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Jackson's Five Star Catering, Inc. v. Beason

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION
Jul 26, 2012
Case No. 10-10010 (E.D. Mich. Jul. 26, 2012)

Summary

holding that M.C.R. 3.501 did not apply to bar TCPA claim

Summary of this case from Compressor Eng'g Corp. v. Chicken Shack, Inc.

Opinion

Case No. 10-10010

07-26-2012

JACKSON'S FIVE STAR CATERING, INC., Plaintiff, v. JOHN R. BEASON d/b/a TAX CONNECTION WORLD and TAX CONNECTION WORLDWIDE LLC, Defendants.


ORDER

In this case, the Plaintiff, Jackson's Five Star Catering, Inc., alleges that it received an unsolicited advertisement by facsimile on January 5, 2006 from the Defendants, John R. Beason et al., in violation of the Telephone Consumer Privacy Act, 47 U.S.C. §227(b)(1)(c). The Plaintiff further alleges that this advertisement was one of approximately 5,000 that were sent on that date on behalf of the Defendants by B2B, a third-party fax broadcaster owned and operated by Caroline Abraham.

I.

On April 20, 2011, the Court (1) certified the Plaintiff, Jackson's Five Star Catering, Inc., to serve as the official representative of a class of similarly situated business entities; (2) authorized the law firms of Sommers Schwartz, P.C., Anderson + Wanca, and Bock & Hatch, LLC to act as the class counsel; and (3) certified the following class: "All persons who were successfully sent one or more faxes on January 5, 2006, from 'Tax Connection World Wide' of Detroit, Michigan, stating 'It's income tax time' and offering 'Fast 24 Hr. Rapid Refunds.'" The Court subsequently approved the parties' joint proposed class notice and procedures for dissemination.

Following a decision last year by the Seventh Circuit to vacate a class certification in a similar case which involved the same class counsel, see Creative Montessori Learning Ctrs. v. Ashford Gear LLC, 662 F.3d 913 (7th Cir. 2011), the Court issued an order on January 23, 2012 that directed the Plaintiff to show cause why the class should not be decertified. In Creative Montessori, the Seventh Circuit found that allegations of attorney misconduct had called into question the adequacy of the class counsel to fairly and loyally represent the interests of the class. See Fed. R. Civ. P. 23(g)(1)(B). Given the similarity to Creative Montessori, the Court was concerned that the Plaintiff in the case sub judice could face similar challenges as to the adequacy of its class counsel.

On March 27, 2012, the Plaintiff filed a motion for leave to (1) proffer the opinion of Richard W. Painter, who was described by the movant as a leading legal ethicist whose expert opinion regarding the allegations of professional misconduct could assist the Court in its resolution of the relevant issues, and (2) a transcript of a hearing before the district court in Creative Montessori, which would allegedly demonstrate that the Seventh Circuit had not made findings of fact that the plaintiff's counsel had engaged in professional misconduct.

In their response, the Defendants have opposed the motion, believing that (1) they would be unfairly prejudiced by the submission of the Painter opinion and (2) these documents are not necessary to the Court's resolution of the relevant issues. The Court agrees with the second argument, finding that the opinion of the proposed expert witness and the introduction of the Creative Montessori transcript will not assist the Court in that they are unnecessary and would constitute an unwarranted distraction from the substantive issues in the case now at bar.

On April 5, 2012, the Plaintiff filed another motion, seeking to introduce the text of a recent class certification order in Reliable Money Order, Inc. v. McKnight Sales Co., No. 10-C-242, Doc. #60 (E.D. Wis. Mar. 30, 2012). As of this date, the Court has not heard from the Plaintiff on this motion. In Reliable Money Order, the district court in Wisconsin granted a class certification for the plaintiffs in a case that is very similar to the case sub judice and Creative Montessori. Id. The Reliable Money Order court specifically rejected the concerns which had been expressed by the Creative Montessori tribunal that allegations of misconduct by the counsel for the named plaintiff had undercut their ability to successfully protect the interests of the class as a whole. Id.

The Court is not aware of any reason that it should not consider this opinion. Although the Wisconsin district court decision is not binding upon this Court, the parties' dispute in Reliable Money Order facially appears to be relevant to the issues herein. Consequently, the Court will grant the Plaintiff's motion to submit this recent class certification order.

II.

In its response to the order to show cause, the Plaintiff, in denying the existence of misconduct in any form by its class counsel, maintains that there is no reason upon which to doubt its adequacy as a representative of the class.

