Source: http://thecomplexlitigator.com/post-data/category/Class+Actions%3A+Adequacy+of+Representation
Timestamp: 2019-04-20 08:13:01+00:00

Document:
Oh, the riches that come to those who wait. After a fairly dry spell, California's Courts of Appeal bestow no fewer than three opinions about issues related to class actions and the Unfair Competition Law ("UCL"). The first up for commentary is Wallace v. Geico General Insurance Company (April 19, 2010). In Wallace, the Court of Appeal (Fourth Appellate District, Division One) considered whether GEICO's offer of monetary compensation to Wallace after she filed her lawsuit caused her to lose standing as the representative plaintiff. Concluding that she did not, the Court reversed the trial court's order striking class allegations.
Wallace filed a proposed class action complaint against GEICO. According to Wallace, her vehicle was damaged in an accident and required body work. She obtained an estimate from a repair shop of her choice and presented the estimate to GEICO. GEICO told her that it would not pay the full amount of the estimate because the hourly rate for labor charged by that business was above what GEICO considered to be the prevailing labor rate.
Meanwhile, following a consent order issued by the California Department of Insurance, GEICO was obligated to calculate reimbursements in an alternative fashion. Two months after Wallace filed her lawsuit, GEICO sent a check for $387.56 to Wallace to cover the amount that Wallace paid out of pocket for the repair of her vehicle. Based on the fact of that payment, the trial court ruled that Wallace lacked standing but gave Wallace time to locate an adequate class representative and allowed discovery for that purpose. Less than two months later, GEICO moved to strike class allegations. The trial court granted the motion on the ground that the class had no representative.
We agree with the parties that the pick off cases are persuasive here, regardless of the injury-in-fact requirement set forth in section 17204. As required by section 17204, Wallace "suffered injury in fact" and "lost money or property" as a result of the practices at issue in this lawsuit. (§ 17204.) Specifically, Wallace was injured by paying for the repair work to her vehicle that GEICO did not agree to cover. Thus, at the time Wallace filed suit she was a proper plaintiff under section 17204. We see no indication in the history of Proposition 64, as reviewed by our Supreme Court in Californians for Disability Rights, supra, 39 Cal.4th 223, 228, that the voters amended section 17204 with the intent of allowing defendants in class actions brought under section 17200 et seq. to defeat class status by forcing an involuntary settlement.
Slip op., at 15-16. The Court went on to explain that Proposition 64 focused on "the filing of lawsuits by attorneys who did not have clients impacted by the defendant's conduct." Slip op., at 16. Thus, "[b]ecause the doctrine expressed in the pick off cases is an established part of class action procedure, there is no reason to believe that Proposition 64 was intended to alter that doctrine in the context of suits brought under section 17200 et seq." Slip op., at 17, relying on In re Tobacco II Cases (2009) 46 Cal.4th 298, 318.
I still can't get over the fact that an insurance company wouldn't pay for the full cost of vehicle repair. Inconceivable.
What are the obligations of class counsel when he learns that the defendant in the class action he is prosecuting has ceased operations, sold its assets to a third party, and intends to file for bankruptcy? In the case before us, counsel obtained a stipulated default and a default judgment that included more than $4 million in aggregate damages for the class, plus more than $1 million in prejudgment interest. So far, so good. But counsel then asserted that his job would be completed once his motion for attorney fees was heard, i.e., that he had no obligation to enforce the judgment on behalf of the class. The trial court disagreed. It ruled that “by assuming the responsibility of pursuing claims on behalf of the class, class counsel assumed the obligation to pursue it until the end (i.e., enforcement of the judgment) and not just until judgment.” Based upon the principles guiding class actions, we agree that class counsel's obligations to the class do not end with the entry of judgment, and hold that class counsel's obligations continue until all class issues are resolved, which may include enforcement of the judgment.
First, the representative plaintiffs must establish that they will adequately represent the class before a class may be certified. (Sav-On, supra, 34 Cal.4th at p. 326.) Part of that showing involves establishing that the counsel they have chosen can and will adequately represent the interests of the class as a whole. (Cal Pak Delivery, Inc. v. United Parcel Service, Inc. (1997) 52 Cal.App.4th 1, 12; McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450.) Second, both the representative plaintiffs and the counsel they have chosen owe absent class members a fiduciary duty to protect the absentees‟ interests throughout the litigation. (Janik v. Rudy, Exelrod & Zieff, supra, 119 Cal.App.4th at p. 938.) Finally, the trial court, “as the guardian of the rights of the absentees, is vested broad administrative, as well as adjudicative, power.” (Greenfield v. Villager Industries, Inc., supra, 483 F.2d at p. 832.) Thus, unlike situations in which the litigant has retained an attorney to conduct litigation, where the litigant and the attorney agree upon the scope of the engagement, and their rights and duties are governed by their agreement, in class actions, where there is no agreement with absentee class members to define the scope of the engagement, class counsel must represent all of the absent class members' interests throughout the litigation to the extent there are class issues, and it is the duty of the trial court to ensure at every stage of the proceeding that counsel is adequately representing those interests.
