[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
_____________________________ FILED
U.S. COURT OF APPEALS
No. 02-15379 ELEVENTH CIRCUIT
_____________________________ December 23, 2003
THOMAS K. KAHN
D.C. Docket No. 99-02294-CV-J-S CLERK
BIRMINGHAM STEEL CORPORATION,
on behalf of itself and all others
similarly situated,
Plaintiff-Appellant,
versus
TENNESSEE VALLEY AUTHORITY,
Defendant-Appellee.
_____________________________
Appeal from the United States District Court
for the Northern District of Alabama
_____________________________
(December 23, 2003)
Before EDMONDSON, Chief Judge, CARNES, Circuit Judge, and CARNES *,
District Judge.
*
Honorable Julie E. Carnes, United States District Judge for the Northern District of
Georgia, sitting by designation.
CARNES, District Judge:
This appeal stems from the decertification of a class action lawsuit against
defendant Tennessee Valley Authority (“TVA”) after the class representative filed
for bankruptcy. The district court granted defendant’s motion to decertify the
class because it concluded that the named plaintiff, Birmingham Steel Corporation
(“Birmingham Steel”), had become an inadequate class representative, that class
counsel had failed to request the substitution of a class representative, and that no
other member of the class was willing to serve in that role. Plaintiff Birmingham
Steel appeals the district court’s decertification of the class, arguing that the court
should have allowed a reasonable time for a class member to intervene or be
substituted as the new class representative.
We conclude that the district court abused its discretion by decertifying the
class without permitting class counsel reasonable time to determine whether a new
class representative could be substituted. We therefore remand the case to the
district court for the purpose of allowing a reasonable period of time for another
member of the class to offer itself as the class representative.
I. Factual and Procedural Background
As the underlying proceedings in this case are pivotal to an understanding
and resolution of this dispute, we will address them in some detail here. Plaintiff
2
Birmingham Steel brought this case as a class action on behalf of a group of
approximately 400 large-volume industrial consumers of electrical power who
had Economy Surplus Power (“ESP”) contracts with TVA. Birmingham Steel
alleged that TVA had overcharged for power during the summer of 1998 and thus
had breached the ESP contracts. Pursuant to Federal Rule of Civil Procedure
23(b)(3),1 the district court certified the case as a class action, with Birmingham
Steel as the class representative, on December 5, 2000. At the suggestion of both
parties, the district court endorsed a bifurcated trial plan, whereby a trial would
first be held on the issue of liability; a second trial to determine damages would be
scheduled only if the defendant was found liable in the first trial. On September
28, 2001, the court set this liability trial to begin approximately one year later, on
September 30, 2002. On this same date, the district court approved the Notice of
Class Action to be sent to potential class members, which Notice directed
members who wished to be excluded from the class to file an opt-out form with
the court no later than December 14, 2001. Of significance to later events in this
case, the Notice, which was drafted by class counsel, states specifically that “[y]ou
1
Federal Rule of Civil Procedure 23 was amended effective December 1, 2003. The
district court’s certification of the class was made pursuant to the version of the rule in effect
prior to this recent amendment. Likewise, the parties’ briefs and this Court’s discussion of Rule
23 reference the pre-Amendment Rule 23. In any event, none of the amended provisions of the
Rule would alter the reasoning or outcome of this Court’s decision.
3
are not included in this class if you are in bankruptcy.”
Pretrial matters proceeded uneventfully until June 14, 2002, when defendant
TVA, having learned that Birmingham Steel had filed a petition for Chapter 11
bankruptcy approximately two weeks before, alerted the district court to that fact
and moved the court to decertify the class. In support of this motion, TVA argued
that, as a company in bankruptcy, Birmingham Steel was no longer a member of
the class and therefore could not serve as the class representative. In the
alternative, TVA requested the entry of an order staying the proceedings until a
substitute class representative could be certified or the class representation issue
could be decided. Birmingham Steel opposed decertification, arguing that the
class definition did not exclude bankrupt companies, albeit the class notice did,
and that, in any event, the district court should amend the class definition to allow
bankrupt companies such as Birmingham Steel to remain in the class. With regard
to TVA’s argument that Birmingham Steel could not serve as a representative,
given that its assets would soon be transferred to a liquidation trustee and the
company would cease to exist, Birmingham Steel disagreed with TVA’s
characterization of the effect or the timing of the proposed reorganization plan.
