Salatino v. Chase , 2007 Vt. 81 ( 2007 )

Salatino v. Chase (2005-506 & 2006-101)
2007 VT 81[Filed 31-Aug-2007]
NOTICE: This opinion is subject to motions for reargument under V.R.A.P.
40 as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
order that corrections may be made before this opinion goes to press.
2007 VT 81Nos. 2005-506 & 2006-101
Joseph Salatino and Judith Salatino Supreme Court
On Appeal from
v. Chittenden Superior Court
David S. Chase, Brianne E. Chase and January Term, 2007
Vermont Associates in Ophthalmology
Ben W. Joseph, J.
Jacob B. Perkinson, James F. Conway, III and Stacey K. Porter of Johnson &
Perkinson, South Burlington, Michael F. Hanley and Paul J. Perkins of
Plante & Hanley, P.C., White River Junction, and John P. Maley and
Christopher J. Maley of Sylvester & Maley, Inc., Burlington, for
Plaintiffs-Appellants/Cross-Appellees.
John D. Monahan, Jr. and Angela R. Clark of Dinse, Knapp & McAndrew, P.C.,
Burlington, for Defendants-Appellees/Cross-Appellants.
PRESENT: Reiber, C.J., Johnson and Skoglund, JJ., and Wesley, Supr. J.
and Martin, Supr. J. (Ret.), Specially Assigned
¶ 1. REIBER, C.J. In these consolidated appeals, plaintiffs Joseph
and Judith Salatino appeal the trial court's denial of their motion to
certify a limited-fund class action. Defendants David and Brianne Chase
and Vermont Associates in Ophthamology appeal the court's order requiring
notice of the certification decision to the putative class members, the
content of the notice, and the manner of giving notice. Plaintiffs appeal
the court's order allocating the costs of providing notice. Because
plaintiffs did not establish the prerequisites for maintaining a
limited-fund class action, we affirm the decision denying class
certification. We reverse the superior court's decision to provide notice
of the class-certification decision to putative class members. Because we
hold that notice is not required, we do not reach defendants' claims
regarding the content and manner of providing notice, nor do we consider
plaintiffs' appeal of the cost-allocation order.
¶ 2. David Chase was a licensed ophthalmologist who ran Vermont
Associates in Ophthamology with his wife Brianne Chase, a licensed
optician. Dr. Chase was licensed in Vermont from 1968 until July 2003,
when the Medical Practice Board suspended his license based on evidence
that Dr. Chase had performed unnecessary cataract surgeries. In December
2003, the State requested that the Board revoke Dr. Chase's license on the
basis that he had falsified patient records, pressured patients to have
unnecessary cataract surgery, performed unnecessary surgeries, and engaged
in other unprofessional conduct in the treatment of at least fourteen
patients. Based on similar facts with respect to thirty-five patients, Dr.
Chase was indicted by a federal grand jury on eighty-one criminal counts in
September 2004. He was ultimately acquitted of all but two of the criminal
counts. The United States of America, together with the State of Vermont,
also filed a civil complaint against Dr. Chase in May 2005 for submitting
false claims to federal and state health programs for at least thirty-three
patients. That complaint was voluntarily dismissed without prejudice nine
months later.
¶ 3. Plaintiffs were patients of Dr. Chase beginning in 1978. They
commenced this action in July 2003, shortly after Dr. Chase's medical
license was suspended. Plaintiffs' second amended complaint, filed in
December 2003, included a class-action claim under the Vermont Consumer
Fraud Act (CFA). 9 V.S.A. §§ 2451-2480n. Plaintiffs' initial complaint did
not demand class certification. In March 2004, plaintiffs moved for class
certification of the CFA claim under V.R.C.P. 23(b)(3), arguing that issues
of fact and law common to the class predominated over individual questions.
A year later, the court denied certification, finding that the CFA claim
principally raised issues needing individualized proof. Consequently, the
court found that common issues did not predominate, as the rule requires,
and that allowing the action to proceed as a class action would not achieve
judicial economy. Plaintiffs did not appeal that denial and did not move
to notify putative class members of it.
