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Cordes & Co. Fin. Servs. v. A.G. Edwards & Sons, Inc.

United States Court of Appeals for the Second Circuit

March 19, 2007, Argued; September 11, 2007, Decided

Docket No. 06-2143-cv

Opinion

 [*94]  SACK, Circuit Judge:

The first of the named plaintiffs in this lawsuit -- Cordes & Company Financial Services, Inc. ("Cordes") -- is the assignee of an antitrust claim against the defendants formerly asserted by Western Pacific Airlines Inc. ("Western Pacific"). The  [**5] interests in this litigation of the second named-plaintiff -- EqualNet Communications Corporation ("EqualNet") -- are being pursued by the Unsecured Creditors Trust ("Creditors Trust") of a subsidiary of EqualNet: EqualNet Corp. ("EN"). Creditors Trust acquired a two-thirds stake in any proceeds EqualNet obtains through this lawsuit. The plaintiffs allege in their Consolidated Class Action Complaint (the "Complaint") that the defendants, who are initial public offering ("IPO") underwriters, violated Section 1 of the Sherman Act, 15 U.S.C. § 1, by agreeing to charge all corporations conducting mid-size IPOs who used their services a fee equal to seven percent of the proceeds of the offering. Cordes and Creditors  [*95]  Trust sought class certification pursuant to Federal Rule of Civil Procedure 23.

The United States District Court for the Southern District of New York (Lawrence M. McKenna, Judge) denied the motion for class certification because, it concluded, two Rule 23 requirements -- the adequacy requirement of Rule 23(a)(4) and the predominance requirement of Rule 23(b)(3) -- were not met.

Rule 23(a)(4) provides that it is a prerequisite to pursuit of an action as a class that "the representative  [**6] parties will fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). The district court reasoned that because Cordes and Creditors Trust are assignees of the entities that instituted this lawsuit and are not themselves members of the putative class, they are not qualified to act as representatives of the class. For reasons set forth below, we think that the fact that the assignee-plaintiffs do not themselves fall within the definition of the class as set forth in the Complaint does not, ipso facto, foreclose their ability to act as class representatives in lieu of the entities that originally brought the claims, both of them members of the class. On remand, the district court should decide whether, on the facts presented in this case, Cordes and Creditors Trust are each adequate representatives of the class.

Rule 23(b)(3) requires, inter alia, that for a lawsuit to be pursued as a class action, "the questions of law or fact common to the members of the class [must] predominate over any questions affecting only individual members . . . ." Fed. R. Civ. P. 23(b)(3). The district court concluded that the plaintiffs failed to establish that this litigation meets  [**7] that requirement because they did not offer evidence to establish that antitrust injury -- one of the elements of the antitrust claim alleged in the Complaint -- could be proved by a method common to the class.

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502 F.3d 91 *; 2007 U.S. App. LEXIS 21720 **; 2007-2 Trade Cas. (CCH) P75,861

CORDES & COMPANY FINANCIAL SERVICES, INC. and EQUALNET COMMUNICATIONS CORPORATION, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, -v- A.G. EDWARDS & SONS, INC., BANCBOSTON ROBERTSON STEPHENS & COMPANY, BEAR STEARNS & CO., CHASE HAMBRECHT & QUIST, INC., CIBC OPPENHEIMER CORP., COWEN & CO., CREDIT SUISSE FIRST BOSTON CORPORATION, DB ALEX. BROWN LLC formerly known as BT ALEX BROWN INC., DONALDSON, LUFKIN & JENRETTE, INC., EVEREN SECURITIES, INC., THE GOLDMAN SACHS GROUP, INC., HANIFEN INHOFF INC., ING BARINGS LLC, J.C. BRADFORD & CO., J.P. MORGAN SECURITIES, INC., JEFFERIES & COMPANY, INC., JOHNSON RICE & COMPANY, LEGG MASON WOOD WALKER INC., LEHMAN BROTHERS INC., MERRILL LYNCH & CO., MORGAN STANLEY DEAN WITTER & CO., NATIONSBANC MONTGOMERY SECURITIES, PAINE WEBBER GROUP, INC., PIPER JAFFRAY & CO., INC., PRUDENTIAL SECURITIES INCORPORATED, RAYMOND JAMES & ASSOCIATES, INC., SALOMON SMITH BARNEY, INC. and UBS WARBURG LLC, Defendants-Appellees.

Subsequent History: As Amended September 27, 2007.

Prior History:  [**1] Appeal from a Memorandum and Order of the United States District Court for the Southern District of New York (Lawrence M. McKenna, Judge) denying the plaintiffs' motion for class certification pursuant to Federal Rule of Civil Procedure 23. We conclude that although the plaintiffs do not fall within the definition of the class as set forth in the complaint, as assignees of class members who brought the suit, they are not categorically excluded from acting as class representatives. We also conclude that the district court erred with respect to the basis on which it concluded that individual questions predominate over common ones.

In re Public Offering Fee Antitrust Litig., 2006 U.S. Dist. LEXIS 21076 (S.D.N.Y., Apr. 18, 2006)

Disposition: Vacated and remanded.

CORE TERMS

district court, antitrust, predominance, class representative, questions, member of the class, class action, class member, defendants', but-for, damages, injury-in-fact, certification, anti trust law, plaintiffs', assignees, legal question, price-fixing, issuer, conspiracy, adequacy, lawsuit, class certification, common question, formula, factual question, antitrust claim, prerequisites, underwriters, proceeds

Civil Procedure, Class Actions, Prerequisites for Class Action, Adequacy of Representation, Maintainability, Appeals, Standards of Review, Abuse of Discretion, Special Proceedings, Appellate Review, General Overview, Clearly Erroneous Review, De Novo Review, Constitutional Law, Case or Controversy, Standing, Third Party Standing, Justiciability, Class Members, Named Members, Case & Controversy Requirements, The Judiciary, Parties, Substitution, Transfer of Interests, Contracts Law, Standards of Performance, Assignments, Antitrust & Trade Law, Sherman Act, Scope, Price Fixing & Restraints of Trade, Per Se Rule & Rule of Reason, Per Se Violations, Clayton Act, Scope