The district court denied defendant’s motion to stay proceedings, but did set
down a hearing on the motion for August 22, 2002. Much of this hearing revolved
4
around the many legal and practical problems that would be engendered by
Birmingham Steel’s continuation as a representative plaintiff, in view of its
bankruptcy status. Central to this discussion was the question whether a
bankrupt company controlled by a liquidator could adequately serve as a class
representative. The district court also expressed concern about what type of new
notice and opt-out period would be required, were the court amenable to
redefining the class to include bankrupt entities and to allowing Birmingham Steel
to remain as the representative plaintiff.
Toward the conclusion of the hearing, the court inquired about the
possibility of finding a substitute class representative, should Birmingham Steel be
excluded. Class counsel replied that it would be “some trouble” to find another
representative because most of the class members were current customers of TVA
who regularly negotiated new power contracts and who therefore would likely be
unwilling to undermine their ongoing business relationships with TVA. Class
counsel also noted that substituting a new class representative would necessitate
more discovery and therefore force the postponement of the trial date. In short,
class counsel expressed the view that a search for a new representative was
“unnecessary” and would cause “serious trouble.” Nevertheless, counsel did
indicate to the district court that, should it decide that Birmingham Steel could no
5
longer serve as the class representative, the law would require that counsel be
given a reasonable period of time to substitute a new representative: a proposition
with which the court concurred.
In contrast, defendant TVA took the position that a new representative was
not an option, but a necessity, under these circumstances. Moreover, TVA
opposed, as inappropriate, any efforts by class counsel to “beat the bushes
begging” for a new representative to step forth, but instead urged the court to
require any such volunteer to contact the court directly.
Thereafter, on September 19, 2002, the district court issued an order
granting TVA’s motion to decertify the class. The court rejected Birmingham
Steel’s argument that, as a bankrupt entity, it was still properly within the
definition of a class member, and the court further declined to amend the class
notice to expand this definition to cover bankrupt companies. Accordingly, the
court reasoned that, as it was no longer a member of the class, Birmingham Steel
could not serve as the class representative. With regard to the substitution of
another class member into the representative spot, the court indicated: “No Party
has asked this court to allow another class member to act as class representative.”
The court subsequently reiterated this point when, in distinguishing cases in which
substitution had occurred after the original class representative ceased its
6
membership in the class, the court noted: “No motion to substitute has ever been
placed before this court.” Finally, having decertified the action, the court
indicated that class members were now free to bring their own individual breach
of contract cases, if they saw fit.
Shortly thereafter, on September 25, 2002, class counsel filed a Motion to
Stay and Alter or Amend One Aspect of the September 19, 2002 Order That
Decertified Class. In that pleading, class counsel did not quarrel with the district
court’s decision that Birmingham Steel was no longer a member of the class and,
consequently, could not act as class representative. Rather, counsel asked only
that the court amend its order to delay decertification until absent class members
were notified and given an opportunity to substitute one of their number as the
class representative. Counsel conceded that if no volunteer stepped forward, the
class should then be decertified.
The district court held argument on this motion and thereafter issued an
order denying class counsel’s motion to suspend decertification until notice could
be given to the class. The court repeated its observation that, at the time of its
earlier ruling, plaintiff had never filed a motion to substitute a class
7
representative.2 Moreover, the court noted that, prior to its ruling decertifying the
class, class counsel had repeatedly emphasized how slim were the chances that a
new representative could be found. Accordingly, the court denied class counsel’s
motion to amend its earlier order, meaning that the class action remained
decertified. Subsequently, the court also granted TVA’s motion to dismiss
Birmingham Steel’s individual action, a decision that plaintiff does not appeal.
II. Standard of Review
Questions concerning class certification are left to the sound discretion of
the district court. Forehand v. Florida State Hosp. at Chattahoochee, 89 F.3d
1562, 1566 (11th Cir. 1996) (quoting Cox v. American Cast Iron Pipe Co., 784
F.2d 1546, 1553 (11th Cir.), cert. denied, 479 U.S. 883, 107 S. Ct. 274 (1986)).
We review orders denying class certification for abuse of discretion. Wooden v.
