Summary
denying class certification because lead plaintiff "had almost no involvement with his case whatsoever" "except for his deposition," and refused to read the complaint because "'I ain't got time. I'm too old to do much more than look at the first two or three pages.'"
Summary of this case from Pub. Employees' Ret. Sys. of Miss. v. Treehouse Foods, Inc.Opinion
Case No. C2-03-67.
September 8, 2008
OPINION AND ORDER
I. INTRODUCTION
This matter is before the Court on remand from the Court of Appeals to determine whether the case should be certified as a class action. Because Plaintiff Kermit D. Bridges cannot show that he will be an adequate class representative who will vigorously litigate the case in the best interests of the class, his motion for class certification is DENIED.
II. BACKGROUND
Bridges brought a class-action lawsuit against Defendant American Electric Power Company, Inc. ("AEP"), alleging violations of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"), in connection with AEP's management of the retirement savings plan (the "Plan") it offered its employees.According to the complaint, the AEP Stock Fund accounted for more than one-quarter of the value of the Plan. Bridges alleges that as Plan administrator, AEP violated its fiduciary duties to the putative class by investing class members' retirement savings in the AEP Stock Fund. The Stock Fund was an imprudent investment, says Bridges, because AEP was artificially inflating its stock price by reporting non-existent revenue generated through sham energy trades. Further, Bridges alleges that AEP misrepresented the true risk entailed in the AEP Stock Fund by failing to disclose the improper activities that boosted the stock price. Class members ultimately sustained substantial retirement losses when the price of the Stock Fund came tumbling down.
On October 31, 2005, Bridges moved for certification of a class consisting of "the Plan, and all Participants in the Plan for whose individual accounts the Plan purchased and/or held shares of the AEP Stock Fund at any time from December 9, 1998, to December 31, 2002, inclusive." On July 11, 2006, after full briefing and oral argument, the Court denied Bridges's motion on the grounds that he lacked standing to maintain his suit under ERISA § 502(a)(2) because he liquidated his Plan holdings in 2004, and therefore was no longer a "participant" in the Plan. On August 15, 2007, the Sixth Circuit reversed this Court's standing determination and remanded for consideration of whether Bridges has satisfied the prerequisites for class certification specified in Federal Rule of Civil Procedure 23. The parties thereafter submitted additional briefing on the propriety of certification.
III. LEGAL STANDARDS
District courts have broad discretion in determining whether cases should be certified as class actions. Olden v. LaFarge Corp., 383 F.3d 495, 507 (6th Cir. 2004). The party seeking certification bears the burden of proving that all the procedural requirements of Federal Rule of Civil Procedure 23 are met. In re Am. Med. Sys., Inc., 75 F.3d 1069, 1079 (6th Cir. 1996). Thus the movant must show compliance with all four prerequisites of Rule 23(a) — commonly referred to as numerosity, commonality, typicality, and adequacy — and further show that the class falls within one of the categories of Rule 23(b). Fed.R.Civ.P. 23(a) (b); Senter v. Gen'l Motors Corp., 532 F.2d 511, 522 (6th Cir. 1976). Here, the Court concludes that Bridges cannot satisfy Rule 23(a)'s adequacy requirement, and therefore the Court will not analyze his showing with respect to any of the other requirements.
The adequacy inquiry turns on whether "the representative parties will fairly and adequately protect the interests of the class." Fed.R.Civ.P. 23(a)(4). Courts must therefore assure themselves that the named plaintiff and his or her counsel will competently and vigorously prosecute the case on behalf of the class. Senter, 532 F.2d at 525. The threshold for establishing adequacy is quite low and will be met so long as the named plaintiff's involvement in the case shows that he or she is not merely a pawn of the class lawyers. See e.g., Moeller v. Taco Bell Corp., 220 F.R.D. 604, 611 (N.D. Cal. 2004); Murray v. E*Trade Fin. Corp., 240 F.R.D. 392, 398-99 (N.D. Ill. 2006). Class plaintiffs need not demonstrate extensive or sophisticated knowledge about a case, nor are they required to show their participation in the litigation at every step of the way. See e.g., Murray, 240 F.R.D. at 398-99 (stating that "[a] class representative . . . is not required to understand the intricacies of the suit" and finding that the adequacy requirement was met where, among other things, the plaintiff reviewed the complaint, discovery, the motion for class certification, the proposed settlement offer, and the court's ruling on the motion to dismiss). Indeed, given the unique properties of class-action litigation — that the individual claims are often too small for any one person to sue, that the vast majority of class members are "absent" (i.e., not directly before the Court), and that the class lawyers have a greater financial incentive to vigorously litigate the case — it is expected that the lawyers prosecuting the case will wield more control over its direction than the named plaintiffs and that the named plaintiffs will rely on the judgment and expertise of their counsel to a significant degree. See e.g., In re Initial Pub. Offering Sec. Litig., 227 F.R.D. 65, 88 (S.D.N.Y. 2004); Moeller, 220 F.R.D. at 611-12; Larry James Oldsmobile-Pontiac-GMC Truck Co. v. GMC, 175 F.R.D. 234, 240 (N.D. Miss. 1997).
