Wexler v. AT&T Corp.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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EVE WEXLER, on behalf of herself and

all others similarly situated,

MEMORANDUM AND ORDER

Plaintiff, Case No.: 15-CV-0686 (FB) (PK)

-against-

AT&T CORP.,

Defendant.

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Appearances:

For the Plaintiff: For the Defendant:

JAMES S. GIARDINA CHRISTOPHER J. HOUPT

The Consumer Rights Law Group, PLLC Mayer Brown LLP

3104 W. Waters Avenue, Suite 200 1221 Avenue of the Americas

Tampa, FL 33614 New York, NY 10020

KEITH J. KEOGH

Keogh Law, Ltd.

55 W. Monroe Street, Suite 3390

Chicago, IL 60603

BLOCK, Senior District Judge:

In a prior memorandum and order, the Court ordered the class-action

allegations stricken from the complaint on the ground that the named plaintiff, Dr.

Eve Wexler (“Dr. Wexler” or “Plaintiff”), could not be an adequate class

representative because she is married to Shimshon Wexler, the lawyer who filed the

complaint. See Wexler v. AT&T Corp., 323 F.R.D. 128 (E.D.N.Y. 2018). It

reasoned that Mr. Wexler’s withdrawal from the case did not cure the conflict

because he still retained the right to seek fees on a quantum meruit theory. See id.

at 130.

In response, Dr. Wexler moved to amend the complaint to resurrect the class-

action allegations. She explained in a promotion letter that Mr. Wexler had agreed

to disavow any claim to attorney fees. The Court referred the motion to Magistrate

Judge Kuo, who issued a Report and Recommendation (“R&R”) on August 5, 2019.

Dr. Wexler timely objected, which requires the Court to review the R&R de novo.

See 28 U.S.C. § 636(b).

The R&R recommends that Plaintiff’s Motion for Leave to File a Second

Amended Complaint (the “Motion”) be denied. It reasons that Plaintiff’s proposed

amendments would be futile “[b]ecause Plaintiff is not an adequate class

representative” and as such “the proposed class cannot be certified under Rule 23.”

R&R at 11.

Plaintiff argues that the R&R erred in two respects: First, as Magistrate Judge

Kuo examined whether Plaintiff was an “adequate representative” under Rule 23,

Plaintiff argues the “R&R addresse[d] the wrong question” and “should be rejected

as contrary to law.” It is true that a motion to amend a pleading is subject to the

lenient standard of Federal Rule of Civil Procedure 15. But when a motion for leave

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to amend arises in the context of a class action, leave “should be denied as futile if

the allegations in the proposed amended complaint . . . demonstrate that the proposed

class cannot be certified under Rule 23.” Moukengeschaie v. Eltman, Eltman &

Cooper, P.C., 277 F. Supp. 3d 337, 347 (E.D.N.Y. 2017) (internal citation omitted).

In this case, Plaintiff’s Motion seeks to reinstate class allegations that were already

stricken by this Court on the grounds that Plaintiff failed to satisfy the “adequacy of

representation” requirement. Dkt 52. Whether Plaintiff’s amendments are futile,

therefore, necessarily requires this Court to consider if those amendments will

enhance the likelihood of class certification under Rule 23. Pierre v. JC Penney

Co., 2006 WL 407553, at *6 (E.D.N.Y. Feb. 21, 2006) (“[T]he court’s role on a

motion to amend is to determine the likelihood that [the] proposed class will be

certified.”).1

Second, Plaintiff argues that it was error for Magistrate Judge Kuo to find

Plaintiff inadequate under Rule 23 because the R&R only found the “mere

appearance of impropriety” and the “potential” for conflicts of interest, rather than

an actual, fully-ripe conflict. The Court overrules this objection as well.

To satisfy Rule 23’s adequate representation requirement, a plaintiff must

1Despite now attempting cast the R&R’s consideration of Rule 23 as “beyond

the scope” of the referral, Plaintiff’s own briefing in support of her motion

extensively addressed that very issue. See Dkt. 60 at 11–14; Dkt. 60-1 at 2–9.

