Opinion ID: 1560325
Heading Depth: 1
Heading Rank: 5

Heading: Inclusion Within The Class Of Members Having Potentially Conflicting Claims

Text: Court of Chancery Rule 23(a)(2) requires that in order to certify the class there must be questions of fact or law that are common to all members of the class. That requirement is met where the question of law linking the class members is substantially related to the resolution of the litigation even though the individuals are not identically situated. [32] That the class members may have different interests and views will not defeat commonality, so long as the common legal questions are not dependent on divergent facts and significant factual diversity does not exist among individual class members. [33] Here, the common issues of law and fact include (among others) whether the holdings of the Class A shareholders (or their successors and assigns) were improperly diluted by the Strategic Investor Transactions, and whether those Transactions were the product of a breach of fiduciary duty in violation of the PHLX Certificate. Thus, the complaint alleges that all class members were injured, some perhaps more than others, by the same events. The Objectors contend, nonetheless, that the class definition is improper because it encompasses multiple constituenciesholders, buyers and sellerswhose interests may potentially come into conflict. That is so, Objectors argue, because those constituencies' differing circumstances and theories of recovery might result in one or more groups claiming the same or overlapping shares of a finite settlement recovery. But, the inclusion of these multiple constituencies and their potential for conflict does not, by itself and without more, preclude certification of the class. There are several reasons. First, it is by no means clear that these constituencies will, in fact, be found to have conflicting claims to the settlement recovery. [34] Second, even if there were no settlement and the class was being certified for litigation purposes, the inclusion of holders, buyers and sellers within the class would not defeat certification, because the class could be subdivided at a later time to take those conflicts into account. [35] Third, because what has been certified is a settlement class, all that remains to be done is to formulate and then carry out the plan of allocation, subject to Court of Chancery review and approval. If during the course of that review it appears that different shareholder groups are advancing conflicting claims, that can be remedied by the Court dividing the class into subclasses, or by other means. The Chancellor so recognized: Now, that is putting to one side a difficult set of problems that are now going to ariseand I don't mean to diminish themthat is, the allocation of the benefit amongst the class members based on their different relative hardships, the injuries that they suffered because some are holders throughout the period, some bought during the period and held, some sold during the period, and some bought during the period and held beyond the period. That is not going to be an easy process. And if, at some point, any members of the class want to challenge the plaintiff's counsels' ability to do this fairly in a way that's objective and reasonable, and in a way that is conflict free, they know how to contact me and I am confident they will contact me. If they do, then I will try to remedy any potential or perceived conflict that may exist. I'm not suggesting that it does exist or that I agree that it exists. But if it should appear, I think that is something that the Court can remedy at a later point in time; and that is all I am trying to tell you now. The Objectors are unable to identify any controlling legal authority that prohibited the Chancellor from certifying a settlement class that includes buyers, sellers and holders, or that required him to divide the class into subclasses at this stage. [36] Manifestly, a decision whether or not to certify a class or divide the class into subclasses calls for the sound exercise of discretion. [37] Here the Objectors have not shown that the Chancellor abused his discretion. Refusing to certify the class would have been tantamount to preventing the settlement from going forward. Establishing subclasses with separate counsel would have risked creating delays that could protract the approval of the settlement beyond the July 31, 2008 deadline. Certifying the class as defined, on the other hand, avoided these risks, yet preserved the option of creating subclasses during the allocation stage, should that become necessary. [38] We conclude that the Chancellor committed no legal error or abuse of his discretion by certifying the class or by refusing to establish subclasses represented by separate counsel. 2. The Asserted Inadequacy Of The Class Representative and Of Class Counsel The Objectors next claim that the Chancellor erred in certifying the class because the class representative, Chuck Ginsburg, and his class counsel, had conflicts that prevent them from adequately representing the class. The Objectors assert that class counsel has been aligned from the very inception of this case with Susquehanna, PHLX's largest single stockholder, which was named in Plaintiff's pre-trial brief as not only one of the architects of the very wrong complained of herein but also a prime mover in getting the wrong underway. [39] Plaintiff Ginsburg cannot adequately represent the class, it is argued, because he is represented by conflicted class counsel, and also because he is a holder whose interests inherently conflict with those class members who are buyers and sellers. The Objectors further contend if any further demonstration of inadequacy were needed, it consists of the Chancellor's failure expressly to find that Ginsburg would be an adequate class representative, as Prezant v. De Angelis [40] required. To the extent that the Objectors claim that the Chancellor improperly failed to inquire into, and determine the adequacy of, the class representative and class counsel, our review is de novo. To the extent the Objectors claim that the Chancellor made erroneous findings of fact in reaching his adequacy determination, our standard of review is whether those findings are supported by the record and are the product of an orderly and logical reasoning process. [41]