(Reuters) - The 11th U.S. Circuit Court of Appeals safeguarded class members from suspect “reverse auction” settlements in its decision last week in Technology Training Associates v. Buccaneers Limited Partnership (2017 WL 4819371), holding that plaintiffs in a previously-filed class action have a right to intervene to protest a $19.5 million junk fax settlement with the Tampa Bay football team. The appellate panel – Chief Judge Ed Carnes and Judges Lanier Anderson and Beverly Martin – rejected arguments that class members need not intervene because they can raise objections through the Rule 23 settlement approval process.
That’s not enough protection when plaintiffs have reason to believe class lawyers are not acting in their interests, the 11th Circuit said. “Under that logic class members could never intervene in a class action because they would always have recourse to Rule 23 procedural protections,” Judge Carnes wrote, citing the U.S. Supreme Court’s 2013 decision in Standard Fire v. Knowles (133 S.Ct. 1345). “Such a conclusion cannot be squared with the Supreme Court’s recognition that ‘members of a class have a right to intervene if their interests are not adequately represented by existing parties.’”
Now for the juicy stuff.
The 11th Circuit decision is important for its precedent assuring class members’ right to intervene. But the ruling is interesting because of the underlying facts of the case, in which onetime confederates in the Telephone Consumer Protection Act plaintiffs’ bar turned into rivals.
TCPA class actions, as you probably know, have become a bane of the anti-litigation lobby, which contends the ever-expanding TCPA docket has turned into a trap for legitimate businesses, not a tool for combatting professional spam artists. The Buccaneers case will supply TCPA class action detractors with new grounds for outrage.
Our story begins back in the early years of this millennium, when two plaintiffs’ firms – Anderson & Wanca and Bock & Hatch – teamed up to prosecute class actions against companies that sent out unsolicited faxes. Under the TCPA, if businesses send faxes without express consent from recipients, they can be liable for statutory damages of $500 per fax, with trebling for willful or knowing violations. That’s a lot of exposure for defendants. Enterprising class action firms like Anderson & Wanca and Bock & Hatch marketed their services to potential plaintiffs that receive lots of faxes. According to 2016 testimony from Bock & Hatch name partner Phillip Bock, the firms jointly filed hundreds of cases across the country.
Then in 2011, 7th Circuit judge Richard Posner wrote a brutal opinion about the firms’ supposed tactics. Naming only Bock & Hatch, Posner accused class counsel of violating a promise of confidentiality to a “fax broadcaster” who supplied them with records of unsolicited faxes she’d blasted out for her clients. “Class counsel have demonstrated a lack of integrity that casts serious doubt on their trustworthiness as representatives of the class,” Posner wrote.
Posner turned out to be wrong about the firms’ conduct. As I wrote back in 2014, when Bock & Hatch had an opportunity to tell its side of the story, it persuaded the trial judge in the case, on remand from the 7th Circuit, that class counsel not only hadn’t done anything wrong but that they also deserved to be reappointed to represent class members.
But according to Bock’s testimony, the Posner decision led to a rift between his firm and Anderson & Wanca. After Posner’s criticism, he said, he had to spend a year “digging out of that hole all around the country.” Meanwhile, according to Bock, Anderson & Wanca bailed on him. As Bock told the story in his 2016 testimony, he was plodding from courtroom to courtroom, defending Anderson & Wanca’s honor along with his own – and Anderson & Wanca repaid the favor by cutting Bock & Hatch out of new cases.
One of those cases was Anderson & Wanca’s junk fax class action in federal court in Tampa against the Buccaneers football team, which allegedly blasted out tens of thousands of unsolicited ticket advertisements in 2009 and 2010. In 2016, after years of litigation and a fruitless 8-month mediation, the Buccaneers moved for a settlement conference before U.S. Magistrate Judge Anthony Porcelli, who was overseeing the case. Anderson & Wanca refused.
With the Buccaneers class action at an impasse, one of the Anderson & Wanca lawyers working on the case, David Oppenheim, moved over to Bock & Hatch in April 2016. (The firm subsequently changed its name to Bock Hatch Lewis & Oppenheim.) At around that time, Bock and other lawyers at the firm engaged in a fateful email chat.