It may be that, given the specialized knowledge needed to enforce judgments, class counsel is not competent to provide enforcement services without assistance. But nothing prevents class counsel from associating in counsel with that expertise, and the cost of that association can be paid by the class from any recovery achieved. And if, after diligent inquiry, class counsel determines there are no recoverable assets, counsel may present such findings to the trial court, and the trial court, as guardian of the rights of the absent class members, may determine whether counsel should be relieved of any further obligations to the class.
This opinion is a necessary reminder of the extent of the duty assumed by class counsel when that fateful line is crossed and the proposed class is certified.
Defense counsel are well acquainted with the concept of conflicts checks at the outset of a matter. Most defense firms with more than a handful of attorneys have electronic systems in place that track all past representations for the purposes of assessing potential conflicts when a matter is first offered to a firm. Plaintiff-side practitioners, at least in my observations, are less rigorous about conflict checks, due, in part, to the infrequency with which conflicts arise in a predominantly plaintiff-side practice. While the infrequency of conflicts allows for laxity without consequence in most cases, when conflicts do surface, the results can be painful.
For example, in Baas, et al. v. Dollar Tree Stores, Inc., (N.D. Cal. Case No. 07-03108 JSW), plaintiffs' counsel undertook to represent two hourly employees in a putative class actions against Dollar Tree Stores, Inc. (“Dollar Tree”), contending that Dollar Tree altered the time records of its employees and, thus, failed to compensate employees for all of the time that they actually worked. Plaintiffs moved for class certification. The Court denied the motion on the sole ground that a conflict of interest by counsel prevented them from adequately representing the class.
“Dollar Tree argues that Plaintiffs’ counsel’s representation of John Hansen (“Hansen”), the manager of the store in which named Plaintiffs Baas and Lofquist used to work, in another lawsuit against Dollar Tree creates a conflict of interest. “The responsibility of class counsel to absent class members whose control over their attorneys is limited does not permit even the appearance of divided loyalties of counsel.” Kayes v. Pacific Lumber Co., 51 F.3d 1449, 1465 (9th Cir. 1995) (quoting Sullivan v. Chase Inv. Serv. of Boston, Inc., 79 F.R.D. 246, 258 (N.D. Cal. 1978)). As the court explained in Kayes, “[t]he ‘appearance’ of divided loyalties refers to differing and potentially conflicting interests and is not limited to instances manifesting such conflict.” Id.
“Here, Plaintiffs’ counsel’s client Hansen is a witness in this matter. Lofquist testified in her deposition that Hansen was aware that she worked off the clock in his presence and that Hansen encouraged her to do so. (Declaration of Beth Hirsch (“Hirsch Decl.”), Ex. F at 247:4-248:17. Hansen testified that Lofquist was paid for the time she worked and that he never asked anyone to come in and work off the clock. (Hirsch Decl., Ex. D at 547:23-548:16). He further testified that he knew it was against Dollar Tree’s policy to misrepresent the time employees worked or took breaks. (Id. at 648:13-17). To reconcile the testimony of Hansen and Lofquist, Plaintiffs’ counsel will either need to portray Hansen as a liar or as a manager who knowingly violated his company’s policies. Plaintiffs counter that Plaintiffs’ and Hansen’s claims and class actions are distinct and do not conflict with one another. Plaintiffs further argue that because Hansen is merely involved as a witness in this matter, he is not placed in any jeopardy of being liable. Plaintiffs thus focus on the existence or absence of any conflicts between the two cases and fail to address the duty of loyalty Plaintiffs’ counsel owe to all their clients.
From the testimony in the record, it appears as Plaintiffs’ counsel will either have to cross-examine Hansen and impeach his credibility, or “soft-pedal” their examination of Hansen to the detriment of their representation of the class members in this action. Even if this conflict of interest could be waived, Plaintiffs’ counsel would need to obtain waivers from every class member, which, as a practical matter, they cannot do from the absent class members. Therefore, the Court concludes that Plaintiffs have not demonstrated their counsel would adequately represent the class as required by Rule 23(a)(4). Failure to satisfy any one of Rule 23’s requirement precludes class certification. Rutledge v. Electric Hose & Rubber, Co., 511 F.2d 668, 673 (9th Cir. 1975); see also Sipper v. Capital One Bank, 2002 WL 398769, *4 (C.D.Cal. Feb. 28, 2002) (denying motion for class certification based on plaintiffs’ counsel’s conflict of interest). Accordingly, the Court denies Plaintiffs’ motion for class certification.
(Opinion, at p. 5.) In a nutshell, plaintiffs' counsel reached one rung too far and were cut off at the knees for it. Had they fully explored the potential for conflict at the outset of the second case, they may have concluded that a referral of the case to another firm was the better course of action.
Here is a link to the Order for visitors without flash: April 1, 2008 Order Denying Certification.
UPDATE: A reader informs me that the Acrobat.com widget is not functioning correctly. I've had some problems with it myself in getting this post up. It is possible that the pdf file contains some sort of error. If I can't get it fixed, I may have to see if iPaper works any better with this file.
UPDATE 2: It appears that Acrobat.com is experiencing some problem today. I am presenting the Order through Scribd.

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