Summary
striking a class representative as inadequate where he was "convicted of conspiracy to commit mail fraud" during the pendency of the class action and "sentenced to forty-six months in prison" and failed to represent this fact to class counsel
Summary of this case from Vine v. PLS Fin. Servs., Inc.Opinion
Civil Action No. 98-CV-1980-M
April 1, 2003
MEMORANDUM OPINION AND ORDER
On October 11, 2002, immediately prior to a scheduled hearing to consider whether or not to approve a settlement in this case, the Court inquired off the record of Marc Stanley and Matthew Zevin, of Stanley, Mandel Iola, L.L.P., and Janine Pollack, of Milberg Weiss Bershad Hynes Lerach, L.L.P. ("Milberg Weiss"), whether one of the class representatives, Mark Geis, was the same person as a criminal defendant whom this Court sentenced to imprisonment after he pled guilty to conspiracy to commit mail fraud. Mr. Stanley and Mr. Zevin indicated they had no knowledge of the matter. Ms. Pollack acknowledged that the class representative and the criminal defendant were the same person, and that she had become aware of that months before the scheduled hearing. Messrs. Stanley and Zevin stated that they were unaware of Mr. Geis's criminal conduct and described Mr. Geis as the client of Milberg Weiss.
Mr. Geis and the other class representatives were appointed by Judge Jerry Buchmeyer on April 6, 1999 when the class was certified, all pursuant to a stipulation of the then-parties.
The Court subsequently conducted a more detailed inquiry of counsel on the record. At that hearing, Mr. Stanley and Mr. Zevin again stated they were unaware of Mr. Geis's status as a convicted felon. Ms. Pollack acknowledged her awareness, although she was unable to state when she became aware of Mr. Geis's conviction. Acting sua sponte, the Court then struck Mr. Geis as a class representative, concluding that he was neither adequate nor typical under FED. R. Civ. P. 23, and concluded not to proceed with the proposed settlement. The Court further required the filing of various materials germane to the issue, some of which were filed under seal because they may reflect communications between Milberg Weiss and Mr. Geis which are arguably subject to the attorney-client privilege.
On October 18, 2002, pursuant to the Court's instructions, Milberg Weiss submitted in camera documents reflecting communications between Ms. Pollack and Mr. Geis or anyone acting on his behalf. On October 22, 2002, the Court signed an Order directing the filing of additional materials. On October 25, 2002, Ms. Pollack filed under seal and in camera a Declaration, to which she attached as Exhibit A a duplicate copy of the documents submitted on October 18, 2002. Also submitted was a Declaration of Melvyn I. Weiss, the senior partner in the firm. Mr. Weiss attached to his Declaration a certification that Abe Kassin, another class representative, was satisfied with the settlement and wished to proceed. The other class representatives submitted similar certifications. Also submitted was a Declaration of Professor Charles Silver and a Memorandum of Law signed by Terrell W. Oxford, as counsel to Milberg Weiss.
In her October 25 Declaration, Ms. Pollack advised the Court that on August 22, 2002, she became aware that Mr. Geis was a defendant in a criminal case, when she spoke with Curtis Silverberg, who was apparently handling Mr. Geis's affairs during his incarceration. Ms. Pollack maintains that Mr. Silverberg told her Mr. Geis was imprisoned for a matter involving "a copyright violation relating to Mr. Geis's business" and "would be released in a few months." In fact, Mr. Geis was convicted of conspiracy to commit mail fraud and was on October 9, 2001 sentenced to forty-six months in prison.
Ms. Pollack declares that after her conversation with Mr. Silverberg, she obtained the docket, the Judgment, and the Information from Mr. Geis's criminal case, all of which should have clarified for Ms. Pollack the inaccuracies in Mr. Silverberg's explanation of the nature of Mr. Geis's conviction and the duration of his incarceration. Ms. Pollack does not explain how she reacted once she became aware of those discrepancies.
Also on October 25, 2002, the firms of Weiss Yourman, Abbey Gardy, L.L.P., and Stanley, Mandel and Iola, L.L.P. submitted documents attesting that until October 11, 2002, they did not know of Mr. Geis's criminal conviction. There is no evidence to the contrary.
On or about October 29, 2002, the Court received an unsigned letter in a plain white envelope with no return address, postmarked New York, New York, which was addressed to the Court and stated "You wanted to see Milberg's records. If you think it would be wrong to edit those records before giving them to you, you need to look deeper." Upon receipt of such letter, the Court contacted Mr. Oxford, advised him of the contents of the letter, and requested that the matter be further investigated and the Court advised. On November 7, 2002, Ms. Pollack submitted another Declaration, under seal and in camera. On or about December 13, 2002, the Court received a second anonymous letter, dated December 7, 2002, on Milberg Weiss letterhead with a Milberg Weiss return address, postmarked New York, New York, and purportedly written by an attorney at Milberg Weiss. The writer asserted that he or she was writing to "fulfill my ethical obligations as an officer of the Court," and stated:
After hearing rumors at the office I investigated and found the following. The September 10 memorandum covering conversations with a client was edited, the edited version submitted to the Court and the original version has been removed from files.
The Court advised Mr. Oxford of this second letter and directed him to submit sworn evidence regarding a memorandum of a conversation between Ms. Pollack and Mr. Geis, which apparently took place on September 10, 2001. As a result, on December 23, 2002, four additional Declarations were filed in camera and under seal, those of Melvyn I. Weiss, Janine Pollack, Rose Farco, and Patrick M. Botti.
