No Heightened Duty Owed to Class Representatives by Class Counsel

Counsel for a proposed class do not owe the named class representatives a heightened fiduciary duty relative to other class members. So held the Eleventh Circuit in Medical & Chiropractic Clinic, Inc. v. Oppenheim, 981 F.3d 983 (11th Cir. 2020), a decision which marked the court’s return to an unseemly controversy stemming from litigation against the Tampa Bay Buccaneers alleging violations of the federal Telephone Consumer Protection Act (TCPA). A previous decision [posted here] reversed a district court’s decision not to allow a class member to intervene in a class action in which a settlement had been proposed, in order to protect its interests. Tech. Training Assocs. v. Buccaneers Ltd. P’ship, 874 F.3d 692 (11th Cir. 2017).

Like the previous case, the new case arose from a struggle between competing would-be class counsel for control of the litigation and how it would be settled. Before the Tech Training case was filed, another would-be federal class action had reached an impasse in mediated settlement negotiations. One of the plaintiffs’ lawyers then jumped ship to another firm, which shortly thereafter filed the Tech Training class action raising the same TCPA claims against the Buccaneers. Within two months, a settlement was reached in the Tech Training case and preliminarily approved by the court. The ensuing appeal permitted a class representative from the first case, represented by rival counsel, to intervene and object to the settlement. Ultimately, on remand, the objection was upheld and the class was decertified.

But the objecting would-be class representative did more than just object to the settlement. It filed a separate action for breach of fiduciary duty against the law firm attempting to represent the class in the second case and against the lawyer who had departed from the firm that had reached the settlement impasse. That action was removed to federal district court. There, the court granted summary judgment, finding that the departing lawyer, Oppenheim, did not owe an individual fiduciary duty to the class representative in the first case. Alternatively, the court held, the plaintiff had failed to show a breach of any fiduciary duty that might exist or prove damages. The plaintiff appealed.

On appeal, the Eleventh Circuit first noted that the parties agreed that putative class counsel owed fiduciary duties to the class as a whole. But the plaintiff contended that Oppenheim owed a heightened fiduciary duty to the putative class representative, distinct from the duty owed to the class. The court rejected this argument. While noting that counsel in class actions have different ethical duties to their clients than in ordinary cases, one “cardinal rule” defines the scope of counsel’s ethical obligations: class counsel owes a duty to the class as a whole and not to any individual member of the class.

The court also characterized the filing of the case in state court as a thinly-veiled attempt to make an end run around the ongoing proceedings in the Tech Training case. As the court put it, “[t]here is only one gatekeeper under Rule 23 and it was wholly inappropriate for [the plaintiff] and its counsel to go to state court in an attempt to employ another one.” The plaintiff “crossed a line” by attempting to litigate their objections in another court.

This second ground for the court’s holding could, and probably should, have been the only basis for the court’s affirmance. The state court action was plainly a collateral attack against aspiring class counsel filed in the wrong court. It is a truism that class counsel owe fiduciary duties to the entire class, but the court’s opinion only hinted at the difficulties in application of that doctrine. What of individual precertification settlements? Litigation of class representatives’ individual claims along with claims of the class? Varying strength of claims among class members? And so on. The existence of a fiduciary duty to all class members may not be in controversy, but the exercise of those duties presents many difficult problems. Oppenheim may end up being cited, unhelpfully, by both sides in future controversies when the scope of class counsel’s obligations are genuinely in issue.

Posted by Tom Byrne.

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