Opinion
CV 21-2312 DSF (ADSx)
2021-12-22
Lawrence A. MAY, et al., Plaintiffs, v. Daniel S. GLADSTONE, et al., Defendants.
Karineh Tarbinian, Thomas Michael Brown, Kenneth P. White, Brown White and Osborn LLP, Los Angeles, CA, for Plaintiffs. Benjamin D. Williams, Ryan D. Watstein, Pro Hac Vice, Kabat Chapman and Ozmer LLP, Atlanta, GA, Paul A. Grammatico, Kabat Chapman and Ozmer LLP, Los Angeles, CA, for Defendants Daniel S. Gladstone, Longeviti Health, LLC.
Karineh Tarbinian, Thomas Michael Brown, Kenneth P. White, Brown White and Osborn LLP, Los Angeles, CA, for Plaintiffs.
Benjamin D. Williams, Ryan D. Watstein, Pro Hac Vice, Kabat Chapman and Ozmer LLP, Atlanta, GA, Paul A. Grammatico, Kabat Chapman and Ozmer LLP, Los Angeles, CA, for Defendants Daniel S. Gladstone, Longeviti Health, LLC.
Order GRANTING Defendants’ Motion to Deny Class Certification and DENYING Request for Sanctions (Dkt. 34)
Dale S. Fischer, United States District Judge
Defendants Longeviti Health LLC and Daniel S. Gladstone (collectively, Defendants) move for an order denying class certification and imposing sanctions. Dkt. 34 (Mot.) Plaintiff Lawrence A. May opposes. Dkt. 35 (Opp'n). The Court deems these matters appropriate for decision without oral argument. See Fed. R. Civ. P. 78 ; Local Rule 7-15. For the reasons stated below, Defendants’ motion is GRANTED in part and DENIED in part.
I. BACKGROUND
May is a medical doctor who practices internal medicine with a concierge medicine practice he operates through SignatureMD. Dkt. 1 (Compl.) ¶ 15. SignatureMD is "a provider of membership-based concierge medicine support services to concierge physicians" that "connects patient members with physicians in their service." ¶¶ 14, 15. Gladstone worked for SignatureMD in sales operations and physician acquisitions from 2010 through 2014. Id. ¶ 14. While employed at SignatureMD, Gladstone had access to SignatureMD's confidential list of potential and existing physician clients in its customer relationship management system. Id. ¶ 16. The list contained physicians’ private contact information, including their personal cell phone numbers and email addresses. Id. May alleges that when Gladstone resigned from SignatureMD in May 2014, Gladstone unlawfully and without SignatureMD's consent retained a copy of the physician list. Id. ¶ 17.
On December 26, 2017, Gladstone registered his company Longeviti in Florida. Id. ¶ 19. Like SignatureMD, Longeviti is a concierge medicine and practice solutions company. Id. May alleges Gladstone stole SignatureMD's physician list in order to target those physicians "with unwanted calls and emails as part of Defendants’ advertising campaign to attract the business of ‘concierge physicians’ away from SignatureMD and to Longeviti's concierge services." Id. ¶ 2.
On about December 24, 2020, May received an unsolicited pre-recorded phone call on his personal cell phone prompting him to "dial one" to learn more about Longeviti. Id. ¶ 22. May alleges this call was a robocall made through auto-dial technology. Id. ¶ 26. After receiving the phone call, May also received an email from Defendants to his personal email address stating, "I recently called you and left you a message" followed by a message about Longeviti's services. Id. ¶ 25. May alleges that he and putative class members have not authorized or consented to Defendants’ use of their personal contact information for these calls. Id. ¶¶ 20, 29.
May argues he was not the only recipient of Defendants’ calls and emails, and specifically that Defendants made "hundreds of unwanted robo-calls and pre-recorded calls and sen[t] hundreds of electronic mail messages" to "dozens of medical doctors throughout the nation" without their prior express consent. Id. ¶ 1. He alleges these actions caused him and members of the putative class "actual harm, including the aggravation, nuisance, and invasion of privacy that necessarily accompanies the receipt of unsolicited phone calls to one's cellular phone." Id. ¶ 4.
This action alleges violations of the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227 ; California Business & Professions Code § 17200, et seq. , for violations of the TCPA, CAN-SPAM Act, and California Public Utilities Code § 2872. May seeks an injunction and statutory damages. Id. at 1, ¶ 5.
The proposed class includes:
All past, current, and potential physicians, domiciled within the United States, who received a nonemergency call from Defendants on their cellular telephone, without their prior express consent, either via an automatic telephone
dialing system ("ATDS") or as a prerecorded message, and/or received an email to their private email address, that references and advertises Longeviti's concierge support services.
Id. ¶ 33.
II. LEGAL STANDARD
"At an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action." Fed. R. Civ. P. 23(c)(1)(A). "A defendant may move to deny class certification before a plaintiff files a motion to certify a class." Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 941 (9th Cir. 2009).
