In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 03–2217

EDWARD P. DECHERT, individually

as trustee of the estate in bankruptcy

of Judy A. Oyler, and on behalf of

all others similarly situated to her,

Plaintiff-Appellee,

v.

THE CADLE COMPANY,

Defendant-Appellant.

____________

Appeal from the United States District Court

for the Southern District of Indiana, Indianapolis Division.

No. IP01–0880–C–B/G—Sarah Evans Barker, Judge.

____________

SUBMITTED MAY 27, 2003—DECIDED JUNE 24, 2003

____________

Before BAUER, POSNER, and COFFEY, Circuit Judges.

POSNER, Circuit Judge. We accepted the defendant’s appeal under Fed. R. Civ. P. 23(f) from the certification of

this suit as a class action in order to determine whether,

as the district judge held, a trustee in bankruptcy is, in

general and in this case, a proper class representative—

whether, that is, he is a member of the class who, as named

plaintiff, “will fairly and adequately protect the interests

of the class.” Fed. R. Civ. P. 23(a)(4). There are no appel-
2 No. 03-2217

late cases on the question, although our decision in Morlan,

quoted below, bears on it; a district court has held that

a trustee in bankruptcy cannot be a proper class representative, King v. Sharp, 63 F.R.D. 60, 64–65 (N.D. Tex. 1974);

and several other cases remark the danger of a conflict of

interest if a bankruptcy trustee is allowed to be class

representative. Ernst & Ernst v. U.S. District Court, 457

F.2d 1399 (5th Cir. 1972) (per curiam); Maddox & Starbuck,

Ltd. v. British Airways, 97 F.R.D. 395, 397 n. 2 (S.D.N.Y. 1983);

In re Plywood Anti-Trust Litigation, 76 F.R.D. 570, 579

(E.D. La. 1976); In re Ball, 201 B.R. 204, 208–09 (Bankr. N.D.

Ill. 1996).

The suit at hand was filed by Judy Oyler under the Fair

Debt Collection Practices Act, 15 U.S.C. § 1692, and alleges that she had received a dunning letter from Cadle

Company (the defendant), a collection agency, that violated the Act because it failed to state the amount that

Cadle was seeking to collect from her and had other deficiencies as well. She sued on behalf not only of herself

but also of all other persons—at least 30 in number, and

possibly 68—who had received the identical form letter

from Cadle. She sought for herself statutory damages

(a maximum of $1,000), costs, and attorneys’ fees. 15 U.S.C.

§ 1692k. If the case is certified as a class action, the other

members of the class will be entitled to total damages of

either $500,000, or 1 percent of the defendant’s net worth—

whichever is less. 15 U.S.C. § 1692k(2)(B). Cadle’s net

worth is somewhere between $350,000 and $800,000, so

that the additional damages to which the class would be

entitled if the suit were successful would be between $3,500

and $8,000.

Shortly before filing the suit, however, Oyler had declared bankruptcy under Chapter 7 of the Bankruptcy

Code, and when the trustee discovered this he had himself
No. 03-2217 3

substituted for her as the plaintiff in her suit. He then

asked the district court to certify the suit as a class action,

with him as the only named plaintiff and therefore as

the only class representative. The district court did so,

precipitating this appeal.

In Morlan v. Universal Guaranty Life Ins. Co., 298 F.3d

609, 619 (7th Cir. 2002), we noted the infrequency of class

actions in which a trustee in bankruptcy is the named

plaintiff: “What trustee in bankruptcy would think it

worthwhile to insert himself in the place of the named

plaintiff? We are not surprised to find very few cases in

which trustees in bankruptcy have done so. The named

plaintiff in a class action usually has only a small stake in

the action, and while the stakes for the class as a whole

may be large, very few of the benefits of settling the

class action or prosecuting it to judgment would be received by the trustee (which is to say the creditors), since

he would just be the named plaintiff’s surrogate. Most of

the benefits would go to the other members of the class

and to the lawyers for the class, so that the trustee, as

class representative yet having fiduciary obligations exclusively to the estate in bankruptcy, would have a potential conflict of interest” (citations omitted). The problems

we noted in Morlan are present in this case. Oyler’s trustee

has a fiduciary obligation to Oyler’s unsecured creditors,

and they will derive no benefit from so much of any judgment or settlement in the class action as enures to the benefit of the other members of the class.

