Court Opinion

ID: 8237266
Source: CourtListenerOpinion
Date Created: 2022-10-16 05:03:56.002083+00
Date Added: 2024-06-11T16:42:37.521575
License: Public Domain

McFADDEN, Presiding Judge,
dissenting.
I respectfully dissent from the majority opinion. Because the trial court made clearly erroneous findings of fact and abused its discretion in denying the motion for class certification, the trial court’s order should be reversed.
On September 21, 2012, Shelia Lewis and Equity Trading filed a proposed class action against Knology, Inc., and its former directors, claiming that they had breached their fiduciary duties to shareholders in obtaining an inadequate per share price upon a merger with another company. On December 23, 2013, Lewis and Equity Trading filed a motion for class certification pursuant to OCGA § 9-11-23. Under a consent order entered on April 14, 2015, Equity Trading was allowed to withdraw from the action, leaving Lewis as the sole plaintiff. On September 23, 2015, a hearing was held on Lewis’s motion for class certification. On December 3, 2015, the trial court entered an order denying the motion. Lewis brought this appeal from that order.
As our Supreme Court has explained, a class action is permitted only in limited circumstances and is a matter within the trial court’s discretion.
The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only, and consistent with its exceptional nature, a class action is permitted only in the limited circumstances described in OCGA § 9-11-23. The party seeking to represent a class bears the burden of proving that class certification is appropriate. . . . [T]o permit the certification of a class of plaintiffs, the named plaintiffs [must] satisfy each of the four requirements described in OCGA § 9-11-23 (a) — numerosity, commonality, typicality, and adequacy of representation — as well as [one of the] requirement^] of OCGA § 9-11-23 (b). ... Whether to certify a class is a matter committed to the discretion of the trial court, but any exercise of that discretion must comport with the statutory requirements. Moreover, the certification of a class is appropriate only to the extent that the trial court is satisfied, after a rigorous analysis, that the statutory requirements have been satisfied. As a part of this rigorous analysis, sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question. Indeed, as the United States Supreme Court has explained: Frequently that rigorous analysis will entail some overlap with the merits of the plaintiff’s underlying claim. That *96cannot be helped. The class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff’s cause of action.
Georgia-Pacific Consumer Products v. Ratner, 295 Ga. 524, 525-527 (1) (762 SE2d 419) (2014) (citations, punctuation and footnotes omitted).
In reviewing a trial court’s order on a motion for class certification, this court will affirm “the factual findings [of] the trial court. . . unless clearly erroneous, and we will review the conclusions of law for an abuse of discretion. Additionally, it is appropriate that we look to federal cases interpreting Rule 23 of the Federal Rules of Procedure, the rule upon which OCGA § 9-11-23 was based, for guidance[.]” American Debt Foundation v. Hodzic, 312 Ga. App. 806, 808 (720 SE2d 283) (2011) (citation and punctuation omitted). Here, the trial court’s order concluded that Lewis had failed to satisfy the adequacy and typicality requirements of OCGA § 9-11-23 (a) and the predominance and superiority grounds of OCGA § 9-11-23 (b).
The majority upholds the trial court’s adequacy and typicality findings but does not address the lower court’s predominance and superiority findings. Because the trial court made clearly erroneous findings of fact and abused its discretion in making such findings, the denial of class certification should be reversed.
1. Adequacy.
Division 1 of the majority opinion upholds the trial court’s finding that Lewis is not an adequate class representative “because she lacks virtually any knowledge of the substance of the claims or the nature of the relief she seeks and has yielded control entirely to her counsel.”Maj. op., p. 91. However, the factual finding that Lewis lacks virtually any knowledge of her claims or the relief sought is clearly erroneous, and the trial court abused its discretion in denying class certification on the purported basis that she has yielded control of the litigation to her counsel.
OCGA § 9-11-23 (a) (4) provides that one or more members of a class may sue orbe sued as representative parties of the class if “[t]he representative parties will fairly and adequately protect the interests of the class.” In considering this factor, “[t]he important aspects of adequate representation are whether the plaintiffs’ counsel is experienced and competent and whether plaintiffs’ interests are antagonistic to those of the class.” Jones v. Douglas County, 262 Ga. 317, 323 (2) (418 SE2d 19) (1992) (citation, punctuation and emphasis omitted).
*97Here, Lewis presented unrefuted evidence demonstrating her counsel’s experience and competence in class action litigation involving mergers and acquisitions. The trial court’s only pertinent finding as to the experience and competence of Lewis’s counsel was that the court did “not question the ability of lead and liaison counsel.” (Emphasis supplied.) Thus, the trial court actually found that Lewis had satisfied what is perhaps the most important adequacy factor in that she has retained experienced and competent counsel to help her adequately protect the class interests.
Although Lewis met this important adequacy factor, the trial court found that Lewis was inadequate because she has given “control of the claims entirely to counsel,” she “lack[ed] virtually any knowledge of the substance of the claims or the nature of the relief” sought, and there were conflicts between her and the majority of shareholders who voted for the merger. With regard to the purported conflicts, the mere fact that some shareholders voted to approve the merger does not create a conflict with Lewis’s central claims that the defendants breached fiduciary duties and that all the shareholders received inadequate compensation.
