 See Pls.' Reply Br. at 35.
the individual claims will not normally preclude 108 ALBA CONTE & HERBERT B.
class certification if the claim arises from the NEWBERG, NEWBERG ON CLASS ACTIONS
same event or course of conduct as the class § 3.29 (4th ed. 2002).
claims, and gives rise to the same legal or
[**39] Second, Wal-Mart argues that the named
remedial theory.").
plaintiffs are not adequate representatives for the deterred
[**37] E. Adequacy of Representation applicants. "A fundamental requirement of
representatives in a class action is that they must be
The fourth Rule 23(a) requirement requires that "a members of the subclasses they seek to represent. The
class representative . . . be part of the class and possess representatives must possess the same interest and suffer
the same interest and suffer the same injury as the class the same injury as their fellow class members." 109 The
members." 103 This requirement "tend[s] to merge" with class representatives here are alleged to have suffered the
the commonality and typicality requirements because its same injury as the deterred applicants, namely being shut
purpose is to determine whether in a particular case out of the opportunity of working as an over-the-road
"maintenance of a class action is economical and whether truck driver for Wal-Mart because of the application of
the named plaintiff's claim and the class claims are so Wal-Mart's hiring policies. Other courts, when addressing
interrelated that the interests of the class members will be word-of-mouth hiring practices similar to those alleged
fairly and adequately protected in their absence." 104 The here, have not hesitated to certify classes represented by
adequacy inquiry also factors in competency and applicants that included deterred applicants. 110 While the
conflicts of class counsel. 105 Wal-Mart does not dispute named plaintiffs made it farther in Wal-Mart's hiring
the competency or qualifications of Plaintiffs' counsel, process than the class members who were deterred from
nor does Wal-Mart argue that Plaintiffs' counsel has any applying at the outset, Wal-Mart has not made any
conflicts of interest. Accordingly, I find class counsel showing of how that factual difference might lead to
qualified and competent to prosecute this class action. conflicting interests between the named plaintiffs and the
class members who are deterred applicants such that
103 East Tex. Motor Freight Sys., Inc. v. recognizing independently represented subclasses [**40]
Rodriguez, 431 U.S. 395, 403, 97 S. Ct. 1891, 52 would be appropriate. 111 At this point, I do not see
L. Ed. 2d 453 (1977) (internal quotation omitted). potential for conflict between the interests of the named
104 Falcon, 457 U.S. at 157 n.13. plaintiffs and the class members who were deterred
[**38] applicants. 112
105 Amchem Prods., Inc. v. Windsor, 521 U.S.
591, 626 n.20, 117 S. Ct. 2231, 138 L. Ed. 2d 689 109 Roby v. St. Louis Sw. Ry. Co., 775 F.2d 959,
(1997). 961 (8th Cir. 1985) (citing Rodriguez, 431 U.S. at
403) (internal quotation omitted).
While Wal-Mart does not challenge the competency 110 See, e.g., Catlett, 828 F.2d at 1262 (class
of Plaintiffs' counsel, Wal-Mart does challenge the representatives were all applicants who
adequacy of the named plaintiffs to represent the class. It represented a class including "all females who
makes three arguments regarding the adequacy of the applied or might have applied"); Van, 672 F.
named plaintiffs. First, Wal-Mart argues that Plaintiff Supp. at 1308-09 (class representatives were
Armstrong is not an appropriate class representative applicants who represented a class including "[a]ll
because he did not verify that he met the minimum women who are past or present applicants [or who
qualifications to be hired as an over-the-road truck driver
Page 12
245 F.R.D. 358, *372; 2007 U.S. Dist. LEXIS 35760, **40;
were] deterred from applying"). 220 F.R.D. 64, 80-81 (M.D. Tenn. 2004).
111 See, e.g., Ortiz v. Fibreboard Corp., 527 117 Hiser v. Franklin, 94 F.3d 1287, 1291 (9th
U.S. 815, 831-32, 119 S. Ct. 2295, 144 L. Ed. 2d Cir. 1996); see also Cooper v. Fed. Reserve Bank
715 (1999) (finding that district court should have of Richmond, 467 U.S. 867, 104 S. Ct. 2794, 81 L.
ensured that the "potentially conflicting interests Ed. 2d 718 (1984); Fortner v. Thomas, 983 F.2d
of easily identifiable categories of claimants be 1024, 1031 (11th Cir. 1993); Norris v.
protected by provisional certification of Slothouber, 231 U.S. App. D.C. 78, 718 F.2d
subclasses under Rule 23(c)(4)"). 1116, 1117 (D.C. Cir. 1983); In re Jackson
112 I can create subclasses if this becomes an Lockdown/MCO Cases, 568 F. Supp. 869, 892
issue later. FED. R. CIV. P. 23(c)(1)(C), (c)(4); (E.D. Mich. 1983) ("[E]very federal court of
see also U.S. Fid. & Guar. Co. v. Lord, 585 F.2d appeals that has considered the question has held
860, 865 (8th Cir. 1978) ("[T]he district court can that a class action seeking only declaratory and
redefine the class or create subclasses, on its own injunctive relief does not bar subsequent
initiative, or on motion of any party."). individual suits for damages based on the same or
similar conditions.").
[**41] Third, Wal-Mart argues that the named [**43]
plaintiffs are not adequate class representatives because, 118 See Samuel Issacharoff, Preclusion, Due
by not seeking compensatory damages, they "place Process, and the Right to Opt Out of Class
themselves in conflict with any absent class members Actions, 77 NOTRE DAME L. REV. 1057, 1078
who might have claims for such damages." 113 All the (2002) (drawing the distinction between equitable
cases cited by Wal-Mart in support of this argument were remedies and traditional common-law
concerned with the potential preclusive effect of the class compensatory remedies in describing the
judgment on any class member having a significant claim res-judicata effect of class actions).
for compensatory damages. 114 While I recognize the
principle that a court "cannot predetermine the res Plaintiffs' claim for punitive damages, however, is
judicata effect of the [class] judgment," 115 I can assess another matter. It may raise res-judicata concerns for any
the risk of res judicata in order to determine the adequacy class member wishing to pursue compensatory damages
of the class representation. 116 The principle that a "class in an individual suit. 119 While I recognize that most of
action suit seeking only declaratory and injunctive relief the members of the proposed class would probably have
does not bar subsequent individual damage claims by insignificant compensatory claims, if any, I am unwilling
class members, even if based on the same events," is well to entirely dismiss the possibility that a few members of
established. 117 To the extent [*373] Plaintiffs seek the proposed class might have claims for significant
declaratory and injunctive relief, as well as back pay, 118 compensatory damages. However, I believe that severing
I am not concerned about the res judicata effect of this the issue of punitive damages under Rule 23(c)(4)(A) and
class action for those class members who want to pursue certifying a class only on the issues of class-wide liability
compensatory damages in individual suits. and declaratory and equitable relief removes any
res-judicata risk. Thus, I find that the named plaintiffs are
113 Defs.' Resp. Br. at 36. adequate representatives of the proposed class.
[**42]
114 See Thompson v. Am. Tobacco Co., Inc., 189 119 See id.
F.R.D. 544, 550-51 (D. Minn. 1999); Zachery v.
Texaco Exploration & Prod., Inc., 185 F.R.D. [**44] III. CERTIFICATION UNDER RULE
230, 243 (W.D. Tex. 1999); Feinstein v. Firestone 23(b)
Tire & Rubber Co., 535 F. Supp. 595, 606-07
Besides meeting the Rule 23(a) requirements of
(S.D.N.Y. 1982).
commonality, typicality, numerosity, and adequacy of
115 Matsushita Elec. Indus. Co., Ltd. v. Epstein,
representation, a plaintiff must also show that the
516 U.S. 367, 396, 116 S. Ct. 873, 134 L. Ed. 2d 6
proposed class meets the requirements of one of the three
(1996); FED. R. CIV. P. 23(c)(3) advisory
categories listed in Rule 23(b). The relevant portion of
committee's note.
Rule 23(b) is:
116 Coleman v. Gen. Motors Acceptance Corp.,
Page 13
245 F.R.D. 358, *373; 2007 U.S. Dist. LEXIS 35760, **44;
(b) Class Actions Maintainable. An

