13 April 2011
The U.S. Court of Appeals for the Seventh Circuit has held that doubts about the truthfulness of a putative class representative’s deposition testimony must be investigated in order to determine whether that representative can satisfy the requirement of Federal Rule of Civil Procedure 23(a)(4) that he be “adequate” to represent the class.
In CE Design Ltd. v. King Architectural Metals Inc., No. 10-8050, a civil-engineering firm brought a class action against a building-component manufacturer, alleging that the defendant had sent unsolicited faxes in violation of the “junk fax” provision of the federal Telephone Consumer Protection Act (TCPA). Under the TCPA, the party sending a fax is not liable if the recipient had consented to receiving it. The plaintiff company and its CEO had participated in a number of previous junk-fax suits under the TCPA. In this case, when the CEO was deposed, he testified that he did not recall signing a form provided by the publisher of a directory of construction-industry firms that authorized the company to be faxed advertisements by the directory’s subscribers—including the defendant. The CEO also testified that he was unfamiliar with the directory’s terms and conditions, under which the fax was authorized. That testimony contradicted the witness’s past deposition testimony from the earlier cases.
The defendant argued that the CEO’s deposition testimony undermined class certification in two ways. First, the plaintiff was not typical of other putative class members because the plaintiff was subject to the defense that it consented to receiving the challenged fax. Second, the plaintiff’s CEO’s credibility problems rendered his company an inadequate class representative. The district court nonetheless certified the class, reasoning that the “discrepancy” in the CEO’s testimony was “immaterial.”
The Seventh Circuit reversed, holding that the district court had erred in treating the “serious doubts concerning the truthfulness of” the CEO’s testimony as “immaterial.” To the contrary, the court explained, “[a] named plaintiff who has serious credibility problems or who is likely to devote too much attention to rebutting an individual defense may not be an adequate class representative.” The Seventh Circuit added that the CEO’s deposition testimony went to a key issue in the case: The “contractual ‘consent’ to communications among a community of businesses involved in the construction industry seems to have no point other than to provide the consent required by this federal law and perhaps similar state laws.” The court remanded the case for further consideration of whether the CEO’s “credibility problem” rendered him inadequate as a class representative.
The Seventh Circuit’s decision underscores the importance of the deposition of the named plaintiff in a class action. If the deposition reveals significant credibility problems or individualized defenses, the class action may fail to meet the adequacy and typicality requirements of Rule 23(a). To be sure, the Seventh Circuit warned that it was not “extending an invitation to defendants to try to derail legitimate class actions by conjuring up trivial credibility problems or insubstantial defenses unique to the class representative.” Instead, the court’s test for distinguishing “serious challenges” from “petty issues” requires evaluating whether “there exists admissible evidence so severely undermining plaintiff’s credibility that a fact finder might reasonably focus on plaintiff’s credibility, to the detriment of class members’ claims.” This standard suggests that district courts will need to consider questions about a named plaintiff’s credibility on a case-by-case basis, and that defendants in class actions should be attentive to the potential existence of such questions.
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