¶ 4. Shortly after the court denied certification of the CFA claim
under the predominance rule, plaintiffs moved to certify a limited-fund
class for all of their claims, under V.R.C.P. 23(b)(1)(B). Those claims
included the CFA claim and common-law claims of medical negligence, lack of
informed consent, negligent misrepresentation, negligent supervision,
battery, and intentional infliction of emotional distress. The court
denied the limited-fund class-certification motion, holding that plaintiffs
had not met three of the four prerequisites for maintaining a class action
under Rule 23(a). The court held that plaintiffs had not established the
size of the class because it was unclear whether the class comprised all of
defendants' former patients or only those who received unnecessary cataract
surgery. Citing the earlier order denying the predominance class
certification for the CFA claim, the court also held that plaintiffs'
medical-malpractice claim was not suited for class treatment because it
would have to be established by examining "the individual circumstances of
class member[s]." Further, the court held that plaintiffs had not shown
that limited-fund class certification was proper under Rule 23(b)(1)(B),
and that the named plaintiffs might be in conflict with other class
members. Plaintiffs appealed from the denial.(FN1)
¶ 5. Plaintiffs also moved for approval to provide notice of the
denial to the putative class members. Plaintiffs argued that the media
coverage of Dr. Chase's license suspension and the subsequent litigation
against him caused absent putative class members to rely on the nascent
class action to protect their legal interests. The superior court, citing
"the court's obligation to safeguard the interests of absent class
members," granted plaintiffs' motion and approved notice of the
class-certification decision to putative class members under Rule 23(d)(2).
The court reasoned that "the mere possibility that any of the media
coverage surrounding Dr. Chase caused putative class members to rely on
this suit suggests that notice is appropriate." In two later orders, the
court established: (1) the content of the notice, (2) that notice would be
given individually by first-class mail, and (3) that plaintiffs would bear
the cost. Defendants appealed all three orders, contesting whether notice
was appropriate at all, the manner of providing notice, and the content of
the notice. Plaintiffs appealed the cost allocation. We first review the
superior court's analysis of the suitability of limited-fund class
certification.
I. The limited-fund class action
¶ 6. Our review of the class-certification decision has two aspects:
we conduct a de novo review of the legal standards employed, and if the
proper legal standards were used, we review the trial court's application
of those standards for abuse of discretion. See Heerwagen v. Clear Channel
Commc'ns, 435 F.3d 219, 225 (2d Cir. 2006). Plaintiffs contend, citing
Heerwagen, that "a denial of class certification is accorded noticeably
less deference than . . . a grant of certification." We disagree with
plaintiffs on this point, and decline to construe Vermont Rule 23 as the
Second Circuit construed the analogous federal rule in that case.(FN2)
¶ 7. A mandatory class may be certified under Rule 23(b)(1)(B) when
the prerequisites of Rule 23(a)--numerosity, commonality, typicality, and
adequacy--are satisfied and
(1) the prosecution of separate actions by . . . individual
members of the class would create a risk of
. . .
(B) adjudications with respect to individual members of the
class which would as a practical matter be dispositive of the
interests of the other members not parties to the
adjudications or substantially impair or impede their ability
to protect their interests.
V.R.C.P. 23(b).(FN3) Vermont's rule mirrors the federal rule in every
respect relevant here, see F.R.C.P. 23(b), and we therefore look to federal
precedent to aid our interpretation of our rule.(FN4)
¶ 8. The U.S. Supreme Court has analyzed the federal limited-fund
rule at some length in a recent case, Ortiz v. Fibreboard Corp., 527 U.S.