action may be maintained as a class action
if the prerequisites of subdivision (a) are Plaintiffs seek class certification under Rule 23(b)(2) or,
satisfied, and in addition: as an alternative, Rule 23(b)(3).
*** 120 FED. R. CIV. P. 23(b).
(2) the party opposing A. Rule 23(b)(2)

the class has acted or
Rule 23(b)(2) requires Plaintiffs to show that
refused to act on grounds
Wal-Mart "acted or refused to act on grounds generally
generally applicable to the
applicable to the class." 121 Wal-Mart's hiring policies, as
class, thereby making
discussed above, meet that requirement. Wal-Mart
appropriate final injunctive
argues, however, that Plaintiffs' proposed class cannot be
relief or corresponding
certified under Rule 23(b)(2) because claims for
declaratory relief with
monetary damages predominate over Plaintiffs' claims for
respect to the class as a
declaratory and injunctive relief.
whole; or
121 Id.
(3) the court finds that
the questions of law or fact [**46] 1. Predomination under Rule 23(b)(2)
common to the members of
the class predominate over Proposed Rule 23(b)(2) classes involving claims for
any questions affecting monetary damages should be treated with special care.
only individual members, "[T]he class treatment of claims for monetary damages
and that a class action is implicates the Seventh Amendment and due process rights
superior to other available of individual class members," since such claims involve
methods for the fair and individual interests that are "necessarily heterogenous in
efficient adjudication of the nature." 122 [*374] Classes certified under Rule 23(b)(3)
controversy. The matters are required to provide the additional procedural
pertinent to the findings protections of notice and the opportunity to opt out
include: (A) the interest of precisely because of the risks attendant with aggregating
members of the class in individual claims for monetary damages. 123 The federal
individually controlling the rules contain no such requirement for Rule 23(b)(2)
prosecution or defense of classes, 124 however, because the "very nature of a (b)(2)
separate actions; (B) the class" is homogeneity "without any conflicting interests
extent [**45] and nature of between the members of the class." 125 Thus, whether the
any litigation concerning monetary relief requested by a Title VII plaintiff seeking
the controversy already class certification is allowable under Rule 23(b)(2) must
commenced by or against be carefully determined in order to protect the individual
members of the class; (C) interests at stake and ensure that the underlying
the desirability or assumption of homogeneity is not undermined. 126
undesirability of
concentrating the litigation 122 Coleman v. Gen. Motors Acceptance Corp.,
of the claims in the 296 F.3d 443, 448 (6th Cir. 2002) (citing Ortiz,
particular forum; (D) the 527 U.S. at 846).
difficulties likely to be [**47]
encountered in the 123 FED. R. CIV. P. 23(c)(2) advisory
management of a class committee's note.
action. 120 124 Whether such requirements can be grafted
onto a (b)(2) class will be discussed below.
Page 14
245 F.R.D. 358, *374; 2007 U.S. Dist. LEXIS 35760, **47;
125 Wetzel v. Liberty Mut. Ins. Co., 508 F.2d the class to a statutorily-mandated damages award as an
239, 256 (3d Cir. 1975). example of when monetary damages would not
126 The Supreme Court has questioned in dicta predominate over injunctive and declaratory relief. 131
whether monetary damages can ever be recovered
in a Rule 23(b)(2) class action, stating that there 127 FED. R. CIV. P. 23 advisory committee's
was at least a "substantial possibility" that they notes.
could not. Ticor Title Ins. Co. v. Brown, 511 U.S. 128 151 F.3d 402, 415 (5th Cir. 1998); see also
117, 121, 114 S. Ct. 1359, 128 L. Ed. 2d 33 Barabin v. Aramark Corp., No. 02-8057, 2003
(1994). The Supreme Court has never squarely U.S. App. LEXIS 3532, 2003 WL 355417, at *1-*2
faced the issue, however. And holding that no (3d Cir. Jan. 24, 2003) (adopting the Allison
monetary relief could be recovered in a (b)(2) approach to incidental damages); Coleman, 296
class flies in the face of long established F.3d at 448; Murray v. Auslander, 244 F.3d 807,
circuit-court precedent. 812 (11th Cir. 2001); Jefferson v. Ingersoll Int'l
Inc., 195 F.3d 894, 898 (7th Cir. 1999). But see
The advisory committee provided guidance as to Robinson v. Metro-North Commuter R.R. Co., 267
when monetary relief is allowable in a (b)(2) class. They F.3d 147, 164 (2d Cir. 2001) (rejecting the Fifth
state that Rule 23(b)(2) does not extend to "cases in Circuit's incidental damages approach as defined
which the appropriate final relief relates exclusively or in Allison in favor of an ad hoc balancing
predominately to money damages." 127 Neither the determination); Molski v. Gleich, 318 F.3d 937,
advisory committee's notes nor the Eighth Circuit has 950 (9th Cir. 2003) (refusing to follow Allison
defined "predominately. [**48] " However, the weight because it "would nullify the discretion vested in
of authority holds that money damages predominate the district courts through Rule 23" and might
when they are not incidental to declaratory and injunctive have "troubling implications for the viability of
relief, i.e., when the damages do not "flow directly from future civil rights actions, particularly those under
liability to the class as a whole on the claims forming the the Civil Rights Act of 1991").
basis of the injunctive or declaratory relief." 128 The Fifth [**50]
