Seyfarth Synopsis: In McKenzie Law Firm, P.A., et al. v. Ruby Receptionists, Inc., 18-CV-1921, 2020 U.S. Dist. LEXIS 94299 (D. Or. May 29, 2020), the U.S. District Court for the District of Oregon lessened the standard for plaintiffs to obtain an order limiting the ability of defense counsel to communicate with absent class members, even when there is an existing business relationship between the defendant and the class members. This case is a must-read for employers facing class action litigation.
In McKenzie, the plaintiffs brought class claims for breach of contract, unjust enrichment, and other contractual claims based on the defendant’s allegedly misleading billing practices in providing virtual reception services. Three days after the Court certified a class of defendant’s customers, the class counsel advised defense counsel that they may not contact absent class members either directly or through third parties. Class counsel argued that they fully represented all absent class members and asked defense counsel to agree not to contact any of them.
Defense counsel disagreed and argued class counsel only had a limited representation of the absent class members, and, accordingly, defense counsel could still contact them. Defense counsel also disagreed that the defendant itself could not have communications with class members regarding the claims, defenses, or subject matter of this litigation. As the defendant had a contractual relationship with many of the class members, defense counsel argued that the defendant had the legal right to communicate with absent class members.
Class counsel thereafter filed a motion requesting that the Court limit defense counsel’s ex parte contact with class members without prior approval of the Court.
The Court’s Decision
After beginning with an analysis of the Rules of Professional Conduct prohibiting attorneys from communicating with represented parties and the standards under Rule 23 of limiting contact between parties in class litigation, the Court focused on whether the evidence in the case revealed that “a threatened communication” between defense counsel or the defendant and a class member was more than just “a theoretical possibility,” such that the Court should exercise its ability to limit communication with class members. The Court found defense counsel’s representation to the plaintiff’s counsel that they disagreed that they needed to cease and desist from contacting class members constituted circumstantial evidence of a threatened communication. In reaching its conclusion, the Court analogized the situation to a property dispute: “[I]f a property owner asks a person not to enter the owner’s property and the person responds by saying that the person has the legal right to enter the owner’s property without permission, that reasonably may be interpreted as a threat to trespass.” McKenzie, 2020 U.S. Dist. LEXIS 94299 at *11. Thus, in the Court’s view, defense counsel’s actions could reasonably be interpreted as a threat to communicate with absent class members.
The Court also examined the defendant’s own actions to ascertain whether there was threatened communication with absent class members. The Court acknowledged that the defendant had the legal right to contact class members, even about the pending litigation. However, the Court cautioned that the defendant could normally communicate with class members “provided that there is no participation, advice, or assistance of any kind by Defense Counsel.” Id. at *12. Further, the Court held that defense counsel’s argument that its client should be able to communicate with the class members about the litigation, taken in the context of the lawsuit, was further evidence of a threat to communicate with the class members. Notably, during class certification briefing, the defendant sought and filed a dozen declarations opposing class certification from putative class members, showing a history of communicating with absent class members with the assistance of its counsel.
After concluding that there was more than a theoretical possibility that defense counsel and the defendant threatened to communicate with class members, the Court analyzed whether the defendant’s communications (with or without any assistance from counsel) to absent class members created a risk of abuse such that they should be limited, even if they normally would have been allowed. The Court highlighted how unilateral communications with absent class members, without the opportunity for class counsel to respond, could irreparably damage the case. This was especially a concern where the defendant and the class were “involved in an ongoing business relationship.” Id. While many absent class members were lawyers with a basic legal knowledge, many of those lawyers did not have expertise in the relevant area of law. Other absent class members had no legal training and were particularly susceptible to undue influence from the defendant. Based on the defendant’s previous attempts to communicate with absent class members to oppose class certification, the Court held there was a realistic risk of abuse that could warrant an order prohibiting class member contact.
Against this record, the Court balanced the risks of “unsupervised, unilateral communications” to the class members with the legitimate need for the defendant to communicate with its customers. Ultimately, the Court issued a specifically tailored order that prohibited defense counsel from communicating with any class member and prohibited the defendant from initiating any communication with any class member regarding or referring to the lawsuit without prior approval from the Court or class counsel. However, the Court held that if a client class member contacted the defendant, it could only respond by stating that it may not discuss this lawsuit or anything about it.
Implications For Employers
One of the trickiest issues for employers to handle when facing employment litigation is how to communicate with their employees, without risking further claims. Employers must always be aware of what they are communicating to their employees, especially when those employees are or may be class members in threatened or ongoing litigation. Courts have been wary of communications sent to represented parties by the opposing side, particularly when there is an ongoing relationship between class members and the defendant. The ruling in the McKenzie case shows that even threatened communications, without any follow up, are enough to warrant an order limiting all communications by employers themselves, hampering an employer’s ability to later fight the case with declarations and other support from would-be class members. When faced with class or collective employment litigation, employers should put together a comprehensive response plan with their counsel so that they do not run afoul of the limitations on communications with represented parties or create a risk of abuse. Armed with a proactive plan, employers can avoid many of the pitfalls presented in this case and prevent a communication order from the Court limiting their ability to speak to their own employees.