Defending Class Actions: Certification Under Rule 23 – Part II
The Adequate Representation Requirement of Rule 23(a)(4)
In defending a class action, the single most important motion facing a defendant is the plaintiff’s motion to certify a class. Rule 23(a) requires that the plaintiff demonstrate numerosity, commonality and typicality, and that the class members will be adequately represented, and must additionally demonstrate that the action satisfies Rule23(b). The class action requirements of Rule 23 are mandatory. Thus, class certification requires that the prospective class representative satisfy the elements set forth in Rule 23(a), as well as the elements of Rule 23(b) (discussed in a separate article) be met. General Telephone Co. of Southwest v. Falcon, 457 U.S. 152, 102 S.Ct. 2364 (1982) (reversing class certification for failure to analyze Rule 23 requirements). This article discusses the adequate representation requirement of Rule 23(a).
Rule 23(a)(4) of the Federal Rules of Civil Procedure provides that a class action may not be maintained unless “the representative parties will fairly and adequately protect the interests of the class.” At the end of this article, we briefly discuss issues of the criminal record and/or credibility of the proposed class representative, and the effect on class certification. In brief, such issues may be relevant because unlike numerosity and commonality, which focus on the characteristics of the class, typicality and adequacy of representation focus on the characteristics of the plaintiff representative of the class. Hassine v. Jeffes, 846 F.2d 169, 176 n.4 (3d Cir.1988); Newberg on Class Actions, “Prerequisites for Maintaining a Class Action,” §3:13, pp.316-17 (4th ed. 2002).
On the other hand, this test focuses generally but not exclusively on the adequacy of counsel for the represented class, rather than the adequacy of the plaintiff representatives. In fact, the Eleventh Circuit recently summarized the four elements required for class certification under Rule 23(a) as “numerosity, commonality, typicality, and adequacy of counsel.” Hines v. Widnall, 334 F.3d 1253. 1255-56 (11th Cir. 2003) (italics added).
The Second Circuit opinion in Eisen v. Carlisle & Jacquelin, 391 F.2d 555, 562 (2d Cir. 1968), is widely quoted on adequacy of class representation. Eisen stated that “an essential concomitant of adequate representation is that the party’s attorney be qualified, experienced and generally able to conduct the proposed litigation.” The Second Circuit later explained its reasoning behind this statement:
Since absent class members are conclusively bound by the result of an action prosecuted by a party alleged to represent their interests, the court’s selection of counsel for the absent class should be guided by the best interests of those members, not the entrepreneurial initiative of the named plaintiffs’ counsel. In making a class certification decision, a district court must frequently select as lead counsel for the class the attorney who will best serve the interests of its members. And the court may also find it necessary to appoint additional counsel to protect the interests of subclasses. See 7 Wright & Miller, Federal Practice and Procedure, Civil § 1765 at 617-623 (1972); 1 Moore’s Federal Practice, Part 2, s 1.44 at 50-51 (2d ed. 1977); Amos v. Board of Directors of City of Milwaukee, 408 F.Supp. 765 (E.D.Wis.), aff’d, 539 F.2d 625 (7th Cir. 1976).
Cullen v. New York State Civil Service Commission, 566 F.2d 846, 849 (2nd Cir. 1977).
Properly read, however, Rule 23(a)(4) requires more.
The adequacy inquiry under Rule 23(a)(4) serves to uncover conflicts of interest between named parties and the class they seek to represent. See General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 157-158, n.13, 102 S.Ct. 2364, 2370-2371, n.13, 72 L.Ed.2d 740 (1982). “[A] class representative must be part of the class and ‘possess the same interest and suffer the same injury’ as the class members.” East Tex. Motor Freight System, Inc. v. Rodriguez, 431 U.S. 395, 403, 97 S.Ct. 1891, 1896, 52 L.Ed.2d 453 (1977) (quoting Schlesinger v. Reservists Comm. to Stop the War, 418 U.S. 208, 216, 94 S.Ct. 2925, 2930, 41 L.Ed.2d 706 (1974)).