Circuit explained this definition in the landmark case 129 Allison, 151 F.3d at 415.
Allison v. Citgo Petroleum Corporation: 130 Murray, 244 F.3d at 812.
131 Allison, 151 F.3d at 415.
[T]he recovery of incidental damages
should typically be concomitant with, not a. Back Pay
merely consequential to, class-wide
While the back-pay remedy Plaintiffs seek would
injunctive or declaratory relief. Moreover,
seem to be classified as non-incidental [*375] damages
such damages should at least be capable of
under the above definition, courts have uniformly held
computation by means of objective
that back pay does not predominate over the declaratory
standards and not dependent on the
and injunctive relief sought by Title VII plaintiffs. "[T]he
intangible, subjective differences of each
availability of equitable monetary remedies in [Rule
class member's circumstances. Liability
23(b)(2)] class actions is entrenched as a matter of
for incidental damages should not require
precedent." 132 As the Eighth Circuit has stated, "Though
additional hearings to resolve the disparate
Rule 23(b)(2) relates to class claims on which declaratory
merits of each individual's case; it should
and injunctive relief is sought, this Court has observed in
neither introduce new and substantial legal
conformity with the majority of federal courts, that the
or factual issues, nor entail complex
fact pecuniary relief in the form of back pay is sought
individualized determinations. 129
incidental to injunctive relief will not preclude
certification." 133 Courts have distinguished back pay
If the monetary relief sought is a group remedy rather
from all other forms of monetary relief and exempted
than an individual-by-individual remedy, however, it
back pay from the rigors of the "incidental"
does not predominate and the class can be certified under
determination. In Allison, the Fifth Circuit stated that
[**49] Rule 23(b)(2). 130 The Fifth Circuit in Allison
[**51] because back pay is a remedy historically
gave a hypothetical where a defendant's liability entitled
Page 15
245 F.R.D. 358, *375; 2007 U.S. Dist. LEXIS 35760, **51;
available in Title VII class actions, it is considered (N.D. Ill. 1995) (citing cases).
incidental by precedent and courts need not engage in [**53]
further analysis. 134 Thus, although individualized 137 See, e.g., Lemon v. Int'l Union of Operating
analysis may be required in determining each individual Engineers, Local No. 139, AFL-CIO, 216 F.3d
class member's entitlement to back pay, that alone has not 577, 579 (7th Cir. 2000); Allison, 151 F.3d at
stopped courts from certifying classes with claims for 416-18; Adler v. Wallace Computer Co., 202
back pay under Rule 23(b)(2). 135 F.R.D. 666 (N.D. Ga. 2001); Hoffman v. Honda of
Am. Mfg., Inc., 191 F.R.D. 530 (S.D. Ohio 1999);
132 Daniel F. Piar, The Uncertain Future of Faulk v. Home Oil Co., Inc., 186 F.R.D. 660
Title VII Class Actions After the Civil Rights Act (M.D. Ala. 1999).
of 1991, 2001 BYU L. REV. 305, 319 (2001); see 138 See Carlson v. C.H. Robinson Worldwide,
also Cooper v. S. Co., 390 F.3d 695, 720 (11th Inc., No. 02-3780, 2005 U.S. Dist. LEXIS 5674,
Cir. 2004) ("Back pay is considered equitable 2005 WL 758602, at *16 (D. Minn. Mar. 31,
relief and can therefore be awarded in a case 2005); Dukes, 222 F.R.D. at 170-71, aff'd, 474
certified under Rule 23(b)(2)."); Jefferson, 195 F.3d 1214 (9th Cir. 2007); Anderson v. Boeing
F.3d at 896 (mentioning the tradition in Title VII Co., 222 F.R.D. 521, 542 (N.D. Okla. 2004);
where back pay was allowed to be recovered in a Palmer v. Combined Ins. Co. of Am., 217 F.R.D.
Rule 23(b)(2) class action and noting that "back 430 (N.D. Ill. 2003). Plaintiffs can request
pay is a form of equitable relief, but this relief punitive damages without also asking for
was treated as incidental to the injunction"). compensatory damages because the Eighth Circuit
133 Marshall v. Kirkland, 602 F.2d 1282, 1295 is one of the circuits that allows an award of
(8th Cir. 1979) (footnote and quotation omitted). punitive damages without any award of
[**52] compensatory damages. Anderson, 222 F.R.D. at
134 See Allison, 151 F.3d at 416 n.10. 542 (citing cases).
135 See Kirby v. Colony Furniture Co., Inc., 613
F.2d 696, 699-700 (8th Cir. 1980); see also [**54] In order to resolve this question, I must
Allison, 151 F.3d at 415 (noting that back pay is determine the nature of the claim for punitive damages in
"an equitable remedy similar to other forms of this case. Punitive damages are available in claims under
affirmative injunctive relief permitted in (b)(2) Title VII where the employer has engaged in intentional
class actions"). discrimination and has done so with malice or reckless
indifference to the federally protected rights of "an
b. Punitive Damages aggrieved individual." 139 Wal-Mart argues that the
punitive damages Plaintiffs seek are an individualized
The more perplexing question is whether the punitive remedy. 140 Plaintiffs, on the other hand, assert [*376]
damages Plaintiffs' seek predominate over the declaratory that their request for punitive damages is a form of
and injunctive relief sought. Both parties were afforded class-wide relief. 141
an opportunity at the April 24, 2007, hearing to provide
further argument on this difficult issue. While several 139 42 U.S.C. § 1981a(b)(1).
courts have addressed the question of whether 140 Defs.' Resp. Br. at 41-42.
compensatory damages, 136 or compensatory damages 141 Pls.' Br. at 42-45.
coupled with a request for punitive damages, 137 are
