Opinion ID: 1971027
Heading Depth: 1
Heading Rank: 1

Heading: The limited-fund class action

Text: ¶ 6. Our review of the class-certification decision has two aspects: we conduct a de novo review of the legal standards employed, and if the proper legal standards were used, we review the trial court's application of those standards for abuse of discretion. See Heerwagen v. Clear Channel Commc'ns, 435 F.3d 219, 225 (2d Cir.2006). Plaintiffs contend, citing Heerwagen, that a denial of class certification is accorded noticeably less deference than . . . a grant of certification. We disagree with plaintiffs on this point, and decline to construe Vermont Rule 23 as the Second Circuit construed the analogous federal rule in that case. [2] ¶ 7. A mandatory class may be certified under Rule 23(b)(1)(B) when the prerequisites of Rule 23(a)numerosity, commonality, typicality, and adequacyare satisfied and (1) the prosecution of separate actions by . . . individual members of the class would create a risk of . . . . (B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. V.R.C.P. 23(b). [3] Vermont's rule mirrors the federal rule in every respect relevant here, see F.R.C.P. 23(b), and we therefore look to federal precedent to aid our interpretation of our rule. [4] ¶ 8. The U.S. Supreme Court has analyzed the federal limited-fund rule at some length in a recent case, Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999). The Ortiz Court noted that, although Rule 23(b)(1)(B) also encompasses several other varieties of class actions, [o]ne recurring type of such suits was the limited fund class action, aggregating `claims . . . made by numerous persons against a fund insufficient to satisfy all claims.' Id. at 834, 119 S.Ct. 2295 (quoting Advisory Committee Notes, F.R.C.P. 23). As the superior court noted in denying plaintiffs' motion for limited-fund class certification, the Ortiz Court identified three characteristics of cases appropriate for limited-fund treatment under the rule. Id. at 838-41, 119 S.Ct. 2295. ¶ 9. First, the totals of the aggregated liquidated claims and the fund available for satisfying them, set definitely at their maximums, demonstrate the inadequacy of the fund to pay all the claims. Id. at 838, 119 S.Ct. 2295. This inadequacy is the sine qua non of a limited-fund class action; without a demonstration of insufficiency, binding absent class members would be unnecessary; the absent class members would be able to recover fully in separate actions. Id. at 838-39, 119 S.Ct. 2295; In re Joint E. & S. Dist. Asbestos Litig., 982 F.2d 721, 739 (2d Cir.1992) (limited-fund class certification appropriate to avoid prejudice to those who file later, where fund likely to be exhausted by earlier filers). Courts have adopted two different standards to determine the inadequacy of an asserted limited fund: (1) inescapable risk of fund exhaustion, In re N. Dist. of Cal., Dalkon Shield IUD Prod. Liab. Litig., 693 F.2d 847, 851-52 (9th Cir.1982); and (2) substantial probability, Trautz v. Weisman, 846 F.Supp. 1160, 1169 (S.D.N.Y.1994). The United States Supreme Court declined in Ortiz to decide which standard was appropriate because it determined that the Ortiz plaintiffs failed to meet either standard. 527 U.S. at 848 n. 26, 119 S.Ct. 2295. ¶ 10. Second, the whole of the inadequate fund [is] to be devoted to the overwhelming claims. Id. at 839, 119 S.Ct. 2295. This requirement ensures that limited-fund treatment does not give a defendant a better deal than seriatim litigation would have produced. Id. Third, the Ortiz Court required that the claimants identified by a common theory of recovery [be] treated equitably among themselves. Id. The Ortiz Court characterized these attributes initially as at least a sufficient set of conditions to justify binding absent members of a class under Rule 23(b)(1)(B), id. at 838, 119 S.Ct. 2295, but went on to conclude that there are good reasons to treat these characteristics as presumptively necessary, and not merely sufficient. Id. at 842, 119 S.Ct. 2295 (emphasis added). ¶ 11. We have noted as a general matter that class actions are intended to be of limited and special application, not to be casually resorted to or authorized. George v. Town of Calais, 135 Vt. 244, 245, 373 A.2d 553, 554 (1977). This is particularly true of the mandatory class actions authorized by Rule 23(b)(1)(B), because class members are bound by the judgment or settlement obtained even if they do not participate in the action. See Reporter's Notes, V.R.C.P. 23 (members of a 23(b)(1)(B) class cannot opt out because the very purpose of the action is to obtain a judgment that binds all in the class.). As the Reporter's Notes imply, mandatory class actions are fundamentally in tension with constitutional guarantees and therefore should not be liberally allowed. Ortiz, 527 U.S. at 845-47, 119 S.Ct. 2295; see also Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 612-13, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) (Rule 23's requirements must be interpreted in keeping with Article III constraints, and with the Rules Enabling