Bd. of Regents of the Univ. Sys. of Georgia, 247 F.3d 1262, 1271 (11th Cir. 2001)
(citing Prado-Steiman v. Bush, 221 F.3d 1266, 1278 (11th Cir. 2000)). Logically,
we also review orders decertifying a class for abuse of discretion as well. Johnson
v. Bd. of Regents of the Univ. of Georgia, 263 F.3d 1234, 1243 (11th Cir. 2001).
2
“First, at the time the court considered the defendant’s motion to decertify, no motion to
substitute the class representative was before the court. Therefore, the court could either grant or
deny the motion to decertify. Neither of these options include the court sua sponte ordering the
plaintiff to find a new class representative. However, plaintiff now argues that this court is in
error for not granting such relief.” [R.3:109:3-4] (footnote omitted).
8
See also Pederson v. Louisiana State Univ., 213 F.3d 858, 866 (5th Cir. 2000)
(holding that the decision to decertify a class is a class certification decision and as
such is reviewed for abuse of discretion); Barnes v. American Tobacco Co., 161
F.3d 127, 138 (3d Cir. 1998) (holding that the decision of a district court to
decertify a class should be reviewed for an abuse of discretion). This Court has
stated that “[a]n abuse of discretion occurs if the judge fails to apply the proper
legal standard or to follow proper procedures in making the determination, or ...
[makes] findings of fact that are clearly erroneous.” Mincey v. Head, 206 F.3d
1106, 1137 n.69 (11th Cir. 2000) (quoting In re Red Carpet Corp. of Panama City
Beach, 902 F.2d 883, 890 (11th Cir. 1990)).
III. Discussion
A. Case Authority
Plaintiff Birmingham Steel argues that the district court abused its
discretion by decertifying the class without first allowing a reasonable time for
substitution or intervention by other class members. Plaintiff contends that the
case law of this Circuit supports its position and notes that this Circuit has never
upheld a decertification by a district court, based on the inadequacy of the class
representative, when the trial court has refused to give the class an opportunity to
substitute a new class representative. Defendant TVA counters that Rule 23
9
nowhere requires a district court to allow an opportunity for the substitution of a
new class representative, prior to decertifying a class. Moreover, defendant
contends that the cases on which plaintiff relies are distinguishable from this case.
To evaluate the respective positions of each party, the Court will address, in turn,
each of the three cases on which plaintiff most heavily relies, followed by
defendant’s two strongest cases.
Plaintiff’s best case is Lynch v. Baxley, 651 F.2d 387 (5th Cir. Unit B July
1981).3 Lynch was a class action challenging the constitutionality of Alabama
civil commitment procedures applicable to individuals who were involuntarily
committed to mental health facilities. After certification of the class, the Alabama
legislature repealed the statutes at issue and enacted new statutes that deprived the
named class representatives of standing to represent any new class that might be
formed in response to the new legislation. Thereafter, given the absence of
standing by the named plaintiffs, the district court dismissed the class action
without prejudice. Id. at 387-88.
The plaintiffs appealed this dismissal, and the former Fifth Circuit reversed
and remanded. Citing the Supreme Court’s decision in Sosna v. Iowa, 419 U.S.
3
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the
Eleventh Circuit adopted as binding precedent all Fifth Circuit decisions handed down prior to
the close of business on September 30, 1981.
10
393, 399, 95 S.Ct. 553, 557 (1975), the court noted that, once certified, a class
acquires a legal status separate from that of the named plaintiffs. 651 F.2d at 388.
Accordingly, while a loss of standing might justify dismissal of the named plaintiff
as a representative, it did not necessarily call for the simultaneous dismissal of the
class action, if members of that class might still have live claims. Rather, the
former Fifth Circuit held that, under the circumstances before it, the district court
erred in dismissing the case without first giving an opportunity for the intervention
of a newly named plaintiff who would have standing to pursue the action. Id.
The only circumstance specifically identified by the panel was the fact that
discovery had been ongoing for a two year period and, therefore, dismissal of the
action “rendered useless” this discovery. Id. at 388 n.1. As a result, the court
reasoned that “[e]fficient judicial administration weighs in favor of allowing an
opportunity for a new and proper class representative to enter the case and litigate
the interests of the subclass.” Id. at 388.
