Before WestFax Inc. was hit last year with a $21.1 million class-action judgment in Arkansas involving unwanted faxes, the client company that made the fax solicitation was allowed to exit the case by saying it couldn’t afford even a modest judgment.
Western Financial LLC of Orange, California, was dismissed from the action in Pope County Circuit Court after asserting it couldn’t “withstand even a modest class-wide judgment sufficient to afford any meaningful relief to the Class,” according to the Dec. 8, 2017, filing from the class members’ attorneys, James Streett of the Streett Law Firm in Russellville and Joe P. Leniski Jr. of Branstetter Stranch & Jennings of Nashville, Tennessee.
Streett told Arkansas Business last week that he accepted a confidentiality agreement with Western Financial after the case was certified as a class action, but before notice of the class action was sent to class members. The settlement called for the lead class member, M.S. Wholesale Plumbing Inc. of Russellville, to dismiss its individual claims against Western Financial. The absent class members, however, still could have sued Western Financial, if they wanted, for alleged violations of the federal Telephone Consumer Protection Act.
Streett said the goal of the lawsuit was to change the conduct of defendants, making them stop sending faxes violating the TCPA. He said he accomplished that. Western Financial declined to comment.
The settlement presented a potential conflict of interest, though, said Brian Fitzpatrick, a professor at Vanderbilt University Law School who teaches about class actions. He learned the details of the proceeding from Arkansas Business.
Once the case is certified as a class action, the plaintiff’s attorney is representing the class members, not just the representative plaintiff, he said.
“And if I, in that capacity, am negotiating a settlement that is only going to my representative plaintiff and not to the full [class members], then that does strike me as a potential conflict of interest,” he said.
Streett said the settlement wasn’t a conflict of interest because the absent class members maintained their right to sue Western Financial. And the case continued against WestFax, a lawsuit resulting in class members receiving the eight-figure judgment.
Fitzpatrick agreed that there might have been a good reason for a lawyer to dismiss a defendant who doesn’t have any money.
“It may not be sinister. It may make perfect sense,” Fitzpatrick said. “But once you are representing the class, … your hands become a little tied on who your loyalties have to be to.”
Days after Streett filed his motion to dismiss Western Financial, Pope County Circuit Court Judge Dennis Sutterfield approved it without holding a hearing.
Fitzpatrick said trial judges have wide flexibility on how to handle class-action cases.
And if no one stands up to object, a judge sometimes will go along with the request, which is part of the problem with the class-action system, he said.
“The class couldn’t object,” he said. “The defendant is not going to object.”
Fitzpatrick said judges are used to an adversarial process, where there are two sides.
And if there’s only one side, sometimes the judges do raise probing questions on their own, he said.
Judge Sutterfield told Arkansas Business last week that he doesn’t comment on cases.