incidental to declaratory and injunctive relief under Rule In most cases, punitive damages are an
23(b)(2), few courts have addressed the question of individualized, and not a class-wide, remedy. To be
whether a request for punitive damages alone defeats eligible to receive punitive damages an individual
certification under Rule 23(b)(2). 138 plaintiff must "establish that the defendant possessed a
reckless indifference to the plaintiff's federal rights -- a
136 See, e.g., Coleman, 296 F.3d at 446-48; fact-specific inquiry into that plaintiff's circumstances."
Robinson, 267 F.3d at 155; Murray, 244 F.3d at 142 Furthermore, given [**55] the Supreme Court's
812; Taylor v. D.C. Water & Sewer Auth., 205 repeated insistence that an award of punitive damages be
F.R.D. 43 (D.D.C. 2002); Buycks-Roberson v. reasonably related to the harm to the individual plaintiff.
Citibank Fed. Sav. Bank, 162 F.R.D. 322, 335
Page 16
245 F.R.D. 358, *376; 2007 U.S. Dist. LEXIS 35760, **55;
143 an award of punitive damages often must include an at issue here. 146 The plaintiffs sought to certify a class of
inquiry into each plaintiff's individual circumstances in all African American employees and applicants of Citgo,
order to determine the amount of punitive damages and included a request for both compensatory and
awardable to that plaintiff. 144 punitive damages on behalf of the class. [**57] 147
Allison held that the district court properly denied
142 Lemon, 216 F.3d at 581. certification. 148 On the road to that holding, the Fifth
143 See Philip Morris USA v. Williams, 127 S. Circuit assumed that punitive damages "may be awarded
Ct. 1057, 1065, 166 L. Ed. 2d 940 (2007) (holding on a class-wide basis, without individualized proof of
that the "Due Process Clause prohibits a State's injury, where the entire class or subclass is subjected to
inflicting punishment for harm caused strangers to the same discriminatory act or series of acts." 149 The
the litigation."); State Farm Mut. Auto. Ins. Co. v. court found, however, that "no such discrimination is
Campbell, 538 U.S. 408, 426, 123 S. Ct. 1513, alleged in this case." 150 The Fifth Circuit was careful to
155 L. Ed. 2d 585 (2003) ("[C]ourts must ensure note that the Allison plaintiffs did "not contend that each
that the measure of punishment is both reasonable [class member] was affected by these policies and
and proportionate to the amount of harm to the practices in the same way." 151 The court observed that
plaintiff and to the general damages recovered."); any award of punitive damages would therefore be
BMW of N. Am. v. Gore, 517 U.S. 559, 580, 116 "uniquely dependent on the subjective and intangible
S. Ct. 1589, 134 L. Ed. 2d 809 (1996) ("The differences of each class member's individual
second and perhaps most commonly cited circumstances" since "[s]ome discriminatory policies
indicium of an unreasonable or excessive punitive may have been implemented more -- or less -- harshly
damages award is its ratio to the actual harm depending [*377] on the department or facility
inflicted on the plaintiff."). Oftentimes that means involved." 152
that the amount of punitive damages awardable to
an individual plaintiff is bounded by some ratio of 145 Pls.' Reply Br. at 44.
the compensatory damages awarded to that 146 Allison, 151 F.3d at 407 (use of an informal
plaintiff. See, e.g., Pac. Mut. Life Ins. Co. v. word-of-mouth announcement process by the
Haslip, 499 U.S. 1, 23, 111 S. Ct. 1032, 113 L. defendant Citgo to fill job vacancies and the use
Ed. 2d 1 (1991) (suggesting that a four-to-one of a subjective decisionmaking process by Citgo's
ratio of punitive damages to compensatory predominantly white supervisory staff in
damages was "close to the line" of constitutional reviewing applicants for hire and employees for
impropriety). promotion).
[**56] [**58]
144 See Campbell, 538 U.S. at 423 ("A 147 Id.
defendant should be punished for the conduct that 148 Id.
harmed the plaintiff, not for being an unsavory 149 Id. at 417.
individual or business."). 150 Id.
151 Id.
Plaintiffs here argue, however, that their claim for 152 Id. at 417, 418.
punitive damages could be considered on a class-wide
basis rather than individually because their claim is based Here, Plaintiffs do allege that each potential class
on a pattern of similar acts perpetrated by Wal-Mart. member has been affected by Wal-Mart's hiring policies
Plaintiffs assert that, because the focus of punitive and practices in a similar way. Furthermore, Plaintiffs
damages is on Wal-Mart's conduct, and not the injury to rely on Williams v. ConAgra Poultry Company 153 for the
each class member, class-wide punitive damages is proposition that punitive damages may be awarded on a
appropriate in this case. 145 The Fifth Circuit in Allison class-wide basis, without individualized proof of injury.
left open the question of whether, in cases involving a 154 The Eighth Circuit in Williams decided to remit a
pattern of illegal acts, punitive damages could be punitive-damages award to an individual plaintiff that
considered on a class-wide basis. Allison involved a was based, in part, on proof of the defendant's
class-action challenge to Citgo's promotion and hiring discriminatory conduct towards others. On the way to
policies, which were similar to Wal-Mart's hiring policies that decision, the Eighth Circuit observed in dictum:
Page 17
245 F.R.D. 358, *377; 2007 U.S. Dist. LEXIS 35760, **58;
punitive damages might be thought of as flowing

