The Eleventh Circuit recently imparted an important message to the class action bar, and in particular to attorneys representing different named plaintiffs in competing class actions: there is “only one gatekeeper under Rule 23,” so any challenge to a proposed class action settlement should be presented to the district judge deciding whether to approve that settlement, not to a different judge by way of a collateral attack on the proposed settlement.
Several years ago, multiple class actions were filed against the Tampa Bay Buccaneers (affectionately known here in Tampa as the Super Bowl-bound “Bucs”). The lawsuits alleged that the Bucs sent telefax advertisements in violation of the Telephone Consumer Protection Act (TCPA). Here is the play-by-play.
First Quarter. At the kickoff, Firm 1 filed a TCPA class action against the Bucs. When Firm 1 filed that class action, one of its players was Lawyer A. But Lawyer A later filed for free agency and left Firm 1 for Firm 2. A month after he did, Firm 2 filed a TCPA class action against the Bucs. Firm 2’s class action alleged essentially the same claims on behalf of essentially the same putative class as Firm 1’s, but with different named plaintiffs. Did Lawyer A steal the playbook from Firm 1? And is that against the rules? Stay tuned to find out!
Second Quarter. When Firm 2 filed its case against the Bucs, a motion for class certification was pending in Firm 1’s case. But despite Firm 1’s early lead over Firm 2, Firm 2 reached a settlement with the Bucs before Firm 1’s case was settled or otherwise resolved. Touchdown! But wait: Firm 1 has thrown the challenge flag! Firm 1, on behalf of one of the named plaintiffs in Firm 1’s case (Client 1), intervened in Firm 2’s case to challenge the proposed settlement negotiated by Firm 2.
Third Quarter. The second half began with Firm 1 filing a state court lawsuit on behalf of Client 1 — the named plaintiff in Firm 1’s case who intervened in Firm 2’s case to challenge the settlement negotiated by Firm 2 — against Lawyer A and Firm 2. The state court suit advanced the stolen playbook theory of liability, which featured two key allegations: (1) because Lawyer A represented Client 1 when he worked at Firm 1 and because attorneys have fiduciary duties to their former clients, Lawyer A had specific fiduciary duties to Client 1; and (2) Lawyer A violated his duty of loyalty and confidentiality to Client 1 by sharing information with Firm 2 that he learned representing Client 1 in Firm 1’s case, information that enabled Firm 2 to reach a proposed settlement with the Bucs faster than it otherwise would have been able to do so. The suit also alleged that Firm 2 committed a personal foul by aiding and abetting Lawyer A’s breach of fiduciary duty. Client 1 sought damages, attorneys’ fees, and an injunction barring Firm 2 from continuing as counsel in its TCPA case against the Bucs or from reaching a settlement with the Bucs in any case substantially related to Firm 1’s TCPA case against the Bucs. Firm 1 and Client 1 were in the red zone.
Fourth Quarter. Interception! Lawyer A and Firm 2 promptly removed Client 1’s state court suit against them to federal court, where the district court granted summary judgment for the defendants and the Eleventh Circuit affirmed.
The Eleventh Circuit called the state court suit “a thinly-veiled attempt to derail” Firm 2’s proposed settlement with the Bucs. It emphasized that any objection to Firm 2’s proposed settlement, including any claim that the proposed settlement injured Client 1, should have been presented to the district judge deciding whether to approve that settlement. This decision sends a strong message that the Eleventh Circuit will not countenance collateral attacks on proposed class action settlements.
The panel also addressed what it called a “unique question:” “does class counsel owe a duty of loyalty and confidentiality to a named class representative that is distinct from the duty owed to the putative class?” It answered that class counsel does not have a “separate and heightened fiduciary duty to class representatives.” Class counsel instead “owes a duty to the class as a whole and not to any individual member of the class.” Because Client 1 asserted not that Lawyer A “violated a duty owed to the [putative] class” in Firm 1’s case but rather that Lawyer A violated a “heightened fiduciary duty” he owed to Client 1 as a “putative class representative” in Firm 1’s case, this separate holding that Lawyer A owed no such heightened duty to Client 1 similarly disposed of the fiduciary duty claims asserted by Client 1. Game over.
Post-Game Analysis. One may wonder why the panel chose to address class counsel’s duties to putative class representatives when the holding that challenges to a proposed class action settlement should be presented to the district judge deciding whether to approve that settlement seems sufficient to resolve the case, especially because the panel’s treatment of class counsel’s duties to putative class representatives is not without complications.
One complication is that while the panel ostensibly holds that Lawyer A owed no fiduciary duty to Client 1 as an individual member of the putative class in Firm 1’s case, it still felt the need to mention that Lawyer A never acquired any confidential information about Client 1 while working at Firm 1 and that Firm 2 screened Lawyer A from any involvement in Firm 2’s TCPA case against the Bucs. One may wonder why those facts were included in the decision if Lawyer 1 truly owed no duty of loyalty or confidentiality to Client 1.
Another complication is revealed by considering the following scenario: what if Lawyer A had actually learned confidential information about Client 1 while working at Firm 1, had actually shared that information with Firm 2, and by doing so had actually enabled Firm 2 to reach a settlement with the Bucs before Firm 1 when Firm 2 otherwise would not have been able to do so, thus depriving Client 1 of an incentive award that in this scenario would now go to a named plaintiff in Firm 2’s case? The panel says in a footnote that another Eleventh Circuit panel recently concluded that incentive awards are “foreclosed by Supreme Court precedent” — a petition pending before the Eleventh Circuit seeks en banc review of that conclusion, which has been reached by no other circuit — but that may strike some as a less than fully satisfying answer. By contrast, the answer that in this scenario Client 1 could ask the district judge deciding whether to approve the proposed settlement to order that an incentive award be paid to Client 1 may seem more satisfactory.
In sum, one clear takeaway from this Eleventh Circuit decision is that proposed class action settlements should not be collaterally attacked. The other key ruling — that class counsel owe a duty to the class as a whole and not to any individual member of the class — seems like one that may need to be revisited and clarified in future seasons.
Medical & Chiropractic Clinic v. Oppenheim, 981 F.3d 983 (11th Cir. 2020).