In Cotterall v. Paul, 755 F.2d 777 (11th Cir. 1985), plaintiff Cotterall had
filed a class action challenging the conditions of confinement in an Alabama
county jail. The district court refused to certify the class, in part, because Cotterall
was not an adequate representative. Id. at 781. Yet, at the same time it rendered
this ruling, the court had pending two motions to intervene by putatively adequate
11
representatives, which intervention motions it denied as moot because it had
refused to certify the class. Id. This Court reversed, holding that it was error for
the district court to deny class certification “on the ground that the named plaintiff
was an inadequate class representative without first making a specific finding that
the would-be intervenors would be inadequate representatives as well.” Id.
Finally, plaintiff also relies upon Ford v. United States Steel Corp., 638
F.2d 753 (5th Cir. Mar. 1981). In that case, the district court decertified a class
that it had sua sponte certified over four years earlier. Id. at 754. One basis for
the decertification was the inadequacy of the named class representative. Id. at
757. Upon decertification, however, several individuals filed motions to
intervene, which motions the district court denied. Id. at 758. The former Fifth
Circuit reversed and remanded the case to the district court for the latter to
determine, among other things, whether a live controversy still existed and, if so,
“to substitute an appropriate class representative should one desire to be
appointed.” Id. at 762. Although the complexity and “convoluted history” of
the case, id. at 754, make it difficult to derive precise principles that could be
readily applied in dissimilar factual scenarios, it bears noting that the former Fifth
Circuit indicated that the district court’s earlier certification of the class could
have triggered reliance among members of the class, such that the decertification
12
could have created an injustice. Id. at 760. Moreover, the panel indicated that the
interest of other members of the class in representing that class was also a factor
the district court should have considered prior to decertifying the class. Id.
Finally, however, the former Fifth Circuit did qualify the general applicability of
its holding by acknowledging that the tasks it had assigned the district court on
remand--including the duty to substitute an appropriate class representative, if one
so volunteered--were not tasks that “courts must always undertake when
confronted with potential class actions.” Id. at 762. Rather, “[t]he unusual
procedural history . . . of this case . . . dictates further consideration to ensure that
those, if any, who are entitled to relief receive it.” Id.
In support of its position, defendant argues that the above cases are factually
distinguishable. Defendant further cites, as persuasive authority, two other cases
from outside this Circuit. In Payne v. Travenol Labs., Inc., 673 F.2d 798 (5th Cir.
1982), as a result of an amendment to add a sex discrimination claim to a class
complaint that had originally alleged only a race discrimination claim, an inherent
conflict arose between the interests of black female and black male members of
the class, necessitating the creation of two subclasses to represent the two groups.
Id. at 807-09. As the only black male named plaintiff had earlier withdrawn
from the case, however, there was no black male to represent such a subclass. Id.
13
at 812. Accordingly, the plaintiffs contended that the district court had a duty to
send a notice to all black males “to allow one of them to step forward to
intervene.” Id. Plaintiffs appealed after the district court refused to send this
notice.
The Fifth Circuit concluded that it could find no such obligation in the law.
Id. In so holding, the court noted that Rule 23 requires a district court to give
notice to the class of developments in the case in only two situations: (1) when the
court certifies a Rule 23(b)(3) class, per Rule 23(c)(2), and (2) when the class
action is about to be dismissed or compromised, per Rule 23(e). As the plaintiffs
had not argued that the redefinition of the class constituted a dismissal of the class
action, the Fifth Circuit concluded that the district court had no duty to “recruit” a
new black male plaintiff to intervene in the case. Id. Otherwise, the court
reasoned, whenever a district court decertified a class upon concluding that the
class representative was inadequate, the court would have to send out a notice
soliciting a new class representative:
Were we to accept [plaintiff’s] reasoning, a district court that
provisionally certified a class but later concluded that the existing
class representative was inadequate would have to send notice
soliciting a new class representative. Plainly, this is not the rule in
this circuit . . . nor should it be . . . . The rule that [plaintiff] proposes
would shift a burden onto the district court that properly remains with
the plaintiff.
14
Id. at 813 (internal citation and footnote omitted). Indeed, the Fifth Circuit
concluded that a district court’s recruitment of black males “would constitute the
stimulation of a new law suit by the court rather than a continuation of the old.” 4
Id.