Where there has been a pattern of illegal to the class as a whole upon a finding of liability.
conduct resulting in harm to a large group
of people, our system has mechanisms Furthermore, Plaintiffs' claim for punitive damages
such as class action suits for punishing would be non-incidental even if a jury in this case were to
defendants. Punishing systematic abuses find that Wal-Mart engaged in a pattern of discriminatory
by a punitive damages award in a case acts that affected class members in a similar way. Even
brought by an individual plaintiff, after such a finding, a jury would not be able to determine
however, deprives the defendant of the the extent of the harm caused by Wal-Mart's conduct, and
safeguards against duplicative [**59] as a corollary the extent of the need for punishment and
punishment that inhere in the class action deterrence, 158 at the class-wide stage without engaging
procedure. 155 in further individualized determinations. The reason for
the need for further proceedings is simple. Typically, a
Plaintiffs urge me to read that statement as a recognition court or jury is not able to determine, until the conclusion
by the Eighth Circuit that some awards of punitive of the second stage of a Teamsters-style proceeding,
damages may flow to a class as a whole. 156 Plaintiffs' which alleged class members were actually harmed by
argument is not without appeal, since a case where the defendant's pattern of discriminatory [**61] acts and
punitive damages flows to a class as a whole -- rather which were not. 159 Thus, unless each alleged class
than existing merely as an individual-by-individual member has actually suffered harm from the pattern of
remedy -- is not inconceivable, if one reflects on the illegal acts -- which is highly unlikely -- Wal-Mart would
Eighth Circuit's example of a "pattern of illegal conduct." be over-deterred by any class-wide award of punitive
157 Nevertheless, when the court in Williams made the [*378] damages. Individualized determinations are
above statement, it was not confronted with the whole necessary to fully realize the extent of the harm caused by
host of issues a request for punitive damages raises at the Wal-Mart's conduct and properly assess the need for
class certification stage. Thus, I am chary of basing my punishment and deterrence. Such individualized
decision on a single statement by the Eighth Circuit in a determinations in this case would include whether each
case that did not present the same issues as are presented proposed class member met Wal-Mart's minimum
here. requirements at the time he or she applied for a position
as an over-the-road truck driver or was deterred from
153 378 F.3d 790 (8th Cir. 2004). applying; whether each proposed class member applied to
154 See Pls.' Br. at 43-44. a transportation office that was currently hiring at the
155 Williams, 378 F.3d at 797. time of the application; and whether Wal-Mart denied
156 Cf. Anderson, 222 F.R.D. at 541 ("Because employment to an individual applicant who met the
the purpose of punitive damages is not to minimum requirements for lawful reasons. Because of the
compensate the victim, . . . [the inquiry] hinges, need for those individualized determinations, I find that,
not on facts unique to each class member, but on in this case, the punitive damages Plaintiffs seek
the defendant's conduct toward the class as a predominate over their claims for injunctive and
whole."); Barefield v. Chevron, U.S.A., Inc., No. declaratory relief. 160
C 86-2427, 1988 U.S. Dist. LEXIS 15816, 1988
WL 188433, *3 (N.D. Cal. Dec. 6, 1988) (holding 158 See Williams, 127 S. Ct. at 1062 ("This
that a class-wide request for punitive damages Court has long made clear that punitive damages
was incidental to declaratory and injunctive relief may properly be imposed to further a State's
because it did not detract from the "homogeneity legitimate interests in punishing unlawful conduct
or cohesiveness" of the 23(b)(2) class). and deterring its repetition.") (internal quotation
[**60] and alteration omitted).
157 If, for instance, the defendant acts in the [**62]
same manner towards each class member while at 159 See Teamsters, 431 U.S. at 371-72 ("The
the same time perceiving the risk that such a task remaining for the District Court [after finding
policy may violate those class members' a pattern-and-practice of discrimination] will not
federally-protected rights, then a claim for be a simple one. Initially, the court will have to
Page 18
245 F.R.D. 358, *378; 2007 U.S. Dist. LEXIS 35760, **62;
make a substantial number of individual 1997) (collecting cases).