That being said, named plaintiffs must still demonstrate a basic understanding of the facts and legal claims comprising their case. They also must show that they will act in the best interests of the class as a whole and that they are willing and able to monitor the work of class counsel. A named plaintiff will be deemed inadequate if he "demonstrates so little knowledge of and involvement in the case that [he] is unable to protect class interests from possibly competing class counsel interests. . . ." Larry James Oldsmobile, 175 F.R.D. at 240. Although "functionally the plaintiffs' attorney is most often the true driving force behind the representation of the class, the named representatives are still required to be more than window dressing or puppets for class counsel." Davidson v. Citizens Gas Coke Util., 238 F.R.D. 225, 229 (S.D. Ind. 2006); see also Jones v. CBE Group, Inc., 215 F.R.D. 558, 568-69 (D. Minn. 2003) (finding that the adequacy requirement was not met where the named plaintiff was, among other things, "confused about the action" and "unfamiliar with his own complaint, his claims and the parties involved"); Shiring v. Tier Techs., Inc., 244 F.R.D. 307, 316 (E.D. Va. 2007) (holding inadequate a named plaintiff whose deposition testimony showed insufficient knowledge about the case and undue reliance on counsel). The denial of class certification is therefore proper "if the named plaintiff's participation is so minimal that the plaintiff has virtually abdicated to his or her attorney the conduct of the case. . . ." Neves v. Nationwide Credit, Inc., No. 95-CV-1532, 1996 U.S. Dist. LEXIS 22241, *6 (N.D. Ga. Mar. 20, 1996).
IV. ANALYSIS
AEP contends that Bridges is not an adequate class representative. Naturally, Bridges disputes this contention. He emphasizes that he has conferred with his counsel "as appropriate," has responded to interrogatories and produced documents, and traveled from his home in West Virginia to AEP's Columbus, Ohio offices to be deposed. Bridges says his deposition testimony confirms his commitment to zealously represent the interests of the class. He testified that,
I'm a man of my word, and I've committed to it, and it will go on if it's up to me. Of course, if they decide to quit, then, you — I am — like I'm just the embodiment of a class of people, and I'm representing them, and I'm kind of going to bat for them. And so I will, you know, pursue and see it through to the end until they get a final judicial judgment about the validity or the legality or whatever.
Bridges further argues that his deposition testimony shows that he adequately grasps the basic details of his case. He points to testimony in which he correctly explained what a class action is and generally described the class he seeks to represent. He also highlights testimony in which he identified allegedly improper trades that artificially boosted AEP's stock price as one of the actions he's challenging. To the extent his testimony reveals gaps in his understanding, Bridges argues that his reliance on counsel is appropriate and that such reliance does not undermine his adequacy.
The Court agrees with AEP that Bridges has not carried his burden with respect to adequacy. Other than in the few places discussed above, Bridges's deposition testimony does not lend itself to the conclusion that he has the interest and ability to vigorously prosecute the class's claims and supervise class counsel. The deposition transcript is replete with startling admissions about Bridges's lack of overall involvement in the case and calls into question his understanding of the nature of the claims asserted. Moreover, his testimony instills little confidence in the Court that he views his role as anything other than a tool of class counsel.
To begin with, except for his deposition, Bridges has had almost no involvement with his case whatsoever. He explained that until he was contacted about scheduling his deposition, he had not spoken with his lawyers since he initially contacted them three years earlier. Bridges saw a notice, possibly online, about legal action against AEP in connection with its employee retirement plan and he called the firm that now represents him to ask that he be "put . . . on the list" of class members. Apparently pleased with a recovery he obtained as an absent class member in an unrelated class action, Bridges wanted to make sure that he would benefit from any recovery against AEP.
Bridges testified that at the time of his initial contact with his lawyers, he did not provide them with any documents relating to his claims and that he had since discarded most such documents; that he did not meet his counsel in person until the morning of his deposition; that he was not aware of what investigation into his claims his lawyers had conducted; that he did not discuss either the complaint or the amended complaint with his counsel prior to their filing and that he had neither previously reviewed, nor received copies of, either one; that he was not aware of any rulings issued by the Court; that he had never received any status updates about the progress of the case from his lawyers; and that he had not been supervising his counsel's work. Bridges said that he did not maintain a file on the case and that he did not plan on doing so because "I've got more paper now than I need to mess with." In what must have been a rather awkward moment for his lawyer, Bridges asked who had drafted the complaint when he was presented with it and expressed an interest in having a copy. Even worse, when he started to review the complaint, Bridges showed little patience with it, stating, "Well, in the first place, I'm going to have difficulty understanding it. `On behalf of himself,' that's too much. I ain't got time. I'm too old to do much more than look at the first two or three pages. What are the consequences of that?" That a lay person might find legalese perplexing is hardly a cause for concern, but Bridges's professed indifference, his insistence that it's "too much," that "I ain't got time," and "I'm too old" to look at more than "the first two or three pages" does not bode well for his ability or willingness to actively engage with the litigation going forward.