815 (1999). The Ortiz Court noted that, although Rule 23(b)(1)(B) also
encompasses several other varieties of class actions, "[o]ne recurring type
of such suits was the limited fund class action, aggregating 'claims . . .
made by numerous persons against a fund insufficient to satisfy all
claims.' " Id. at 834 (quoting Advisory Committee Notes, F.R.C.P. 23). As
the superior court noted in denying plaintiffs' motion for limited-fund
class certification, the Ortiz Court identified three characteristics of
cases appropriate for limited-fund treatment under the rule. Id. at
838-41.
¶ 9. First, "the totals of the aggregated liquidated claims and the
fund available for satisfying them, set definitely at their maximums,
demonstrate the inadequacy of the fund to pay all the claims." Id. at 838.
This inadequacy is the sine qua non of a limited-fund class action; without
a demonstration of insufficiency, binding absent class members would be
unnecessary; the absent class members would be able to recover fully in
separate actions. Id. at 838-39; In re Joint E. & S. Dist. Asbestos
Litig., 982 F.2d 721, 739 (2d Cir. 1992) (limited-fund class certification
appropriate to avoid prejudice to those who file later, where fund likely
to be exhausted by earlier filers). Courts have adopted two different
standards to determine the inadequacy of an asserted limited fund: (1)
"inescapable" risk of fund exhaustion, In re N. Dist. of Cal., Dalkon
Shield IUD Prod. Liab. Litig., 693 F.2d 847, 851-52 (9th Cir. 1982); and
(2) "substantial probability," Trautz v. Weisman, 846 F. Supp. 1160, 1169
(S.D.N.Y. 1994). The United States Supreme Court declined in Ortiz to
decide which standard was appropriate because it determined that the Ortiz
plaintiffs failed to meet either standard. 527 U.S. at 848 n.26.
¶ 10. "Second, the whole of the inadequate fund [is] to be devoted
to the overwhelming claims." Id. at 839. This requirement ensures that
limited-fund treatment does not "give a defendant a better deal than
seriatim litigation would have produced." Id. Third, the Ortiz Court
required that "the claimants identified by a common theory of recovery [be]
treated equitably among themselves." Id. The Ortiz Court characterized
these attributes initially as "at least a sufficient set of conditions to
justify binding absent members of a class under Rule 23(b)(1)(B)," id. at
838, but went on to conclude that "there are good reasons to treat these
characteristics as presumptively necessary, and not merely sufficient."
Id. at 842 (emphasis added).
¶ 11. We have noted as a general matter that "class actions are
intended to be of limited and special application, not to be casually
resorted to or authorized." George v. Town of Calais, 135 Vt. 244, 245,
373 A.2d 553, 554 (1977). This is particularly true of the mandatory class
actions authorized by Rule 23(b)(1)(B), because class members are bound by
the judgment or settlement obtained even if they do not participate in the
action. See Reporter's Notes, V.R.C.P. 23 (members of a 23(b)(1)(B) class
"cannot opt out because the very purpose of the action is to obtain a
judgment that binds all in the class."). As the Reporter's Notes imply,
mandatory class actions are fundamentally in tension with constitutional
guarantees and therefore should not be liberally allowed. Ortiz, 527 U.S.
at 845-47; see also AmChem Prods., Inc. v. Windsor, 521 U.S. 591, 612-13
(1997) ("Rule 23's requirements must be interpreted in keeping with Article
III constraints, and with the Rules Enabling Act, which instructs that
rules of procedure 'shall not abridge, enlarge, or modify any substantive
right.' ") (quoting the Rules Enabling Act, 28 U.S.C. § 2072(b)). Our
Rules Enabling Act, 12 V.S.A. § 1, is nearly identical to the federal act,
with which the AmChem Court was concerned. For these reasons, we construe
Rule 23(b)(1)(B) narrowly.
