A Cautionary Tale: Attorney Misconduct Could Potentially Warrant Class Action Dismissal
In the case Reliable Money Order Inc. v. McKnight Sales Co. Inc., No. 12-2599 (Jan. 9, 2013), four named plaintiffs filed a lawsuit regarding unlawful “fax blasts” allegedly sent by defendant. During discovery conducted prior to the class action certification hearing, plaintiff trial attorneys received copies of the defendant’s back up disks and hard drives, which contained lists of multiple businesses that were sent faxes. The plaintiff trial lawyers used this electronic data from the defense production to solicit new plaintiffs. Over a hundred new clients joined the class as a result of the solicitations from the electronic data and hard drive information.
At the class certification hearing, the defendant argued against certification by claiming the plaintiffs breached promises of confidentiality regarding the electronic discovery and sent misleading solicitation letters. The district court of Wisconsin certified the class; the defendant appealed.
The issue presented by this case is when does counsel misconduct warrant denial of class certification? “Misconduct by class counsel that creates a serious doubt that counsel will represent the class loyally requires a denial of class certification.” This quote in the case refers to the “serious doubt” standard from a prior case known as Ashford Gear II. The 7th Circuit Court of Appeals wrote that denial of certification is appropriate for misconduct that prejudices the class, creates a direct conflict between counsel and the class or jeopardizes the court’s ability to reach a just and proper outcome.
Fortunately for plaintiffs counsel, the court found that the facts of the present case did not demonstrate prejudice to the class or undermine the integrity of the proceeding. However, while affirming class certification, the court noted that whether the attorneys violated ethical rules was a matter for the state bar disciplinary committees, not the court in the underlying lawsuit.