Second, defendant relies on a recent Seventh Circuit decision, Culver v.
City of Milwaukee, 277 F.3d 908 (7th Cir. 2002). In Culver, the district court had
certified a class in an action brought on behalf of white males who claimed to have
been discriminated against in hiring by the Milwaukee police department. The
district court originally certified a class consisting of both white males who had
unsuccessfully applied for positions and white males who had not been allowed to
apply for positions. Id. at 910. Six years later, the district court granted the City’s
motion to decertify the class because the class improperly included two mutually
exclusive groups of claimants, and Culver was an inadequate representative of the
group to which he belonged; the judge then dismissed Culver’s individual claim as
being moot. Id. at 910-11.
The plaintiff appealed the district court’s decertification of the class.
4
The opinion left open the possibility that had black males relied to their detriment on
their provisional inclusion in a class, the district court might have arguably abused its discretion
if it had not ensured that this group received notification of its impending exclusion. Payne v.
Travenol Labs, Inc., 673 F.2d 798, 813 (5th Cir. 1982).
15
Although noting that the district court could have divided the class into two
subclasses, instead of outright decertifying the class, the Seventh Circuit held that,
under the particular facts of the case, the district court had no obligation to so act.
The court noted that Culver was clearly an inadequate representative because, in
eight years of litigation, he had yet to identify any member of the class other than
himself or to otherwise move the case forward. Id. at 912. As to the ability to
substitute another person as the representative plaintiff for either subclass, the
court noted that the “lackadaisical” lawyer for the class should have lined up
another class member to take Culver’s place in the event the appellate court
ordered recertification, but that she had failed to do so. Id. Further, the Seventh
Circuit considered the refusal of the class counsel to cooperate in the district
court’s efforts to divide the class into subclasses as a sufficient independent
ground for concluding that the plaintiff was an inadequate representative of the
class, as “the performance of the class lawyer is inseparable from that of the class
representative.” Id. at 913. In short, the Seventh Circuit concluded that the
district court did not err in decertifying the class.
The Seventh Circuit nevertheless held that the district court’s failure to
notify the class of its decertification order was error that required a remand to
allow the district court to correct its omission. Id. at 913-15. Citing Rule 23(e),
16
which requires that class members be notified of the proposed dismissal or
compromise of an action, the panel noted that although a primary purpose behind
this requirement is to protect the class against a proposed settlement agreement in
which the class counsel may be “selling out the class,” another important purpose
is to alert the class that the statute of limitations for any individual claims, which
was tolled upon the motion for class certification, will begin running again upon
the dismissal of the action; absent such notification, members of the class might
“find themselves time barred without knowing it.” Id. at 914. Although
acknowledging that decertification of a class is not the same thing as dismissal of
the action, the court noted that decertification restarts the running of the statute of
limitations in the same way as would dismissal. Hence, it concluded that the court
should notify the class members of the decertification. Id. at 915.
Upon careful review of the above authority, we adopt the following
principles that we have extrapolated from these cases. A district court that is
about to decertify a class on the ground of inadequate representation by the named
plaintiff will, except in extraordinary circumstances, not be required to take on
itself the responsibility of notifying the class members of the imminent
decertification in order to allow these members an opportunity to intervene or
substitute themselves as the class representative; this is the job of class counsel or
17
the class representative. Accordingly, on remand, the district court will not be
required to notify the class of its impending decertification. Yet, we are also
persuaded by the reasoning in Culver that, once a district court has decertified a
class, it must ensure that notification of this action be sent to the class members,
in order that the latter can be alerted that the statute of limitations has begun to run
again on their individual claims. Accordingly, if, on remand, the district court
again decertifies the class, the court must see that timely notification of
decertification is sent to the class.