Granted, a class representative always has a conflict of

interest of sorts, because he has an individual as well as a

representative interest in the outcome of the case. In the

usual class-action case, in which the class representative’s stake is so small that as a practical matter the lawyer

for the class completely controls the litigation, there is
4 No. 03-2217

a danger remarked in numerous cases that the lawyer

will negotiate a settlement with the defendant that gives

the lawyer a large fee but the class a meager recovery. See,

e.g., Reynolds v. Beneficial National Bank, 288 F.3d 277

(7th Cir. 2002). But that is just to say that agents, being selfinterested, cannot be trusted always to be faithful to

their principals. This problem, which economists discuss under the rubric of “agency costs,” lies behind the

law’s imposing on agents strict, enforceable duties of care

and loyalty toward their principals, and behind such

specific rules as the requirement that the court approve

a class-action settlement because of the “sell out” danger

noted above. But from the ubiquity of potential conflicts

of interest in the class-action setting and other principalagent settings it does not follow that a person can properly

be an agent of two principals having conflicting interests

(unless both principals consent). For then the conflict

of interest is not potential but actual. The fact that some

lawyers may be imperfect agents because of their selfinterest does not permit a lawyer to represent two clients

in the same case who have inconsistent defenses, without both clients’ consent.

It might seem that the conflict of interest in this case

between the trustee in bankruptcy and the members of

the class (other than the estate in bankruptcy) is inherent

in class actions because a named plaintiff cannot be assumed to have the same interest in the litigation as the

unnamed class members. So what difference does it

make whether the named plaintiff is a trustee in bankruptcy? The difference is that in the usual class action the

named plaintiff is a nominal party and the real party is

the lawyer for the class. The lawyer has no reason to favor the named plaintiff over the rest of the class members. When the named plaintiff is a fiduciary, however,

he cannot just “go along” with the class lawyer. He has
No. 03-2217 5

a duty to seek to maximize the value of his claim, and

this duty may collide with his fiduciary duty as class

representative (if he is permitted to be the class representative) to represent all members of the class equally. Such

a collision is especially likely in a case in which the fiduciary is a trustee in bankruptcy, because class-action litigation tends to be protracted yet the Bankruptcy Code

requires the trustee to complete his work expeditiously.

11 U.S.C. § 704(1).

We do not want to lay down a flat rule that a trustee

in bankruptcy (or, what is the equivalent, a debtor in

possession) can never be a class representative. And we

do not want to question the appropriateness of other fiduciaries, such as pension funds, guardians, and administrators of decedents’ estates, serving as class representatives, see Woodard v. Online Information Services, 191 F.R.D.

502, 506 (E.D.N.C. 2000); In re Pizza Time Theatre Securities

Litigation, 112 F.R.D. 15, 22 (N.D. Cal. 1986); Landy v.

Amsterdam, 96 F.R.D. 19, 21 (E.D. Pa. 1982); Kane Associates

v. Clifford, 80 F.R.D. 402, 409–10 (E.D.N.Y. 1978), especially

when there is consent by the beneficiaries, as in In re

Independent Gasoline Antitrust Litigation, 79 F.R.D. 552, 557

(D. Md. 1978). There may be cases in which the expected

recovery of individual class members is substantial and

only a fiduciary is available to be the class representative.

There has been no showing of either circumstance in

this case.

The case features another conflict of interest besides

that inherent in the trustee’s dual role as class representative and creditors’ representative: The defendant, Cadle,

the collection agency that sent the dunning letter to Oyler,

is affiliated with the firm that bought Oyler’s delinquent

loan that Cadle dunned her to repay. That firm is thus

one of Oyler’s creditors, and by virtue of the affiliation
6 No. 03-2217

with it Cadle is an indirect creditor of Oyler. She responded

to the dunning letter by suing the sender rather than by

paying what she owed her creditor. Because the trustee

in bankruptcy is the representative of all Oyler’s unsecured creditors, he is (via the affiliation) Cadle’s representative, putting him on both sides of the controversy

between the creditors and Oyler. There would be no

actual conflict if one of the other class members were

the named plaintiff, for the trustee would then have no

control over the litigation.

For the reasons stated, the class certification is vacated.

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—6-24-03