determinations in deciding which of the minority 162 See Robert M. Brava-Partain, Note, Due
employees were actual victims of the company's Process, Rule 23, and Hybrid Classes: A
discriminatory practices."). Practical Solution, 53 HASTINGS L.J. 1359,
160 Although this conclusion appears to be 1369-70 (2002).
inconsistent with allowing back pay in a (b)(2) 163 64 F.3d 1171, 1175 (8th Cir. 1995).
class--a remedy which will potentially involve 164 Robinson, 111 F. Supp. 2d at 1127.
just as many individualized determinations as an 165 Id.
award of punitive damages--it is worth reiterating 166 64 F.3d at 1175.
that the back-pay remedy has been historically
recoverable in Rule 23(b)(2) Title VII class B. Rule 23(b)(3)
actions, while punitive damages have not.
Plaintiffs request, as an alternative to Rule 23(b)(2),
2. Opting Out of a Rule 23(b)(2) Class that either their proposed class be certified entirely under
Rule 23(b)(3) or that two classes be certified: one under
Plaintiffs argue that the due-process problems caused Rule 23(b)(2) for the issues of liability and declaratory
by allowing non-incidental damages in a Rule 23(b)(2) and equitable relief, the other under Rule 23(b)(3) on
class can be avoided if class members are given notice [**65] the issue of punitive damages. In addition to the
and an opportunity to opt out as other courts have done. Rule 23(a) requirements,
161 Allowing class members to opt out arguably relieves
any due-process concerns. [**63] 162 However, the a class certified under Rule 23(b)(3)
Eighth Circuit foreclosed this option in DeBoer v. Mellon must meet that provision's heightened
Mortgage Company, where it stated that "the privilege to requirements that '[common] questions of
opt-out of the action should be operable only when the law or fact . . . predominate over any
class action is maintainable under [Rule 23(b)(3)] alone." questions affecting only individual
163 While Plaintiffs urge me to distinguish DeBoer on the members, and that a class action is
facts, as the court did in Robinson v. Sears, Roebuck and superior to other available methods for the
Company, 164 I decline the invitation. The court in fair and efficient adjudication of the
Robinson distinguished DeBoer on the grounds that it controversy.'" 167
involved incidental damages and therefore did not
confront the question of opting out of a Rule 23(b)(2) [*379] While this is a close issue, I find that the
class in the context of non-incidental damages. 165 superiority and predominance requirements, though not
Robinson did not explain why the distinction between necessary for certification under Rule 23(b)(2), 168 pose
incidental and non-incidental damages would make a an insuperable barrier to certification of Plaintiffs'
difference. Given the Eighth Circuit's stated reason for proposed class under Rule 23(b)(3).
preferring a mandatory class over a Rule 23(b)(3) opt-out
class -- i.e. "to avoid unnecessary inconsistencies and 167 Blyden v. Mancusi, 186 F.3d 252, 269 (2d
compromises in future litigation" 166 -- the distinction Cir. 1999) (quoting FED. R. CIV. P. 23(b)(3)).
between incidental and non-incidental damages appears 168 Robinson v. Tex. Auto. Dealers Ass'n, 387
immaterial, since the whole point of having a mandatory F.3d 416, 426 n.29 (5th Cir. 2004) ("[P]roposed
Rule 23(b)(2) class is destroyed if opting out is allowed (b)(2) classes need not withstand a court's
regardless of whether the damages involved are [**64] independent probe into the superiority of the class
incidental or are not incidental to the declaratory and action over other available methods of
injunctive relief. Thus, according to DeBoer, if Plaintiffs adjudication[,] as (b)(3) classes must.").
want the right to opt out, they can get it only in a Rule
[**66] As mentioned above, recovery of punitive
23(b)(3) class.
damages in Title VII cases is a fact-specific inquiry
161 111 F. Supp. 2d 1101, 1127 (E.D. Ark. requiring "individualized and independent proof of injury
2000); see also Eubanks v. Billington, 324 U.S. to, and the means by which discrimination was inflicted
App. D.C. 41, 110 F.3d 87, 93-94 (D.C. Cir. upon, each class member." 169 Regardless of whether
Plaintiffs are able to establish a pattern or practice of
Page 19
245 F.R.D. 358, *379; 2007 U.S. Dist. LEXIS 35760, **66;
discrimination at the liability stage, a jury or juries 170 depend on the circumstances surrounding each
still would have to make a "substantial number of individual employment decision, relating to each
individual determinations" 171 in deciding which of the class member. This will require individualized
alleged class members were actual victims and thus evidence as to the qualifications of the persons
entitled to collect a share of the back pay and punitive who applied for and received promotions, as well
damages. 172 Such individual determinations include as the qualifications of the persons who were
whether each proposed class member met Wal-Mart's denied those promotions."); Ramirez v. DeCoster,
minimum requirements at the time he or she applied for a 194 F.R.D. 348, 354 (D. Me. 2000).
position as an over-the-road truck driver or was deterred [**68]
from applying; whether each proposed class member 173 If Plaintiffs establish that Wal-Mart's hiring
applied to a transportation office that was currently hiring polices amounted to a pattern-or-practice of
at the time of the application; and whether Wal-Mart discrimination, then the burden would rest on
denied employment to an individual applicant who met Wal-Mart to demonstrate that the individual
the minimum requirements for lawful reasons. 173 The applicant was denied an employment opportunity
individual issues involved in these "mini-trials" for each for lawful reasons. Teamsters, 431 U.S. at 362.
potential class member would swamp the litigation and, 174 Allison, 151 F.3d at 409; see also Piar,
[**67] as a result, detract from a class action's supra, at 318 ("While not entirely formulaic,
superiority over other methods of adjudication. [back pay determinations, as opposed to the
Furthermore, because the Plaintiffs have exercised their determinations necessary for awards of
right to a jury trial, the impact of these individualized compensatory or punitive damages,] are made
issues on the management of the litigation could not be according to methods of calculation that are well
lessened by the use of more efficient litigation developed and can be applied with some degree of
techniques, such as the use of a special master or other class-wide efficiency, especially because they
similar timesaving device. 174 Finally, "the most need not be determined by juries.").
compelling rationale for finding superiority in a class 175 Allison, 151 F.3d at 420.
action" -- the negative value suit -- is missing in this case.
175 Because of their claim for punitive damages, then, C. Rule 23(c)(4)(A) Severance
Plaintiffs cannot meet the predominance and superiority
Although Plaintiffs' class claim for punitive damages
requirements of Rule 23(b)(3), either for the entire
throws a monkey wrench in certification under either
proposed class or a separate punitive-damages only class.
Rule 23(b)(2) or Rule 23(b)(3), that is not the end of the
169 Allison, 151 F.3d at 419. matter. In my letter to the parties dated [*380] April 4,
170 Title VII plaintiffs have a right to a jury trial 2007, I raised the question of whether I could sever the
when they request punitive damages, 42 U.S.C. § request for [**69] punitive damages under Rule
1981a(c), and Plaintiffs have exercised that right 23(c)(4)(A) and certify a Rule 23(b)(2) class on the issues
here. Doc. No. 40 at 16. of class-wide liability, declaratory relief, and equitable
171 Teamsters, 431 U.S. at 371. relief. To that possibility I now turn. Rule 23(c)(4)(A)
172 Jackson v. Motel 6 Multipurpose, Inc., 130 states that "[w]hen appropriate an action may be brought
F.3d 999, 1006 (11th Cir. 1997); see also Rutstein or maintained as a class action with respect to particular
v. Avis Rent-A-Car Sys., Inc., 211 F.3d 1228, issues." 176 A district court may utilize Rule 23(c)(4)(A)
1235 (11th Cir. 2000) ("Given that each plaintiff on its own initiative. 177 "The theory of Rule 23(c)(4)(A)
must demonstrate that he or she suffered from is that the advantage and economies of adjudicating
intentional discrimination, however, we expect issues that are common to the entire class on a
that most, if not all, of the plaintiffs' claims will representative basis should be secured even though other
stand or fall, not on the answer to the question issues in the case may have to be litigated separately by
whether [Avis] has a practice or policy of [ethnic] each class member." 178 "[T]he relevant inquiry under
discrimination, but on the resolution of . . . highly Rule 23(c)(4)(A) is whether resolution of the particular
case-specific factual issues.") (internal quotation common issues would materially advance the disposition
omitted); Adams v. Henderson, 197 F.R.D. 162, of the litigation as a whole." 179
172 (D. Md. 2000) ("The issue of liability will
Page 20
245 F.R.D. 358, *380; 2007 U.S. Dist. LEXIS 35760, **69;
176 FED. R. CIV. P. 23(c)(4)(A). 219, 222 (2002).

