Have you heard that the new owner of the Cleveland Browns
has gotten himself into a bit of legal trouble? It's alleged that Jimmy
Haslem's other business, Pilot Flying J, defrauded trucking companies of fuel
rebates. In an effort to head-off a stream of civil lawsuits, Mr. Haslam has
been meeting with customers to settle the alleged missing rebates. One such
customer sought a temporary restraining order to stop such meetings because,
according to the Wall Street Journal, Pilot was "obtaining releases, and
settling claims before the potential class members even know the full extent of
their claims." Yesterday, the court denied the restraining order, permitting Haslem's
company to continue attempting to settle these claims.
Recall that just two weeks ago, the Supreme Court decided a case involving the pick-off named
plaintiffs in wage and hour collective actions. In the Genesis
Healthcare case, however, the employer communicated the offer to the
plaintiff through her attorney. What happens, however, if the employer
communicates directly with un-represented and un-named members of a
yet-to-be-certified class? Is there anything prohibiting an employer from
contacting them directly in an effort to obtain settlements of their potential
claims? It depends.
There is nothing inherently unethical in defense counsel
contacting putative class members at the pre-certification stage. According to ABA Comm. on Ethics and Prof'l Responsibility, Formal Op.
07-445 (2007) [pdf], communications between defense counsel and putative
class members does not violate the Models Rules of Professional Responsibility
because there is no attorney-client relationship between plaintiffs' counsel
and members of an un-certified, putative class.
Yet, a court still might limit such communications if
they are designed to confuse or coerce.
In Gulf Oil v. Bernard (1981) [an enhanced version of this opinion is available to lexis.com
subscribers], the U.S. Supreme Court rejected the argument that
defense counsel are per se prohibited from contacting putative class
members before a class is certified. Instead, a court can only limit
pre-certification communications to address communications that misrepresent
the status or effect of the case or that have an obvious potential for
confusion, and must be based on "a specific record showing by the moving party
of the particular abuses by which it is threatened."
In accordance with the Supreme Court's Bernard
decision, federal district courts have routinely refused to exercise their
supervisory authority over communications with putative class members in
situations where the complaining party cannot demonstrate actual abuses. Such
abuses that would justify a gag order include communications that coerce
putative members into excluding themselves from the class, undermine
cooperation with or confidence in plaintiffs' counsel, or suggest retaliation
for participating in or assisting the class.
For example, in Parks v. Eastwood Ins. Servs. (C.D. Cal. 2002) [enhanced version], the named plaintiffs brought a
collective action against their employer for unpaid overtime under the Fair
Labor Standard Act. Prior to sending a court-approved notice to putative class
members, the employer sent a memorandum to its employees asking them to contact
the company's general counsel if they had any questions regarding the case. The
court concluded that a curative communication was unnecessary because the
at-issue memorandum was not coercive and did not suggest that any employee
would be retaliated against for joining the class.
There are significant strategic decision that companies
and their attorneys must make when defending class action lawsuits.
Pre-certification communications with potential class members carries a big
upside, albeit with the potential of significant risk.
Visit the Ohio Employer's Law Blog for more
Presented by Kohrman Jackson & Krantz,
with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a
partner in our Labor
& Employment group, at (216) 736-7226 or email@example.com.
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