As for the trial court’s findings that Lewis had ceded control entirely to counsel and that she had virtually no knowledge of her own claims, the trial court cited no specific evidence in support of these findings. While the majority attempts to support the trial court’s unsupported findings by citing parts of Lewis’s deposition indicating that she did not know that her attorneys had made the procedural decision to dismiss the case in Delaware and re-file it in Georgia, did not know the actual name of her counsel’s law firm, and did not know the fee that it might earn. However, all of those matters have no bearing on the real issues pertaining to the question of adequacy First, contrary to the majority and trial court’s reliance on irrelevant facts, it is apparent from a reading of Lewis’s entire deposition testimony that she adequately understood the lawsuit and that she has actively participated in the case. Lewis testified that she had regular communication on the phone and through e-mail with her attorneys, that she had reviewed documents from counsel which had information about Knology and the merger, that she knew Knology was merging with a buyer who would pay only $19.75 per share, that she knew other bidders had wanted to purchase Knology for a higher price, and that she believed company insiders were unfairly benefit-ting from the merger while shareholders were receiving an inadequate payment. She further deposed that as class representative her duty was to fairly protect the interests of the class and that she would go to any depositions or to court as needed. Contrary to the majority’s reasoning, it is not proof of inadequate representation that Lewis has *98not immersed herself in the details of this litigation, or even that she is unfamiliar with possible legal developments that loom large to the professionals working on it. It is enough that she is in communication with her legal team; she is not required to be familiar with every member of it. Nor is it proof of inadequacy that she personally cannot effectively articulate the nuanced merits of her case. That is what lawyers are for. Indeed, that is why, rather than focusing on the named plaintiff’s intimate knowledge of the details of this complex litigation, “[t]he focus of adequacy of representation is on class counsel.” Georgia-Pacific Consumer Products v. Ratner, 323 Ga. App. 203, 209 (1) (d) (746 SE2d 829) (2013), reversed on other grounds, Georgia-Pacific Consumer Products, 295 Ga. 524.
Adequate class representation generally does not require that the named plaintiffs demonstrate to any particular degree that they will individually pursue with vigor the legal claims of the class... . The fact that [Lewis is] allowing [her] counsel to prosecute the case demonstrates the exercise of good judgment and not abdication of [her] obligations as class representative[ ]. [Lewis has] met [her] burden under [OCGA § 9-11-23 (a) (4)] of showing that [she] will fairly and adequately protect the interests of the class.
In re Miller Indus. Securities Litigation, 186 FRD 680, 687-688 (II) (B) (4) (N.D. Ga. 1999). Under these circumstances, the trial court abused its discretion in finding that Lewis was not an adequate class representative.
2. Typicality.
OCGA § 9-11-23 (a) (3) provides that one or more members of a class may sue or be sued as representative parties on behalf of the class if “[t]he claims or defenses of the representative parties are typical of the claims or defenses of the class[.]”
The typicality requirement under OCGA § 9-11-23 (a) is satisfied upon a showing that the defendant committed the same unlawful acts in the same method against an entire class. Thus, typicality measures whether a sufficient nexus exists between the claims of the named representatives and those of the class at large. A sufficient nexus is established if the claims or defenses of the class and the class representatives arise from the same event or pattern or practice and are based on the same legal theory.
*99Brenntag Mid South v. Smart, 308 Ga. App. 899, 904 (2) (a) (iii) (710 SE2d 569) (2011) (citations and punctuation omitted).
In this case, a sufficient nexus exists between Lewis’s claims and those of the class at large. As set forth in her complaint, Lewis alleges that the defendants breached their fiduciary duties to her and to other former Knology shareholders in connection with their agreement to sell Knology to a private equity fund for inadequate consideration of $19.75 per share. The asserted claims of both Lewis and the putative class clearly arise from the same alleged events concerning the sale of Knology and are based on the same legal theory of breach of fiduciary duty Accordingly, the typicality requirement of OCGA § 9-11-23 (a) (3) has been satisfied.
In holding otherwise, the majority and the trial court noted that Lewis had not received or read the proxy statement issued prior to the sale of the company, that she had not voted on the proposed sale, and that after filing suit she obtained payment for her former Knology stock in accordance with the merger agreement. Based on these circumstances, the majority upholds the trial court’s findings that “the record is unclear as to what, if anything, Ms. Lewis still hopes to attain in this lawsuit” and that “there was no evidence adduced that would explain what, if any, claim[s] she continues, individually, to have, and thus no basis to conclude whether or not they are typical of those of other shareholders.” These factual findings are clearly erroneous as it is apparent from Lewis’s complaint, her motion for class certification, and her deposition testimony that she is seeking monetary damages for the allegedly inadequate payment of $19.75 per share. Such claims for Lewis and other members of the class still exist, regardless of whether or not she had read the proxy statement or voted on the merger. Those distinctions would make a difference only if they represented credible defenses against Lewis’s claims, but they do not. Thus, the majority’s decision is premised on clearly erroneous factual findings by the trial court on matters that are immaterial to Lewis’s claims.