A litigant who seeks to obtain class certification must fulfill the requirements of Fed. R. Civ. P. 23. The "adequacy" element requires that the proposed "representative parties will fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). When considering the adequacy of the representative party, the Court is encouraged to assess the representative's counsel's qualifications, including any relevant conduct. See, e.g., Stanich v. Travelers Indem. Co., 249 F.R.D. 506, 524 (N.D. Ohio 2009) (courts should consider whether class counsel is "qualified, experienced and generally able to conduct the litigation" while determining the adequacy of the representative party); Ballan v. Upjohn Co., 159 F.R.D. 473, 489 (W.D. Mich. 1994) ("When an attack on the class representatives is made, the court may weigh . . . whether the action of potential class counsel in selecting them creates some doubt about counsel's ability to serve as lead counsel in this suit.").

Within this Rule, a district court has broad discretion in deciding whether to certify a class. In re Am. Med. Sys., 75 F.3d 1069, 1079 (6th Cir. 1996).

The Sixth Circuit has identified two criteria for determining the adequacy of the representation: "(1) the representative must have common interests with unnamed members of the class, and (2) it must appear that the representatives will vigorously prosecute the interests of the class through qualified counsel." In re Am. Med. Sys., 75 F.3d at 1083. Since the Court has previously considered these factors and concluded that the Plaintiff was an adequate class representative under this standard, it will now focus only on the recent concerns of the alleged attorney misconduct. --------

A court may consider a number of factors that are pertinent to a class counsel's ability to fairly and adequately represent the interests of the class. See Fed. R. Civ. P. 23(g)(1)(B). This Court agrees with the Seventh Circuit that misconduct by class counsel could cast "serious doubt" on the propriety of its representation of the class. See Creative Montessori, 662 F.3d at 917 (citing Fed. R. Civ. P. 23(a)(4), (g)).

Creative Montessori and the case sub judice are both among a group of more than fifty class action suits brought by the same attorneys based on information obtained from a single source. In Creative Montessori, the Seventh Circuit vacated a class certification due to allegations that the attorney had committed professional misconduct. Finding that misconduct by its counsel could make the plaintiff an inadequate class representative, the Creative Montessori court remanded the case to the district court to determine if misconduct existed under the standard created in Culver v. City of Milwaukee, 277 F.3d 908, 913 (7th Cir. 2001).

The Court finds that the allegations of misconduct from Creative Montessori do not bar the Plaintiff's counsel as adequate representatives in this case. In Creative Montessori, the Seventh Circuit focused on two factual issues regarding allegations of misconduct: namely, whether the plaintiff's attorneys had (1) broken confidentiality promises made to Caroline Abraham by using B2B's client information to identify potential plaintiffs, and (2) misled the plaintiff in a marketing letter by implying there was already a certified class to which the recipient belonged.

The Plaintiff has presented sufficient evidence to show that the B2B client information was not obtained under any confidentiality agreement. Although Abraham maintains that she had been promised that any information that she gave to the attorneys would not be used for additional purposes, no evidence has been produced to support this claim. Furthermore, the Plaintiff's counsel received the B2B records from Joel Abraham, Caroline's adult son who also worked at B2B - not Caroline. After Caroline refused to turn over the evidence, Joel submitted a DVD containing B2B's records on January 8, 2009 pursuant to subpoena in a related case. Joel's attorney, Eric M. Rubin, also mailed a computer hard drive and a different DVD containing B2B client information to the Plaintiff's lawyers. Rubin has conceded that he never claimed any confidentiality regarding these records. Since Caroline Abraham did not produce the information, the Plaintiff's attorneys could not have breached any assurance of confidentiality allegedly made to her.

The Plaintiff has also presented a sufficiency of evidence which facially negates the concern that its attorneys deceived it - or other potential class members - in connection with this case. In Creative Montessori, the plaintiff's lawyers allegedly used this client information to send marketing letters to potential clients, stating "we have determined that you are likely to be a member of the class." 662 F.3d at 916. The Seventh Circuit was concerned that this letter had misled the plaintiff by implying that there was already a certified class to which the plaintiff belonged. Id. at 917. In this case, however, the Defendants have not presented any similar marketing evidence that would suggest that the Plaintiff's attorneys misled their potential clients. According to the Plaintiff, one of its representatives contacted its counsel because the Plaintiff "was tired of receiving the junk faxes and . . . pursued information, trying to find an attorney that specialized in that." (Jackson Dep. 23:8-24, Ex. Z to Pl.'s Resp. to Order to Show Cause). Since the available evidence shows that the Plaintiff initiated contact with its attorneys, this particular concern from Creative Montessori does not appear to apply in the case at bar.

Without further evidence that the actions of the Plaintiff's counsel should be characterized as misconduct, the Court concludes that (1) its concerns about misconduct have been answered, and (2) the class will remain certified, with the Plaintiff remaining as its class representative.

III.