Amchem Products, Inc. v. Windsor, 521 U.S. 591, 625-626, 117 S.Ct. 2231 (1997) (italics added).
Because Rule 23(a)(4) focuses “on the desired characteristics of the class representative,” Newberg on Class Actions, §3:13, pp.316-17, courts will entertain representative-specific objections in determining whether to certify a class. Or as one court explained,
Generally, the adequacy requirement focuses on the competency of class counsel, but it is clear that some inspection of the individual representative is required.
Byes v. Telecheck Recovery Services, Inc., 173 F.R.D. 421, 425-26 (E.D. La. 1997) (citations omitted).
For example, the defendants in Byes challenged the adequacy of Byes as a class representative on three grounds: “her unfamiliarity with the proceedings in this case, her lack of credibility, and her criminal conviction for theft.” 173 F.R.D. at 426.
The first of these issues requires a careful understanding of the difference between ignorance and inattention. “A class representative is not required to understand the meaning of complex legal terms or to direct litigation strategies.” Byes, at 426. Indeed, this was settled by the United States Supreme Court more than 40 years ago, when it reversed a Circuit Court judgment based on the educational level of the proposed class representative:
In fact the opinion of the Court of Appeals indicates in several places that a woman like Mrs. Surowitz, who is uneducated generally and illiterate in economic matters, could never under any circumstances be a plaintiff in a derivative suit brought in the federal courts to protect her stock interests.
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We cannot construe Rule 23 or any other one of the Federal Rules as compelling courts to summarily dismiss, without any answer or argument at all, cases like this where grave charges of fraud are shown by the record to be based on reasonable beliefs growing out of careful investigation. The basic purpose of the Federal Rules is to administer justice through fair trials, not through summary dismissals as necessary as they may be on occasion. These rules were designed in large part to get away from some of the old procedural booby traps which common-law pleaders could set to prevent unsophisticated litigants from ever having their day in court. If rules of procedure work as they should in an honest and fair judicial system, they not only permit, but should as nearly as possible guarantee that bona fide complaints be carried to an adjudication on the merits. Rule 23(b), like the other civil rules, was written to further, not defeat the ends of justice. The serious fraud charged here, which of course has not been proven, is clearly in that class of deceitful conduct which the federal securities laws were largely passed to prohibit and protect against. There is, moreover, not one word or one line of actual evidence in this record indicating that there has been any collusive conduct or trickery by those who filed this suit except through intimations and insinuations without any support from anything any witness has said. The dismissal of this case was error. It has now been practically three years since the complaint was filed and as yet none of the defendants have even been compelled to admit or deny the wrongdoings charged. They should be.
Surowitz v. Hilton Hotels Corp., 383 U.S. 363, 372, 373-74, 86 S.Ct. 845 (1966).
Nonetheless, “Courts have found the proposed representative inadequate in numerous cases due to the plaintiff’s unfamiliarity with the suit,” Byes, at 426 and cases cited, that is, where the plaintiff’s participation in the litigation is “minimal” so that the court determines that responsibility for the litigation has been abdicated to class counsel.
A class representative’s credibility or criminal record similarly presents two different issues. On the one hand, it is well settled that a criminal record alone does not render an individual incapable of serving as a class representative. Even “a felony criminal record is not per se disqualifying as a class representative.” Haywood v. Barnes, 109 F.R.D. 568, 579 (E.D. N.C.1986). Accord Randle v. Spectran, 129 F.R.D. 386, 392 (D. Mass. 1988) (citing Haywood); Byes, at 427 (“A criminal record is not per se disqualifying.”
However, if the criminal record goes to the credibility of the prospective class representative, then the court may refuse to certify the class. See e.g., In re BankAmerica Corp. Securities Litigation, 95 F.Supp.2d 1044, 1050 (E.D. Mo. 2000) (stating that “one proposed class representative was highly inadequate due to his criminal record and history of participation in fraud”); Green v. Carlson, 653 F.2d 1022 (5th Cir.1981), cert. denied, 454 U.S. 944,102 S.Ct. 484 (1981) (affirming refusal to grant class action where proposed representative had engaged in a pattern of abuse of the judicial system).