No Class

A decision issued today by the United States Court of Appeals for the Second Circuit

The law firm of Leeds, Morelli & Brown PC, representing 587 plaintiffs with discrimination claims against their employer, defendant‐appellant Nextel Communications, Inc., agreed with Nextel to set up a dispute resolution process whereby all of the plaintiffs’ claims against Nextel would be resolved without litigation. After most of the cases were settled through the dispute resolution process, a group of Nextel employees brought suit on behalf of the entire class of the firm’s Nextel clients against both the law firm and Nextel, alleging, inter alia, breach of fiduciary duty, legal malpractice, and breach of contract. A prior panel of this Court vacated a decision dismissing the case, and the district court (George B. Daniels, Judge) subsequently certified a class pursuant to Federal Rule of Civil Procedure 23(b)(3). In granting plaintiffs’ motion for class certification, the district court applied New York law to all of the class members’ claims, even though the class members hailed from twenty‐seven different states, and held that common issues predominated over any individual issues, even though prior litigation in state court indicated that for class members from Colorado, individual waivers of the law firm’s conflict of interest could have vitiated defendants’ liability. We conclude that the district court erred in its choice‐of‐law analysis, and that a proper analysis makes clear that the individual issues in this case will overwhelm common issues. Plaintiffs therefore fail to meet the criteria for a class action under Rule 23(b)(3).

Thanks to a reader for sending this along. (Mike Frisch)