We still must resolve the central dispute in this appeal, however, which is
whether the district court was required to allow class counsel and the class a
reasonable period of time to find a new class representative, prior to decertifying
the class. In answering this question, we find Lynch to provide the most apt
guidance on this matter. Again, as noted, the former Fifth Circuit recognized in
Lynch that a class has a legal status separate from the named plaintiff and
accordingly held that the district court had erred in summarily decertifying a class
when the class representative had become inadequate, without first giving other
members of the class an opportunity to substitute themselves as the class
representative. In support of its holding, the panel noted that the efficient
administration of justice required that such an opportunity be given as otherwise
18
the two years spent conducting discovery would be rendered useless by the
decertification of the class. Similarly, in this case, the parties had completed
discovery, had litigated numerous pretrial motions, and were on the eve of trial
when the named plaintiff, Birmingham Steel, became an inadequate representative.
Accordingly, absent some special circumstance that would take this case out of the
reach of the holding in Lynch, the latter case would indicate that the district court
here erred by not giving counsel an opportunity to seek a new named plaintiff.
Defendant and the district court have asserted that such distinguishing
circumstances exist, and it is to this contention that we now turn our attention.
B. Basis of District Court’s Refusal to Allow Time for a New
Class Representative to be Substituted
In the present case, the district court decertified the class on the ground that
the named plaintiff inadequately represented the class, and the court did so without
first giving class counsel the opportunity to try to find a member of the class who
would be willing to act as the class representative, although counsel had requested
such an opportunity. The court indicated that it did not allow class counsel this
opportunity (1) because no party had asked the court to allow another class
member to act as class representative and, consequently, the court could not rule
on a motion that had never been made; (2) because, given class counsel’s assertion
19
that it would be difficult to find a member of the class that would be willing to
challenge defendant TVA, it appeared very unlikely that any member of the class
would be willing to intervene as a class representative; and (3) because class
members would suffer no prejudice from this decertification, as they could still
litigate their actions individually.
We conclude that the third ground constitutes an insufficient basis for
refusing to allow class counsel time to locate an appropriate substitute
representative. The same argument would have been applicable in Lynch and
Ford, yet the former Fifth Circuit nevertheless concluded that the respective
district courts erred in those cases by not allowing class members an opportunity
to intervene prior to decertification. We are bound by those decisions and
likewise conclude that the ability of the class members to bring their own
individual actions does not decide the question of whether a district court errs
when it refuses to allow class counsel time to locate a substitute class
representative, prior to decertification.
The first two grounds for the district court’s decision, however, are not
implicated in the cases discussed above, and we must therefore determine the
appropriateness of the district court’s decision in a legal context not present in
those cited cases. To do so, we must delve again into the proceedings leading up
20
to the order decertifying the class. The record before this Court suggests that the
district court believed that class counsel had sandbagged it by arguing strenuously
that the court should reject defendant’s argument that the class representative
should be replaced with a substitute representative, only to make that very same
request once the district court had decided that Birmingham Steel was, in fact, an
inadequate representative. Amplifying the court’s apparent sense that class
counsel was switching arguments after earlier committing itself to a contrary
position was counsel’s assertion, in response to the court’s inquiry at the August
22nd hearing, that he would have great difficulty in finding a class member who
would be willing to act as a representative. Indeed, defendant now argues that
class counsel’s change of position triggers application of the “invited error”
principle5 or constitutes judicial estoppel.6 Without launching into a lengthy
discussion of what conduct is necessary to trigger invocation of these legal
5
“It is a cardinal rule of appellate review that a party may not challenge as error a ruling
or other trial proceeding invited by that party.” Ford ex rel. Estate of Ford v. Garcia, 289 F.3d
1283, 1293-94 (11th Cir. 2002), cert. denied, 537 U.S. 1147, 123 S. Ct. 868 (2003) (quoting
United States v. Ross, 131 F.3d 970, 988 (11th Cir. 1997)).
6
“Judicial estoppel” is an equitable doctrine that protects the integrity of the judicial
process “by prohibiting parties from deliberately changing positions according to the exigencies
of the moment.” New Hampshire v. Maine, 532 U.S. 742, 749-50, 121 S. Ct. 1808, 1814 (2001)
(internal citations and quotations omitted). In the Eleventh Circuit, the inconsistent positions
must have been made under oath and must have been calculated to make a mockery of the
judicial system. Salomon Smith Barney, Inc. v. Harvey, 260 F.3d 1302, 1308 (11th Cir. 2001),
vacated on other grounds, 537 U.S. 1085, 123 S. Ct. 718 (2002) (citing Taylor v. Food World,
Inc., 133 F.3d 1419, 1422 (11th Cir. 1998)) (additional citations omitted).
21
principles, suffice it to say that defendant argues that, given class counsel’s initial
contradictory position during the proceedings at issue, plaintiff waived its right to
now argue that the court erred by not doing what plaintiff had initially opposed:
staying the action to allow an opportunity to find another class representative.
This Court has carefully reviewed the record, admittedly with the luxury of
a less hurried pace than was available to the district court during the fast-moving
proceedings on the eve of the trial date. That review causes us to conclude that,
while substitution was clearly not class counsel’s first choice of action, he did not
take a contradictory position during the pivotal proceedings, such that he should
be deprived of the ability to argue that the district court erred in its ultimate
decision not to allow a reasonable period of time for another member of the class
to be substituted as the class representative. As noted supra, defendant contended
that Birmingham Steel was an inadequate representative and sought to stay the
proceedings in order that plaintiff could seek a new representative party.7
Plaintiff, however, vigorously contended that Birmingham Steel could still serve
as a class representative, notwithstanding its pending bankruptcy and ultimate
7
Although defendant’s motion was styled, “ Motion To Decertify Class Action Or, In
The Alternative, To Stay Proceedings,” defendant never took the position that the class should be
immediately decertified without first giving plaintiff an opportunity to find a substitute
representative, if such existed.
22
liquidation. Prior to decertification, class counsel’s efforts were clearly focused
on persuading the court on this point. In its response to defendant’s motion,
plaintiff confined its discussion to arguments intended to convince the district
court that no substitution of representatives was necessary; plaintiff never
addressed what should happen were the district court to reject its position.8
Moreover, at the August 22nd hearing on defendant’s motion, counsel for
defendant did not request an immediate decertification, but instead indicated that
the district court should allow a notice to be sent to class members, alerting them
to the absence of a class representative and allowing one of their number to
assume this duty. Finally, at that same hearing, in response to the district court’s
observation that, upon decertification, class members would be able to file
individual actions, class counsel made clear his position that the law required that
the class be given time to substitute a representative, should the court so rule:
Mr. McKee: If the named class representative in a class action
becomes unable to continue to serve, say an individual dies, for
example, the law is that the plaintiff or plaintiff’s counsel is to be
given a reasonable time to substitute a new member.
The Court: Absolutely.
8
It bears noting that, although plaintiff ultimately failed to persuade the district court that
Birmingham Steel remained an adequate representative, the district court, at the outset, clearly
considered plaintiff’s argument to have some potential for success. Thus, we cannot characterize
plaintiff’s ultimately unsuccessful contention as frivolous or taken for the purpose of delay.
23
Accordingly, we conclude that class counsel did not mislead the district court as to
his position regarding substitution should the court ultimately decertify the class,
but instead alerted the court to the position that counsel would take in that event.
Therefore, plaintiff is not estopped from arguing that the district court should
have allowed a reasonable time for substitution.
Similarly, as to plaintiff’s failure to file a motion to substitute prior to
decertification, we conclude that given the posture of the proceedings, class
counsel could have reasonably inferred that no such motion was necessary prior to
a decision on defendant’s decertification motion. Moreover, given defendant’s
objection to any efforts by class counsel to locate a substitute representative on
his own, class counsel argues that he was therefore reluctant to launch his own
search for a new substitute. While there may have been no motion to substitute a
particular party, there was clearly a motion to stay proceedings to allow
substitution of a new representative. In fact, it was defendant who filed this
motion and advanced this request at the hearing; as noted, plaintiff agreed that a
stay would be necessary if the court deemed Birmingham Steel an inadequate
representative, and the district court concurred with this particular assessment by
plaintiff.
Finally, the district court based its decision not to allow time for the
24
substitution of a new class representative on its conclusion that any attempt to find
such a substitute would be futile and would delay resolution of a case that had
been pending for over three years. The court arrived at this conclusion as a result
of class counsel’s consistently pessimistic appraisal of the likelihood of finding a
class member who would be willing to serve as a representative. Given the
extreme time constraints and case loads of most district courts, we are sensitive to
their need to manage efficiently their dockets. Accordingly, we sympathize with
the frustration of the district court as to any further delay of a trial that had been
specially set for over a year, particularly when the potential for class counsel to
interest anyone else in serving as the class representative seemed unpromising.9
Nevertheless, that counsel was pessimistic does not necessarily mean that he
would have been unable to interest another member of the class in serving as the
representative.10
9
Again, with the clarity that hindsight often brings, a dual track, in which class counsel
was locating a new representative at the same time that the court and parties were litigating the
motion to decertify, might have saved the trial date.
