194 F.R.D. 595 | S.D. Ohio | 1999
DECISION AND ENTRY OVERRULING MOTION TO STRIKE CLASS ACTION ALLEGATIONS (DOC. #55), FILED BY DEFENDANT MOORE U.S.A., INC., WITHOUT PREJUDICE TO RENEWAL; MOTION TO STRIKE CLASS ACTION ALLEGATIONS (DOC. # 56), FILED BY DEFENDANTS UARCO, INC., AND STANDARD REGISTER COMPANY, OVERRULED WITHOUT PREJUDICE TO RENEWAL; MOTION FOR PROTECTIVE ORDER (DOC. #51), FILED BY DEFENDANTS STANDARD REGISTER COMPANY AND UARCO, INC., OVERRULED WITHOUT PREJUDICE TO RENEWAL
This anti-trust litigation stems from the Plaintiffs’ allegations that the Defendants have engaged in collusive conduct by agreeing not to hire or to solicit one another’s sales representatives, and by including “non-compete” provisions in their employment contracts. The Plaintiffs are former sales representatives for Defendants UARCO, Inc., the Standard Register Company, and Moore, U.S.A., Inc. The Plaintiffs now work for Monarch, Inc., which is a competitor of each of the Defendants in the “business forms” production and distribution industry. The Plaintiffs seek to pursue this litigation as a class action on behalf of “[a]U persons who,
I. Defendants’ Motions to Strike Class Action Allegations (Doc. # # 55-56)
In two similar Motions, the Defendants seek to strike the class action allegations from the Plaintiffs’ first amended Complaint, pursuant to Fed.R.Civ.P. 23(d)(4) and S.D. Ohio Loc.R. 23.3. The former rule provides that “the pleadings may be amended to eliminate therefrom allegations as to representation of absent persons____” Likewise, the Local Rule provides that “[njothing in this rule shall preclude a motion by any party at any time to strike class allegations or to dismiss the complaint.” Although the class action issue is before the Court in the context of a preemptive Motion to Strike, as opposed to an affirmative motion from the Plaintiffs-to certify a class, a proper analysis nevertheless must begin with Rule 23 of the Federal Rules of Civil Procedure, which governs the maintenance of class actions.
The Supreme Court has held that a District Court must conduct a “rigorous analysis” into whether the prerequisites of Rule 23 are met when considering the propriety of a class action. General Tel. Co. v. Falcon, 457 U.S. 147, 161, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982). Although a District Court has broad discretion with respect to certifying class actions, it must exercise that discretion within the framework of Rule 23. Cross v. National Trust Life Ins. Co., 553 F.2d 1026, 1029 (6th Cir.1977).
The Federal Rules of Civil Procedure mandate a two step process to determine if an action is maintainable as a class action. First, the Court must determine whether the four prerequisites to a class action are present. These four prerequisites, referred to as numerosity, commonality, typicality and adequacy of representation, are: (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately represent the interests of the class. Fed.R.Civ.P. 23(a). These prerequisites limit class claims to those which are encompassed by the named plaintiffs’ claims. Falcon, 457 U.S. at 147, 102 S.Ct. 2364. Second, if the foregoing prerequisites are satisfied, the Court must then determine whether one of the factual situations described in Rule 23(b) has been established. Specifically, the Court must decide whether: (1) separate actions would create inconsistent results or would be dispositive of the interests of other potential plaintiffs; (2) the party opposing the class has acted, or refused to act, on grounds generally applicable to the class; or (3) issues common to the class predominate over other issues, such that the best method of trying the suit is as a class action.
When determining whether a class action may properly be maintained, a District Court may not base its decision upon the merits of a plaintiffs claims. Weathers v. Peters Realty Corp., 499 F.2d 1197, 1201 (6th Cir.1974). This does not mean, however, that the Court may not delve into the factual and legal issues -underlying the lawsuit. To the contrary, the Supreme Court has recognized that “the class determination generally
With the foregoing considerations in mind, the Court turns now to the pending Motions to Strike.
Fritz Kauffman, a former UARCO supervisor, has provided deposition testimony in which he alleges that Monarch’s owners met with him and expressed their frustration at unsuccessfully litigating the “non-compete” cases against Standard Register and UAR-CO. (Kauffman depo. at 419-420, 424-426, 437-438, Doc. # 56 at Exh. D). According to Kauffman, the litigation against Standard Register and UARCO has cost Monarch more than $500,000. (Id. at 420). In his deposition, Kauffman also inferred that Monarch devised the present litigation as a means to challenge the Defendants’ “non-compete” agreements. (Doc. # 113, at 425-428). Monarch vigorously denies that allegation.
In any event, the present action appears to have been spawned, at least in part, by the dispute between Monarch and the Defendants.