The 11th Circuit opinion includes the highlights. Oppenheim told Bock the Bucs case was stalled because Anderson & Wanca was holding out for a $75 million settlement. Bock responded that Oppenheim “could come forward with another class member and settle (the) case over the objections of (Anderson & Wanca).” After all, Bock said, Oppenheim’s duty was to the class, not to any particular class member and “certainly not to some greedy asshole who is not a class member and is just sitting in an office in Rolling Meadows.” (Bock was referring to Anderson & Wanca, which is based in Rolling Meadows, Illinois.)
Bock said his firm would be “even more Machiavellian” if it hired Anderson & Wanca’s local counsel in Tampa as counsel in a separate class action against the Buccaneers. He capped off the email chain with a note to several lawyers at the firm: “Hmm. (Anderson & Wanca) holding out for a record settlement.... We could find a plaintiff and approach the defendant about settling? Lol.”
That’s precisely what Bock’s firm did. Bock’s 2016 testimony about how his firm came to file its TCPA class action exemplifies what drives defendants crazy about these cases. Bock’s first hurdle was to find a plaintiff who’d received an allegedly unsolicited fax from the Bucs. From the docket in the Anderson & Wanca class action, the Bock firm downloaded an expert witness report that included a list of fax numbers that had received the Bucs’ blast. Bock testified that he recognized a couple of numbers on the list: They belonged to businesses that had previously responded to Bock & Hatch marketing for potential TCPA plaintiffs. The Bock firm reached out to the potential clients. Technology Training Associates and Dr. Larry Schwanke said they wanted to be named plaintiffs.
In short order, Bock’s firm filed a state-court class action against the Bucs in Hillsborough County. By its own admission, the plaintiffs’ firm then contacted Latham & Watkins, which represents the Bucs. Less than a month later, after two days of mediation, Bock and the Bucs agreed to settlement terms. The class action would be resolved for $19.5 million. Bock’s firm, it was later disclosed, would ask for fees of $4.9 million, or 25 percent of the fund.
Anderson & Wanca was enraged, as you can imagine. After some procedural developments, the Bock firm’s class action ended up before Judge Porcelli, who was already presiding over the parallel Anderson & Wanca case. The Anderson firm told the judge that Bock’s firm sold out the class in a reverse auction, allowing the Bucs to settle with the lowest bidder.
In a separate case, one of Anderson & Wanca’s clients sued Oppenheim for allegedly breaching his duty to the class. The judge in that case concluded that the Bock firm had taken care to wall Oppenheim off from its class action so there was no conflict. (Bock testified in 2016 that his main concern in excluding Oppenheim wasn’t the new partner’s ethical duty to his former clients but that Anderson & Wanca would “have a cow” if it found out Oppenheim was involved in a rival class action.)
Judge Porcelli held an evidentiary hearing in October 2016. To its credit, the Bock firm disclosed what it called the “not necessarily flattering” email chain that ended up being quoted in the 11th Circuit decision. Judge Porcelli’s preoccupation was Oppenheim’s role in the new case. Bock repeatedly assured him that Oppenheim had been walled off.
Despite Anderson & Wanca’s protests, the judge granted preliminary approval to the $19.5 million settlement in March. In the same opinion, he denied Anderson & Wanca’s motion to intervene, holding that the firm could instead object to final approval of the settlement. It could even ask for fees from the settlement fund, Judge Porcelli said.
The 11th Circuit, in last week’s decision, said the real question was whether the Bock firm had adequately represented the interests of class members. Based on the record of the case, the appeals court said, it seemed clear that, during settlement negotiations, Bock Hatch and the named plaintiffs were more closely aligned with the Bucs than with the rest of the class.
“The record appears to show that the plaintiffs’ counsel, Bock Hatch, deliberately underbid (Anderson & Wanca) in an effort to collect attorney’s fees while doing a fraction of the work that the movants’ counsel did,” Judge Carnes wrote. “If, as it appears, Bock Hatch was indeed motivated by a desire to grab attorney’s fees instead of a desire to secure the best settlement possible for the class, it violated its ethical duty to the class.”
After the 11th Circuit decision, Judge Porcelli stayed the Bock class action and said he would schedule a hearing that all of the lawyers must attend in person.
I emailed Phillip Bock for comment on the 11th Circuit decision and the emails it cited. He did not respond. Nor did Bucs’ counsel Roman Martinez of Latham. Glenn Hara of Anderson & Wanca declined to comment.
Reporting by Alison Frankel
The views expressed in this article are not those of Reuters News.