10
Although the Culver court considered the likely futility of finding a new class
representative to be a factor justifying the district court’s immediate decertification of the class,
the facts were more extreme in that case than in the case before us. Specifically, Culver had
never identified a single other member of the class in the six years since certification. Moreover,
Culver’s class counsel had litigated the case in a “lackadaisical” manner and had refused to
cooperate with the district court in creating subclasses. Culver v. City of Milwaukee, 277 F.3d
908, 912 (7th Cir. 2002). Here, in contrast, class counsel had helped to create a class of about
400 members; he appears to have been diligently litigating the case, as the case was on the eve of
trial; and, while he disagreed with the need to find a substitute representative, he did not oppose,
25
In short, we conclude that the grounds articulated by the district court do not
adequately support its refusal to allow time for class counsel to locate a new class
representative. As discovery had been completed, numerous pretrial motions had
been resolved, and the case was ready for trial, we conclude that, as in Lynch, the
efficient administration of justice and the interests of the class were not served
when the district court decertified the class without first giving class members an
opportunity to intervene as the class representative. Accordingly, we find an
abuse of discretion and remand for the district court to allow a reasonable period
of time for the substitution or intervention of a new class representative.11
but rather endorsed, this endeavor, should it become necessary.
11
We likewise deny defendant TVA’s Motion to Dismiss for Lack of Subject Matter
Jurisdiction, filed in this Court on the eve of oral argument, purportedly as the result of a newly
issued case out of the Eighth Circuit. Defendant relies on a line of authority involving plaintiffs
who have settled their claims and who then seek to appeal the denial of class certification. This
class was certified, however, before the decision by the district court now being appealed: its
refusal to allow time for class members to be substituted for the inadequate class representative.
As noted, once certified, a class acquires a legal status separate from that of the named plaintiffs.
Sosna v. Iowa, 419 U.S. 393, 399, 95 S.Ct. 553, 557 (1975). Moreover, we conclude that Lynch,
supra, controls the motion to dismiss. As noted supra, in Lynch, the former Fifth Circuit
reversed a district court’s decision to decertify the class on the ground of the newly discovered
inadequacy of its named plaintiff without giving the class an opportunity to substitute one of its
members as the class representative. The panel remanded the action for the district court to
permit time for the intervention of a new plaintiff. There is no indication in Lynch that the
named plaintiff was contesting the district court’s decision that he was inadequate nor arguing
that he should be allowed to remain the class representative on remand. See Pederson v.
Louisiana State Univ., 213 F.3d 858, 866 n.6 (5th Cir. 2000) (despite alleged mootness of the
named plaintiff’s claim, the latter is the proper party to contest the district court’s decertification
decision). See also Johnson v. Bd. of Regents of the Univ. of Georgia, 263 F.3d 1234, 1268 n.30
(11th Cir. 2001) (citing Sosna, 419 U.S. at 399-40, 95 S. Ct. at 557) (“if a plaintiff had standing
at the time of the complaint and at the time a class [wa]s certified, subsequent events that may
26
IV. Conclusion
We therefore VACATE the district court’s order decertifying the case and
REMAND this case to the district court to allow a reasonable period of time for a
member of the class to intervene or to be substituted as the class representative. If,
at the end of that period, no adequate representative has appeared, the district
court may again decertify the action.12
VACATED AND REMANDED.
moot [its] own claim . . . do not necessarily defeat [its] ability to continue to represent a class
whose members still have live claims”).
12
As noted supra, we do not require the district court, itself, to notify the class of that
court’s determination that the named plaintiff is no longer adequate. If the court eventually
decertifies the action, however, it must cause notice to be sent to the class in order that the latter
will be made aware that the statute of limitations, tolled during the class action, has begun
running upon the decertification of the class. See Culver v. City of Milwaukee, 277 F.3d 908,
913-14 (7th Cir. 2002).
27