¶ 12. Here, the trial court correctly concluded that the burden was
on plaintiffs to show that they satisfied the Ortiz requirements. First,
then, it was plaintiffs' burden to show that the total of the aggregated
liquidated claims exceeded the fund available to satisfy them. See Ortiz,
527 U.S. at 838. Plaintiffs contend that their aggregate claim for
attorney's fees arising from their CFA claims exceeds the total amount of
funds available to satisfy the claims. Plaintiffs assert that defendant's
$21 million insurance policy will be exhausted by a total claim for fees
and costs of over $25 million. The $25 million figure was derived by
multiplying plaintiffs' estimate of the number of claimants--633--by
plaintiffs' estimate that each claimant would be entitled to recover
$40,000 in legal fees and costs. Plaintiffs assert that the attorney's
fees are liquidated for purposes of satisfying the Ortiz requirement. The
superior court, without analysis, characterized the fees as liquidated, but
then concluded that plaintiffs' "fundamental stumbling block" in meeting
their burden was their calculation of the number of class members entitled
to a fee award. Because we affirm the result on a different basis, see
Hudson v. Town of East Montpelier, 161 Vt. 168, 170, 638 A.2d 561, 563
(1993), we do not consider the question of the number of class members.
¶ 13. We conclude that the CFA-based attorney's fees are not
liquidated. The trial court concluded that "the only liquidated claim
Plaintiffs present is their statutory claim for attorneys' fees and costs
under the [CFA]." As a general matter, a liquidated claim is one whose
amount is "settled or determined, [especially] by agreement." Black's Law
Dictionary 949 (8th ed. 2004).
¶ 14. The CFA provides that a prevailing plaintiff "may . . .
recover from the seller, solicitor, or other violator . . . reasonable
attorney's fees." 9 V.S.A. § 2461(b). "Where a court finds that the [CFA]
has been violated, it is not within the court's discretion to determine
whether to award such fees . . . but rather its task is to determine what
constitutes reasonable fees in each instance." L'Esperance v. Benware,
2003 VT 43, ¶ 21, 175 Vt. 292, 830 A.2d 675 (citation omitted). Trial
courts determine reasonable attorney's fees by making a preliminary
determination of the number of hours reasonably expended on the case,
multiplying that number by a reasonable hourly rate, and then adjusting the
result based on several factors. Id. ¶ 22. We afford the trial court
"wide discretion" in determining reasonable fees. Human Rights Comm'n v.
LaBrie, Inc., 164 Vt. 237, 251, 668 A.2d 659, 669 (1995).
¶ 15. Although the parties have cited no cases directly on this
point, and our research reveals none, we note that other courts have
concluded, for purposes of prejudgment-interest awards, that attorney's
fees are not liquidated until fixed by the trial court following
discretionary calculations similar to those detailed above. See, e.g.,
State v. Ehrlander, 1998 WL 34347991 (Alaska 1998) (unreported mem.)
(upholding trial court denial of prejudgment interest on attorney's fees
because "the claim for attorney's fees was not liquidated until reduced to
judgment"); Asian Imports, Inc. v. Pepe, 633 So. 2d 551, 553 (Fla. Dist.
Ct. App. 1994) (trial court erred in awarding plaintiff attorney's fees
without affording defendant an opportunity to be heard on the issue of
their amount; "an item of damages for 'reasonable attorney's fees' is not
liquidated"). Plaintiffs cite only a decision from the Bankruptcy
Appellate Panel of the Ninth Circuit Court of Appeals for the proposition
that the class members' attorney's fees are liquidated. In that case, the
court decided that certain attorney's fees were subject to "ready
determination" and therefore were "liquidated" for purposes of determining
Chapter 13 bankruptcy eligibility. In re Wenberg, 94 B.R. 631, 634-35
(B.A.P. 9th Cir. 1988). But that determination was only possible in
Wenberg because the fees at issue had already been incurred and billed;
although the parties disputed the precise amount, it was susceptible to
calculation by the court. Id. The Wenberg decision was a limited one, and
we decline to extend it to this very different factual context. Plaintiffs
here are simply speculating about future fees and costs to be incurred.
Those fees are not, like the fees in Wenberg, subject to "ready
determination."