177 Robinson v. Gillespie, 219 F.R.D. 179, 185 181 See, e.g., Carlson v. C.H. Robinson
(D. Kan. 2003). Worldwide, Inc., No. 02-3780, 2005 U.S. Dist.
178 7A CHARLES ALAN WRIGHT, ARTHUR LEXIS 5674, 2005 WL 758602, at *16 (D. Minn.
R. MILLER & MARY KAY KANE, FEDERAL Mar. 31, 2005); Morgan v. United Parcel Serv. of
PRACTICE AND PROCEDURE § 1790 (3d ed. Am., Inc., 169 F.R.D. 349, 358 (E.D. Mo. 1996).
2005). 182 Robinson, 267 F.3d at 167 ("District courts
[**70] should take full advantage of [Rule 23(c)(4)(A)] to
179 Emig v. Am. Tobacco Co., 184 F.R.D. 379, certify separate issues in order to reduce the range
395 (D. Kan. 1998) (internal quotation omitted). of disputed issues in complex litigation and
achieve judicial efficiencies.") (internal quotations
The advisory committee envisioned severance of omitted).
liability issues from damages issues as an appropriate use [**72]
of Rule 23(c)(4)(A). 180 Other courts have severed claims 183 See Issacharoff, supra, at 1073 (limiting
for punitive and compensatory damages from the certification to those claims that actually fit the
determination of liability and declaratory and equitable Rule 23(b)(2) model leaves "individuals free to
relief in Title VII pattern-and-practice class actions. 181 pursue their separate claims should individual
Thus, under Rule 23(c)(4)(A), I am severing the issue of class members . . . find that these claims merited
punitive damages and certifying a class under Rule individual prosecution" without the fear that those
23(b)(2) on the issues of class-wide liability, declaratory claims have been waived in the class action).
relief, and equitable relief. 182 I believe this option makes
the best use of judicial resources and the efficiencies of CONCLUSION
the class-action device to materially advance this
litigation, while at the same time protecting the Based on all the filings and proceedings on the
due-process rights of individual class members and Plaintiffs' motion, and for the reasons stated above,
avoiding the difficult legal and managemental issues Plaintiffs' Motion for Class Certification is GRANTED
attendant to aggregating individual punitive-damages IN PART and DENIED IN PART. I certify the following
claims. Any class member wishing to bring an individual class under Federal Rule of Civil Procedure 23(b)(2) for
suit for punitive or compensatory damages after the purposes of class-wide liability, declaratory relief, and
conclusion of [**71] this litigation will be free to do so equitable relief only:
without worrying about the risk of res judicata. 183
a. African American persons who reside
180 The advisory committee's note states: in the continental United States of
America who have applied for
This provision recognizes that an employment as over-the-road truck drivers
action may be maintained as a at Wal-Mart since September 22, 2001,
class action as to particular issues and who have not been hired; and
only. For example, in a fraud or
similar case the action may retain b. African American persons who
its "class" character only through reside in the continental United States of
the adjudication of liability to the America [*381] who were deterred or
class; the members of the class thwarted from applying [**73] for
may thereafter be required to come positions as over-the-road truck drivers at
in individually and prove the Wal-Mart due to Wal-Mart's challenged
amounts of their respective claims. policies and practices.
FED. R. CIV. P. 23(c)(4)(A) advisory committee's