In his deposition, Plaintiff Bill Kusumoto acknowledged receiving a similar telephone call from Tom Majors, who “mentioned that there was an agreement that they were looking into that is a class action and that Mr. Parilla would be giving [him] a call.” (Id. at Exh. K, p. 54). Finally, Plaintiff Eugene Thomas, the initial class representative, testified in his deposition that he first considered being a party to the present litigation after he “was talked to about it.” (Id. at Exh. J, p. 83). Thomas also testified about his aware
In connection with the Motions currently pending, the Plaintiffs have provided the Court with a number of declarations from themselves, from Parilla, and from Monarch representatives. Among other things, the declarations state that Monarch neither pressured the Plaintiffs into pursuing the present litigation, nor promised them anything in return for doing so. Nevertheless, the Plaintiffs’ own deposition testimony reveals that Monarch and its counsel undeniably played a key role in the commencement of this action. Against that backdrop, the Court turns now to the allegations contained in the Plaintiffs’ first amended Complaint.
In support of their anti-trust claim, the Plaintiffs allege, among other things, that “beginning sometime prior to 1970 and continuing to the present, the defendants and their co-conspirators entered into a series of agreements not to compete with one another for the services of sales representatives.” (First Amended Complaint, Doc. #22 at H 24). According to the Plaintiffs, “[t]he purpose and effect of these agreements was to restrict the movement of plaintiffs and the other members of the class and to stabilize and reduce the price for their services.” (Id.) They further allege that “[o]ne mechanism by which the defendants and their co-eonspirators carried out their agreement not to compete with one another for the services of sales representatives was to use substantially identical ‘Salesman’s Agreements’ that prohibited any sales representative from soliciting his or her former customers or selling competitive products to his or her former customers.” (Id. at 1125). The Plaintiffs also contend that “[t]he purpose of the defendants and their co-conspirators in using substantially identical Salesman’s Agreements was to prevent the free movement of sales representatives between competitors, thereby stabilizing and reducing the price of their services.” (Id. at 1127). Furthermore, the Plaintiffs allege that “[i]n addition to agreeing to utilize substantially identical Salesman’s Agreements in order to make it more difficult for sales representatives to leave the employ of one defendant and begin employment with another, the defendants and their co-conspirators entered into an agreement not to hire each other’s current or former sales representatives at all.” (Id at 28). As a result, “a sales representative employed by one of the defendants or their co-conspirators who wanted to change jobs had no choice but to accept employment with a smaller competitor, or leave the industry.” (Id at 28).
In their first amended Complaint, the Plaintiffs seek to pursue the foregoing allegations, and others, on behalf of “[a]ll persons who, between 1990 and the present, were employed by one of the defendants as a sales representative.” (Id. at 1114). A review the Plaintiffs’ deposition testimony suggests, however, that they are questionable candidates to pursue such claims on behalf of the class. In his deposition testimony, Eugene Thomas testified that in 1970 he first discovered the existence of an agreement among UARCO, Standard Register, and Moore not to hire each other’s sales representatives. (Thomas depo. at 145-146). Thomas made this discovery while being trained to interview and to hire job applicants. (Id.) Furthermore, Thomas testified that class representative Harriet Hara “worked for UARCO,
In her own deposition, Hara admitted discovering sometime “in the 1990s” that UAR-CO and Standard Register had an agreement not to hire each other’s salespeople. (Hara depo. at 54). Specifically, Hara heard “[p]robably more than once” that the Defendants had a “gentleman’s agreement” not to hire each other’s reps. (Id. at 55). She nevertheless could not remember any details, because “so much time has passed.” (Id. at 57). In addition to a possible statute of limitations problem, Hara’s anti-trust claims face an additional impediment. She first learned of the present lawsuit in July, 1998, and decided to become a class representative that same month. (Id. at 63). She signed a general release on August 10, 1998, however, releasing Standard Register “from any and all claims, salaries, commissions, and/or monies claimed by me----” (Doc. # 56 at Exh. I).
In light of the foregoing deposition testimony, the Plaintiffs appear to be curious choices to pursue the present litigation as class representatives. In their amended Complaint, the Plaintiffs assert a cause of action under the Clayton Act, which has a four-year statute of limitations. 15 U.S.C. § 15b. In an effort to avoid this statute of limitations, the Plaintiffs plead fraudulent concealment by the Defendants. (See First Amended Complaint, Doc. # 22 at H 34). In order to establish fraudulent concealment, the Plaintiffs must plead and prove: (1) wrongful concealment of their actions by the Defendants; (2) failure to discover the operative facts that are the basis of their cause of action within the limitations period; and (3) the exercise of due diligence until discovery of the facts. State of Ohio ex rel. Fisher v. Louis Trauth Dairy, Inc., 856 F.Supp. 1229, 1236 (S.D.Ohio 1994).
