Opinion ID: 770253
Heading Depth: 3
Heading Rank: 3

Heading: Inadequate Representation and Conflict of Interest

Text: 31 In rejecting the applicants' claim of inadequate representation, Judge Korman explained that the settlement amount was based on an estimate of the assets of European Jews that flowed into Swiss banks during the period of Nazi rule and, consequently, that it made sense to direct the settlement offer primarily to Jewish victims and their heirs. In addition, he questioned the relevance of the broad language of the original complaints (in which the applicants now insist they were included) for purposes of determining whether intervention must be granted. We consider appellants' claim of inadequate representation in some detail because it raises a question not previously addressed by this Court. 32 The thrust of appellants' inadequate representation argument is that class counsel used the threat of a lawsuit brought on behalf of broadly defined worldwide classes to obtain the greatest possible offer from defendants, and subsequently narrowed the class drastically in order to secure the greatest possible recovery for a smaller group of plaintiffs. Appellants argue that this alleged maneuver not only amounts to inadequate representation by class plaintiffs, but also suggests the existence of a conflict of interest on the part of class counsel, because some of the attorneys for the class in the instant case represent ethnic Poles in other related litigation, where a similar Victims or Targets category has included non-Jewish ethnic Poles. 33 These arguments rely principally on the notion that the broad language of the original complaint in a class action lawsuit vests in putative class members-that is, those who seem to be included in the class described in the complaint-a right to be included in the class ultimately certified by the District Court. Appellants' inadequate representation claim is somewhat unusual, for, as they acknowledge, normally the concern is that class counsel may unfairly bind the interests of absent class members-that is, those ultimately included in the class and thereby barred from future lawsuits. Appellants' Brief at 24 (emphasis added). However, appellants cite three cases from other federal courts in support of the proposition that they are not the first putative class members to complain that they have been excluded from a class settlement unfairly, as a result of the narrowing of the class. Id. at 26 (citing In re Fine Paper Antitrust Litig., 695 F.2d 494 (3d Cir. 1982); In re Records and Tapes Antitrust Litig., 118 F.R.D. 92 (N.D. Ill. 1987); In re Chicken Antitrust Litig., 560 F. Supp. 943 (N.D. Ga. 1979)). 12 In response, appellees assert that a complaint's [a]spirational language describing a proposed class creates no such rights or duties. Appellees' Brief at 38. 34 It appears that our Court has not previously addressed the question of whether the broad language of the original complaint in a class action lawsuit may vest in putative class members a right to remain a part of the class upon certification. However, two Third Circuit cases that have spoken to this question, as well as the language of Federal Rule of Civil Procedure 23(c)(1) and the case law on intervention generally, do not lend support to appellants' suggestion that their apparent inclusion in the complaint entitles them to be a part of the class ultimately certified. 13 35 The Third Circuit's opinion in In re Fine Paper sheds some light on the issue. There, the Court addressed a somewhat different contention on the part of the proposed intervenors, who argued not that a certification order had wrongly excluded them, but that the language of the order was ambiguous and should be interpreted to include them. See In re Fine Paper, 695 F.2d at 498. (The proposed intervenors had been excluded from the plaintiff class because they were defendants in another, related lawsuit. See id. at 497.) The Third Circuit rejected their argument, holding that the certification order was clear and did not include them. See id. at 499. To the extent that In re Fine Paper is relevant here, it supports the view that the District Court has broad discretion in certifying the class-for, having established that the certification order was clear and understandable, the Court did not then examine whether the order should have included the proposed intervenors, deferring instead to the District Court's discretion regarding certification. See id. at 498. 36 An earlier appeal in the In re Fine Paper litigation had rejected a putative class member's objection to a certification order that had carv[ed] out a much smaller class than the one described in the original complaint. See In re Fine Paper, 632 F.2d 1081, 1087 (3d Cir. 1980). In that case, the Third Circuit acknowledged that an unclear certification order had left the claims of the objector and other putative class members in suspended animation, and therefore found that the order dismissing the settling defendants had to wait until the Court ruled on whether to certify a separate class that could proceed with its own action. Id. at 1087-88. However, the Court held that the narrowing of the original class was not a reason to create an exception to the general rule that a nonsettling party may not object to the terms of a settlement which do[es] not affect its own rights. Id. at 1087. We view the opinion of the Third Circuit as standing for the proposition that a certification order may exclude putative class members as long as they remain free to bring their own lawsuit. Cf. id. at 1088 (The claims of ... putative members of the national class may not be overlooked.). 37 Our conclusion is consistent with the language of Rule 23 and the case law on intervention. Rule 23 gives the District Court broad discretion to modify the definition of the class even after certification, see FED. R. CIV. P. 23(c)(1) ([A certification] order under this subdivision may be conditional, and may be altered or amended before the decision on the merits.), while the case law on intervention sets forth the multi-factor analysis outlined above, which does not require a court even to consider the language of the original complaint when assessing a motion to intervene. See, e.g., Catanzano, 103 F.3d at 232; New York News, 972 F.2d at 485; Farmland Dairies, 847 F.2d at 1043-44. 38 In light of these considerations, appellants in the instant case cannot demonstrate that they have been inadequately represented by asserting that they were excluded from a class to which they originally belonged. While it is true that the language of the original complaints describes the class broadly, and that the Agreement in Principle referred to the worldwide classes delineated in the complaints, it is also true, as the District Court stated, that the broad language of these complaints is simply not relevant to the decision concerning whether to grant a motion to intervene. Once the District Court exercised its discretion in certifying a class, the broad language of the complaints did not create an exception to the general rule that a nonsettling party may not object to the terms of a settlement which do[es] not affect its own rights. In re Fine Paper, 632 F.2d at 1087. The non-party's only recourse is to file a motion to intervene, and the evaluation of such a motion does not require a court to take into account the language of the original complaint. 39 It bears emphasis that appellants' inadequate representation and conflict of interest claims also contradict Judge Korman's statements at the hearing on their motion to intervene. As noted above, Judge Korman explained that the Settlement amount does not account for the losses of a worldwide class but, rather, reflects a calculation of Jewish assets transferred into Swiss banks during the relevant period. As a result, the Settlement offer is properly directed primarily to Jewish victims and their heirs. Class counsel have not excluded appellants from a settlement offer based on an estimate of funds that includes the losses of ethnic Poles. Instead, the parties have justifiably limited the class to those whose losses are reflected in the Settlement amount. 14 40 In sum, we hold that the broad language of a complaint in a class action lawsuit does not vest in putative class members a right to be part of the class ultimately certified by the District Court. In the instant case, the District Court acted well within its discretion in denying appellants' motion to intervene because their motion was not timely filed. There is no basis on this record to question Judge Korman's conclusion that intervention would prejudice the existing parties by destroying their Settlement. Appellants, in turn, have failed to show that they were inadequately represented at any time, or that their ability to protect their interests will be impaired by a denial of their motion, inasmuch as they remain completely free to pursue their claims on their own.