Although the Court has received two unsigned letters questioning the authenticity of documents furnished to it, based on the records it has reviewed and the Declarations it has considered, the Court cannot and does not conclude that the records of communications between Ms. Pollack and Mr. Geis are not authentic, genuine, or complete.
As a matter of factual determination, this Court concludes that, of the co-lead counsel in this case, only Ms. Pollack and some of her colleagues at Milberg Weiss were aware of Mr. Geis's criminal history prior to the Court's inquiry of October 11, 2002. The Court further concludes that Ms. Pollack did not become aware of Mr. Geis's criminal history until after June 10, 2002, when the Court preliminarily approved the proposed settlement now before it.
The Court therefore writes to express its views on what class counsel should have done when, as here, she learned of information that raises questions as to the continuing adequacy and/or typicality of a class representative appointed by the Court.
In August 2002, Ms. Pollack became aware that Mr. Geis was a convicted felon. She further investigated, and presumably learned from the Information, docket sheet, and Judgment the dates of Mr. Geis's wrongdoing, plea, conviction, and sentencing. Yet Ms. Pollack did not advise other class counsel or the Court of what she learned. The Court feels strongly that Ms. Pollack should have immediately advised the Court of the facts related to Mr. Geis so the Court would be able to determine what action was appropriate. The Court's view in this regard is based on three concepts: counsel's fiduciary duties to the class, counsel's duty of candor to the Court, and the Court's reponsibilities to the class. The fact that class counsel has a fiduciary duty to the class is clear. Indeed, Milberg Weiss's counsel and Professor Silver both acknowledge the existence of that high duty, which has been repeatedly recognized by courts and commentators. See, e.g., Greenfield v. Villager Indus., Inc., 483 F.2d 824, 832 (3d Cir. 1973); Buford v. HR Block, Inc., 168 F.R.D. 340, 351-52 (S.D. Ga. 1996), aff'd sub nom Jones v. HR Block Tax Servs., 117 F.3d 1433 (11th Cir. 1997); Manual for Complex Litig. (3d ed.) § 30. In this Court's view, recognition of that fiduciary duty to the class as a whole should compel recognition of a serious potential problem for the class, when a class representative, whose duties obviously require acting on behalf of absent persons, is convicted of a felony involving fraud. In this Court's view, the duty of candor to the Court mandates counsel to advise the Court that facts questioning the adequacy and typicality of a class representative previously appointed by the Court have come to counsel's attention. The duty of candor includes a "continuing duty to inform the Court of any development which may conceivably affect the outcome of the litigation." Bd. of License Comm'rs. v. Pastore, 469 U.S. 238, 240 (1985) (quoting Fusari v. Steinberg, 419 U.S. 379, 391 (1975)). of course, an attorney may breach the fiduciary duty of candor through silence as well as through an affirmative misrepresentation. See Am. Int'l Adjustment Co. v. Galvin, 86 F.3d 1455, 1460 (7th Cir. 1996). In Pastore, the Supreme Court noted that when a development after the granting of certiorari arises which could deprive the Court of jurisdiction due to the absence of a case or controversy, that must be promptly divulged to the Court. 469 U.S. at 240. Ms. Pollack states she did not disclose this development to the Court due to the state of the litigation and because other class representatives, including Abe Kassin, had diligently reviewed and approved the settlement. However, the settlement is not consummated until the Court approves it. The fact that a person convicted of mail fraud recommends it to the Court is certainly not persuasive. Although the approval of the other representatives might persuade the Court, it is for the Court, and not counsel, to determine what impact Mr. Geis's role would have on final approval. Certainly Ms. Pollack could argue that the settlement should still be approved; indeed, she would be obligated to do so in satisfaction of her fiduciary duty to the class as a whole if she believed it to be in the best interests of the class. However, because the Court appointed the class representatives, and in so doing found them to be adequate and typical, the duty of candor required Ms. Pollack to advise the Court of Mr. Geis's conviction, even if ultimately it would not impact the settlement. The Court reaches this conclusion in further recognition of its special responsibilities to act as a "guardian of absentee interests." Mendoza v. United States, 623 F.2d 1338, 1346 (9th Cir. 1980), accord, Greenfield, supra, at 832. Indeed, in the class context, "the special nature of the court's responsibility in approving settlements likewise supports imposing a greater duty of candor on lawyers for settling parties in a class action." Susan P. Korniak, Feasting While the Widow Weeps: Georgine v. Amchem Products, Inc., 80 CORNELL. L. REV. 1045, 1128 (1995).
Until October 11, 2002, the Court had no knowledge of the fact that the Mr. Geis in this case was the same person as a criminal defendant in another case.
In short, the Court disagrees with the opinion of Professor Silver. The Court believes Ms. Pollack had a duty to advise the Court promptly of the facts relating to Mr. Geis once they came to her attention. Only in this way could Ms. Pollack satisfy her fiduciary duty to the class and her duty of candor to the Court, so that the Court could satisfy its responsibilities to act as guardian of the class's interests.
Although the Court finds that Ms. Pollack was careless in discharging her responsibilities once she learned of Mr. Geis's conduct, the Court further finds that Ms. Pollack did not act in bad faith and notes that no adverse consequences to the class accrued. Therefore, the Court determines that no sanctions should be imposed against her or Milberg Weiss.
The Court orders the Clerk to file in the public record all of the Declarations and Memoranda submitted on this issue, as well as the two unsigned letters, with the exception of the exhibits to Ms. Pollack's Declaration of October 25, 2002, which will remain sealed.