The trial court also found that Lewis had not shown typicality because “record evidence demonstrates that many class members do not share Plaintiff’s position.” The trial court did not indicate what evidence it was relying on for such a finding, but it appears that it may have been referring to the fact that a majority of the outstanding shares had voted in favor of the proposed sale of the company. But contrary to the trial court’s finding, a vote in favor of the merger does not necessarily mean that those class members would reject Lewis’s position that the $19.75 per share payment was inadequate. It seems obvious that the vote would have come out very differently if the proxy notice had announced that — as Lewis contends — for no valid *100reason the defendants had expedited the sale to a lower bidder when there was another bidder who had previously offered a higher price per share but needed only two more weeks to submit its final bid.
It is not a valid criticism of Lewis’s evidence that she failed to prove that other shareholders agree with her that it would have been better to sell higher. The majority’s position making such a criticism is not supported by the Georgia case it cites, Rite Aid of Ga. v. Peacock, 315 Ga. App. 573, 578 (1) (b) (726 SE2d 577) (2012). In that case, we found no typicality, noting that the putative class representative had failed to prove that his objection to the closing of a specific pharmacy was shared by other members of the class. Id. But the instant case is materially different in that it involves shares of stock that were allegedly sold for an inadequate price.
Moreover, the trial court’s finding ignores Lewis’s fundamental allegation that the proxy statement did not disclose material information needed for shareholders to cast an informed vote. Thus, the fact that a majority of shareholders may have cast uninformed votes does not render Lewis’s claims atypical.
That an investor voted in favor of the merger does not preclude that investor from having a claim against [defendants. Even the unnamed class members that voted for the merger have suffered from a similar [alleged] injury as [Lewis], as they . . . were reimbursed using the same valuation as [Lewis]. Moreover, that an investor voted for the merger is not strong evidence that the investor does not share [Lewis’s] complaints about the merger[ ]. The thrust of [Lewis’s] case is that investors were misled about the desirability of the merger. And even if a class member would have voted for the merger even if fully informed of the information that [Lewis] argue [s] should have been included in the proxy statements, that class member would still share [Lewis’s] interest in any compensatory relief that would result if the lawsuit succeeds. Based on the allegations and evidence before [us, we] find[ ] that the claims of [Lewis] are typical of those of the class.
Schulein v. Petroleum Dev. Corp., 2014 U. S. Dist. LEXIS 4154 *10-11 (2.3) (C.D. Cal. 2014) (punctuation omitted). See also Liberty Lending Svcs. v. Canada, 293 Ga. App. 731, 738 (1) (b) (668 SE2d 3) (2008) (typicality requirement met where plaintiff’s claims and those of class were one and the same).
*1013. Predominance and superiority.
The majority does not reach the trial court’s predominance and superiority findings. But like the typicality and adequacy findings, the trial court abused its discretion in finding that Lewis had not met these factors for class certification.
OCGA § 9-11-23 (b) (3) provides that a class action may be maintained if “[t]he court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy” Here, the trial court found that Lewis had not shown predominance because there may be individual questions involving acquiescence and ratification, and causation that arise in the litigation. However, “as long as the common questions predominate, a class may be certified even if some individual questions of law or fact exist.” Village Auto Ins. Co. v. Rush, 286 Ga. App. 688, 691 (1) (649 SE2d 862) (2007) (citation and punctuation omitted). As discussed above, the questions pertaining to the defendants’ liability for the alleged breaches of fiduciary duties and the payment of inadequate per share price upon the merger are common to all the members of the class and predominate over any possible individual questions. “Common issues of fact and law predominate if they have a direct impact on every class member’s effort to establish liability and on every class member’s entitlement to injunctive and monetary relief.” Liberty Lending Svcs., 293 Ga. App. at 739 (2) (citation and punctuation omitted). Accordingly, the trial court abused its discretion in concluding that Lewis had not shown predominance.
As for the issue of superiority:
The cost... to conduct discovery, and to present the case for trial for an individual party [that owned stock] in the class . . . would be essentially the same as preparing and presenting the case for all class members. The cost of preparation of an individual claim could well exceed the potential recovery of actual damages. The efficiencies of preparation and presentation on a class-wide basis outweigh any interest of class members proceeding on an individual basis. Moreover, anyone who wishes to opt out will be given the opportunity to opt out of this class action. There [apparently] is no other competing litigation of the claims presented in this action. . . . A class action would clearly be more manageable than [multiple] separate lawsuits or mass joinder of [multiple] named plaintiffs in a single action.
*102Decided March 16, 2017
Reconsideration denied March 29, 2017
David A. Bain, for appellant.
Willis McKenzie, Mark L. DeGennaro, Matthew C. Alford, for appellees.
Georgia-Pacific Consumer Products, 323 Ga. App. at 212 (2) (b).
For the foregoing reasons, the trial court committed clear error and abused its discretion in denying Lewis’s motion for class certification. Accordingly, unlike the majority, I believe this court should reverse that erroneous trial court order.
I am authorized to state that Judge Reese joins in this dissent and that Presiding Judge Miller and Presiding Judge Ellington concur in judgment only as to this dissent.