Opinion ID: 500420
Heading Depth: 2
Heading Rank: 1

Heading: The Unique Defense Problem

Text: 16 This case was certified as a 23(b)(3) class action. Accordingly, the named plaintiffs were required to satisfy the elements of Fed.R.Civ.P. 23(a) (numerosity, commonality, typicality, and adequacy of representation) and the requirement of rule 23(b)(3) that common issues predominate over individual issues so that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. 17 The claim by defendants that the named plaintiffs are subject to a unique defense (i.e., not generally applicable to the class) questions the commonality and typicality of the named plaintiffs' claims and postulates that the named plaintiffs are not adequate class representatives. The district court correctly noted that the unique defense argument could be addressed under any of the rule 23(a) tests. See Appleyard v. Wallace, 754 F.2d 955, 958 (11th Cir.1985) (considerations of rule 23(a)(2), (3), & (4) tend to overlap). 18 The existence of a unique defense certainly is relevant to the certification decision. See generally, 7A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure Sec. 1764, p. 259-60 & n. 27 (1986) (typicality requirement has not been met in securities class actions in which unique defenses would be applicable to the representative parties' claims; citing numerous cases). The existence of even an arguable defense can vitiate the adequacy of representation if it will distract the named plaintiff's attention from the issues common to the class. See Koos v. First National Bank of Peoria, 496 F.2d 1162, 1165 (7th Cir.1974); McNichols v. Loeb Rhoades & Co., 97 F.R.D. 331, 334 (N.D.Ill.1982) (in order to defeat class certification, possible defense need only be unique, arguable and likely to usurp a significant portion of the litigant's time and energy). The certification of a class is questionable where it is predictable that a major focus of the litigation will be on an arguable defense unique to the named plaintiff or a small subclass. Koos, 496 F.2d at 1164; Kas v. Financial General Bankshares, Inc., 105 F.R.D. 453, 461 (D.D.C.1984); see Kline v. Wolf, 88 F.R.D. 696, 699-700 (S.D.N.Y.1981) (plaintiff's deposition testimony on critical issue conflicted with testimony of plaintiff's broker; credibility problem rendered named plaintiff's claim atypical), aff'd in pertinent part, 702 F.2d 400, 403 (2d Cir.1983) (incredibility might support a rebuttal unavailable against many other class members, i.e., that plaintiffs did not significantly rely on the integrity of the market). 19 Although the existence of an arguable defense can be taken into account by the district court, the court is not required to deny certification for such speculative reasons. Questions concerning class certification are left to the sound discretion of the trial court. See Griffin v. Carlin, 755 F.2d 1516, 1531 (11th Cir.1985); Walker v. Jim Dandy Co., 747 F.2d 1360, 1363 (11th Cir.1984); McKinnon v. Talladega County, 745 F.2d 1360, 1365 (11th Cir.1984). The district court's decision to certify the class will be upheld absent an abuse of discretion. Griffin, 755 F.2d at 1531. Accordingly, we will not reverse the district court's decision certifying the class merely because the defendants have raised a defense which can be termed arguable. Some showing must be made by defendants that the district court misunderstood the potential significance of the asserted defense. 20 In this case, the defendants claim plaintiff Miller's reliance on the misrepresentations of his broker (and not his reliance on the integrity of the market) caused him to purchase the bonds. Furthermore, defendants claim both named plaintiffs have indicated in their depositions that they would not have purchased the Mount Royal bonds if they had been aware of information disclosed in the offering circular. According to defendants, this testimony will make it difficult (if not impossible) for named plaintiffs to prove that they relied on the bonds' availability on the market as an indication of their apparent genuineness. Shores, 647 F.2d at 469-70. The district court concluded that these asserted defenses were not so unique as to preclude class certification. If there has been even a partial reliance on the integrity of the market, the claim is not atypical. Record, Vol. 4, Tab 273 at 16. In making this determination, the court recognized that the law in this circuit regarding the relationship between reliance and class certification under Shores is far from clear. 6 For the reasons discussed below, we believe the district court acted within its discretion in certifying the class.