Within its response to the order to show cause, the Defendants argue that Michigan Court Rule 3.501(a)(5) prohibits the maintenance of this Telephone Consumer Privacy Act claim as a class action. This Rule provides that "[a]n action for a penalty or a minimum amount of recovery without regard to actual damages imposed or authorized by statute may not be maintained as a class action unless the statute specifically authorizes its recovery as a class action." The question of how the Telephone Consumer Privacy Act's private right of action provision, 47 U.S.C. 227(b)(3) ("A person or entity may, if otherwise permitted by the laws or rules of court of a State, bring in an appropriate court of that State" an action for alleged violations of the Telephone Consumer Privacy Act), interacts with various state statutes and rules has divided the courts. The Defendants rely upon Holster v. Gatco, Inc., 618 F.3d 214 (2nd Cir. 2010), to argue that this class action may not be maintained. In Holster, the Second Circuit held that a New York statute which is similar to the Michigan Rule at issue here deprived federal courts of subject-matter jurisdiction over class actions that involve the Telephone Consumer Privacy Act. Id. at 216 ("Because federal law [the Telephone Consumer Privacy Act] uses state law to define the federal cause of action, when the state refuses to recognize that cause of action, there remains [nothing] to which any grant of federal court jurisdiction could attach." (citation and internal quotation marks omitted)).

The Plaintiff first argues that the Defendants waived this argument by failing to make it earlier. However, the issue of subject matter jurisdiction is never waived. See Fed. R. Civ. P. 12(h)(1) (excepting lack of subject matter jurisdiction from list of defenses that may be waived); Fed. R. Civ. P. 12(h)(3) ("If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.").

However, the Court agrees with the Plaintiff's second argument; namely, that Holster is not persuasive. Resolving an issue that had divided the circuits, the Supreme Court has recently held that "Congress did not deprive federal courts of federal-question jurisdiction over private [Telephone Consumer Privacy Act] suits." Mims v. Arrow Fin. Servs. LLC, 1132 S. Ct. 740, 747 (2012). This holding made clear that the state and federal courts possess concurrent jurisdiction over Telephone Consumer Privacy Act claims. A plain text reading of this statute shows that the phrase "if otherwise permitted by the laws or rules of court of a State" is a limitation on actions "[brought] in an appropriate court of that State." Section 227(b)(3) allows states to close their courthouse doors to actions that the Supremacy Clause would otherwise require them to maintain, see Hawk Valley v. Taylor, No. 10-00804, 2012 WL 1079965, at *10 (E.D. Pa. Mar. 30, 2012) - but does not speak to actions brought in the federal courts and does not require that state substantive law and procedural rules be imported into federal actions. See, e.g., Weitzner v. Sanofi Pasteur, Inc., No. 11-2198, 2012 WL 1677340, at *3 (M.D. Pa. May 14, 2012); Bailey v. Domino's Pizza, LLC, ___ F. Supp. 2d ___, 2012 WL 1150882, at *6 (E.D. La. Apr. 5, 2012) ("Section 227(b)(3) applies to [Telephone Consumer Privacy Act] claims brought in state court but by its plain language does not reach a [Telephone Consumer Privacy Act] claim brought in federal court under federal-question jurisdiction."). Therefore, the Defendants' claim that the Michigan Rule bars this action in federal court must be rejected.

IV.

For the reasons that have been set forth above, the Court (1) denies the Plaintiff's motion for leave to submit the Painter opinion and Creative Montessori transcript (ECF 39); and (2) grants the Plaintiff's motion to submit the class certification order in Reliable Money Order (ECF 40) for its review. The Court is satisfied that the Plaintiff has demonstrated that the proposed class satisfies the requirements of Fed. R. Civ. P. 23(c)(1)(C). Consequently, the order to show cause (ECF 34) is set aside.

IT IS SO ORDERED. Date: July 26, 2012

s/Julian Abele Cook, Jr.

JULIAN ABELE COOK, JR.

U.S. District Court Judge

CERTIFICATE OF SERVICE

The undersigned certifies that the foregoing Order was served upon counsel of record via the Court's ECF System to their respective email addresses or First Class U.S. mail to the non-ECF participants on July 26, 2012.

s/ Kay Doaks

Case Manager


Summaries of

Jackson's Five Star Catering, Inc. v. Beason

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION
Jul 26, 2012
Case No. 10-10010 (E.D. Mich. Jul. 26, 2012)

holding that M.C.R. 3.501 did not apply to bar TCPA claim

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Case details for

Jackson's Five Star Catering, Inc. v. Beason

Case Details

Full title:JACKSON'S FIVE STAR CATERING, INC., Plaintiff, v. JOHN R. BEASON d/b/a TAX…

Court:UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

Date published: Jul 26, 2012

Citations

Case No. 10-10010 (E.D. Mich. Jul. 26, 2012)

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