Bethany Krajelis Jan. 11, 2013, 1:19pm
CHICAGO - A junk fax suit can move forward as a class action despite questionable conduct on the part of plaintiffs’ attorneys, a federal appeals panel held this week.
Although the attorneys’ performance in the investigative stage of the suit gave it “serious pause,” the 7th Circuit Court of Appeals on Wednesday determined that the alleged misconduct does not require reversal of the class certification order in Reliable Money Order Inc. v McKnight Sales Company, Inc.
The case, which came to the panel on appeal from the U.S. District Court for the Eastern District of Wisconsin, deals with accusations of unethical behavior lodged against attorneys at Anderson & Wanca in Rolling Meadows.
That firm, as well as the Chicago firm of Bock & Hatch, brought the class action suit on behalf of Reliable Money, which accused McKnight of violating the Telephone Consumer Protection Act.
Under this act, anyone who faxes an unsolicited advertisement can be required to pay $500 in damages per fax and up to $1,500 per fax if it is determined they sent it intentionally.
Writing for the federal appeals panel, U.S. District Judge Joel Flaum explained that “because plaintiffs may enforce the statute via class action and because a single advertisement is often faxed to hundreds—if not thousands— of phone numbers, suits under the Act present lucrative opportunities for plaintiffs’ firms.”
He noted in the court’s 29-page opinion that the appeal in this case “involves one firm’s response to these financial incentives and its attorneys’ conduct in identifying potential new cases under the Act.”
McKnight asked the appeals court last year to dismiss the suit, claiming that attorneys at Anderson & Wanca exhibited unethical behavior while investigating claims for four other junk fax class action lawsuits they were handling.
During their investigation, they came across Caroline Abraham and her company, Business-to-Business Solutions (B2B), which faxed advertisements on behalf of advertisers.
McKnight claims that the attorneys promised Abraham confidentiality and then used her fax records as a way to find clients and defendants to sue. The firm sent out solicitation letters to recipients of B2B’s faxes, informing them that they might be a class member to junk fax suits it was pursuing.
That process led Reliable Money Order to contact the firm and become the lead plaintiff in this case.
According to the opinion, “Anderson & Wanca attorneys have filed over one hundred putative class actions under the Act, all rooted in data recovered from the B2B disks and hard drive”
McKnight claimed that this conduct was unethical and required reversal of the district court’s class certification order, as well as its appointment of Anderson & Wanca as class counsel in the case.
The federal appeals panel in its opinion discussed rulings by other courts that have addressed Anderson & Wanca’s alleged misconduct.
“Although the various district courts made conflicting findings on whether Anderson + Wanca breached a promise of confidentiality or mailed misleading solicitations … all agreed that the conduct did not require denial of class certification,” Flaum wrote for the court.
In this case, the district court determined that alleged ethical violations did not require reversal of the certification order or render class counsel inadequate.
McKnight filed a petition for interlocutory review. Reliable Money opposed it and then sought dismissal of the appeal.
The federal appeals panel this week denied the motion to dismiss, saying that interlocutory review in this case makes sense because “this appeal would inform class action law.”
In addition, Flaum also explained that class certification is proper because “the district court’s certification order extends McKnight’s exposure to nearly $5 million” and “denial of class certification would keep this case a one-count, $1,500 claim.”
“Such a dramatic increase in potential liability would raise the prospect of coercing a settlement from McKnight, a self-described ‘small family business,’” Flaum wrote.
While the federal appeals panel will “neither approve of nor condone the actions of” attorneys from Anderson & Wanca, Flaum wrote that it does not find that “counsels’ questionable performance in the investigative stage of this case prevents class certification.”
“Our holding here reflects only the judgment that actions such as occurred here—which do not prejudice an attorney’s client or undermine the integrity of judicial proceedings—do not mandate disqualification of counsel,” he wrote.
Despite its ruling in favor of the plaintiff, the panel emphasized its concern over alleged misconduct.
“McKnight warns that our outcome will incentivize and reward overly aggressive and unethical attorney conduct,” Flaum wrote. “But this scenario of unpunished, inappropriate attorney action results only if the litigants and fellow members of the bar fail to refer legitimate instances of attorney misconduct to the relevant bar authority for investigation.”
Judges John Tinder and John Tharp joined Flaum on the panel of the 7th Circuit in this case.