¶ 16. Like the Ortiz Court, we need not decide whether plaintiffs
must show a "substantial probability" of fund exhaustion, or that "allowing
the adjudication of individual claims will inescapably compromise the
claims of absent class members." Ortiz, 527 U.S. at 848 n.26. Plaintiffs
met neither standard, and the trial court properly declined to certify the
class.
II. Notice
¶ 17. The second question presented for our review is whether the
trial court erred in approving notice of the class certification denial to
putative class members. Defendants argue, first, that Rule 23(d)(2) does
not grant the court authority to order notice after it has decided not to
certify a class. Whether the rule provides such authority is a question of
law, which we review de novo. State v. Valyou, 2006 VT 105, ¶ 4, ___ Vt.
___, 910 A.2d 922 (mem.). Defendants' second argument is that if the court
had legal authority to use Rule 23(d)(2) after denying class certification,
it erred by approving notice to putative class members under the
circumstances of this case. The permissive language of Rule 23(d) vests
the trial court with discretion to order notice, and we review the court's
decision for abuse of that discretion.
a. Authority under Rule 23(d)(2)
¶ 18. The threshold question is whether a court can use Rule
23(d)(2) to order notice to putative class members after it has decided
that an action cannot be maintained as a class action. The rule states:
In the conduct of actions to which this rule applies, the
court may make appropriate orders: . . . (2) requiring, for
the protection of the members of the class or otherwise for
the fair conduct of the action, that notice be given in such
manner as the court may direct to some or all of the members
of any step in the action, or of the proposed extent of the
judgment, or of the opportunity of members to signify whether
they consider the representation fair and adequate, to
intervene and present claims or defenses, or otherwise to
come into the action.
V.R.C.P. 23(d)(2). Defendants argue that the phrase "actions to which this
rule applies" limits the scope of Rule 23(d) to certified class actions.
They also argue that, as soon as a court rules against class certification,
the action stops being even a "putative class action," and the court can no
longer rely on Rule 23(d) to make any orders relating to the action.
Defendants emphasize that the rule is directed at "members of the class"
and note that when no class has been certified, there are no class members
for the court to protect. On this reading, a court could use Rule 23(d)(2)
only when a certified class exists and not before certification, or upon
decertification, or when certification is denied. But this reading is
unduly restrictive and contrary to the court's role as protector of absent
class members' interests. See Phillips Petroleum Co. v. Shutts, 472 U.S.
797, 809-10 (1985); Am. Pipe & Const. Co. v. Utah, 414 U.S. 538, 552 (1974)
(stating that "potential class members are mere passive beneficiaries of
the action" prior to the trial court's certification determination). Both
the Advisory Committee Notes and the bulk of federal court decisions allow
discretionary notice to uncertified classes under Rule 23, and we concur
that notice may be proper under certain circumstances. We conclude,
however, that the trial court erred in ordering notice under the facts
presented here.
¶ 19. There are few decisions applying Rule 23(d)(2) in
circumstances similar to those presented here, but many appellate courts
have allowed (or ordered) courts to use Rule 23(e) to provide notice of a
dismissal or compromise to putative members of an uncertified class. Doe
v. Lexington-Fayette Urban County Gov't, 407 F.3d 755, 761-62 (6th Cir.
2005) (requiring notice of dismissal to putative class members under Rule
23(e) after class certification denied).(FN5) The circuit courts have
generally held that if a court finds "that the putative class members are
likely to be prejudiced on account of a settlement or dismissal, the
district court should provide Rule 23(e) notice." Doe, 407 F.3d at 762.
Rule 23(e) is a notice provision that applies only to dismissal or
settlement and mandates notice, while Rule 23(d)(2) can relate to any
aspect of a class action and is discretionary. Rule 23(e) notice to
members of a certified class is required because when a previously
certified class action is dismissed or settled, it will have a res judicata
or collateral estoppel effect on class members. But courts also allow
discretionary application of Rule 23(e) to uncertified classes, similar to
the superior court's application of Rule 23(d)(2) here.
