By Gerald L. Maatman, Jr. and Howard M. Wexler

The Supreme Court denies writs of certiorari in an overwhelming majority of cases. Most of the times these denials are formulaic and the Supreme Court does not provide a “look behind the curtain” as to why the Justices decided not to review a particular case, or how they view the merits of a case that they will not be reviewing. This was not the case earlier this week as Justice Samuel Alito issued a scathing statement on November 18, 2013 – in dissenting from the denial of certiorari – that was highly critical of one federal district court judge’s practice of taking diversity issues into account in appointing lead counsel in class actions even though the Supreme Court denied the writ of certiorari.

Background

The case of Martin, et al. v. Carl Blessing, No. 13-169 (U.S. Nov. 18, 2013), involves an anti-trust challenge to the 2008 merger of Sirius Satellite Radio, Inc. and XM Satellite Holdings, Inc. Id. at 1. Several class actions were consolidated before Judge Harold Baer, Jr. in the U.S. District Court for the Southern District of New York, and Judge Baer appointed three law firms to serve as interim class counsel. Id. When the plaintiffs moved to certify a class action, one requirement that they had to demonstrate pursuant to Federal Rules of Civil Procedure 23(g) is adequate class counsel.

Rule 23(g) requires a district court judge to consider four particular indicators of adequacy, including: (i) the work counsel has done in identifying or investigating potential claims in the action; (ii) counsel’s experience in handling class actions, other complex litigation, and the types of claims asserted in the action; (iii) counsel’s knowledge of the applicable law; and (iv) the resources that counsel will commit to representing the class. Rule 23(g) also permits district court judges to “consider any other matter pertinent to counsel’s ability to fairly and adequately represent the interests of the class.” In addition to the four enumerated Rule 23(g) factors, Judge Baer – as he has done is several prior matters – ordered that the three law firms “ensure that the lawyers staffed on the case fairly reflect the class composition in terms of relevant race and gender metrics.” Id. at 2. 

Following certification, Nicholas Martin, a class member, objected to the terms of the settlement, as well as Judge Baer’s reliance on race and gender in assessing the adequacy of class counsel. Id. at 3. The Second Circuit refused to set aside the settlement on standing grounds, concluding that Martin failed to allege injury in fact. Id. at 3. 

Judge Alito’s Dissent From Certiorari

While Justice Alito acknowledges that Rule 23(g) allows a district court judge to consider “any matter” pertinent to counsel’s ability to fairly and adequately represent the interest of a class, in his opinion, it is nonetheless “doubtful” that Judge Baer’s practice of requiring the race and gender of class counsel to mirror the class composition could survive a constitutional challenge. Id. at 6. According to Justice Alito, “It seems quite farfetched to argue that class counsel cannot fairly and adequately represent a class unless the race and gender of counsel mirror the demographics of the class.” Id. at 4. To demonstrate the “strange results” that Judge Baer’s requirement may lead to, Justice Alito used an example of a class action that consisted of persons who had undergone a particular type of treatment for prostate cancer and then questioned whether “it would be proper for a district judge to favor law firms with a high percentage of male attorneys?” Id. at 5. Additionally, Justice Alito questioned how this rule could be applied since in some cases it is impossible to obtain the relevant information without requesting it from all of the class members, such as in a securities case where the class consists of everyone who purchased stock of a particular company. Id. at 4.

Although Justice Alito did not disagree with the Supreme Court’s decision to deny certiorari as “unlike the courts of appeals, we are not a court of error correction,” he nonetheless went to great pains to point out that “the denial of certiorari does not constitute an expression of any opinion on the merits” and, in his view, he was “hard pressed to see any ground on which Judge Baer’s practice can be defended.” Id. at 3 & 6. In a closing salvo, Justice Alito warned that “if the challenged appointment practice continues and is not addressed by the Courts of Appeals, future review may be warranted.” Id. at 6.

Implications For Employers

The more than 600 district court judges across the country have a wide range of discretion in appointing class counsel pursuant to Rule 23(g), as they are allowed to consider “any other matter” they deem pertinent in addition to the four required factors. Although issues involving Rule 23(g) are often an afterthought for employers as it usually comes into play when dueling law firms are vying for the appointment of lead class counsel, Justice Alito’s statement – and warning that review of Judge Baer’s practice at a later date may be appropriate if it persists – seems to indicate that at least one Supreme Court Justice will be paying closer attention to Rule 23(g) issues going forward. Stay tuned.