To certify a class under Rule 23, the party seeking class certification must first satisfy the four prerequisites of Rule 23(a) – numerosity, commonality, typicality, and adequacy of representation. Rodriguez v. Hayes, 591 F.3d 1105, 1122 (9th Cir. 2010).
Defendants address only Rule 23(a)(3) and (4).
III. DISCUSSION
A class representative must have claims or defenses that are "typical of the claims or defenses of the class" and must "fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(3)-(4). Defendants argue May does not satisfy either the typicality or adequacy requirements. For the reasons explained below, the Court finds May is not an adequate representative and therefore need not address the other issues raised by Defendants.
A. Adequacy
Rule 23(a)(4) permits the certification of a class action only if "the representative parties will fairly and adequately protect the interests of the class." "[U]ncovering conflicts of interest between the named parties and the class they seek to represent is a critical purpose of the adequacy inquiry." Rodriguez v. West Publ'g. Corp., 563 F.3d 948, 959 (9th Cir. 2009). "An absence of material conflicts of interest between the named plaintiffs and their counsel with other class members is central to adequacy and, in turn, to due process for absent members of the class." Id. Determining adequacy involves two inquiries: (1) whether the representative plaintiffs and their counsel have any conflicts of interest with other class members, and (2) whether the representative plaintiffs and their counsel will prosecute the action vigorously on behalf of the class. Staton v. Boeing Co., 327 F.3d 938, 957 (9th Cir. 2003). "District courts have ‘latitude’ in what information they can consider to assess adequacy." In re Mersho, 6 F.4th 891, 901 (9th Cir. 2021) (citing In re Cavanaugh, 306 F.3d 726, 732 (9th Cir. 2002) in class action brought pursuant to the Private Securities Litigation Reform Act).
Defendants first contend May is not an adequate class representative because May has "abdicated his duties as a class representative by ceding control of the litigation" to SignatureMD; Jacobson, Signature MD's founder and CEO; and "the lawyers Jacobson chose for Dr. May." Mot. at 12. Defendants characterize May as a "pawn in an abusive, anticompetitive litigation scheme." Id. May disagrees, of course, citing his deposition testimony demonstrating he has worked with his attorneys to prosecute this action and has been actively participating in the case. Opp'n at 8; Dkt. 34-2 (May Dep.) 96:2-9. But it was Jacobson's idea to file this lawsuit and he asked May to serve as the "lead plaintiff." May Dep. 16:18-25. May testified that he agreed because he is "the chairman of [Jacobson's] advisory committee and a representative of the physicians who are Signature MD doctors." Id. 17:4-13. But he admits he would not have brought the lawsuit if Jacobson hadn't asked him to, id. 33:3-5, and has not filed any other suits though he has received other robocalls, id. 33:15-23. The attorneys were "presented to [him], not selected by [him]," and he had no say in the process. Id. 39:14-24. Nevertheless, he chose to continue working with Jacobson's selected attorneys even though he has his own personal attorney. Id. May Dep. 39:2. He didn't even speak with his own attorney before filing the complaint. Id. 39:11-13.
Second, Defendants argue May has an "irreconcilable conflict" with other putative class members because he is chairman of SignatureMD's medical advisory board and in that position, he is paid to advance the company's interests. May disagrees, arguing he is an independent contractor representing the other concierge doctors at SignatureMD, and voluntarily took on the role of class representative. Further, May argues that Defendants improperly assume that because SignatureMD is paying May's legal fees, May necessarily does not have a personal desire to vindicate his own rights and wishes only to "financially harm" Defendants and "drive them out of the marketplace." Id. at 14; Mot. at 13. May has a leadership position in SignatureMD and has been affiliated with SignatureMD since April 2017 as a participating physician and chairman of the medical advisory board. May Dep. 29:20-30:16. But he testified that he "think[s] that is a relationship that is not relevant here." Id. He also "provide[s] advice and "look[s] into opportunities," but there are a number of activities he believes "are not relevant to this." Id. 30:11-16. He receives a $5,000 a month stipend from SignatureMD. Id. 31:22-32:3.
Third, Defendants argue May is inadequate because he has "no understanding of what his responsibilities are as a class representative." Mot. at 13. May answered "no" when asked if he has "any knowledge of what a class representative is for [ ] a class action." May Dep. 44:2-6. He also has no understanding of the arguments his attorneys are making as to damages. May Dep. 93:2-10. May's apparent lack of interest in his responsibilities and the goals of the litigation is troubling.
Fourth, Defendants point to allegations in the Complaint that are purportedly inconsistent with May's deposition testimony. Mot. at 14. "While credibility is a relevant consideration with respect to the adequacy analysis, to show that a class representative is not adequate, credibility problems must relate to issues directly relevant to the litigation." Keegan v. Am. Honda Motor Co., 284 F.R.D. 504, 525 (C.D. Cal. 2012). Defendants point to May's inconsistent statements about whether Defendants’ emails contained an opt-out mechanism, whether May ever tried to unsubscribe from Defendants’ emails, and whether Defendants obtained May's cell phone number from his business card. Mot. at 13-14. These issues appear relevant to the litigation.