¶ 20. While most courts allow discretionary use of the Rule 23
notice provisions, defendants cite two federal district court cases in
support of their plain-language theory. Street v. Diamond Offshore
Drilling, No. 00-1317, 2001 WL 883216, *1 (E.D. La. July 30, 2001) (holding
that Rule 23(d)(2) cannot be used to notify putative class members);
Rineheart v. Ciba-Geigy Corp., 190 F.R.D. 197, 200 (M.D. La. 1999) (holding
that Rule 23(e) cannot be used to notify putative class members). Street
relies entirely on Rineheart for its reasoning and holding. Street, 2001
WL 883216, *1. Rineheart, in turn, cites the Fifth Circuit's holding in
Pearson as the main basis for concluding that Rule 23 notice cannot be
provided when the court has not certified a class. Pearson v. Ecological
Sci. Corp., 522 F.2d 171, 177 (5th Cir. 1975). But Pearson does not
absolutely deny courts discretion to provide notice to putative class
members under Rule 23. Pearson turned on its facts: the trial court had
denied certification, and following that denial, the named plaintiffs
settled with the defendants. Two named plaintiffs, who had attempted to
revoke their stipulation to the settlement, then argued that the court
erred in enforcing terms of the settlement, and the S.E.C., as amicus
curiae, argued that the court had erred by failing to require Rule 23(e)
notice of the proposed settlement to the putative class members. Id. at
176. But there was no showing of prejudice to, or reliance by, putative
class members. Accordingly, the Pearson court held that "where a court has
ruled . . . that an action cannot properly be maintained as a class action
the notice requirements of Rule 23(e) do not apply, at least where the
dismissal and settlement of the action do not directly affect adversely the
rights of individuals not before the court." Id. at 177. Pearson
authorizes courts to weigh the rights and interests of absent putative
class members; accordingly, it undercuts defendants' theory. Indeed, the
Sixth Circuit cites Pearson for the rule that, where prejudice or collusion
may occur, courts must use Rule 23(e) to notify putative class members of a
dismissal or settlement even after they have denied class certification.
Doe, 407 F.3d at 761-62.
¶ 21. Pearson quotes a statement from the Advisory Committee Notes
to Rule 23 that appears to support defendants' position: " '[a] [n]egative
determination (of class action status) means that [t]he action should be
stripped of its character as a class action.'" Pearson, 522 F.2d at 177
(quoting F.R.C.P. 23, Advisory Committee Notes). But the Advisory
Committee went on to state that "[w]hether the court should require notice
to be given to members of the class of its intention to make a
determination [of class certification], or of the order embodying it, is
left to the court's discretion under subdivision (d)(2)." F.R.C.P. 23,
Advisory Committee Notes. The Advisory Committee envisioned that courts
should make discretionary use of Rule 23(d)(2) in the exact situation
presented here. The superior court correctly decided that Rule 23(d)(2)
allows courts discretion to order notice of class-certification denial to
putative class members.
b. Discretionary Notice
¶ 22. Although the court had authority to provide notice to putative
class members under Rule 23(d)(2), it remains to determine whether it
properly exercised its discretion. The procedural and factual history of
this case, and the policy reasons against court-approved notice to putative
class members, which we outline below, substantially narrow the trial
court's discretion here. "Abuse of discretion occurs when that discretion
is exercised on grounds or for reasons clearly untenable, or to an extent
clearly unreasonable." In re Halnon, 174 Vt. 514, 517, 811 A.2d 161, 165
(2002) (mem.). The superior court exercised its discretion on grounds that
are clearly untenable by concluding that notice to putative class members
was appropriate because here "there is a significant risk of prejudice" to
class members unaware that the denial of class certification restarts the
running of the statutes of limitations on their claims against defendants.
We find no legal or factual basis for holding that there was any risk of
prejudice to putative class members in this case, and absent such a risk,
notice of class-certification denial was inappropriate.
