Kleiner v. First Nat. Bank of Atlanta
| Citation | 751 F.2d 1193 |
| Decision Date | 31 January 1985 |
| Docket Number | No. 83-8794,83-8794 |
| Parties | , 40 Fed.R.Serv.2d 1390 Jackie KLEINER, Plaintiff-Appellee, v. The FIRST NATIONAL BANK OF ATLANTA, Defendant-Appellant, Hansell & Post, Richard Kirby and Richard M. Langway, Appellants, George W. MOROSANI, Plaintiff-Appellee, v. The FIRST NATIONAL BANK OF ATLANTA, Defendant-Appellant, Hansell & Post, Richard Kirby and Richard M. Langway, Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (11th Circuit) |
Robert B. Remar, Jerome J. Froelich, Jr., Kenneth P. McDuffie, Atlanta, Ga., Michael P. Malakoff, Pittsburgh, Pa., for plaintiff-appellee.
Appeals from the United States District Court for the Northern District of Georgia.
Before HILL, VANCE and ANDERSON, Circuit Judges.
We consider whether the first amendment rationale of Bernard v. Gulf Oil Co. 1 bars sanctions against a defendant and counsel for secretly soliciting exclusion requests from potential members of a Rule 23(b)(3) plaintiff class.
This appeal is the closing phase of a ground-breaking class action against the First National Bank of Atlanta 2 filed by Jackie Kleiner, an Atlanta lawyer and real estate investor. The lawsuit, sounding in fraud, RICO and breach of contract, charged the Bank with reneging on its promise to peg the interest it charged smaller customers to the prime rate by undercutting the announced prime rate for the Bank's best commercial customers. 3 Richard M. Kirby, a partner in the Atlanta law firm of Hansell & Post and an attorney experienced at class action litigation, undertook the Bank's defense.
On April 15, 1983, after over two years of discovery, the district judge certified certain of the contract claims for class action treatment. The tripartite plaintiff class, certified under Fed.R.Civ.P. 23(b)(3), numbered approximately 8,600 potential members. 4
The following month Kirby served notices of deposition and subpoenas duces tecum on twenty-five prospective class members. Plaintiffs moved for a protective order to bar the Bank from badgering class members by taking their depositions. At a May 20 hearing on the motion, the court initially suggested that the Bank confine class member discovery to affidavits. 5 Outspoken protests from plaintiffs, however, caused the court to reconsider its response. Opposing counsel argued that unilateral contacts by the Bank before the close of the exclusion period would intimidate eligible members, many of whom would be very worried about their credit ratings and their ability to borrow in the future. Counsel contended that many would be deterred from participating in the class, which was their right.
After extended discussion, the district judge granted the protective order subject to a proviso allowing the Bank to take depositions of five class members. Both sides were to have the opportunity to interview the deponents before the depositions, and plaintiffs would have the opening interview. The court took the broader question of unsupervised contacts between the Bank and class members under advisement pending further briefing, ruling:
At this time, I am going to let [defense counsel] take no more than five depositions. Otherwise, I am granting the motion for a protective order. However, if you can get me some law that convinces me that it is all right for you to otherwise be able to contact class members, then I will permit you to contact additional people informally.
Both Kirby and Richard M. Langway, general counsel for the Bank, attended the hearing.
A month later, on June 29, the district judge approved the class notice required under Fed.R.Civ.P. 23(c)(2). The notice, as approved, informed recipients that they would be included in the class unless they took the affirmative step of opting out by returning an exclusion request to the clerk of the district court within a stated time. The class members were also directed to address any inquiries to their choice of plaintiffs' or defense counsel. 6 After further negotiation, August 13 was set as the date of mailing.
The following day, June 30, the district judge entered a sua sponte order amplifying the class notice ruling. According to the addendum, copies of the proposed replies to inquiries, as well as the inquiries themselves, were to be furnished to opposing counsel before being mailed. In addition, the district judge acknowledged the receipt of briefs on the ex parte contact issue and explicitly reiterated that the question of unsupervised Bank contacts with plaintiff class remained under advisement.
