Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—5thCir: Class of Governmental Customers of Cell Phone Service Providers Was Improper “Opt In” Class , (Oct 29, 2012)

By Peter Reap, J.D., LLM

A certified class of governmental customers of cellular telephone service providers that alleged violations of the Louisiana Unfair Trade Practices and Consumer Protection Law and breach of contract impermissibly required members to “opt into” the class in violation of Rule 23 of the Federal Rules of Civil Procedure, the U.S. Court of Appeals in New Orleans has decided (Ackal v. Centennial Beauregard Cellular LLC, October 26, 2012, King, C.). Therefore, a class certification order was vacated, and the dispute was remanded for further proceedings.

The underlying suit was predicated on claims that the defendant service providers engaged in improper and deceptive billing practices. For example, the providers were alleged to overcharge customers by “rounding up” partial minute telephone calls to the next full minute.

The district court denied certification as to individual and corporate customers, finding that they did not meet some of the requirements for class certification. However, the court certified a class of governmental customers composed of “certain named governmental entities within the State of Louisiana.” The class purportedly consists of 299 governmental entities, including parish police juries, parish school boards, and other local boards and commissions.

Class Certification Under Rule 23

Rule 23(a) imposes four prerequisites on a class seeking certification: (1) numerosity; (2) commonality (3) typicality (4) adequacy of representation. In addition, a party seeking class certification under Rule 23(b)(3) must also demonstrate both (1) that questions common to the class members predominate over questions affecting only individual members, and (2) that class resolution is superior to alternative methods for adjudication of the controversy.

Significantly, Rule 23 also contains a so-called “opt out” clause, providing that “[f]or any class certified under Rule 23(b)(3), the court must direct to class members…notice…that the court will exclude from the class any member who requests exclusion.” The ability to “opt out” of a Rule 23(b)(3) action is necessary because each person within the description is considered to be a class member and, as such, is bound by any judgment unless he “opted out” of the suit, the court noted.

Unlike certain statutory collective actions, Rule 23 does not require that class members affirmatively “opt in,” nor was such a requirement mandated by due process. Indeed, substantial legal authority supports the view that not only is an “opt in” provision not required, by adding the “opt out” requirement Congress prohibited “opt in” provisions by implication.

This view is bolstered by the fact that, in drafting Rule 23, the Advisory Committee on Civil Rules “rejected the suggestion ‘that the judgment in a [Rule 23](b)(3) class action, instead of covering by its terms all class members who do not opt out, should embrace only those individuals who in response to notice affirmatively signify their desire to be included.’” Simply put, there is no authority for establishing “opt in” classes in which the class members must take action to be included in the class, according to the court.

Certified Class Impermissibly Required Members to “Opt In”

The plaintiffs acknowledged that Louisiana law limits the ability of certain government entities, including many of the plaintiffs in the certified class, to be represented by private counsel as prescribed by this class action. In particular, Louisiana Revised Statute section 42:263 provides:

No parish governing authority, levee board . . . , parish school board, city school board, or other local or state board shall retain or employ any special attorney or counsel to represent it in any special matter or pay any compensation for any legal services whatever unless a real necessity exists, made to appear by a resolution thereof stating fully the reasons for the action and the compensation to be paid. The resolution then shall be subject to the approval of the attorney general and, if approved by him, shall be spread upon the minutes of the body and published in the official journal of the parish.

It was undisputed that only the class representatives, Iberia and Delcambre, satisfied the procedures set forth in section 42:263 for the retention of private counsel. Additionally, both parties agreed that numerous other entities within the certified class were subject to the statute’s mandates.

The plaintiffs argued, however, that it was sufficient, at the class certification stage, that the class representatives satisfied the requirements of section 42:263. The plaintiffs maintained that “upon completion of the appellate process, [they will] pursue the same process and seek approval from every entity listed in order to comply with any statutory requirements for certification.” Thus, the plaintiffs viewed the satisfaction of section 42:263’s requirements as a mere “procedural issue” that could be addressed after class certification.

However, the plaintiffs underestimated the import of this “procedural issue,” the court determined. Nothing in section 42:263 suggested that private representation of entities subject to the statute could be undertaken while the entities pursue satisfaction of the statute’s requirements. As importantly, given the various “procedural” hurdles that must be cleared under section 42:263 before a class member was even authorized to participate in this action, the plaintiffs effectively created an “opt in” class.

Contrary to the requirements of a Rule 23(b)(3) action, here, a potential class member’s decision to take no action upon receipt of notice did not result in the entity’s inclusion in the class. Rather, the default position of each class member was that it was not in the class until it successfully completed a series of actions required by law for it to participate in the suit. Requiring such affirmative acts from putative class members before they could actually participate in a Rule 23 action was contrary to the express provisions of Rule 23(c)(2)(B), the court held.

Here, the class members must effectively “opt into” the class by satisfying a number of preconditions before they legally may be included in the class. Even if they wished to participate in the action, they could not do so until they affirmatively: (1) established that a “real necessity exists” for the retention of private counsel; (2) enacted a resolution “stating fully the reasons for the action and the compensation to be paid;” (3) received the attorney general’s approval of the resolution; and (4) publish the resolution in their minutes and the official journal of the applicable parish. Thus, the district court abused its discretion by certifying this class.

The case is No. 12-30084.

Theodore Michael Haik, Jr (Haik Minivielle & Grubbs) for Iberia Credit Bureau Inc. Joseph E Leblanc, Jr (LeBlanc Bland) for Telecorp Communications Inc.

Cases: StateUnfairTradePractices LouisianaNews MississippiNews TexasNews