IT IS SO ORDERED this 16th day of May, 2007.
note; See also Hannah Stott-Bumsted, Note,
Severance Packages: Judicial Use of Federal /s/ Wm. R. Wilson, Jr.
Rule of Civil Procedure 23(c)(4)(A), 91 GEO. L.J.
Page 21
245 F.R.D. 358, *381; 2007 U.S. Dist. LEXIS 35760, **73;

Jonathon Rowles v. Chase Home Finance, LLC Response To Petition For TRO

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Jonathon Rowles v. Chase Home Finance, LLC Response To Petition For TRO

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9:10-cv-01756-MBS Date Filed 12/30/10 Entry Number 17 Page 1 of 24

UNITED STATES DISTRICT COURT

JONATHON ROWLES, individually and as Civil No. 9:10-cv-01756-MBS

Columbia: 1452454 v.4

rights, is precisely what this Court should prohibit.

later participate in litigation.

(Exhibit 1, Declaration of Michael J. Agoglia ¶ 2 (“Agoglia Decl.”).) In addition to providing

Chase committed significant resources to this review, including the development of a

discrepancies in the accounts under review. (Id.)

Should you have questions, please call (XXX) XXX-XXXX.

(See Petition, Exh. A (Docket Entry 10-1).)

The toll-free number is included because, based on its considerable experience in

following scripted Frequently Asked Questions and responses:

1. Why did I receive a check/refund?

2. Do I continue to have SCRA protection from here forward?

3. What are the tax implications of this refund?

most expansive class period would likely extend.

account for SCRA-related overcharge would satisfy claim).

I. THERE IS NO BASIS TO LIMIT OR ALTER CHASE’S REFUND

communications] requiring remedies at all.” Id. at 104.

defendants’ contact with the putative class members”) (citation omitted).

any type of waiver from the homeowners”).

intends to take with this refund.

A. Courts Routinely Permit Refunds of This Kind.

not qualify as grounds to limit Chase’s planned refund. Id.

account with the amount of alleged SCRA overcharge).

B. Plaintiff Has Not Identified Any Case Limiting Communication with

putative class urging them to opt out of class action).

C. Plaintiff’s Proposed Revisions to Chase’s Communication Serve Only to

“to compel follow-up communications in a manner helpful to the advancement of plaintiffs’

requested communication. Id. at *6-7. Similarly, plaintiffs’ proposed communication here

proposed communication that would prejudice putative class members.

1. Plaintiff’s Proposed Revisions to Chase’s Communication

refunds inform recipients that:

• The loan-level review was the result of the present action;

• The refund is for all SCRA-related overcharges;

• The refund is not a settlement of any rights under the SCRA;

caption for such action); and

(Agoglia Decl. ¶ 4, Exh. B.)

2. The Extraordinary Step of Pre-Certification Notice Is Not Warranted

Plaintiff’s proposed revisions would create a confusing and incomplete pre-certification

it induce reliance on the activity of named class members.

Bublitz involved a communication between an employer/defendant and employee/putative class

pre-certification notice is not required or helpful in this instance.

II. PLAINTIFF HAS NOT MET HIS BURDEN FOR A PRELIMINARY

A. Plaintiff Is Not Likely to Succeed on the Merits.

Real Truth About Obama, Inc., 575 F.3d at 346.

determine the amount of punitive damages awardable to that plaintiff.”).6

of plaintiff’s Rule 23(d) Motion, it is evident that he would not prevail.

(Footnote continued from previous page.)

B. Plaintiff Fails to Meet the Additional Requirements of a Preliminary

In addition to showing a likelihood of prevailing on the underlying merits, plaintiff must

interest. Real Truth About Obama, Inc., 575 F.3d at 346.

As a result, there is no harm to plaintiff or putative class members to balance against

notice of any overcharges).)

concern is premised on a mischaracterization of the refunds. A borrower’s decision to accept the

Dated: December 30, 2010 By: s/James Y. Becker

Michael J. Agoglia (Pro Hac Pending)

Attorneys for Defendant Chase Home Finance,

UNITED STATES DISTRICT COURT

JONATHON ROWLES, individually and as Civil No. 9:10-cv-01756-MBS

I, Michael J. Agoglia, declare as follows:

competently testify as follows: