Class Status Survives Fishy Attorney Conduct

CHICAGO (CN) - Attorney misconduct in a junk fax suit should not result in decertification of the class, the 7th Circuit ruled.

Under the Junk Fax Prevention Act of 2005, individuals who receive unsolicited advertisements via fax can recover $500 in damages per transmission. Plaintiffs can receive up to $1,500 if the violation is shown to be willful.

"Because plaintiffs may enforce the statute via class action and because a single advertisement is often faxed to hundreds - if not thousands - of phone numbers, suits under the act present lucrative opportunities for plaintiffs' firms," Judge Joel Flaum wrote for a three-judge panel of the 7th Circuit.

The case in particular turns on a list of junk fax recipients uncovered by Anderson & Wanca, an Illinois firm specializing in class actions under the Junk Fax Prevention Act.

While investigating four class actions under the act, Anderson & Wanca discovered that a small company, Business-to-Business Solutions, still possessed records of the recipients whom it had been contracted to send fax ads.

After obtaining a spreadsheet listing the plaintiffs relevant to its existing litigation, Anderson & Wanca continued pushing Business-to-Business Solutions to disclose all of its transmission data.

"Anderson & Wanca recognized that the [Business to Business] hard drives and fax lists likely contained a treasure trove of potential clients for putative class action suits," Flaum explained.

The firm subpoenaed Business-to-Business Solutions owner Caroline Abraham to testify at deposition and produce back-up disks and a hard drive containing the transmission info.

Anderson & Wanca attorneys represented to Abraham that a protective order would protect the confidentiality of information not relevant to the trials at hand. The firm later used the data to solicit plaintiffs for more than 100 new class actions.

One recipient, a company called Reliable Money Order, contacted Anderson & Wanca and became the named plaintiff in one such case.

U.S. District Judge William Callahan Jr. granted class certification, drawing a challenge from defendant McKnight Sales Co. It said the lawyers had used Abraham's confidential data, had sent misleading solicitation letters and had attempted to bribe a witness using a $5,000 check.

Callahan found that Anderson & Wanca may have acted improperly, but also said there was no justification for confidentiality and that McKnight could not demonstrate prejudice.

The 7th Circuit affirmed last week, noting that several courts had already addressed challenges to fax cases brought by Anderson & Wanca.

In fact, the appeals court ruled in 2011 on a case filed from Business-to-Business data. In Ashford Gear II, the 7th Circuit determined that only "misconduct by class counsel that creates a serious doubt that counsel will represent the class loyally requires denial of certification."

Reliable Money Order's case was the first Anderson & Wanca suit to reach the appeals court since the creation of the "serious doubt" standard.

"Class actions present strong incentives for counsel 'to sell out the class by agreeing with the defendant to recommend that the judge approve a settlement involving a meager recovery for the class but generous compensation for the lawyers,'" Flaum wrote.

"Thus, when 'class counsel have demonstrated a lack of integrity' through misconduct and unethical action, 'a court can have no confidence that they will act as conscientious fiduciaries of the class,'" he added.

Though the firm "engaged in conduct which gives this court serious pause," Flaum nonetheless refused to decertify the class.

Callahan properly decided to vacate the protective order covering the disks and hard drive, the appeals court said. It also upheld text in the solicitation letter that stated: "we have determined that you are likely to be a class member in one or more cases we are pursuing." The court said such text was not likely to lead recipients to believe that a certified class already suggested.

Despite suspicion surrounding Anderson & Wanca's $5,000 payment to Abraham's attorney, Eric Ruben, the court said there is no evidence that the money was a bribe.

"Unethical conduct, not necessarily prejudicial to the class, nevertheless raises a 'serious doubt' about the adequacy of class counsel when the misconduct jeopardizes the court's ability to reach a just and proper outcome in the case," Flaum wrote.

Decertification would be appropriate if Anderson & Wanca had attempted to bribe Ruben, but the case should be allowed to continue in the absence of such evidence.

Over the course of the 29-page opinion, Flaum suggested multiple times that Anderson & Wanca's conduct may warrant disciplinary action.

"McKnight warns that our outcome will incentivize and reward overly aggressive and unethical attorney conduct," he wrote. "But this scenario of unpunished, inappropriate attorney action results only if the litigants and fellow members of the bar fail to refer legitimate instances of attorney misconduct to the relevant bar authority for investigation."

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