¶ 23. Ordering notice to putative class members--in addition to
precipitating litigation of notice issues--imposes substantial time burdens
and costs on the parties and the courts, as evidenced by the six months
spent by the superior court determining the form, manner, and cost
allocation of notice here. Notice can "be an exceedingly costly burden,
and many times it is not necessary to protect the class." Glidden v.
Chromalloy Am. Corp., 808 F.2d 621, 627 (7th Cir. 1986). Additionally,
many courts have recognized that ordering notice to putative class members
absent evidence of reliance would promote barratry and could suggest that
the court had made merits-based determinations about the action. Street,
2001 WL 883216 at *1; Marian Bank v. Elec. Payment Servs., Inc., No.
95-614-SLR, 1999 WL 151872, *2 (D. Del. 1999); Rineheart, 190 F.R.D. at
201; Maddox & Starbuck, Ltd. v. British Airways, 97 F.R.D. 395, 397
(S.D.N.Y. 1984); Cherner v. Transitron Elec. Corp., 201 F. Supp. 934, 936
(D. Mass. 1962). The Advisory Committee warned that notice "should not be
used merely as a device for the undesirable solicitation of claims."
F.R.C.P. 23, Advisory Committee Notes. Given these countervailing
interests, notice of class-certification denial is only appropriate when
the denial may "affect adversely the rights of individuals not before the
court." Pearson, 522 F.2d at 177.
¶ 24. The main reason to order notice after denial of class
certification is to ensure that putative members are not unfairly prevented
from having their claims heard. While a pending class action does not bar
individuals from filing separate claims, they may refrain from doing so and
rely on the class action to protect their interests. To promote this
practice, which furthers efficiency of litigation and helps avoid
unnecessary filings, the filing of a class action tolls the statutes of
limitation for the class claims of all putative class members. Am. Pipe &
Constr. Co. v. Utah, 414 U.S. 538, 551, 553-54 (1974). But once a court
denies class certification, the statutes of limitation run again. Crown,
Cork & Seal Co. v. Parker, 462 U.S. 345, 354 (1983). The concern expressed
by the superior court and plaintiffs here is that if these individuals do
not learn that class certification has been denied, they will not know that
the limitation period is again running, and they may miss the opportunity
to have their claims adjudicated.
¶ 25. While some potential plaintiffs may lose their chance to
litigate by letting the statutes of limitation expire on their claims
against Dr. Chase, absent a showing of reliance on the pending action,
there is no risk that putative class members will be prejudiced if the
court does not approve of notice that it has denied class certification.
The superior court suggests that merely restarting the running of the
statutes of limitation prejudices class members. But rather than being
prejudiced, putative class members benefitted from the American Pipe rule,
which tolled the statutes of limitation while the class action was pending.
Bantolina v. Aloha Motors, Inc., 75 F.R.D. 26, 32 (D. Haw. 1977).
Restarting the limitation period does not prejudice the putative class
members; they are free now, as they have been the entire time that the
class action was pending, to initiate an action against defendants. And
unlike dismissals or settlements of certified class actions, the denial of
class certification has no effect on any putative class member's legal
interests. Putative class members will only be prejudiced by not receiving
notice that class certification is denied when they are reasonably relying
on the pending class action to protect their interests. The court's
discretion to provide notice of class certification denial to putative
class members must be exercised only in that situation. Otherwise, the
burdens, costs, and barratry concerns surrounding notice weigh more heavily
than the need to protect an uncertified class. See, e.g., Maddox &
Starbuck, 97 F.R.D. at 397; Elias v. Nat'l Car Rental Sys., Inc., 59 F.R.D.
276, 276 (D. Minn. 1973); see also Simer, 661 F.2d at 665 (rejecting the
"absolute application" of Rule 23(e) to provide notice in the
precertification context because the high costs and time delay of notice
"may be injurious to the interests of the putative class members").