Act, which instructs that rules of procedure `shall not abridge, enlarge, or modify any substantive right.') (quoting the Rules Enabling Act, 28 U.S.C. § 2072(b)). Our Rules Enabling Act, 12 V.S.A. § 1, is nearly identical to the federal act, with which the Amchem Court was concerned. For these reasons, we construe Rule 23(b)(1)(B) narrowly. ¶ 12. Here, the trial court correctly concluded that the burden was on plaintiffs to show that they satisfied the Ortiz requirements. First, then, it was plaintiffs' burden to show that the total of the aggregated liquidated claims exceeded the fund available to satisfy them. See Ortiz, 527 U.S. at 838, 119 S.Ct. 2295. Plaintiffs contend that their aggregate claim for attorney's fees arising from their CFA claims exceeds the total amount of funds available to satisfy the claims. Plaintiffs assert that defendant's $21 million insurance policy will be exhausted by a total claim for fees and costs of over $25 million. The $25 million figure was derived by multiplying plaintiffs' estimate of the number of claimants633by plaintiffs' estimate that each claimant would be entitled to recover $40,000 in legal fees and costs. Plaintiffs assert that the attorney's fees are liquidated for purposes of satisfying the Ortiz requirement. The superior court, without analysis, characterized the fees as liquidated, but then concluded that plaintiffs' fundamental stumbling block in meeting their burden was their calculation of the number of class members entitled to a fee award. Because we affirm the result on a different basis, see Hudson v. Town of East Montpelier, 161 Vt. 168, 170, 638 A.2d 561, 563 (1993), we do not consider the question of the number of class members. ¶ 13. We conclude that the CFA-based attorney's fees are not liquidated. The trial court concluded that the only liquidated claim Plaintiffs present is their statutory claim for attorneys' fees and costs under the [CFA]. As a general matter, a liquidated claim is one whose amount is settled or determined, [especially] by agreement. Black's Law Dictionary 949 (8th ed.2004). ¶ 14. The CFA provides that a prevailing plaintiff may . . . recover from the seller, solicitor, or other violator . . . reasonable attorney's fees. 9 V.S.A. § 2461(b). Where a court finds that the [CFA] has been violated, it is not within the court's discretion to determine whether to award such fees . . . but rather its task is to determine what constitutes reasonable fees in each instance. L'Esperance v. Benware, 2003 VT 43, ¶ 21, 175 Vt. 292, 830 A.2d 675 (citation omitted). Trial courts determine reasonable attorney's fees by making a preliminary determination of the number of hours reasonably expended on the case, multiplying that number by a reasonable hourly rate, and then adjusting the result based on several factors. Id. ¶ 22. We afford the trial court wide discretion in determining reasonable fees. Human Rights Comm'n v. LaBrie, Inc., 164 Vt. 237, 251, 668 A.2d 659, 669 (1995). ¶ 15. Although the parties have cited no cases directly on this point, and our research reveals none, we note that other courts have concluded, for purposes of prejudgment-interest awards, that attorney's fees are not liquidated until fixed by the trial court following discretionary calculations similar to those detailed above. See, e.g., State v. Ehrlander, 1998 WL 34347991 (Alaska 1998) (unreported mem.) (upholding trial court denial of prejudgment interest on attorney's fees because the claim for attorney's fees was not liquidated until reduced to judgment); Asian Imports, Inc. v. Pepe, 633 So.2d 551, 553 (Fla.Dist.Ct.App.1994) (trial court erred in awarding plaintiff attorney's fees without affording defendant an opportunity to be heard on the issue of their amount; an item of damages for `reasonable attorney's fees' is not liquidated). Plaintiffs cite only a decision from the Bankruptcy Appellate Panel of the Ninth Circuit Court of Appeals for the proposition that the class members' attorney's fees are liquidated. In that case, the court decided that certain attorney's fees were subject to ready determination and therefore were liquidated for purposes of determining Chapter 13 bankruptcy eligibility. In re Wenberg, 94 B.R. 631, 634-35 (9th Cir. BAP 1988). But that determination was only possible in Wenberg because the fees at issue had already been incurred and billed; although the parties disputed the precise amount, it was susceptible to calculation by the court. Id. The Wenberg decision was a limited one, and we decline to extend it to this very different factual context. Plaintiffs here are simply speculating about future fees and costs to be incurred. Those fees are not, like the fees in Wenberg, subject to ready determination. ¶ 16. Like the Ortiz Court, we need not decide whether plaintiffs must show a substantial probability of fund exhaustion, or that allowing the adjudication of individual claims will inescapably compromise the claims of absent class members. Ortiz, 527 U.S. at 848 n. 26, 119 S.Ct. 2295. Plaintiffs met neither standard, and the trial court properly declined to certify the class.