In the present case, however, proposed class representative Thomas has testified that he became aware of the Defendants’ alleged no-hire agreement thirty years ago, and that the existence of such a policy was common knowledge. This testimony makes him a poor candidate to represent a class pinning its hopes on a fraudulent concealment theory. Cf. Bill Minnielli Cement Contr., Inc. v. Richter Concrete Corp., 62 F.R.D. 381, 390 (S.D.Ohio 1973) (Porter, J.) (“William Minniellif,] having admitted that he knew for years of price tampering, equal pricing, and collusion, seems a poor representative for any class member who had a valid fraudulent concealment claim.”) Nor do the two other proposed class representatives fare much better. Kusumoto admitted having knowledge of a no-hire “salesman’s agreement” in the 1980s. For her part, Hara signed a general release waiving all claims that she might possess, and she faces a potential statute of limitations problem as well. Cf. Robinson v. Sheriff of Cook County, 167 F.3d 1155, 1158 (7th Cir.1999) (recognizing that if a plaintiffs claim “is a clear loser at the time he asks to be made class representative, then approving him as a class representative can only hurt the class”).
In the present case, the Court is reluctant to certify a class with Thomas, Hara, and Kusumoto as its representatives, particularly given the real possibility that some of all of those Plaintiffs may well be vulnerable to a motion for summary judgment.
In light of the concerns identified above, however, the Court believes that the most appropriate approach in the present case is to defer resolving the class certification question, until after affording the Defendants an opportunity to file a motion for summary judgment with respect to the statute of limitations and release issues discussed, supra. The Sixth Circuit has recognized that “[i]t is reasonable to consider a Rule 56 motion first [(before ruling on a motion for class certification) ] when early resolution of a motion for summary judgment seems likely to protect both parties and the court from needless and further litigation.’ ” Thompson v. County of Medina, Ohio, 29 F.3d 238, 241 (6th Cir.1994), quoting Wright v. Schock, 742 F.2d 541, 544 (1984); see also Marx v. Centran Corp., 747 F.2d 1536, 1552 (6th Cir.1984) (rejecting the proposition that “in all cases the determination of the propriety of a class action must precede any consideration of the merits”); Gwirtz v. Ohio Educ. Ass’n, 887 F.2d 678, 683 (6th Cir.1989) (“We also agree that the district court did not err
Others also have recognized that, in appropriate cases, a District Court may utilize an “accelerated summary judgment procedure” to winnow out substantively deficient class actions, prior to class certification:
... [I]t is now clear that an inquiry into the merits is not a proper consideration during the class certification process. Notably, this does not necessarily mean that the defendant may be subject to harassing expense or adverse publicity attendant to a class suit if the plaintiffs’ claims are not meritorious. In appropriate cases, the court may use an accelerated summary judgment procedure prior to class certification to test plaintiffs right to proceed to trial. [In such a case,] the court is not assessing whether there is a substantial possibility that plaintiff will prevail for purposes of deciding whether class certification is appropriate, but is determining that there are no genuine issues of material fact and that defendant is entitled to prevail as a matter of law on the underlying dispute.
7B Charles Arthur Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1785, p. 127-128 (1986).
For the reasons set forth above, the Court will grant the Defendants an opportunity to file a motion for summary judgment, directed to the specific claims of the individual Plaintiffs who seek to represent the class, before it resolves the class certification issue.
II. Defendants’ Motion for a Protective Order (Doc. #51)
Also pending before the Court is a Motion for a Protective Order, filed by Standard
. Defendant Moore U.S.A., Inc., has joined in the other Defendants’ Motion for a Protective Order. (See Doc. # 53).
. Because the two Motions raise essentially the same arguments, the Court will address them together.
. Monarch was not named as a defendant in the Hawaii litigation.
. On May 17, 1999, the Plaintiffs informed the Court that the "non-compete” litigation in Hawaii and Washington settled in April, 1999. (Doc. # 108).
. Although Parilla initially represented the Plaintiffs in this action, he has withdrawn as counsel.
. Specifically, Thomas testified: "She worked for UARCO for a long time, and it was common knowledge throughout people that have been with the company that we were not allowed to apply to Standard Register or Moore because we would not be hired, and that their salesmen could not apply to us because we would not hire them.” (Id. at 113).
. Given that UARCO merged into Standard Register on January 1, 1998, Hara’s release also likely covered any claims that she might have had against UARCO. (See Hara depo. at 29).