¶ 26. In this case, there were no actions by the court that could
have caused reasonable reliance by putative class members on plaintiffs'
suit, and there is no evidence that any class members were in fact relying
on the suit. There was never a decision in favor of class certification;
the court twice denied class certification, under two different provisions
of Rule 23. Neither the court nor the attorneys provided notice to
putative class members of plaintiffs' class claim. Likewise, neither the
court nor the attorneys provided putative class members with notice that
plaintiffs had moved for class certification, either under the predominance
theory or the limited-fund theory. Additionally, plaintiffs have not
submitted any evidence that the court or any of the attorneys had been
contacted about the litigation by putative class members, or that there are
putative class members who actually relied on the litigation. The only
evidence of reliance might be inferred from the media coverage of Dr.
Chase, but no actual evidence was introduced.
¶ 27. Plaintiffs argue that the coverage of defendant's license
suspension, Medical Practice Board proceedings, criminal charges, and civil
litigation was sufficient to engender reasonable reliance on the class
action by putative class members. We disagree with plaintiffs' contention
that media coverage of defendants' legal troubles provides a sufficient
basis for putative class members to reasonably rely on the action. This
media coverage is particularly ill-suited for engendering reliance because
none of it directly addressed plaintiffs' suit, and only a few newspaper
articles mentioned the attempted class action. None of the coverage stated
that a class action existed. Media coverage like this is not a sufficient
basis for finding that putative class members will be prejudiced if they do
not receive notice of denial of class certification. Because there was no
risk of prejudice under these facts, ordering notice was an abuse of the
court's narrow discretion.
¶ 28. Because notice was not proper, we do not reach the appeals
regarding the content of the notice, the manner of providing notice, or the
cost allocation.
Affirmed in part and reversed in part.
FOR THE COURT:
_______________________________________
Chief Justice
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Footnotes
FN1. Although the superior court's entry order does not mention the
battery and infliction-of-emotional-distress claims explicitly, the court
seems to have dealt with the certification question as applied to
plaintiffs' claims as a group. Because plaintiffs do not claim error with
respect to this issue, and because it would not change the outcome of this
appeal, we do not address it. See Banker v. Dodge, 126 Vt. 534, 537, 237
A.2d 121, 124 (1967) (points not advanced on appeal not subject to review).
FN2. Neither the Heerwagen court nor any of the line of cases preceding it
offer any reason that a denial of class certification should be scrutinized
more closely than a grant. The original case in this line, Abrams v.
Interco, Inc., 719 F.2d 23, 28 (2d Cir. 1983), states only that "[a]buse of
discretion can be found far more readily on appeals from the denial or
grant of class action status than where the issue is, for example, the
curtailment of cross-examination or the grant or denial of a continuance."
(Emphasis added.) The Abrams court based this statement on the fact that
"[t]he courts have built a body of case law with respect to class action
status." Id. We take no issue with the statement in Abrams, but we are
not convinced that the subsequent mutation of the Abrams standard is well
founded.
FN3. In view of our disposition of the Rule 23(b) question, we do not reach any
of the claims of error involving Rule 23(a).
FN4. The forthcoming minor amendments to federal Rule 23, which will be
effective December 1, 2007, do not alter Rule 23(b) in any material
respect. See Committee Note, F.R.C.P. 23, Order of April 30, 2007, U.S.
Order 07-30 (changes to Rule 23 "are intended to be stylistic only").
FN5. See also Birmingham Steel Corp. v. TVA, 353 F.3d 1331, 1339 (11th Cir.
2003); Culver v. City of Milwaukee, 277 F.3d 908, 914-15 (7th Cir. 2002);
Crawford v. F. Hoffman-La Roche Ltd., 267 F.3d 760, 764-65 (8th Cir. 2001);
Diaz v. Trust Territory of the Pac. Islands, 876 F.2d 1401, 1408, 1409 (9th
Cir. 1989); Shelton v. Pargo, Inc., 582 F.2d 1298, 1315 (4th Cir. 1978);
Pearson v. Ecological Sci. Corp., 522 F.2d 171, 177 (5th Cir. 1975).