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“have no interests antagonistic to the interest of the other class members.” Denney

v. Deutsche Bank AG, 443 F.3d 253, 268 (2d Cir. 2006). A proposed representative

may be an inadequate if, for example, they have a close relationship with class

counsel or would otherwise permit a settlement on terms less favorable to absent

class members. Aliano v. CVS Pharmacy, Inc., No. 16-CV-2624, 2018 WL

3625336, at *5 (E.D.N.Y. May 21, 2018) (“[C]ourts consider factors such as the

closeness of the relationship and the degree to which it has been disclosed.”);

Spagnola v. Chubb Corp., 264 F.R.D. 76, 96 (S.D.N.Y. 2010) (“Numerous courts

. . . have found that a named plaintiff is an inadequate representative where there is

a close personal relationship between a plaintiff and class counsel.”).

While Plaintiff argues the “mere appearance of impropriety” is not

disqualifying under Rule 23, the Court cannot agree. “An actual conflict is not a

prerequisite to a finding of inadequacy; even a potential conflict of interest is

sufficient to render a named plaintiff an inadequate class representative.” Aliano,

2018 WL 3625336, at *6 (internal quotations omitted). The Court’s role is not to

discern whether the representative-counsel relationship creates an actual conflict,

but rather to assess the likelihood that a conflict of interest may exist. Id.

According to Plaintiff, even the “appearance” of a conflict of interest was

dispelled when Mr. Wexler—the former lead counsel in this case and Plaintiff’s

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spouse—renounced his claim for fees, including for quantum meruit. Here again,

the Court does not agree. Evidence brought out in the parties briefing and an

evidentiary hearing on the Motion confirm that potential conflicts of interest remain

even in the absence of a direct fee claim from Mr. Wexler.

For example, Mr. Wexler’s testimony revealed a history of business dealings

between him and current class attorneys James Giardina and Keith Keogh. Mr.

Wexler admitted that he and Mr. Giardina previously worked together as counsel on

more than one matter and that, in at least two additional cases, Mr. Keogh had taken-

over as lead counsel for Mr. Wexler. Dkt. 71, Tr. 61–63. Given their “positive

working relationship”, Mr. Wexler admitted that he trusted Giardina and Keogh to

“be fair to me” with respect to any fee claim, and that a positive result for Giardina

and Keogh in this case could lead to reputational and financial (future case referrals)

benefits for Mr. Wexler himself. Id. at 73, 76, 85. Plaintiff also testified at the

evidentiary hearing, stating that the decision to have Mr. Wexler withdraw as

counsel “came from either Mr. Wexler or Mr. Giardina,” as did the idea to have Mr.

Wexler waive his claim for fees. Id. at 41–42 and 54.

Thus, even accepting as true that Mr. Wexler was not promised specific

remuneration by Giardina and Keogh in this case, the significant potential for a

conflict of interest remains: Mr. Wexler acknowledged that he previously brought

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Giardina and/or Keogh into cases with hope of financial gain, that he had attempted

to do so here, and that he may do so again in the future. The clear possibility that

Plaintiff’s husband may derive financial gain from class counsel creates the

appearance that Plaintiff would have an incentive to maximize fees for her attorneys.

See, e.g., Hale v. Citibank, N.A., 198 F.R.D. 606 (S.D.N.Y. 2001) (finding proposed

plaintiff inadequate under Rule 23 where plaintiff’s husband, an attorney, had

referred multiple cases to class counsel). Moreover, Plaintiff’s own testimony

confirmed that she had little or no involvement in the decisions about who would act

as class counsel or be entitled to recover fees. A plaintiff cannot adequately

represent a class if they “have so little knowledge of and involvement in the class

action that they would be unable or unwilling to protect the interests of the class

against the possibly competing interests of the attorneys.” Baffa v. Donaldson,

Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 61 (2d Cir. 2000) (internal quotations

omitted).

Having reviewed the R&R de novo, the Court adopts the R&R in full.

SO ORDERED.

/S/ Frederic Block____________

FREDERIC BLOCK

Senior United States District Judge

Brooklyn, New York

September 30, 2019

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