. The Plaintiffs cite Bittinger v. Tecumseh Products Co., 123 F.3d 877 (6th Cir.1997) in support of their argument that Hara's release does not preclude her from serving as a class representative. Notably, however, the proposed class representative in Bittinger had signed a release, along with two-thirds of the other class members. Therefore, the class members’ claims rose and fell along with the named plaintiff’s claim. In the present case, the Plaintiffs have not identified any other class members who signed a release similar to Hara’s. In any event, the Sixth Circuit has also recognized that "plaintiffs have no basis for complaining of a refusal to certify a proposed class where the representatives of the class cannot prevail on the merits....’’ Sprague v. General Motors Corp., 133 F.3d 388, 397 (6th Cir.1998).
. In making this observation, the Court does not intend to suggest that it has predetermined its ruling on any such motion. Rather, the Court merely notes that the statute of limitations and/or release issues are obvious potential problems.
. Indeed, Sixth Circuit case law gives the Court some reason to believe otherwise. Under Fed. R.Civ.P. 23(a), the Court must consider, among other things, whether the named Plaintiffs will fairly and adequately represent all class members. Construing nearly identical language under Fed.R.Civ.P.23.1, which applies to share
. As noted, supra, the Plaintiffs have refused to reveal the source of their financing for the present lawsuit, but they have testified that they will incur no financial obligation, no matter what the outcome.
. If the Defendants’ statute of limitations and release arguments prove persuasive, the Plaintiffs will be vulnerable to a motion for summary judgment, thereby precluding them from recovering damages. Although the Plaintiffs also seek in-junctive relief, they no longer work for the Defendants and cannot harbor any realistic expectation of ever returning to such employment.
. Cf. Robinson v. Sheriff of Cook County, 167 F.3d 1155, 1157 (7th Cir.1999) (”[I]f when class certification is sought it is already apparent ... that the class representative's claim is extremely weak, this is an independent reason to doubt the adequacy of his representation, [citations omitted]. One whose own claim is a loser from the start knows that he has nothing to gain from the victory of the class, and so he has little incentive to assist or cooperate in the litigation; the case is then a pure class action lawyer’s suit, [citation omitted]. Finally, if the class representative's claim is both weak and typical — if the case as a whole is as weak as the representative’s individual claim — then the case should be dismissed with or without class certification.”).
. The Defendants have provided the Court with proposed interrogatories and document production requests related to the "predominance” issue. (Doc. # 88, Stewart declaration).
. Cf. Wenning v. Jim Walter Homes, Inc., 606 F.2d 784, 785 (7th Cir.1979) ("Plaintiff also contends that the district court erred in failing to decide the class action question before reaching the summary judgment motion. The court proceeded in the sequence complained of because the plaintiff's capacity to represent the class depended upon whether his own claim was barred. The determination that plaintiffs claim was barred meant that plaintiff could not adequately represent the class ... and no other class action issue remained to be decided. Under these circumstances it was not error to reach the statute of limitations issue before deciding the class issue.").
. See also Boards of Managers of Dunbar Lakes Condominiums v. Dunbar Homes, Inc., 1985 WL 1379 (N.D.Ill. May 15, 1985):
In the present case Defendants have taken every opportunity to inform the Court that statute of limitation problems plague this lawsuit. Defendants even suggest the named class representative may be unable to adequately represent the class of original condominium owners. See Wenning v. Jim Walter Homes, Inc., 606 F.2d 784, 785 (7th Cir.1979). Indeed, resolution of the various statute of limitation issues may in fact define the class in this case. This not to say, however, that this case may not be maintained as a class action. The court believes the most expeditious manner of proceeding with this suit is to reach as many statute of limitation issues as possible prior to ruling on the certification of a class. After the statute of. limitation issues are decided the Court will be in a better position to assess Defendants' arguments in opposition to class certification. Consequently, at this stage in the lawsuit, Defendants’ motion to dismiss the class action allegations found in Counts IV through VII must be denied....
... Accordingly, Defendants are ordered to present motions based on the statute of limitation on or before the next status hearing in this case (30 days from the date of this order) and the Plaintiffs are ordered to present a motion for class certification within 30 days of the Court’s ruling on Defendants’ motions.
. Defendant Moore has joined in the Motion for a Protective Order. (Doc. # 53).
. More specifically, the Court will defer ruling on all discovery until after resolving the summary judgment motion. If the named Plaintiffs’ claims survive summary judgment, or if the Defendants elect not to file such a motion at this time, and are excused from doing so by the Court, then the Court will rule immediately upon the Plaintiffs’ request for discovery directed toward the class certification issue.
. Cf. National Organization for Women v. Sperry Rand Corp., 88 F.R.D. 272, 276 (D.Conn.1980) ("To spend either three million or three hundred thousand dollars, in order to move a mountain of documents and statistics from the defendant’s facilities to the plaintiffs' offipes, would be, in this pre-certification context, a wasteful and unjustifiable action.”).