Given his almost complete lack of involvement in the prosecution of his case, it is not surprising that Bridges's testimony suggests that he may not entirely understand his duties as a class representative. As noted above, Bridges recognized that the role of a class representative is to stand in for all the absent class members and advocate on behalf of their interests. But, when opposing counsel asked him when he retained the law firm representing him, Bridges responded, "What do you mean retained? I still don't feel like I've retained him. I'm just a member of a class. . . ." Although Bridges's answer might be excused as the product of confusion over the meaning of the word "retained" — afterall, Bridges might not think of his lawyers as "retained" when he is not paying them for their services — it can just as easily be interpreted as an acknowledgment that it was his counsel who "retained" him, and not vice versa. Moreover, Bridges's follow-up statement that he's "just a member of a class," suggests that he did not realize that he had agreed to serve as a class representative and that he further did not appreciate that this designation carries with it a special responsibility to actively assist class counsel in prosecuting the litigation and monitor their work.
Bridges also came across as ill-informed about the nature of the allegations asserted on his and the putative class's behalf. He repeatedly compared AEP's alleged wrongdoing to that of Enron. While such a comparison might be apt insofar as the complaint in this matter pleads that AEP artificially raised its stock price through improper energy trades, Bridges went further, accusing AEP of "off-the-books entities" which mirrored entities created by Enron. The complaint does not make any reference to off-book transactions or improper accounting practices at AEP. What's more, Bridges denied making certain claims that are plainly asserted in his complaint. He denied that he was challenging any statements or misstatements made by AEP and he did not seem to understand that one of the central claims in the case is that the AEP Stock Fund was not a prudent investment. Bridges also denied that he was contesting AEP's compliance with its fiduciary duties, even though this too is a central allegation in the complaint:
Q: Are you making any claim that the defendants failed to appoint fiduciaries with the knowledge and expertise necessary to manage the plan's assets?
A: No, I don't make that claim.
Q: Are you claiming that the defendants failed to monitor the manner in which the fiduciaries were investing the plan assets?
A: No, I don't say that.
Q: Do you claim that the defendants failed to provide the plan fiduciaries with sufficient information?
A: No, I don't make that claim.
Bridges's deposition testimony leaves the Court with the strong impression that he is insufficiently familiar with the basic facts and allegations in this case, and that he has a poor understanding of his role and responsibilities as a class representative. Bridges's involvement with this case began when he called to make sure he would be included as a class member in any litigation relating to the AEP retirement plan. Three years later, he got a call from his lawyers hurriedly seeking to schedule his deposition. In the interval between his initial contact and the scheduling of his deposition, Bridges had no idea what was happening in his case and apparently no interest in finding out. He never saw or contributed to the complaint or the amended complaint and knew nothing about any of the litigated issues, such as the motion to dismiss, or the discovery conducted. At his deposition, he showed a lack of familiarity with the allegations in the case and he made comments suggesting that he would be unlikely to consult regularly with his counsel and help direct the litigation towards an outcome that is best for the class. In sum, the Court cannot conclude on this record that Bridges is an adequate class representative.
It bears repeating that the burden on a named plaintiff to establish that he or she is an adequate class representative is not high. As the cases cited above demonstrate, class representatives need to be more than mere figureheads who lend their names to pleadings, but can be far less than hands-on decisionmakers propelling the litigation forward. The precise degree of involvement that class representatives must have and the due process implications in crafting such a standard are not presently before this Court. Suffice it say that even under the most lenient standard, Bridges's complete absence from this case during most of its pendency is simply not enough for him to qualify as an adequate class representative. With even a minimal amount of consultation with his lawyer, he likely would have passed muster. But that did not happen.
Finally, the Court notes that Bridges maintains that even if class certification is denied, he may nonetheless obtain a recovery on behalf of the Plan because ERISA § 502(a)(2) allows for representative actions. AEP disagrees, arguing that even a representative action must comply with the procedural requirements of Rule 23. In an order dated October 22, 2007, the Court ruled that if it denied class certification, it would afford the parties the opportunity to brief the question of whether Bridges may maintain his § 502(a)(2) claim on behalf of the Plan in the absence of class certification. Accordingly, Bridges shall have until Friday, September 26, 2008, to file his brief. AEP shall have until Friday, October 17, 2008, to file a response, and Bridges shall file a reply, if any, by Monday, October 27, 2008.