- An attorney’s fiduciary duties are owed to all class members equally.
- The lawyer changed law firms and filed a second, identical class action lawsuit with a new class representative.
A lawyer who filed a class action lawsuit on behalf of a class representative did not breach his fiduciary duties to that client by changing law firms and filing a second, identical class action lawsuit with a new class representative, according to a federal appellate court. Class counsel owes a fiduciary duty to the class as a whole and not to any individual class member, including the class representative.
The case of Medical & Chiropractic Clinic, Inc. v. David M. Oppenheim (M&C v. Oppenheim) began with the law firm of Anderson & Wanca (A&W) filing a putative class action against the Buccaneers Limited Partnership, doing business as the Tampa Bay Buccaneers, for alleged violations of the Telephone Consumer Protection Act (TCPA). The plaintiff Medical & Chiropractic Clinic, Inc. (M&C) served as one of the class action representatives in the M&C v. Buccaneers suit. A mediation was held, but the A&W firm refused to settle the class action for anything less than a $99 million settlement fund and $24.75 million in attorney fees.
Afterward, one of A&W’s lawyers, David Oppenheim, left the firm and joined a competitor, the Bock Law Firm, LLC. Before leaving the A&W firm, Oppenheim copied the hard drive of his A&W firm computer. The hard drive contained briefs, pleadings, and other documents he had worked on at A&W, along with a year’s worth of his emails. The Bock Firm then filed a new class action on behalf of Technology Training Associates against the Buccaneers (TTA v. Buccaneers), alleging the same TCPA claims. Attorney Oppenheim was screened from any involvement in the TTA v. Buccaneers lawsuit. Shortly thereafter, the Bock Firm reached a proposed settlement with the Buccaneers and sought preliminary approval of the class settlement. The proposed settlement of $19.5 million and $4.875 million in attorney fees in the TTA v. Buccaneers lawsuit was substantially less than had been proposed in the M&C v. Buccaneers lawsuit.
While the motion for preliminary approval was pending, M&C moved to intervene in the TTA v. Buccaneers lawsuit. The U.S. District Court for the Middle District of Florida initially denied the intervention motion and granted preliminary approval of the class settlement. On interlocutory appeal, however, M&C was permitted to intervene in the case to protect its interests.
Separate and apart from intervening in TTA v Buccaneers, M&C filed a separate lawsuit in Florida state court against Oppenheim and the Bock Firm, alleging that Oppenheim breached his fiduciary duties of loyalty and confidentiality to the named class representative. M&C sought money damages and an injunction preventing the Bock Firm from representing clients in the TTA v. Buccaneers lawsuit. Oppenheim and the Bock Firm removed the M&C v. Oppenheim case to federal court, and the parties filed cross motions for summary judgment.
The district court held “(1) that Oppenheim did not owe an individual fiduciary duty to M&C, (2) that even assuming such a duty existed, M&C failed to show Oppenheim or the Bock Firm breached that duty, and (3) that, in any event, M&C failed to prove damages.”
Subsequently, the intervenors in the TTA v. Buccaneers lawsuit filed a renewed motion to decertify the settlement class on the grounds that the plaintiff’s claims were potentially barred by the statute of limitations and because counsel’s switching law firms may have impacted plaintiff’s negotiating position. The district court granted the motion and set aside the settlement.
On appeal in M&C v. Oppenheim, the U.S. Court of Appeals for the Tenth Circuit noted that “[t]he parties all agree that, as putative class counsel, Oppenheim owed fiduciary duties to the class as a whole. But, that is not the issue we must address.” The court of appeals instead turned to the issue of “whether class counsel owes a fiduciary duty to class representatives that is distinct from the fiduciary duty owed to the class.” The court concluded that “class counsel does not.”
But the appellate court did not stop there, describing M&C’s suit against Oppenheim and the Bock Firm as “an attempt to end run around the TTA court,” and “a thinly-veiled attempt to derail the TTA settlement.” M&C sought not only money damages but also an injunction to prevent the Bock Firm from proceeding as class counsel in the TTA v. Buccaneers case. “As the saying goes, that won’t work,” opined the appellate court. “There is only one gatekeeper under Rule 23, and it was wholly inappropriate for M&C and its counsel to go to state court in an attempt to employ another one,” the court concluded.
The Tenth Circuit additionally found that M&C failed to demonstrate that it suffered damages from Oppenheim’s alleged fiduciary breach. The appellate court held that the proper forum for objectors like M&C to address a proposed settlement was the TTA v. Buccaneers court. “For these reasons, any objections to the federal TTA settlement, or any claim that the TTA settlement somehow injured M&C, should have been raised before the court in the federal TTA case in accordance with Rule 23.”
“The court got it right,” asserts Adam Polk, San Francisco, CA, cochair of the ABA Litigation Section’s Class Actions & Derivative Suits Committee. “The decision makes clear that you need to go to the court where the settlement is pending to object to a proposed settlement.”
“While the case is a hot mess and sort of a soap opera,” opines Ian H. Fisher, Chicago, IL, cochair of the Litigation Section’s Class Actions & Derivative Suits Committee, “the case makes it clear that class counsel cannot prefer one class member over the class as a whole. If you owe a fiduciary duty to the class, you do not have an increased fiduciary duty to the class representative.”
Section leaders believe that there are several lessons to be learned from the opinion. First, the “opinion is a clear rebuke of M&C’s counsel’s attempt to end-run around the process for objecting to proposed class settlements. The settlement court and only the settlement court gets to decide these types of issues,” says Fisher. After M&C v. Oppenheim, the clear lesson is “take it to the settlement judge,” Fisher counsels.
Second, Polk believes that there also was some judicial consternation over M&C’s counsel “not staying in their lane. Counsel needs to bring issues up in the forum where the class settlement is pending.” Ultimately, however, the proposed settlement in M&C v. Buccaneers “was decertified,” observes Polk. “The takeaway from decisions like these is that counsel should cooperate or pursue consolidated or even MDL proceedings to avoid a reverse auction,” he offers. “Otherwise, the settlement court is the only proper forum to contest a settlement and courts will have very little patience for a collateral attack on a proposed settlement in a separate class action,” Polk advises.