But the Court need not determine whether any of the above issues – or a combination of them – defeats adequacy because the Court finds there is a conflict of interest between May's counsel and members of the putative class that precludes counsel from prosecuting this action vigorously on behalf of all members of the putative class.
"There may be a conflict of interest where a third party is paying for the attorney to represent another person or entity; when a third party pays for a lawyer's service to a client, there is a danger that the lawyer will tailor his or her representation to please the payor rather than the client...." Parker et al., Cal. Law and Motion Authorities § 2:19 (2021). The California Rules of Professional Conduct also provide, "[a] lawyer shall not enter into an agreement for, charge, or accept compensation for representing a client from one other than the client" unless (1) "there is no interference with the lawyer's independent professional judgment or with the lawyer-client relationship"; (2) the client's confidential information is protected; and (3) with limited exceptions, "the lawyer obtains the client's informed written consent at or before the time the lawyer has entered into the agreement for, charged, or accepted the compensation, or as soon thereafter as reasonably practicable...." California R. of Prof'l Conduct 1.8.6.
Jacobson – the CEO of SignatureMD – pays May's legal fees in this litigation against SignatureMD's competitor and former employee. See Opp'n at 12. Even if May would have granted consent after being informed of the conflict, May's counsel could not have obtained informed, written consent from absent class members before entering into the agreement. Moreover, this arrangement raises significant concern as to whether May's counsel is motivated by a desire to zealously represent the putative class, or instead by Jacobson's or SignatureMD's litigation agenda. This arrangement also raises significant concern about whether Jacobson has or will interfere with the professional judgment of May's counsel.
SignatureMD previously brought suit against Gladstone in May 2018, and the parties settled that action in September 2018. Dkt. 33 Exs. 1-2. SignatureMD initiated arbitration proceedings against Gladstone in January 2021 – approximately two months before May initiated the instant action. Id. Ex. 3. The Court takes no position on the merits of those disputes.
Additionally, May's counsel has not taken the case on a contingency fee basis – an anomaly in class action litigation. The fee agreement here adds to the Court's considerable doubt that May's counsel is independent of Jacobson and – at the very least – gives the appearance that counsel may take actions urged by Jacobson that are inconsistent with the interests of the entire class.
The relationship between counsel and the representative plaintiff is a factor for consideration by the district court. Pattillo v. Schlesinger, 625 F.2d 262, 265 n.2 (9th Cir. 1980) (citing Zylstra v. Safeway Stores, Inc., 578 F.2d 102 (5th Cir. 1978) ); Susman v. Lincoln American Corp., 561 F.2d 86 (7th Cir. 1977). "[T]he district court has a fiduciary duty to look after the interests of ... absent class members." Allen v. Bedolla, 787 F.3d 1218, 1223 (9th Cir. 2015) (explaining district court's fiduciary duty to class members in approving class action settlements). This is especially so prior to class certification, when "the court has not yet approved class counsel, who would owe a fiduciary duty to the class members." Briseno v. Henderson, 998 F.3d 1014, 1024 (9th Cir. 2021). In addition to the factors previously discussed, Jacobson's influence on May is likely to affect May's ability to represent the class adequately. As described earlier, May became the class representative because Jacobson asked him to do so, and simply accepted Jacobson's selected attorneys without considering the potential conflict and despite having his own personal attorney. Jacobson's apparent strong influence on May is likely to interfere with his ability to represent the interests of the class.
The facts here – whether the Court accepts those proffered by May or by Defendants – are unique in the Court's experience. But because both May and his counsel very likely have a conflict of interest with the putative class, the Court also finds May is not an adequate class representative and cannot "fairly and adequately protect the interests of the class." See Rodriguez, 563 F.3d at 959. B. Request for Sanctions
Defendants ask the Court to award monetary sanctions pursuant to 28 U.S.C. § 1927. Mot. at 20-24. Section 1927 provides that "any attorney ... who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct." 28 U.S.C. § 1927. "Sanctions pursuant to section 1927 must be supported by a finding of subjective bad faith." Blixseth v. Yellowstone Mountain Club, LLC, 796 F.3d 1004, 1007 (9th Cir. 2015). "Bad faith is present when an attorney knowingly or recklessly raises a frivolous argument or argues a meritorious claim for the purpose of harassing an opponent." Id. (simplified).
Although the Court is obviously troubled by the facts described above and Defendants’ allegations, the Court does not have enough information or evidence on which to base the required findings, so an award of sanctions would be premature.
Defendants’ motion for sanctions is DENIED without prejudice.
IV. CONCLUSION
Defendants’ motion to deny class certification is GRANTED. The class allegations are stricken and the matter will proceed as an individual action. Defendants’ request for sanctions is DENIED.
IT IS SO ORDERED.