By mid-July, the Bank had seized upon the idea of soliciting class exclusion requests as a means to reducing its potential liability and quelling the adverse publicity the lawsuit had spawned. 7 Kirby, alerted of the plan, researched the legality of a solicitation campaign. Meeting with top Bank managers on August 8, Kirby advised that a communications scheme would be lawful under the precepts of Bernard v. Gulf Oil Co. as long as the conversations were truthful and noncoercive. The lawyer warned that any such campaign, while legal, would be an extraordinary move likely to provoke the wrath of the court. He outlined the risks the Bank might court, including an injunction against further contacts, cancellation of the exclusion requests, and an order to issue corrective notice at Bank expense.
Without further hesitation, Thomas R. Williams, chairman of the board, canvassed the potential benefits and costs and resolved to proceed. 8 The remainder of the discussion was devoted to specifics. In response to a question, Kirby opined that phone calls would be better than letters, given the danger that people would disregard letters as more "junk mail." Williams assigned Thomas Chapman, Bank marketing director, responsibility for coordinating all solicitation efforts in close consultation with Kirby and Langway.
Secrecy and haste shrouded the undertaking, which would coincide with the district judge's vacation. Neither the court nor opposing counsel were alerted to the telephone campaign, as was Kirby's intent. Chapman hurriedly organized a force of 175 loan officers to staff the telephones, while lawyers Kirby and Langway lent their assistance by reviewing and revising a briefing letter from Williams to the employees as well as a question-and-answer prompting sheet to be used by the loan officers. Kirby supplied Chapman with the class notice and exclusion request forms for reproduction. He also collaborated with the Bank's computer center to generate lists of potential class members broken down under each of the Bank's cost centers.
On August 11, two days before the scheduled date of class notice mailing, the Bank convened a meeting of the loan officers. Kirby and Langway sat in the front row. Board chairman Williams opened the meeting with brief introductory remarks, then turned the session over to Chapman. Chapman announced that the Bank was going to take "bold, decisive action which had no precedent." He informed the assembly that the Bank was commencing a "communications program" to insure that the class members in the Kleiner litigation understood the merits of the dispute and their right to opt out. Chapman went on to say that the officers would be asked to telephone the customers they knew best, and he exhorted them to "do the best selling job they had ever done." The officers were to proceed swiftly since, in Chapman's words, the court might halt the program. The objective, according to Chapman's notes, was to persuade the borrowers to "withdraw from the class."
Chapman repeatedly stressed that the conversations were to proceed on a "factual" plane, without arm-twisting or coercion. The loan officers, however, received Opinion of the district court at 20.
The loan officers dispersed into smaller groups where they were told to call the most receptive customers first and to avoid phoning antagonistic borrowers altogether. They were handed computer lists of customers marked "Friend" and "Foe" as well as score sheets lined with columns for tallying opt-out commitments and the dollar amounts of the corresponding loans. The telephone campaign began immediately afterward. 9 The Bank eventually succeeded in reaching a little over 3000 customers, nearly 2800 of whom decided to exclude themselves. Many decided to do so before they received the court-approved notice. By August 12 the Bank had reaped opt-out commitments from customers representing a sum total of $694,997,218 in past or present loans.
The district judge, just back from a two-week vacation, held a hearing on August 24 at plaintiffs' request. When apprised of the campaign, she immediately cited Kirby for contempt and restricted communication to class members by all parties and their counsel to approved responses to individual inquiries. She further denied the Bank permission to depose borrowers who had agreed to opt out. Hansell & Post was cited for contempt the following week. An evidentiary hearing was calendared for October 5.
At an in-chambers conference on September 15, the district judge stated that the proceedings were "in the nature of a disciplinary proceeding" rather than for civil or criminal contempt. The contempt citations were later vacated. The district judge explained that the charges against counsel were grounded in violations of the orders dated May 20 and June 30 as well as in Model Rules 4.2 and 8.4(d) of the A.B.A. Model Rules of Professional Conduct (1983). 10 The court lodged additional charges against the Bank for violation of Local Rule 221.2 of the ...
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